<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
----------------------------
COMMISSION FILE NUMBER 0-23562
---------------------
MICROELECTRONIC PACKAGING, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-3142624
- ------------------------------------ ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9577 CHESAPEAKE DRIVE, SAN DIEGO, CALIFORNIA 92123
- -------------------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (619) 292-7000
---------------------
Indicate by check whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [_]
At May 10, 1999, there were outstanding 10,856,890 shares of the
----------
Registrant's Common Stock, no par value per share.
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<PAGE>
<TABLE>
<CAPTION>
INDEX PAGE NO.
- ----- --------
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets...................................... 3
Condensed Consolidated Statements of Operations............................ 4
Condensed Consolidated Statements of Cash Flows............................ 5
Condensed Consolidated Statement of
Changes in Shareholders' Deficit....................................... 6
Notes to Condensed Consolidated Financial Statements....................... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......................... 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk................. 16
PART II OTHER INFORMATION
Item 1. Legal Proceedings.......................................................... 17
Item 2. Changes in Securities and Use of Proceeds.................................. 17
Item 3. Defaults upon Senior Securities............................................ 17
Item 4. Submission of Matters to a Vote of Security Holders........................ 17
Item 5. Other Information.......................................................... 17
Item 6. Exhibits and Reports on Form 8-K........................................... 18
SIGNATURES............................................................................. 19
EXHIBIT INDEX.......................................................................... 20
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
MICROELECTRONIC PACKAGING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, December 31,
1999 1998
- --------------------------------------------------------------------------------------------------------------------
ASSETS (UNAUDITED)
<S> <C> <C>
Current assets:
Cash $ 129,000 $ 469,000
Accounts receivable, net 1,130,000 1,306,000
Inventories 2,742,000 3,073,000
Other current assets 166,000 60,000
- --------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 4,167,000 4,908,000
Property, plant and equipment, net 1,654,000 1,806,000
Other non-current assets 144,000 171,000
====================================================================================================================
$ 5,965,000 $ 6,885,000
====================================================================================================================
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Current portion of long-term debt $ 19,000 $ 20,000
Accounts payable 3,932,000 4,045,000
Accrued liabilities 669,000 908,000
Debt and accrued interest of discontinued operations,
in default, due on demand 27,557,000 27,055,000
- --------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 32,177,000 32,028,000
Long-term debt, less current portion 45,000 49,000
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIT
Common stock, no par value 40,162,000 40,143,000
Accumulated deficit (66,419,000) (65,335,000)
- --------------------------------------------------------------------------------------------------------------------
Total shareholders' deficit (26,257,000) (25,192,000)
- --------------------------------------------------------------------------------------------------------------------
$ 5,965,000 $ 6,885,000
====================================================================================================================
</TABLE>
3
<PAGE>
MICROELECTRONIC PACKAGING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
---------------------------------------------
1999 1998
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $ 1,743,000 $ 7,334,000
Cost of goods sold 1,584,000 5,381,000
- ----------------------------------------------------------------------------------------------------------------------
Gross profit 159,000 1,953,000
Selling, general and administrative 546,000 776,000
Engineering and product development 191,000 272,000
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) from operations (578,000) 905,000
Other income (expense):
Interest (expense), net (506,000) (3,000)
Other income, net -- 70,000
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations
before provision for income taxes (1,084,000) 972,000
Provision for income taxes -- (18,000)
- ----------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (1,084,000) $ 954,000
- ----------------------------------------------------------------------------------------------------------------------
Net income (loss) per common share $ (0.10) $ 0.09
======================================================================================================================
======================================================================================================================
Net income (loss) per common share - assuming dilution $ (0.10) $ 0.08
======================================================================================================================
</TABLE>
4
<PAGE>
MICROELECTRONIC PACKAGING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
---------------------------------------------
1999 1998
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES OF:
Continuing operations $ (331,000) $ 195,000
Discontinued operations (23,000)
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by operating activities (331,000) 172,000
- ----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of fixed assets (4,000) (546,000)
Proceeds from the sale of fixed assets 13,000
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by investing activities (4,000) (533,000)
- ----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt
and promissory notes (5,000) (3,000)
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities (5,000) (3,000)
- ----------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH (340,000) (364,000)
CASH AT BEGINNING OF PERIOD 469,000 1,296,000
- ----------------------------------------------------------------------------------------------------------------------
CASH AT END OF PERIOD $ 129,000 $ 932,000
======================================================================================================================
</TABLE>
5
<PAGE>
MICROELECTRONIC PACKAGING, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' DEFICIT
(unaudited)
<TABLE>
<CAPTION>
Common Stock Accumulated
---------------------------------------
Shares Amount Deficit Total
----------------- ----------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Balance at January 1, 1999 10,856,890 $40,143,000 $(65,335,000) $(25,192,000)
Non-employee stock-based
compensation 19,000 19,000
Net (loss) (1,084,000) (1,084,000)
- ----------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1999 10,856,890 $40,162,000 $(66,419,000) $(26,257,000)
============================================================================================================================
</TABLE>
6
<PAGE>
MICROELECTRONIC PACKAGING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. QUARTERLY FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements and related
notes as of March 31, 1999 and for the three month period ended March 31,
1999 and 1998 are unaudited but include all adjustments (consisting of
normal recurring adjustments) which are, in the opinion of management,
necessary for a fair statement of financial position and results of
operations of the Company for the interim period. Certain prior year
amounts have been reclassified to conform to the current year presentation.
The results of operations for the three month period ended March 31, 1999
is not necessarily indicative of the operating results to be expected for
the full fiscal year. The information included in this report should be
read in conjunction with the Company's audited consolidated financial
statements and notes thereto and the other information, including risk
factors, set forth for the year ended December 31, 1998 in the Company's
Annual Report on Form 10-K. Readers of this Quarterly Report on Form 10-Q
are strongly encouraged to review the Company's Annual Report on Form 10-K.
Copies are available from the Chief Financial Officer of the Company at
9577 Chesapeake Drive, San Diego, California 92123.
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
MARCH 31, 1999 December 31, 1998
---------------------------- ----------------------------
(UNAUDITED)
<S> <C> <C>
Raw materials ................................. $ 2,276,000 $ 2,203,000
Work-in-progress .............................. 1,194,000 1,531,000
Finished goods ................................ 1,000 38,000
Obsolescence reserve .......................... (729,000) (699,000)
---------------------------- ----------------------------
$ 2,742,000 $ 3,073,000
============================ ============================
</TABLE>
3. EFFECTS OF INCOME TAXES
The Company has not recorded provisions for any income taxes for the three
months ended March 31, 1999, since the Company's operations have generated
operating losses for both financial reporting and income tax purposes. A
100% valuation allowance has been provided on the total deferred income tax
assets as they are not more likely than not to be realized.
The Company believes that it has incurred an ownership change pursuant to
Section 382 of the Internal Revenue Code and, as a result, the Company
believes that its ability to utilize its current net operating loss and
credit carryforwards in subsequent periods will be subject to annual
limitations.
7
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
4. NET INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
For the three months ended March 31, 1999
--------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
------------ ------------ ---------
<S> <C> <C> <C>
Loss from continuing operations $(1,084,000)
BASIC EPS
Loss available to common shareholders $ (0.10)
$(1,084,000) 10,856,890
========
</TABLE>
The computation of diluted loss per share excludes the effect of
incremental common shares attributable to the exercise of outstanding
common stock options and warrants because their effect was antidilutive
due to losses incurred by the Company.
<TABLE>
<CAPTION>
For the three months ended March 31, 1998
---------------------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------------- --------------- -----------------
<S> <C> <C> <C>
Income from continuing operations $ 954,000
BASIC EPS
Income available to common shareholders 954,000 10,793,279 $ 0.09
=================
Effect of dilutive securities:
Stock options -- 1,740,282
Warrants -- --
----------------- ---------------
DILUTED EPS
Income available to common shareholders
+ assumed conversions $ 954,000 12,533,561 $ 0.08
================= =============== =================
</TABLE>
Options to purchase 275,800 shares and warrants to purchase 1,227,693
shares of common stock at prices ranging from $0.63 to $6.50 were
outstanding during the first quarter of 1998, but were not included in
the computation of diluted EPS because the options' and warrants'
exercise prices were greater than the average market price of the common
shares for the quarter then ended.
8
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
5. COMMITMENTS AND CONTINGENCIES
The Company entered into a lease for new manufacturing facilities and
corporate offices. Commencing September 1, 1997, and extends to October 31,
2002. Minimum monthly rental payments of $16,000 began on November 1, 1997,
with scheduled annual increases of 6% to 7% per year beginning November 1,
1998. The Company also entered into an agreement in 1998 whereby the
Company obtained the use of a piece of test equipment and technical support
for such equipment from a supplier. The agreement calls for minimum annual
payments of $360,000 through 2007, plus the possible acceleration of
payments if the Company obtains new customers with projects that require
the use of the equipment and technical support of the equipment supplier.
6. ASIAN CREDITOR LOAN AGREEMENTS GUARANTEED BY MPI
With respect to the Company's subsidiaries in Singapore, all of which
ceased operations in 1997 ("Singapore Subsidiaries"), the Company
guaranteed certain debt obligations of the Singapore Subsidiaries
("Guaranty Obligations"). During 1998, the Company entered into settlement
agreements ("Settlement Agreements") with each of the eight creditors of
the Singapore Subsidiaries to whom the Company had a liability under the
Guaranty Obligations ("Singapore Subsidiary Creditors"), pursuant to which
the Company and the Singapore Subsidiary Creditors agreed that the Company
would be released from all of its liabilities under the Guaranty
Obligations in exchange for cash settlement payments in the aggregate
amount of approximately $9.3 million ("Settlement Payments"). The Company
was obligated to pay the entire amount of the Settlement Payments on or
about May 1, 1999 ("Settlement Due Date").
After entering into the Settlement Agreements, the Company determined that
it would not have the ability to pay any portion of the Settlement Payments
by the Settlement Due Date. Therefore, the Company and the Singapore
Subsidiary Creditors negotiated new terms for the settlement of the
Guaranty Obligations, which new settlement terms are set forth in non-
binding letter agreements entered into between the Company and each of the
eight Singapore Subsidiary Creditors during the first quarter of 1999
("Letter Agreements"). The Letter Agreements provide that the entire amount
of the Guaranty Obligations would be converted into shares of the Company's
Series A Preferred Stock ("Debt to Equity Conversion"). Each share of
Series A Preferred Stock would be convertible into two shares of the
Company's Common Stock, have a 3.5% per annum cumulative dividend,
liquidation preferences, registration rights, and certain other rights,
preferences and privileges senior to the Company's Common Stock. Upon the
effective date of the Debt to Equity Conversion, the entire amount that
would be shown on the Company's accompanying financial statements as "Debt
and accrued interest of discontinued operations, in default, due on demand
("Discontinued Operations Debt"), the aggregate amount of which is
$27,557,000 as of March 31, 1999, would be converted into shares of the
Company's Series A Preferred Stock. Upon such conversion, the Discontinued
Operations Debt would be reduced to zero.
The Letter Agreements call for the Company and the Singapore Subsidiary
Creditors to enter into definitive agreements with respect to the Debt to
Equity Conversion ("Conversion Agreements"). The Company has entered into
Conversion Agreements with three of the eight Singapore Subsidiary
Creditors. In addition, the Company has entered into an agreement with an
additional Singapore Subsidiary Creditor, pursuant to which all of the
rights of such creditor under the Guaranty Obligations will be assigned to
one or more third parties (some of whom are employees of the Company). All
of such third parties have agreed, upon such assignment, to enter into
Conversion Agreements and participate in the Debt to Equity Conversion on
the same terms and conditions as the other Singapore Subsidiary Creditors
("Creditor Assignment"). The Creditor Assignment will become effective upon
the approval of the Debt to Equity Conversion by the Company's
shareholders. Thus, after taking into account the three Conversion
Agreements and the Assignment Agreement that have already been entered
into, the Company only needs to enter into Conversion Agreements, which may
not be more favorable to any one creditor than the other creditors, with
all of the remaining four of the Singapore Subsidiary Creditors and obtain
shareholder approval and a fairness opinion. As soon as that has been
accomplished, which the Company believes should be accomplished during the
second quarter of 1999, the Company will take steps to obtain shareholder
approval of the Debt to Equity Conversion. In the event the Company is
successful in obtaining shareholder approval of the Debt to Equity
Conversion, the Discontinued Operations Debt will be eliminated in its
entirety and the Company will no longer have any liabilities under the
Guaranty Obligations. In addition, if the Company is successful in
completing the Debt to Equity Conversion, the equity interests of the
Company's existing shareholders will be substantially diluted and the
Singapore Subsidiary Creditors, assuming conversion of all their Series A
Preferred Stock on the closing of the Debt to Equity Conversion, would own
a majority of the outstanding common stock of the company.
7. GOING CONCERN
The Company's accompanying financial statements have been prepared assuming
the Company (along with its only operating subsidiary, CTM) will continue
as a going concern. A number of factors, including the Company's history of
significant losses, the debt service costs associated with the Guaranty
Obligations and the Company's other debt obligations, and the current
uncertainty regarding whether the Company will successfully complete the
Debt to Equity Conversion, raise substantial doubts about the Company's
ability to continue as a going concern. As of March 31, 1999, the Company
has an accumulated deficit of $66.4 million and a working capital
deficiency of $28.0 million, which includes $27.6 million of liabilities
under the Guaranty Obligations. In the event the Company is not successful
in completing the Debt to Equity Conversion, and any of the Singapore
Subsidiary Creditors demand that the Company pay any portion of the
Settlement Payments or any of the Company's liabilities under the Guaranty
Obligations, the Company would be unable to do so. If the Company fails to
complete the Debt to Equity Conversion, material adverse impacts will occur
with respect to the Company's financial condition and ability to continue
as a going concern. Furthermore, such failure is likely to require the
Company and its U.S. subsidiaries to seek bankruptcy protection under
Chapter 11 or Chapter 7 of Title 11 of the United States Code.
9
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUIDTED)
- --------------------------------------------------------------------------------
8. FORWARD LOOKING STATEMENTS
These Condensed Consolidated Financial Statements contain forward-looking
statements which involve substantial risks and uncertainties. The Company's
actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including the
effects of debt restructuring.
10
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements which involve substantial risks
and uncertainties. The Company's actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including those set forth in this section and elsewhere in this
Quarterly Report on Form 10-Q.
RESULTS OF OPERATIONS
NET SALES
For the three months ended March 31, 1999, net sales were $1,743,000 as compared
to net sales of $7,334,000 for the first quarter of 1998, resulting in decreased
sales of $5,591,000 or 76%. The decrease in net sales is primarily the result of
decreased shipments to the Company's largest customer. Sales to this one
customer comprised 85% and 77% of total net sales for the first quarters of 1999
and 1998, respectively. Sales to this customer declined from $6,465,000 for the
first quarter of 1998 to $1,490,000 for the first quarter of 1999, a decrease of
$4,975,000 or 77%. Units shipped to this customer declined by 35%, reflecting
lower demand from the customer in the first quarter of 1999 as compared to the
first quarter of 1998. Revenue in terms of dollars declined by greater than
revenue in terms of units because of a significant shift in product mix in the
first quarter of 1999. Approximately one-half of sales to the Company's
principal customer in 1999 were comprised of the repair and upgrade of
multi-chip modules (MCMs). This repair activity generates only one-fourth of the
dollar revenue as compared to the dollar revenue of newly-built MCMs, thereby
causing a decline in revenue dollars greater than the decline in revenue units.
Such repair activities comprised only 5% of sales for the first quarter of 1998.
COST OF GOODS SOLD
For the three months ended March 31, 1999, the cost of goods sold was $1,584,000
as compared to $5,381,000 for the first quarter of 1998, a decrease of 3,797,000
or 71%. The decrease in cost of goods sold is partially due to a 32% decline in
MCM units shipped from 1998 to 1999. The decrease in units shipped was
exacerbated by a 63% decrease in the average selling price of a unit shipped in
1999 as compared to the corresponding quarter of 1998. The primary reason for
the decrease in average cost per unit sold results from the change in product
mix described above.
GROSS PROFIT
Gross profit was $159,000 (9% of net sales) for the first quarter of 1999 as
compared to $1,953,000 (27% of net sales) for the first quarter of 1998. The
decrease in gross profit is attributable to the decrease in sales and the result
of the change in product mix, as discussed above.
11
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses were $546,000 for the first quarter
of 1999, representing a decrease of $230,000 or 30% from the first quarter of
1998. The decrease is primarily the result of a reduction of additional
consulting fees which had been incurred by the Company.
ENGINEERING AND PRODUCT DEVELOPMENT
Engineering and product development expenses were $191,000 for the first quarter
of 1999, representing a decrease of $81,000 or 30% from the corresponding
quarter of 1998. The decrease is primarily comprised of decreased use of outside
consultants in 1999 as compared to 1998.
INTEREST EXPENSE
Interest expense was $506,000 for the first quarter of 1999, representing an
increase of $503,000 from the corresponding quarter of 1998. The Company had
previously recorded at June 30, 1997 estimated interest on the Guaranty
obligations through December 31, 1998, as part of the estimated loss on its
discontinued operations. Since the Guaranty Obligations have not yet been paid,
the Company initiated the accrual of interest thereon in the first quarter of
1999. The Company has accrued but not paid this interest. No provision for
interest expense was necessary in the first quarter of 1998 as the Company had
accrued interest expense at June 30, 1997 as part of its discontinued
operations. See Note 6 to the accompanying Condensed Consolidated Financial
Statements for an explanation of how the Company intends to eliminate the
Guaranty Obligations and the associated interest expense.
OTHER INCOME
Other income was nil for the first quarter of 1999, as compared to $70,000 for
the first quarter of 1998. Other income for 1998 was comprised of the
amortization of deferred revenue which was reclassified to discontinued
operations at December 31, 1998, and collection of a previous year tax item,
which did not occur in 1999.
EFFECTS OF INCOME TAXES
The Company has not recorded provisions for any income taxes for the three
months ended March 31, 1999, since the Company's operations have generated
operating losses for both financial reporting and income tax purposes. A 100%
valuation allowance has been provided on the total deferred income tax assets as
they are not more likely than not to be realized.
12
<PAGE>
The Company believes that it has incurred an ownership change pursuant to
Section 382 of the Internal Revenue Code, and, as a result, the Company believes
that its ability to utilize its current net operating loss and credit
carryforwards in subsequent periods will be subject to annual limitations.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended March 31, 1999, the Company financed its
operations from operating cash flow. During this period, operating activities of
continuing operations used $331,000. Investing activities, consisting
principally of the acquisition of fixed assets of continuing operations, used
$4,000. At March 31, 1999, the Company had a working capital deficiency of
$28,011,000 and an accumulated deficit of $66,419,000. At March 31, 1999, the
Company had outstanding approximately $27,557,000 of principal and accrued
interest under the Guaranty Obligations.
The Company's sources of liquidity at March 31, 1999 consisted of inventories of
$2,742,000, trade accounts receivable of $1,130,000 and its cash balance of
$129,000. The Company has no borrowing arrangements available to it.
As indicated in Note 6, to the Condensed Consolidated Financial Statements, the
Company has renegotiated its settlement of the Guaranty Obligations pursuant to
which settlement all liabilities and accrued interest under the Guaranty
Obligations, would be converted into 9,362,777 shares of the Company's Series A
Preferred Stock. If the Conversion Agreements are not all finalized, or if the
Company's shareholders do not approve the Debt to Equity Conversion, the entire
liability of $27,557,000 under the Guaranty Obligations, which is currently in
default, will be immediately due and payable.
FUTURE OPERATING RESULTS
Status as a Going Concern. The Company's independent certified public
accountants have included an explanatory paragraph in their audit report with
respect to the Company's 1998, 1997, 1996 and 1995 consolidated financial
statements related to a substantial doubt with respect to the Company's ability
to continue as a going concern. Absent outside debt or equity financing, and
excluding significant expenditures required for the Company's major projects and
assuming the Company is successful in restructuring its liability under the
Guaranty Obligations, the Company currently anticipates that cash on hand and
anticipated cash flow from operations may be adequate to fund its operations in
the ordinary course throughout 1999. Any significant increase in planned capital
expenditures or other costs or any decrease in or elimination of anticipated
sources of revenue or the inability of the Company to restructure its liability
under the Guaranty Obligations could cause the Company to restrict its business
and product development efforts. There can be no assurance that the Company will
be successful in restructuring its liability under the Guaranty Obligations. If
adequate revenues are not available, the Company will be unable to execute its
business development efforts and may be unable to continue as a going concern.
There can be no assurance that the Company's future consolidated financial
statements will not include another
13
<PAGE>
going concern explanatory paragraph if the Company is unable to restructure its
liability under the Guaranty Obligations and become profitable. The factors
leading to and the existence of the explanatory paragraph will have a material
adverse effect on the Company's ability to obtain additional financing.
Risk of Bankruptcy. If the Company is not able to restructure its liabilities
under the Guaranty Obligations, the Company will need to be reorganized under
Chapter 11 of Title 11 of the United States Code or liquidated under Chapter 7
of Title 11 of the United States Code. There can be no assurance that if the
Company decides to reorganize under the applicable laws of the United States
that such reorganizational efforts would be successful or that shareholders
would receive any distribution on account of their ownership of shares of the
Company's stock. Similarly, there can be no assurances that if the Company
decides to liquidate under the applicable laws of the United States that such
liquidation would result in the shareholders receiving any distribution on
account of their ownership of shares of the Company's stock. In fact, if the
Company were to be reorganized or liquidated under the applicable laws of the
United States, the bankruptcy laws would require (with limited exceptions) that
the creditors of the Company be paid before any distribution is made to the
shareholders.
Certain Obligations of MPS. In connection with Microelectronic Packaging (S)
Pte. Ltd. ("MPS") borrowing from Citibank N.A., Motorola guaranteed (and
subsequently satisfied MPS' obligation) of $2.2 million in borrowings from
Citibank N.A. Under the terms of the agreement relating to Motorola's guarantee,
MPI granted Motorola a security interest in all of the issued and outstanding
capital stock of MPS, CTM Electronics, Inc. ("CTM") and Microelectronic
Packaging America ("MPA"). While in default, Motorola may have the right to
vote and give consents with respect to all of the issued and outstanding capital
of MPS, CTM and MPA . As a result, during the continuation of any such event of
default, MPI may be unable to control at the shareholder level the direction of
the subsidiaries that generate substantially all of the Company's revenues and
hold substantially all of the Company's assets. Any such loss of control would
have a material adverse effect on the Company's business, prospects, financial
condition, results of operations and status as an ongoing concern and could
force the Company to seek protection under Chapter 7 or Chapter 11 of Title 11
of the United States Code or similar bankruptcy laws of Singapore. The other
Asian debt agreements contain numerous restrictions and events of default that
have been triggered by the aforementioned actions and would, if they became
effective and operative, materially adversely affect the Company's business,
prospects, results of operations, condition and status as an ongoing concern and
could force the Company to seek protection under Chapter 7 or Chapter 11 of
Title 11 of the United States Code or similar bankruptcy laws of Singapore.
In January 1999, the Company and Motorola signed a non-binding letter agreement
which calls for the conversion of all the Company's liabilities to Motorola
under the Guaranty Obligations into shares of the Company's Series A Preferred
Stock as explained in Note 6 to the accompanying Condensed Consolidated
Financial Statements. There can be no assurance that the Company will be
successful in its efforts to reduce this non-binding agreement reached with
Motorola to a binding Conversion Agreement.
Reliance on Schlumberger. Sales to one customer, Schlumberger, accounted for 85%
of the Company's net sales in the first quarter of 1999 and is expected to
continue to account for most of the Company's net sales. Under the agreement
between Schlumberger and the Company entered into in January 1998, the Company
is obligated to provide Schlumberger with its
14
<PAGE>
requirements for MCM product. Given the Company's anticipated continued reliance
on its MCM business as a large percentage of overall net sales, the failure to
meet Schlumberger's requirements will materially adversely affect the Company's
ability to continue as a going concern. In addition, under the terms of the
agreement, Schlumberer is entitled to request repricing of the Company's
products. Schlumberger has requested repricing on several occasions in the past.
Such repricing in the future may result in the Company being unable to produce
the products made for Schlumberger with an adequate operating profit, and the
Company may be unable to compete with the prices of other vendors who supply the
same or similar products to Schlumberger. The failure to satisfy the terms of
the agreement, or the failure of the Company to achieve an operating profit
under the contract, would have a material adverse impact on the Company's
business, financial condition, and results of operation.
Year 2000 Compliance. Many currently installed computer systems and software
products are coded to accept only two digit entries in the date code field.
These date code fields will need to accept four digit entries to distinguish
21st century dates from 20th century dates. As a result, in less than one year,
computer systems and/or software used by many companies may need to be upgraded
to comply with such "Year 2000" requirements. Significant uncertainty exists in
the software industry and in other industries concerning the potential effects
associated with such compliance. Although the Company currently offers products
that are designed to be Year 2000 compliant, there can be no assurance that the
Company's products and the software products used by the Company contain all
necessary date code changes. As of March 31, 1999, the Company has partially
completed an analysis of its readiness for compliance with the Year 2000 change.
Its assessment of its manufacturing systems and company products reveals that no
known Year 2000 issues currently exist either in the products, their raw
materials, or their relationship as components to larger systems produced by its
customers; its financial systems software is currently being upgraded to a newer
replacement system which will be complete in 1999, and which system is Year 2000
compliant; documentation systems that currently use fixed dating are Year 2000
compliant, while those that require revision dating are currently under review;
and approximately 50% of the Company's computing hardware systems have been
upgraded to be Year 2000 compliant. The Company's costs to become Year 2000
compliant as of March 31, 1999 have been $235,000 for computer software and
$48,000 for computer hardware.
The Company has not yet completed its analysis of its readiness for compliance
with the Year 2000 change. Based upon the partial analysis described above, the
Company believes its exposure to Year 2000 risks is limited because the majority
of the Company's recordkeeping systems are new and compliant and have been
installed within the last eighteen months. The Company utilizes no
custom-programmed "legacy" software or hardware systems known to need Year 2000
upgrading or conversion. The Company believes it should be fully compliant with
its Year 2000 issues by the end of the second quarter of 1999 when it believes
it will have completed due diligence of its internal systems and supplier
compliance requirements, as well as completed the remaining 50% of its computing
hardware upgrades needed. However, there can be no assurance that conditions or
events may occur during the course of the completion of this analysis which will
have an adverse impact on the Company's readiness for compliance with the Year
2000 change. In addition, the Company cannot be certain that its suppliers,
service providers and customers will be Year 2000 compliant. The failure of
these companies to be fully
15
<PAGE>
compliant could create critical cash shortages to the Company due to the
inability of customers to send payments to the Company. In addition, any product
shortages from suppliers, or service shutdowns from the Company's utility or
communications providers could potentially shut down the Company's manufacturing
operations, thereby causing a material adverse impact on the Company's
operations and liquidity.
The Company believes that the purchasing patterns of customers and potential
customers and the performance of vendors may be affected by Year 2000 issues in
a variety of ways. Many companies are expending significant resources to correct
or patch their current software systems for Year 2000 compliance. These
expenditures may result in reduced funds available to purchase products such as
those offered by the Company or the inability to render services or provide
supplies to the Company. Year 2000 issues may cause other companies to
accelerate purchases, thereby causing an increase in short-term demand and a
consequent decrease in long-term demand for software products, and disruption of
supply patterns. Additionally, Year 2000 issues could cause a significant number
of companies, including current Company customers and vendors, to spend
significant resources upgrading their internal systems, and as a result consider
switching to other systems or suppliers. Any of the foregoing could result in a
material adverse effect on the Company's business, operating results and
condition.
ITEM 3 - QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
The Company has no derivative financial instruments.
The Company has outstanding indebtedness at March 31, 1999 to DBS denominated in
Singapore dollars of approximately Singapore $737,000 (U.S. equivalent
$445,000). All of the Company's other indebtedness is denominated in U.S.
dollars, and all other Singapore-based assets have been liquidated by the
receiver of MPM or MPS and used to retire outstanding indebtedness. Accordingly,
the Company believes its exposure to foreign currency rate movements is limited.
16
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
17
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Reports on Form 8-K.
None.
The Exhibits filed as part of this report are listed below.
Exhibit No. Description
----------- -----------------------------------------------------
10.75 Debt Conversion and Mutual Settlement and Release
Agreement between Texas Instruments Incorporated and
the Company dated April 27, 1999.
10.76 Debt Conversion and Mutual Settlement and Release
Agreement between ORIX Leasing and the Company dated
April 16, 1999.
10.77 Debt Conversion and Mutual Settlement and Release
Agreement between Transpac Capital and the Company
dated April 29, 1999.
10.78 Form of Assignment of Interest Under Letter Agreement
With STMicroelectronics, Inc. between FI Financial,
LLC and various parties dated April 21, 1999.
10.79 Letter Agreement between STMicroelectronics, Inc.,
FI Financial LLC and the Company dated
April 14, 1999
10.80 Letter of Intent Agreement between FI Financial LLC
and the Company dated April 15, 1999.
27.1 Financial Data Schedule
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MICROELECTRONIC PACKAGING, INC.
-------------------------------
(Registrant)
Date: May 14, 1999 By: /s/ Denis J. Trafecanty
----------------------------- ----------------------------------
Denis J. Trafecanty
Senior Vice President,
Chief Financial Officer and Secretary
19
<PAGE>
EXHIBIT INDEX
Number Description
------ -----------
10.75 Debt Conversion and Mutual Settlement and Release
Agreement between Texas Instruments Incorporated and
the Company dated April 27, 1999.
10.76 Debt Conversion and Mutual Settlement and Release
Agreement between ORIX Leasing and the Company dated
April 16, 1999.
10.77 Debt Conversion and Mutual Settlement and Release
Agreement between Transpac Capital and the Company
dated April 29, 1999.
10.78 Form of Assignment of Interest Under Letter Agreement
With STMicroelectronics, Inc. between FI Financial,
LLC and various parties dated April 21, 1999.
10.79 Letter Agreement between STMicroelectronics, Inc.,
FI Financial LLC and the Company
dated April 14, 1999.
10.80 Letter of Intent Agreement between FI Financial LLC
and the Company dated April 15, 1999.
27.1 Financial Data Schedule
20
<PAGE>
Exhibit 10.75
DEBT CONVERSION
AND
MUTUAL SETTLEMENT AND RELEASE AGREEMENT
THIS DEBT CONVERSION AND MUTUAL SETTLEMENT AND RELEASE AGREEMENT
("Conversion Agreement") is entered into at San Diego, California, effective as
of April 27, 1999 ("Effective Date"), between Microelectronic Packaging, Inc.
("MPI"), on behalf of itself and its predecessors, successors, former and
current subsidiaries, affiliates, shareholders, directors, officers, agents,
attorneys, representatives, insurers, employees and assigns (collectively with
MPI the "MPI Group"); and Texas Instruments Incorporated, assignee of Texas
Instruments Singapore (Pte) Ltd., ("TI") and their respective predecessors,
successors, former and current subsidiaries, affiliates, shareholders,
directors, officers, agents, attorneys, representatives, insurers, employees and
assigns (collectively with TI the "Investor Group").
WITNESSETH:
WHEREAS, pursuant to a Loan and Security Agreement dated May 16, 1995 by
and among MPI, Microelectronic Packaging (S) Pte Ltd ("MPS") and TI (including
the Form of Promissory Note executed by MPS pursuant thereto, collectively, the
"Initial Loan Agreement"), TI made a lump sum advance in the amount of Three
Million Five Hundred Thousand US Dollars (US$3,500,000) to MPS, a subsidiary of
MPI currently in liquidation, upon which certain interest amounts were
thereafter due and payable periodically under the Initial Loan Agreement as
amended by Addendum One to the Loan and Security Agreement, which was last
signed on July 15, 1996, and Addendum Two to the Loan and Security Agreement
dated April 2, 1997 (Addendum One and Addendum Two, collectively with the
Initial Loan Agreement, are referred to as the "Loan Agreement");
WHEREAS, MPI entered into a Form of Corporate Guarantee dated May 16, 1995
with TI (the "Guarantee"), pursuant to which MPI agreed to guaranty the
obligations of MPS under the Loan Agreement;
WHEREAS, MPS has defaulted on its obligations under the Initial Loan
Agreement;
WHEREAS, in an effort to restructure and settle all of MPI's obligations
under the Guarantee, MPI and TI entered into a Restructuring, Settlement and
Mutual Release Agreement dated April 24, 1998, pursuant to which MPI agreed to
make certain payments to TI, in exchange for the agreement of TI to reduce the
amount of MPI's obligations under the Guarantee ("Restructuring Agreement").
Contingent upon MPI's performance of its obligations under the Restructuring
Agreement, the Restructuring Agreement provided that all obligations of MPI
under the Guarantee would be deemed settled and TI would release MPI from any
further obligations with respect thereto.
WHEREAS, MPI is not able to comply with its payment obligations under the
Restructuring Agreement.
<PAGE>
WHEREAS, the MPI Group with respect to the Investor Group, and the Investor
Group with respect to the MPI Group, desire to finally settle all of their
respective rights and obligations under the Loan Agreement, the Guarantee, the
Restructuring Agreement and all amendments thereto, and all other related
agreements (collectively the "Former Agreements"), terminate and release all of
their respective rights and obligations under the Former Agreements, and settle
all other disputes of any kind that may or could exist between the MPI Group and
the Investor Group with respect to the Former Agreements, all upon the terms and
conditions set forth in this Conversion Agreement.
NOW THEREFORE, in consideration of the mutual agreements contained herein
and for other good and sufficient consideration, the receipt and sufficiency of
which is hereby acknowledged, the MPI Group and the Investor Group agree as
follows:
1. Defined Terms. In addition to those terms that may be defined
-------------
elsewhere in this Conversion Agreement, the following terms shall have the
meanings defined in this Section 1.
1.1 "Conversion Date" means the date upon which the TI Conversion
occurs pursuant to the terms and conditions hereof.
1.2 "Performance Date" means June 30, 1999.
1.3 "Series A Preferred Stock" means the Series A Preferred Stock of
MPI, the rights, preferences privileges and restrictions of which are set forth
in the Certificate of Amendment to the Amended and Restated Articles of
Incorporation of MPI, in the form attached hereto as Exhibit "A" and
incorporated herein by reference.
1.4 "Transpac Conversion" means the conversion of indebtedness in the
amount of principal and interest owed by MPM Singapore Pte. Ltd and guaranteed
by MPI in the aggregate to Transpac Capital Pte. Ltd., Transpac Industrial
Holdings Ltd., Regional Investment Company Ltd. and Natsteel Equity III Pte.
Ltd. (the "Transpac Entities"), accrued as of December 31, 1997 (which is the
entire amount MPI and the Transpac Entities have agreed is due and payable),
into Four Million Thirty One Thousand Eight Hundred Twenty Six (4,031,826)
shares of Series A Preferred Stock.
1.5 "DBS Bank Conversion" means the conversion of indebtedness in the
amount of principal and interest owed by MPM Singapore Pte. Ltd and MPS and
guaranteed by MPI to Development Bank of Singapore Ltd. ("DBS"), accrued as of
December 31, 1997 (which is the entire amount MPI and DBS have agreed is due and
payable), into One Million One Hundred Fifty Four Thousand Three Hundred Eleven
(1,154,311) shares of Series A Preferred Stock.
1.6 "Motorola Conversion" means the conversion of indebtedness in the
amount of principal and interest owed by MPS and guaranteed by MPI to Motorola,
Inc., accrued as of December 31, 1997 (which is the entire amount MPI and
Motorola have agreed is
2
<PAGE>
due and payable), into Eight Hundred Sixty Nine Thousand Nine Hundred Thirty Two
(869,932) shares of Series A Preferred Stock.
1.7 "NS Electronics Conversion" means the conversion of indebtedness
in the amount of principal and interest owed by MPI to NS Electronics Bangkok
(1993) Ltd. ("NSEB"), accrued as of December 31, 1997 (which is the entire
amount MPI and NSEB have agreed is due and payable), into Two Hundred Seventy
One Thousand One Hundred Seventy Six (271,176) shares of Series A Preferred
Stock.
1.8 "ORIX Leasing Conversion" means the conversion of indebtedness in
the amount of principal and interest owed by MPM and MPS and guaranteed by MPI
to ORIX Leasing Singapore Limited, accrued as of December 31, 1997 (which is the
entire amount MPI and ORIX Leasing have agreed is due and payable) into Four
Hundred Seventy Three Thousand Five Hundred Eighty Four (473,584) shares of
Series A Preferred Stock.
1.9 "Samsung Corning Conversion" means the conversion of indebtedness
in the amount of principal and interest owed by MPS and guaranteed by MPI to
Samsung Corning Co., Ltd., accrued as of December 31, 1997 (which is the entire
amount MPI and Samsung Corning have agreed is due and payable) into One Hundred
Eighty Three Thousand Two Hundred Seventy Five (183,275) shares of Series A
Preferred Stock.
1.10 "STMicroelectronics Conversion" means the conversion of
indebtedness in the amount of principal and interest owed by MPS and guaranteed
by MPI to STMicroelectronics, Inc. (and/or any one or more assignees and/or
transferees of STMicroelectronics, Inc.), accrued as of December 31, 1997 (which
is the entire amount MPI and STMicroelectronics have agreed is due and payable)
into One Million Three Hundred Twenty Two Thousand Six Hundred Forty One
(1,322,641) shares of Series A Preferred Stock.
1.11 "TI Conversion" means the conversion of indebtedness in the
amount of principal and interest owed by MPS and guaranteed by MPI to TI,
accrued as of December 31, 1997 (which is the entire amount MPI and TI have
agreed is due and payable) into One Million Fifty Six Thousand Twenty Seven
(1,056,027) shares of Series A Preferred Stock.
1.12 "Other Creditor Conversions" means collectively the DBS Bank
Conversion, the Motorola Conversion, the NSEB Conversion, the ORIX Leasing
Conversion, the Samsung Corning Conversion, the STMicroelectronics Conversion
and the Transpac Conversion.
1.13 "Other Creditors" means collectively DBS Bank; Motorola, Inc.;
NSEB; ORIX Leasing Singapore Limited; Samsung Corning Co., Ltd.;
STMicroelectronics, Inc.; and the Transpac Entities.
1.14 "Insolvency Action" means the commencement of a voluntary or
involuntary case against MPI under the United States Bankruptcy Code ("Code") or
an assignment for the benefit of creditors by MPI, but shall not include any
involuntary case brought under the Code which is dismissed within sixty (60)
days of its commencement where no action is brought during such time period to
avoid any issuance of Series A Preferred Stock
3
<PAGE>
by MPI or the performance by MPI of any of its other obligations pursuant to
this Conversion Agreement.
2. Duration of Conversion Agreement. This Conversion Agreement shall
--------------------------------
remain in full force and effect until the Conversion Date, subject to the
following termination provisions:
2.1 Prior to the Performance Date, no party shall have any right
to terminate this Conversion Agreement in any respect, and all of the terms and
conditions hereof shall remain in full force and effect as set forth herein.
2.2 As of and after the Conversion Date, even if the Conversion
Date occurs after the Performance Date, no party shall have any right to
terminate this Conversion Agreement in any respect, and all of the terms and
conditions hereof shall remain in full force and effect as set forth herein.
2.3 After the Performance Date, so long as the Conversion Date has
not occurred, TI shall have sole discretion (but shall not be required) to
terminate this Conversion Agreement by giving a written termination notice to
MPI ("Termination Notice"). In the event TI gives MPI a Termination Notice after
the Performance Date and prior to any occurrence of the Conversion Date, then
this Conversion Agreement shall be deemed terminated as of the date the
Termination Notice is deemed given to MPI pursuant to the provisions of Section
10.3 hereof. In the event this Conversion Agreement is terminated by TI pursuant
to the provisions of this Section 2.3, then this Conversion Agreement shall be
deemed completely void, and MPI and TI shall retain and remain subject to
whatever respective rights and obligations they may otherwise have under the
Former Agreements.
2.4 Regardless of any other provision of this Section 2, if an
Insolvency Action is commenced prior to the Conversion Date, then this
Conversion Agreement and the respective rights and obligations of MPI and TI
hereunder shall be deemed immediately terminated without notice, and MPI and TI
shall retain and remain subject to whatever respective rights and obligations
they may have under the Former Agreements.
2.5 Except as provided otherwise in Sections 7.1 or 7.2 of this
Agreement, the Former Agreements shall remain in full force and effect at all
times after the Effective Date.
3. Conditions to TI Conversion. The completion of the TI Conversion
--------------------------
pursuant to the terms and conditions of this Conversion Agreement shall be
subject to the performance and satisfaction of each of the following conditions,
either prior to or concurrently with the occurrence of the TI Conversion
("Completion Conditions"):
3.1. The completion of the Other Creditor Conversions pursuant to
agreements entered into between MPI and the Other Creditors upon terms and
conditions that are not more favorable to any of such Other Creditors than the
terms and conditions contained in this Conversion Agreement. In particular, but
without limiting the generality of the foregoing provisions of this section, the
effective price per share of the Series A Preferred Stock applicable
4
<PAGE>
to the Other Creditor Conversions shall not be less than One Dollar And Two
Cents ($1.02), and the terms and conditions of the settlement and release
provisions applicable to the Other Creditor Conversions shall not be different
in any material respect from the terms and conditions of the settlement and
release provisions contained in this Conversion Agreement.
3.2 The material terms and conditions of the TI Conversion and
the Other Creditor Conversions shall have been approved by MPI's Board of
Directors, which approval shall be sought and obtained by MPI in accordance with
all applicable laws.
3.3 The material terms and conditions of the TI Conversion and
the Other Creditor Conversions shall have been approved by MPI's Shareholders,
which approval shall be sought and obtained by MPI in accordance with all
applicable laws.
3.4 The Certificate of Amendment of the Amended and Restated
Articles of Incorporation of MPI, in the form attached hereto as Exhibit "A" and
incorporated herein by reference ("Certificate of Amendment"), shall have been
duly adopted by all necessary corporate action of the Board of Directors and
shareholders of MPI, and shall have been duly filed with and accepted by the
California Secretary of State, upon which filing and acceptance MPI shall be
authorized to issue the Series A Preferred Stock to TI and the Other Creditors
as required pursuant to the TI Conversion and the Other Creditor Conversions.
3.5 L.H. Friend, Weinress, Frankson & Presson, Inc., an
investment banking firm who serves as financial adviser to MPI, shall have
executed and issued to MPI a written opinion, in form and substance satisfactory
to MPI in its sole discretion, concluding that the TI Conversion and the Other
Creditor Conversions are fair to MPI's Shareholders ("Fairness Opinion"), and a
copy of such Fairness Opinion shall have been provided to TI.
3.6 MPI and TI shall have performed each of their respective
obligations and conditions that this Conversion Agreement requires them to
perform on or prior to the Conversion Date.
4. Obligations of MPI for TI Conversion. MPI shall have the following
------------------------------------
affirmative obligations under this Conversion Agreement until such time as the
TI Conversion has been completed, or this Conversion Agreement has been
terminated pursuant to the provisions of Section 2 hereof:
4.1 MPI shall use its best and most diligent efforts to obtain
the agreement of each of the Other Creditors to complete the Other Creditor
Conversions pursuant to agreements entered into between MPI and the Other
Creditors upon terms and conditions that are not more favorable to such Other
Creditors than the terms and conditions contained in this Conversion Agreement.
In particular, but without limiting the generality of the foregoing provisions
of this section, MPI shall use its best and most diligent efforts to obtain the
agreement of the Other Creditors that the effective price per share of the
Series A Preferred Stock applicable to the Other Creditor Conversions shall not
be less than One Dollar And Two Cents ($1.02), and the terms and conditions of
the settlement and release provisions applicable to the Other Creditor
5
<PAGE>
Conversions shall not be different in any material respect from the terms and
conditions of the settlement and release provisions contained in this Conversion
Agreement.
4.2 MPI shall use its best and most diligent efforts to obtain
the approval of MPI's Board of Directors of the material terms and conditions of
the TI Conversion and the Other Creditor Conversions, which approval shall be
obtained in accordance with applicable laws.
4.3 MPI shall use its best and most diligent efforts to obtain
the approval of MPI's Shareholders of the material terms and conditions of the
TI Conversion and the Other Creditor Conversions, which approval shall be
obtained in accordance with applicable laws.
4.4 MPI shall use its best and most diligent efforts to cause
the Certificate of Amendment to be approved by MPI's Board of Directors and
shareholders, which approval shall be obtained in accordance with applicable
laws, and to cause the Certificate of Amendment to be filed with and accepted by
the California Secretary of State, upon which filing and acceptance MPI shall be
authorized to issue the Series A Preferred Stock to TI and the Other Creditors
as required pursuant to the TI Conversion and the Other Creditor Conversions.
4.5 MPI shall use its best and most diligent efforts to cause
the TI Conversion to be completed as soon as reasonably possible.
4.6 MPI shall use its best and most diligent efforts at all
times prior to the Conversion Date, to conduct its business in the usual and
ordinary course.
5. [This Section has been intentionally left blank.]
6. Completion of Conversion. At such time as all of the Completion
------------------------
Conditions have been performed and satisfied by MPI, then MPI and TI shall
complete the TI Conversion concurrently with the completion by MPI and the Other
Creditors of the Other Creditor Conversions, by concurrently taking the
following actions:
6.1 Actions By MPI.
--------------
(a) MPI shall duly execute and deliver to TI a counterpart
copy of the form of Registration Rights Agreement attached to this Conversion
Agreement as Exhibit "B" and incorporated herein by reference ("Registration
Agreement").
(b) MPI's Chief Executive Officer shall duly execute and
deliver to TI the form of Certificate of Chief Executive Officer attached to
this Conversion Agreement as Exhibit "E" and incorporated herein by reference
("Certificate of CEO"), certifying the following matters:
(i) Any approvals of MPI's shareholders and directors
that may be required under any applicable law, in connection with the
transactions contemplated
6
<PAGE>
by this Conversion Agreement, have been duly obtained and are in full force and
effect as of the Conversion Date.
(ii) All of the representations and warranties of MPI
set forth in this Conversion Agreement,. the Ancillary Agreements (as defined
below) or in any other document delivered to TI in connection herewith, are
true, accurate, complete, and not misleading in any material respect as of the
Conversion Date.
(iii) MPI has performed all of the duties and
obligations required to be performed by MPI on or prior to the Conversion Date,
pursuant to the provisions of this Conversion Agreement, the Ancillary
Agreements (as defined below) or in any other document delivered to TI in
connection herewith.
(c) MPI shall cause its legal counsel to duly execute and
deliver to TI the form of legal opinion letter attached to his Conversion
Agreement as Exhibit "F" and incorporated herein by reference ("Legal Opinion").
(d) MPI shall deliver to TI copies of certificates of good
standing for MPI issued by the California Secretary of State and the California
Franchise Tax Board, dated not more than five (5) days prior to the Conversion
Date.
(e) MPI shall deliver to TI the stock certificate
representing One Million Fifty Six Thousand Twenty Seven (1,056,027) shares of
Series A Preferred Stock issued by MPI to TI.
(f) MPI shall deliver to TI and its legal counsel copies of
the following documents:
(i) A copy of the Certificate of Amendment and Bylaws
of MPI (as amended through the Conversion Date), certified by the Secretary of
MPI as true and correct copies thereof as of the Conversion Date.
(ii) A copy of the resolutions of the Board of
Directors and shareholders of MPI evidencing the amendment to MPI's Amended and
Restated Articles of Incorporation providing for the authorization of the Series
A Preferred Stock and the approval of this Agreement and the other agreements,
documents, and matters contemplated hereby, certified by the Secretary of MPI to
be true, complete and correct.
6.2 Actions By TI.
--------------
(a) TI shall duly execute and deliver to MPI a counterpart
copy of the Registration Agreement.
6.3 Effect of Conversion. Upon the occurrence of the Conversion
--------------------
Date, (a) the debts owed by MPI to TI shall be deemed to have been converted
into the number of shares of MPI's Series A Preferred Stock issued to TI, as set
forth in Section 6.1; and (b) as of
7
<PAGE>
and after the Conversion Date, MPI shall not owe any debt of any kind to TI, as
set forth in more detail pursuant to Section 7 of this Conversion Agreement.
7. Settlement and Mutual Release. If and only if the Conversion is
-----------------------------
completed pursuant to the terms and conditions of this Conversion Agreement,
then in that case only, effective as of the Conversion Date, MPI and TI agree
that the terms and conditions of this Section 7 shall be in effect with respect
to the Former Agreements and all of the respective rights and obligations of MPI
and TI pursuant to the Former Agreements and all other related agreements:
7.1 The Former Agreements shall be deemed to have been
voluntarily terminated pursuant to the mutual agreement of MPI and TI, without
any remaining liability to either the MPI Group or the Investor Group. Without
limiting the generality of the foregoing provisions of this section, MPI and TI
agree that MPI shall no longer have any obligations of any kind under the Former
Agreements to pay any amount to TI, and TI shall no longer have any rights of
any kind under the Former Agreements to convert any amounts owed under the
Former Agreements into, or to otherwise obtain ownership of, shares of MPI's
stock of any class or series.
7.2 The MPI Group with respect to the Investor Group, and the
Investor Group with respect to the MPI Group, shall be deemed to have forever
released and discharged each other from and against any and all claims, damages
and causes of action they may have against each other with respect to and in
connection with the Former Agreements and any matter arising out of the terms
and conditions thereof, including without limitation, any breach of any
representation or warranty or noncompliance or nonfulfillment of any covenant or
agreement contained in or arising out of the Former Agreements; provided that
such release and discharge shall not extend to any claims, damages and causes of
action any member of the Investor Group may have against any member of the MPI
Group (or any member of the MPI Group may have against any member of the
Investor Group) for fraud or willful misconduct with respect to any of the
Former Agreements or any of the transactions contemplated by this Agreement.
However, the foregoing release provisions of this section do not apply to this
Conversion Agreement, or the Certificate of Amendment, the Registration
Agreement, (collectively the "Ancillary Agreements"), or any of the respective
rights and obligations of MPI and/or TI pursuant to the terms and conditions of
this Conversion Agreement or the Ancillary Agreements.
8. Representations, Warranties and Agreements of MPI. In addition to
-------------------------------------------------
any representations and warranties MPI may make to TI elsewhere in this
Conversion Agreement, the Ancillary Agreements or in any other document
delivered to TI in connection herewith, MPI represents and warrants to TI that
the statements contained in this Section 8 are true, accurate, complete, and not
misleading in any material respect, and also shall be so as of the Conversion
Date.
8.1 Organization and Good Standing, and Other Status. MPI
------------------------------------------------
is a corporation, legally and validly incorporated, organized and existing under
the laws of the State
8
<PAGE>
of California. MPI is in good standing as certified by both the California
Secretary of State and the California Franchise Tax Board.
8.2 Authority to Conduct Business. MPI possesses full corporate power
-----------------------------
and lawful authority to own, lease and operate its assets, and to carry on its
business as presently conducted. MPI is duly and legally qualified to do
business and is in good standing in each country, state, county, city or other
jurisdiction in which the failure to so qualify would have a material adverse
impact on MPI's business.
8.3 Authority Regarding this Agreement.
----------------------------------
8.3.1 MPI has the complete and unrestricted right, power,
authority and capacity to (a) execute and deliver this Conversion Agreement, the
Ancillary Agreements and every other document executed and delivered by MPI to
TI in connection therewith (collectively the "Transaction Documents"); and (b)
carry out and perform each of MPI's obligations pursuant to the Transaction
Documents.
8.3.2 As of the Conversion Date, no further corporate or
shareholder authority, approvals, actions or proceedings will be necessary on
the part of MPI to authorize the Transaction Documents or any of the
transactions contemplated thereby.
8.3.3 This Conversion Agreement has been, and, as of the
Conversion Date all of the other Transaction Documents will have been, duly and
validly executed and delivered by MPI, and when so executed and delivered, will
constitute legal, valid and binding obligations of MPI, enforceable in
accordance with their terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement of creditors' rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief, or
other equitable remedies, and (iii) to the extent the indemnification provisions
contained in the Registration Agreement may be limited by applicable federal or
state securities laws.
8.3.4 The execution and delivery of this Conversion Agreement
does not, the execution and delivery of the other Transaction Documents will
not, and the consummation of the transactions contemplated thereby will not,
violate any provision of MPI's Amended and Restated Articles of Incorporation or
Bylaws (as amended), or any mortgage, lien, lease, agreement, instrument, order,
judgment or decree to which MPI is a party or by which MPI or any of its assets
is bound.
8.4 Valid Issuance of Preferred and Common Stock. The Series A
--------------------------------------------
Preferred Stock, when issued and delivered in accordance with the terms of this
Conversion Agreement, will be duly and validly issued, fully paid, and
nonassessable, and will be free of restrictions on transfer other than those
stated in this Conversion Agreement and/or that may arise under applicable state
and federal securities laws. The common stock of MPI issuable upon conversion of
the Series A Preferred Stock has been duly and validly reserved for issuance
and, upon issuance in accordance with the terms of the Certificate of Amendment,
will be duly and validly issued, fully paid, and nonassessable, and will be free
of restrictions on transfer other than
9
<PAGE>
those stated in this Conversion Agreement and/or that may arise under applicable
state and federal securities laws.
8.5 Consents. No consent, approval, order or authorization of, or
--------
registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority or any third party on the part of
MPI is required in connection with the consummation of the transactions
contemplated by this Conversion Agreement, except (i) the filing of the
Certificate of Amendment with the California Secretary of State; (ii) the filing
required pursuant to Section 25102(f) of the California Corporate Securities Law
of 1968, as amended, and the rules thereunder, which filing will be effected
within fifteen (15) days after the issuance of the Series A Preferred Stock
pursuant hereto.
8.6 Offering. Subject in part to the truth and accuracy of the
--------
representations of TI set forth in Section 9 of this Agreement, the issuance of
the Series A Preferred Stock as contemplated by the Transaction Documents is
exempt from the registration and qualification requirements of any applicable
state and federal securities laws, and neither MPI nor any authorized agent
acting on its behalf will take any action hereafter that would cause the loss of
such exemption.
8.7 Disclosure. MPI has fully provided TI with all information TI has
----------
requested for deciding whether to enter into the transactions contemplated by
the Transaction Documents, including without limitation, the acquisition of the
Series A Preferred Stock.
8.8 Brokers. MPI has not taken any actions in connection with the
-------
negotiations relating to the Transaction Documents or the transactions
contemplated thereby that could give rise to an obligation on the part of TI to
pay any brokerage or finder's fee, commission or similar compensation to any
party in connection therewith.
8.9 Litigation: Except as set forth in this Section 8.9, there is no
----------
action, suit, proceeding, claim, arbitration or investigation ("Action") pending
(or, to the best of MPI's knowledge, currently threatened) against MPI, its
activities, properties or assets or, to the best of MPI's knowledge, against any
officer, director or employee of MPI in connection with such officer's,
director's or employee's relationship with, or actions taken on behalf of, MPI.
To the best of MPI's knowledge, there is no factual or legal basis for any such
Action that might result, individually or in the aggregate, in any material
adverse change in the business, properties, assets, financial condition, affairs
or prospects of MPI. MPI is not a party to or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency or
instrumentality, and there is no Action by MPI currently pending or which MPI
intends to initiate (other than claims for monetary damages asserted by MPI
against International Business Machines Corporation ("IBM") under the Purchase
Option Agreement dated August 4, 1994, between IBM and MPI and the Multilayer
Technology Transfer and Licensing Agreement dated August 4, 1994, between IBM
and MPI). MPI is a defendant in a lawsuit filed on December 18, 1998, against
MPI and Schlumberger Technologies, Inc., in the United States District Court for
the Southern District of New York ("Lawsuit"). The plaintiffs in the Lawsuit are
Gary Stein and Lewis Solomon. Both Mr. Solomon and Mr. Stein are former
directors of MPI. The Lawsuit alleges the following claims against MPI:
10
<PAGE>
(a) Failure to pay an amount alleged to be not less than Thirty
Thousand Dollars ($30,000) allegedly owed to Lewis Solomon as compensation for
services performed by him as the former Chairman of MPI's Board of Directors;
(b) Failure to pay an amount alleged to be not less than Seventy
One Thousand Two Hundred Fifty Dollars ($71,250) allegedly owed in the aggregate
to Mr. Stein and Mr. Solomon as compensation under a consulting agreement;
(c) Wrongful termination of a consulting agreement, for which
wrongful termination Mr. Stein and Mr. Solomon allege damages in the aggregate
of not less than Five Hundred Thousand Dollars ($500,000);
(d) Tortious interference with Mr. Stein's and Mr. Solomon's
prospective economic relationships and business advantages as consultants and
directors of public corporations, presumably arising out of MPI's termination of
their consulting agreement, for which Mr. Stein and Mr. Solomon allege damages
in the aggregate of not less than Five Million Dollars ($5,000,000);
(e) Costs and expenses incurred in the Lawsuit in an unspecified
amount.
MPI believes the claims made by Mr. Stein and Mr. Solomon against MPI
in the lawsuit are completely without merit. MPI is actively and vigorously
defending the lawsuit, and has made substantial counterclaims against Mr. Stein
and Mr. Solomon.
8.10 Capitalization. The capitalization of MPI immediately prior to
--------------
the Conversion Date will consist of the following:
(a) Preferred Stock. A total of Nine Million Three Hundred
---------------
Sixty Two Thousand Seven Hundred Seventy Eight (9,362,778) authorized shares of
preferred stock, no par value per share, consisting of Nine Million Three
Hundred Sixty Two Thousand Seven Hundred Seventy Eight (9,362,778) shares
designated as Series A Preferred Stock, none of which will be issued and
outstanding. Upon the TI Conversion and Other Creditor Conversions, the rights,
preferences and privileges of the Series A Preferred Stock will be as stated in
MPI's Amended and Restated Articles of Incorporation, as amended by the
Certificate of Amendment, and as provided by law.
(b) Common Stock. A total of Fifty Million (50,000,000)
------------
authorized shares of common stock, no par value per share (the "Common Stock"),
of which not more than Eleven Million (11,000,000) shares will be issued and
outstanding.
(c) Options, Warrants, Reserved Shares. Except for: (i) the
----------------------------------
conversion privileges of the Series A Preferred Stock; (ii) Four Million Six
Hundred Ninety Thousand Six Hundred Thirty Two (4,690,632) shares of Common
Stock reserved for issuance under MPI's 1993 Stock Option Plan under which
options to purchase Two Million Four
11
<PAGE>
Hundred Twenty Four Thousand Five Hundred (2,424,500) shares are outstanding;
and (iii) warrants to purchase Seven Hundred Thousand (700,000) shares of Common
Stock; there is no outstanding, option, warrant, right (including conversion or
preemptive rights) or agreement for the purchase or acquisition from MPI of any
shares of its capital stock or any securities convertible into or ultimately
exchangeable or exercisable for any shares of MPI's capital stock. Apart from
the exceptions noted in this Section 8.10, and except for rights of first
refusal held by MPI to purchase shares of its stock issued under MPI's 1993
Stock Option Plan, no shares of MPI's outstanding capital stock , or stock
issuable upon exercise or exchange of any outstanding options, warrants or
rights, or other stock issuable by MPI, are subject to any preemptive rights,
rights of first refusal or other rights to purchase such stock (whether in favor
of MPI or any other person), pursuant to any agreement or commitment of MPI.
9. Representations, Warranties and Agreements of TI. In addition to
------------------------------------------------
any representations and warranties TI may make to MPI elsewhere in this
Conversion Agreement, the Ancillary Agreements or in any other document
delivered to MPI in connection herewith TI, represents and warrants to MPI that
the statements contained in this Section 9 are true, accurate, complete, and not
misleading in any material respect, and also shall be so as of the Conversion
Date.
9.1 Authority Regarding this Agreement.
----------------------------------
9.1.1 TI has the complete and unrestricted right, power,
authority and capacity to (a) execute and deliver each Transaction Document to
which it is a party; and (b) carry out and perform each of its obligations
pursuant to such Transaction Documents.
9.1.2 As of the Conversion Date, no further corporate or
shareholder authority, approvals, actions or proceedings will be necessary on
the part of TI to authorize the Transaction Documents or any of the transactions
contemplated thereby.
9.1.3 This Conversion Agreement has been, and, as of the
Conversion Date all of the other Transaction Documents will have been, duly and
validly executed and delivered by TI, and when so executed and delivered, will
constitute legal, valid and binding obligations of TI, enforceable in accordance
with their terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent the indemnification provisions contained in
the Registration Agreement may be limited by applicable federal or state
securities laws.
9.2 Purchase Entirely For Own Account. MPI is entering into the
---------------------------------
Transaction Documents in reliance on the representation made by TI, which
representation is confirmed by TI's execution of this Conversion Agreement, and
TI hereby confirms, that the Series A Preferred Stock to be received by TI, and
MPI's common stock issuable upon conversion thereof (collectively the
"Securities") will be acquired for investment and not with a view to the resale
or distribution of any part thereof, and that TI has no present intention of
selling, granting any participation in, or otherwise distributing the same. By
executing this
12
<PAGE>
Conversion Agreement, TI further represents that TI does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Securities.
9.3 Disclosure of Information. TI believes it has received all the
-------------------------
information it considers necessary or appropriate for deciding whether to
acquire the Securities. TI further represents that it has had an opportunity to
ask questions and receive answers from MPI regarding the terms and conditions of
the Transaction Documents and the business, properties, prospects and financial
condition of MPI.
9.4 Investment Experience. TI acknowledges that it is able to fend
---------------------
for itself, can bear the economic risk of its investment, and has such knowledge
and experience in financial or business matters that it is capable of evaluating
the merits and risks of the investment in the Securities. TI has carefully
evaluated its financial resources and investment position and the risks
associated with an investment in the Securities, and acknowledges that it is
able to bear the economic risks of this investment. TI further acknowledges that
its financial condition is such that it is not under any present necessity or
constraint to dispose of the securities to satisfy any existing or contemplated
debt or undertaking. TI also represents it has not been organized for the
purpose of acquiring the Securities.
9.5 Restricted Securities. TI understands that the Securities are
---------------------
characterized as "restricted securities" under the federal securities laws of
the United States, inasmuch as they are being acquired from MPI in a transaction
not involving a public offering, and that under such laws and applicable
regulations the Securities may be resold without registration only in certain
limited circumstances. In this connection, TI represents that it is familiar
with Securities and Exchange Commission ("SEC") Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and generally by
the federal securities laws of the United States. TI further understands that
the Securities have not been registered under the Securities Act of 1933, as
amended ("33 Act") or qualified or otherwise registered under the applicable
securities laws of any state or other jurisdiction, that any disposition of the
Securities by TI is subject to restrictions imposed by federal and state laws,
that the stock certificates representing the Securities will bear a restrictive
legend stating that TI cannot dispose of the Securities absent such registration
and qualification, except pursuant to any available exemption from such
registration and qualification.
9.6 Further Restrictions on Transfer. Without in any way limiting the
--------------------------------
representations set forth above in this Section 9, TI further agrees not to make
any disposition of all or any portion of the Securities unless and until the
transferee has agreed in writing for the benefit of MPI to be bound by the
provisions of Sections 9.3 through 9.7 hereof, and the provisions of the
Registration Agreement, to the extent such sections and such agreement are then
applicable, and:
(a) There is then in effect a Registration Statement under the
33 Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
13
<PAGE>
(b) TI shall have notified MPI of the proposed disposition and
shall have furnished MPI with a detailed statement of the circumstances
surrounding the proposed disposition, and if reasonably requested by MPI, TI
shall have furnished MPI with an opinion of counsel, reasonably satisfactory to
MPI, that such disposition will not require registration of the Securities in
question under the 33 Act.
Notwithstanding the provisions of paragraphs (a) and (b) above, no
such registration statement or opinion of counsel shall be required: (i) for any
transfer of any Securities in compliance with SEC Rule 144 or Rule 144A; or (ii)
for any transfer of any Securities by a holder thereof that is a partnership or
a corporation to: (1) a partner of such partnership or a shareholder of such
corporation; (2) a retired partner of such partnership who retires after the
date hereof; or (3) the estate of any such partner or shareholder; provided,
--------
that in each of the foregoing cases the transferee agrees in writing to be
subject to the terms of this Section 9 to the same extent as if the transferee
were an original purchaser of Securities hereunder.
9.7 Restrictive Legend. Each certificate representing the Series A
------------------
Preferred Stock or any other securities issued in respect of the Series A
Preferred Stock or upon the conversion thereof, shall be stamped or otherwise
imprinted with a legend in the following form, in addition to any legend
required pursuant to applicable state securities laws:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (AS AMENDED), NOR QUALIFIED OR OTHERWISE REGISTERED
UNDER THE APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. THESE
SECURITIES HAVE BEEN ACQUIRED ONLY FOR INVESTMENT AND MAY NOT BE OFFERED, SOLD,
TRANSFERRED, PLEDGED, OR OTHERWISE DISPOSED OF OR HYPOTHECATED (a) IN THE
ABSENCE OF BOTH (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OF 1933 (AS AMENDED), AND (ii) AN EFFECTIVE QUALIFICATION OR REGISTRATION UNDER
THE APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION, OR (b) UNLESS
AN EXEMPTION FROM ANY SUCH REGISTRATIONS OR QUALIFICATIONS IS AVAILABLE AND THE
ISSUER HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT
SUCH REGISTRATIONS OR QUALIFICATIONS ARE NOT REQUIRED.
9.8 (This Section has been intentionally left blank.)
9.9 Brokers or Finders. TI has not taken any actions in connection
------------------
with the negotiations relating to this Conversion Agreement or the transactions
contemplated hereby that could give rise to an obligation on the part of MPI to
pay any brokerage or finder's fee, commission or similar compensation to any
party in connection therewith.
14
<PAGE>
10. Miscellaneous Provisions.
------------------------
10.1 Exhibits. All exhibits described in this Conversion Agreement
--------
are incorporated by reference as if fully set forth herein, and constitute a
material part of this Conversion Agreement, whether or not such exhibits are
attached hereto.
10.2 Governing Law. This Conversion Agreement shall in all respects
-------------
be construed, interpreted and enforced in accordance with and governed by the
laws of the State of California, United States of America. Any legal action
between the parties regarding this Conversion Agreement shall be brought in, and
the parties hereby consent to the jurisdiction of and venue in, either (a) the
federal and state courts located in the County of San Diego, State of
California, United States of America; or (b) the courts located in the country
of Singapore.
10.3 Notices. Any notice, demand or other communication required or
-------
permitted under this Conversion Agreement shall be deemed given and delivered
when in writing and (a) personally served upon the receiving party, or (b) upon
the third (3rd) calendar day after mailing to the receiving party by either (i)
United States registered or certified mail, postage prepaid, or (ii) FedEx or
other comparable overnight delivery service, delivery charges prepaid, and
addressed as follows:
To MPI: Microelectronic Packaging, Inc.
9577 Chesapeake Drive
San Diego, CA 92123
Attn: Chief Executive Officer
To TI Texas Instruments Incorporated
PO Box 650311
MS 3994
Dallas, TX 75265
Attn: Mr. Thomas J. Gentry
Vice President
Any party may change the address specified in this section by giving the other
party notice of such new address in the manner set forth herein.
10.4 Severability. In the event that any provision of this Conversion
------------
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or invalid, then this Conversion Agreement shall continue
in full force and effect without said provision. If this Conversion Agreement
continues in full force and effect as provided above, the parties shall replace
the invalid provision with a valid provision which corresponds as far as
possible to the spirit and purpose of the invalid provision.
10.5 Counterparts. This Conversion Agreement may be executed in any
-------------
number of counterparts, each of which may be executed by less than all of the
parties hereto,
15
<PAGE>
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one document.
10.6 Entire Agreement. This Conversion Agreement, the Ancillary
----------------
Agreements, and the documents and agreements contemplated herein and therein,
constitute the entire agreement between the parties with respect to the subject
matter hereof, and supersede all prior oral or written agreements,
representations or warranties between the parties other than those set forth
herein or herein provided for.
10.7 Successors and Assigns. Except as specifically permitted
----------------------
pursuant to the terms and conditions hereof, no party shall be permitted to
assign their respective rights or obligations under this Conversion Agreement
without the prior written consent of the other parties. The provisions hereof
shall inure to the benefit of, and be binding upon, the permitted successors and
assigns, heirs, executors, and administrators of the parties hereto.
10.8 Amendment and Waiver. No modification or waiver of any provision
--------------------
of this Conversion Agreement shall be binding upon the party against whom it is
sought to be enforced, unless specifically set forth in writing signed by an
authorized representative of that party. A waiver by any party of any of the
terms or conditions of this Conversion Agreement in any one instance shall not
be deemed or construed to be a waiver of such terms or conditions for the
future, or of any subsequent breach thereof. The failure by any party hereto at
any time to enforce any of the provisions of this Conversion Agreement, or to
require at any time performance of any of the provisions hereof, shall in no way
to be construed to be a waiver of such provisions or to affect either the
validity of this Conversion Agreement or the right of any party to thereafter
enforce each and every provision of this Conversion Agreement.
[The remainder of this page has been intentionally left blank.]
16
<PAGE>
10.9 Survivability. All of the representations, warranties,
-------------
agreements and obligations of the parties pursuant to this Conversion Agreement
shall survive any issuance of the Shares and/or the Option Shares by the Company
to the Buyers.
IN WITNESS WHEREOF, the parties hereto have duly executed this Conversion
Agreement as of the date first above written.
MICROELECTRONIC PACKAGING, INC. TEXAS INSTRUMENTS INCORPORATED
By: /s/ Denis J. Trafecanty By: /s/ Thomas J. Gentry
------------------------------------ -------------------------------
Signature Signature
Title: Senior Vice President and CFO Title: Vice President
---------------------------------- ----------------------------
[The remainder of this page has been intentionally left blank.]
17
<PAGE>
Exhibit 10.76
DEBT CONVERSION
AND
MUTUAL SETTLEMENT AND RELEASE AGREEMENT
THIS DEBT CONVERSION AND MUTUAL SETTLEMENT AND RELEASE AGREEMENT
("Conversion Agreement") is entered into at San Diego, California, effective as
of April 16, 1999 ("Effective Date"), between Microelectronic Packaging, Inc.
("MPI"), on behalf of itself and its predecessors, successors, former and
current subsidiaries, affiliates, shareholders, directors, officers, agents,
attorneys, representatives, insurers, employees and assigns (collectively with
MPI the "MPI Group"); and ORIX Leasing Singapore Limited ("ORIX"), and their
respective predecessors, successors, former and current subsidiaries,
affiliates, shareholders, directors, officers, agents, attorneys,
representatives, insurers, employees and assigns (collectively with ORIX the
"Investor Group").
WITNESSETH:
WHEREAS, pursuant to Hire Purchase Agreement Nos. H/1875/95-9264, H-1874/
95-9263, H/1986/95-9265, H/2212/95-9668, H/0459/96-1061, H/0957/96-1329,
H/0959/96-1331, H/0958/96-1330, H/0069/96-0179 and H/1751/96-2298 by and between
MPM Singapore Pte. Ltd. ("MPM") and ORIX and pursuant to Hire Purchase Agreement
No. H/0956-96-1328 by and between Microelectronic Packaging (S) Pte Ltd ("MPS")
and ORIX (collectively, the "Agreements"), ORIX leased equipment to MPM and MPS,
respectively, each a subsidiary of MPI currently in liquidation, which
Agreements call for certain lease payments and interest amounts were thereafter
due and payable periodically;
WHEREAS, MPI entered into a Guarantee and Indemnity with ORIX in connection
with each of the Agreements (collectively, the "Guarantees"), pursuant to which
MPI agreed to guaranty the obligations of MPM and MPS under the Agreements;
WHEREAS, MPM and MPS have defaulted on their obligations under the
Agreements and giving rise to MPI's obligations under the Guarantees; and
WHEREAS, in an effort to restructure and settle all of MPI's obligations
under the Guarantees, MPI and ORIX entered into a Restructuring, Settlement and
Mutual Release Agreement dated April 14, 1998, pursuant to which MPI agreed to
make certain payments to ORIX, in exchange for the agreement of ORIX to reduce
the amount of MPI's obligations under the Guarantees ("Restructuring
Agreement"). Contingent upon MPI's performance of its obligations under the
Restructuring Agreement, the Restructuring Agreement provided that all
obligations of MPI under the Guarantees would be deemed settled and ORIX would
release MPI from any further obligations with respect thereto.
WHEREAS, MPI is not able to comply with its payment obligations under the
Restructuring Agreement.
WHEREAS, the MPI Group with respect to the Investor Group, and the Investor
Group with respect to the MPI Group, desire to finally settle all of their
respective rights and obligations under the Loan Agreements, the Guarantees, the
Restructuring Agreement and all
<PAGE>
amendments thereto, and all other related agreements (collectively the "Former
Agreements"), terminate and release all of their respective rights and
obligations under the Former Agreements, and settle all other disputes of any
kind that may or could exist between the MPI Group and the Investor Group with
respect to the Former Agreements, all upon the terms and conditions set forth in
this Conversion Agreement.
NOW THEREFORE, in consideration of the mutual agreements contained herein
and for other good and sufficient consideration, the receipt and sufficiency of
which is hereby acknowledged, the MPI Group and the Investor Group agree as
follows:
1. Defined Terms. In addition to those terms that may be defined elsewhere
-------------
in this Conversion Agreement, the following terms shall have the meanings
defined in this Section 1.
1.1 "Conversion Date" means the date upon which the ORIX Conversion
occurs pursuant to the terms and conditions hereof.
1.2 "Performance Date" means June 30, 1999.
1.3 "Series A Preferred Stock" means the Series A Preferred Stock of
MPI, the rights, preferences privileges and restrictions of which are set forth
in the Certificate of Amendment to the Amended and Restated Articles of
Incorporation of MPI, in the form attached hereto as Exhibit "A" and
incorporated herein by reference.
1.4 "Transpac Conversion" means the conversion of indebtedness in the
amount of principal and interest owed by MPM and guaranteed by MPI in the
aggregate to Transpac Capital Pte. Ltd., Transpac Industrial Holdings Ltd.,
Regional Investment Company Ltd. and Natsteel Equity III Pte. Ltd. (the
"Transpac Entities"), accrued as of December 31, 1997 (which is the entire
amount MPI and the Transpac Entities have agreed is due and payable), into Four
Million Thirty One Thousand Eight Hundred Twenty Six (4,031,826) shares of
Series A Preferred Stock.
1.5 "DBS Bank Conversion" means the conversion of indebtedness in the
amount of principal and interest owed by MPM and MPS and guaranteed by MPI to
Development Bank of Singapore Ltd. ("DBS"), accrued as of December 31, 1997
(which is the entire amount MPI and DBS have agreed is due and payable), into
One Million One Hundred Fifty Four Thousand Three Hundred Eleven (1,154,311)
shares of Series A Preferred Stock.
1.6 "Motorola Conversion" means the conversion of indebtedness in the
amount of principal and interest owed by MPS and guaranteed by MPI to Motorola,
Inc., accrued as of December 31, 1997 (which is the entire amount MPI and
Motorola have agreed is due and payable), into Eight Hundred Sixty Nine Thousand
Nine Hundred Thirty Two (869,932) shares of Series A Preferred Stock.
1.7 "NS Electronics Conversion" means the conversion of indebtedness
in the amount of principal and interest owed by MPI to NS Electronics Bangkok
2
<PAGE>
(1993) Ltd. ("NSEB"), accrued as of December 31, 1997 (which is the entire
amount MPI and NSEB have agreed is due and payable), into Two Hundred Seventy
One Thousand One Hundred Seventy Six (271,176) shares of Series A Preferred
Stock.
1.8 "ORIX Leasing Conversion" means the conversion of indebtedness in
the amount of principal and interest owed by MPM and MPS and guaranteed by MPI
to ORIX Leasing Singapore Limited, accrued as of December 31, 1997 (which is the
entire amount MPI and ORIX Leasing have agreed is due and payable) into Four
Hundred Seventy Three Thousand Five Hundred Eighty Four (473,584) shares of
Series A Preferred Stock.
1.9 "Samsung Corning Conversion" means the conversion of indebtedness
in the amount of principal and interest owed by MPS and guaranteed by MPI to
Samsung Corning Co., Ltd., accrued as of December 31, 1997 (which is the entire
amount MPI and Samsung Corning have agreed is due and payable) into One Hundred
Eighty Three Thousand Two Hundred Seventy Five (183,275) shares of Series A
Preferred Stock.
1.10 "STMicroelectronics Conversion" means the conversion of
indebtedness in the amount of principal and interest owed by MPS and guaranteed
by MPI to STMicroelectronics, Inc. (and/or any one or more assignees and/or
transferees of STMicroelectronics, Inc.), accrued as of December 31, 1997 (which
is the entire amount MPI and STMicroelectronics have agreed is due and payable)
into One Million Three Hundred Twenty Two Thousand Six Hundred Forty One
(1,322,641) shares of Series A Preferred Stock.
1.11 "Texas Instruments Conversion" means the conversion of
indebtedness in the amount of principal and interest owed by MPS and guaranteed
by MPI to Texas Instruments Incorporated, accrued as of December 31, 1997 (which
is the entire amount MPI and Texas Instruments have agreed is due and payable)
into One Million Fifty Six Thousand Twenty Seven (1,056,027) shares of Series A
Preferred Stock.
1.12 "Other Creditor Conversions" means collectively the DBS Bank
Conversion, the Motorola Conversion, the NS Electronics Conversion, the Transpac
Conversion, the Samsung Corning Conversion, the STMicroelectronics Conversion
and the Texas Instruments Conversion.
1.13 "Other Creditors" means collectively DBS; Motorola, Inc.; NSEB;
the Transpac Entities; Samsung Corning Co., Ltd.; STMicroelectronics, Inc.; and
Texas Instruments Incorporated.
1.14 "Insolvency Action" means the commencement of a voluntary or
involuntary case against MPI under the United States Bankruptcy Code ("Code") or
an assignment for the benefit of creditors by MPI, but shall not include any
involuntary case brought under the Code which is dismissed within sixty (60)
days of its commencement where no action is brought during such time period to
avoid any issuance of Series A Preferred Stock by MPI or the performance by MPI
of any of its other obligations pursuant to this Conversion Agreement.
3
<PAGE>
2. Duration of Conversion Agreement. This Conversion Agreement shall
--------------------------------
remain in full force and effect until the Conversion Date, subject to the
following termination provisions:
2.1 Prior to the Performance Date, no party shall have any right to
terminate this Conversion Agreement in any respect, and all of the terms and
conditions hereof shall remain in full force and effect as set forth herein.
2.2 As of and after the Conversion Date, even if the Conversion Date
occurs after the Performance Date, no party shall have any right to terminate
this Conversion Agreement in any respect, and all of the terms and conditions
hereof shall remain in full force and effect as set forth herein.
2.3 After the Performance Date, so long as the Conversion Date has not
occurred, ORIX shall have sole discretion (but shall not be required) to
terminate this Conversion Agreement by giving a written termination notice to
MPI ("Termination Notice"). In the event ORIX gives MPI a Termination Notice
after the Performance Date and prior to any occurrence of the Conversion Date,
then this Conversion Agreement shall be deemed terminated as of the date the
Termination Notice is deemed given to MPI pursuant to the provisions of Section
10.3 hereof. In the event this Conversion Agreement is terminated by ORIX
pursuant to the provisions of this Section 2.3, then this Conversion Agreement
shall be deemed completely void, and MPI and ORIX shall retain and remain
subject to whatever respective rights and obligations they may otherwise have
under the Former Agreements.
2.4 Regardless of any other provision of this Section 2, if an
Insolvency Action is commenced prior to the Conversion Date, then this
Conversion Agreement and the respective rights and obligations of MPI and ORIX
hereunder shall be deemed immediately terminated without notice, and MPI and
ORIX shall retain and remain subject to whatever respective rights and
obligations they may have under the Former Agreements.
2.5 Except as provided otherwise in Sections 7.1 or 7.2 of this
Agreement, the Former Agreements shall remain in full force and effect at all
times after the Effective Date.
3. Conditions to ORIX Conversion. The completion of the ORIX Conversion
-----------------------------
pursuant to the terms and conditions of this Conversion Agreement shall be
subject to the performance and satisfaction of each of the following conditions,
either prior to or concurrently with the occurrence of the ORIX Conversion
("Completion Conditions"):
3.1. The completion of the Other Creditor Conversions pursuant to
agreements entered into between MPI and the Other Creditors upon terms and
conditions that are not more favorable to any of such Other Creditors than the
terms and conditions contained in this Conversion Agreement. In particular, but
without limiting the generality of the foregoing provisions of this section, the
effective price per share of the Series A Preferred Stock applicable to the
Other Creditor Conversions shall not be less than One Dollar And Two Cents
($1.02), and the terms and conditions of the settlement and release provisions
applicable to the Other Creditor
4
<PAGE>
Conversions shall not be different in any material respect from the terms and
conditions of the settlement and release provisions contained in this Conversion
Agreement.
3.2 The material terms and conditions of the ORIX Conversion and the
Other Creditor Conversions shall have been approved by MPI's Board of Directors,
which approval shall be sought and obtained by MPI in accordance with all
applicable laws.
3.3 The material terms and conditions of the ORIX Conversion and the
Other Creditor Conversions shall have been approved by MPI's Shareholders, which
approval shall be sought and obtained by MPI in accordance with all applicable
laws.
3.4 The Certificate of Amendment of the Amended and Restated Articles
of Incorporation of MPI, in the form attached hereto as Exhibit "A" and
incorporated herein by reference ("Certificate of Amendment"), shall have been
duly adopted by all necessary corporate action of the Board of Directors and
shareholders of MPI, and shall have been duly filed with and accepted by the
California Secretary of State, upon which filing and acceptance MPI shall be
authorized to issue the Series A Preferred Stock to ORIX and the Other Creditors
as required pursuant to the ORIX Conversion and the Other Creditor Conversions.
3.5 L.H. Friend, Weinress, Frankson & Presson, Inc., an investment
banking firm who serves as financial adviser to MPI, shall have executed and
issued to MPI a written opinion, in form and substance satisfactory to MPI in
its sole discretion, concluding that the ORIX Conversion and the Other Creditor
Conversions are fair to MPI's Shareholders ("Fairness Opinion"), and a copy of
such Fairness Opinion shall have been provided to ORIX.
3.6 MPI and ORIX shall have performed each of their respective
obligations and conditions that this Conversion Agreement requires them to
perform on or prior to the Conversion Date.
4. Obligations of MPI for ORIX Conversion. MPI shall have the following
--------------------------------------
affirmative obligations under this Conversion Agreement until such time as the
ORIX Conversion has been completed, or this Conversion Agreement has been
terminated pursuant to the provisions of Section 2 hereof:
4.1 MPI shall use its best and most diligent efforts to obtain the
agreement of each of the Other Creditors to complete the Other Creditor
Conversions pursuant to agreements entered into between MPI and the Other
Creditors upon terms and conditions that are not more favorable to such Other
Creditors than the terms and conditions contained in this Conversion Agreement.
In particular, but without limiting the generality of the foregoing provisions
of this section, MPI shall use its best and most diligent efforts to obtain the
agreement of the Other Creditors that the effective price per share of the
Series A Preferred Stock applicable to the Other Creditor Conversions shall not
be less than One Dollar And Two Cents ($1.02), and the terms and conditions of
the settlement and release provisions applicable to the Other Creditor
Conversions shall not be different in any material respect from the terms and
conditions of the settlement and release provisions contained in this Conversion
Agreement.
5
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4.2 MPI shall use its best and most diligent efforts to obtain the
approval of MPI's Board of Directors of the material terms and conditions of the
ORIX Conversion and the Other Creditor Conversions, which approval shall be
obtained in accordance with applicable laws.
4.3 MPI shall use its best and most diligent efforts to obtain the
approval of MPI's Shareholders of the material terms and conditions of the ORIX
Conversion and the Other Creditor Conversions, which approval shall be obtained
in accordance with applicable laws.
4.4 MPI shall use its best and most diligent efforts to cause the
Certificate of Amendment to be approved by MPI's Board of Directors and
shareholders, which approval shall be obtained in accordance with applicable
laws, and to cause the Certificate of Amendment to be filed with and accepted by
the California Secretary of State, upon which filing and acceptance MPI shall be
authorized to issue the Series A Preferred Stock to ORIX and the Other Creditors
as required pursuant to the ORIX Conversion and the Other Creditor Conversions.
4.5 MPI shall use its best and most diligent efforts to cause the ORIX
Conversion to be completed as soon as reasonably possible.
4.6 MPI shall use its best and most diligent efforts at all times
prior to the Conversion Date, to conduct its business in the usual and ordinary
course.
5. [This Section has been intentionally left blank.]
6. Completion of Conversion. At such time as all of the Completion
------------------------
Conditions have been performed and satisfied by MPI, then MPI and ORIX shall
complete the ORIX Conversion concurrently with the completion by MPI and the
Other Creditors of the Other Creditor Conversions, by concurrently taking the
following actions:
6.1 Actions By MPI.
--------------
(a) MPI shall duly execute and deliver to ORIX a counterpart copy
of the form of Registration Rights Agreement attached to this Conversion
Agreement as Exhibit "B" and incorporated herein by reference ("Registration
Agreement").
(b) MPI's Chief Executive Officer shall duly execute and deliver
to ORIX the form of Certificate of Chief Executive Officer attached to this
Conversion Agreement as Exhibit "E" and incorporated herein by reference
("Certificate of CEO"), certifying the following matters:
(i) Any approvals of MPI's shareholders and directors that
may be required under any applicable law, in connection with the transactions
contemplated by this Conversion Agreement, have been duly obtained and are in
full force and effect as of the Conversion Date.
6
<PAGE>
(ii) All of the representations and warranties of MPI set
forth in this Conversion Agreement,. the Ancillary Agreements (as defined below)
or in any other document delivered to ORIX in connection herewith, are true,
accurate, complete, and not misleading in any material respect as of the
Conversion Date.
(iii) MPI has performed all of the duties and obligations
required to be performed by MPI on or prior to the Conversion Date, pursuant to
the provisions of this Conversion Agreement, the Ancillary Agreements (as
defined below) or in any other document delivered to ORIX in connection
herewith.
(c) MPI shall cause its legal counsel to duly execute and deliver
to ORIX the of legal opinion letter attached to his Conversion Agreement as
Exhibit "F" and incorporated herein by reference ("Legal Opinion").
(d) MPI shall deliver to ORIX copies of certificates of good
standing for MPI issued by the California Secretary and State and the California
Franchise Tax Board, dated not more than five (5) days prior to the Conversion
Date.
(e) MPI shall deliver to ORIX the stock certificate representing
Four Hundred Seventy Three Thousand Five Hundred Eighty Four (473,584) shares of
Series A Preferred Stock issued by MPI to ORIX.
(f) MPI shall deliver to ORIX and its legal counsel copies of the
following documents:
(i) A copy of the Certificate of Amendment and Bylaws of MPI
(as amended through the Conversion Date), certified by the Secretary of MPI as
true and correct copies thereof as of the Conversion Date.
(ii) A copy of the resolutions of the Board of Directors and
shareholders of MPI evidencing the amendment to MPI's Amended and Restated
Articles of Incorporation providing for the authorization of the Series A
Preferred Stock and the approval of this Agreement and the other
agreements, documents, and matters contemplated hereby, certified by the
Secretary of MPI to be true, complete and correct.
6.2 Actions By ORIX.
----------------
(a) ORIX shall duly execute and deliver to MPI a counterpart copy
of the Registration Agreement.
6.3 Effect of Conversion. Upon the occurrence of the Conversion Date,
--------------------
(a) the debts owed by MPI to ORIX shall be deemed to have been converted,
respectively, into the number of shares of MPI's Series A Preferred Stock issued
to ORIX, as set forth in Section 6.1; and (b) as of and after the Conversion
Date, MPI shall not owe any debt of any kind to ORIX, as set forth in more
detail pursuant to Section 7 of this Conversion Agreement.
7
<PAGE>
7. Settlement and Mutual Release. If and only if the Conversion is
-----------------------------
completed pursuant to the terms and conditions of this Conversion Agreement,
then in that case only, effective as of the Conversion Date, MPI and ORIX agree
that the terms and conditions of this Section 7 shall be in effect with respect
to the Former Agreements and all of the respective rights and obligations of MPI
and ORIX pursuant to the Former Agreements and all other related agreements:
7.1 The Former Agreements shall be deemed to have been voluntarily
terminated pursuant to the mutual agreement of MPI and ORIX, without any
remaining liability to either the MPI Group or the Investor Group. Without
limiting the generality of the foregoing provisions of this section, MPI and
ORIX agree that MPI shall no longer have any obligations of any kind under the
Former Agreements to pay any amount to ORIX, and ORIX shall no longer have any
rights of any kind under the Former Agreements to convert any amounts owed under
the Former Agreements into, or to otherwise obtain ownership of, shares of MPI's
stock of any class or series.
7.2 The MPI Group with respect to the Investor Group, and the Investor
Group with respect to the MPI Group, shall be deemed to have forever released
and discharged each other from and against any and all claims, damages and
causes of action they may have against each other with respect to and in
connection with the Former Agreements and any matter arising out of the terms
and conditions thereof, including without limitation, any breach of any
representation or warranty or noncompliance or nonfulfillment of any covenant or
agreement contained in or arising out of the Former Agreements; provided that
such release and discharge shall not extend to any claims, damages and causes of
action any member of the Investor Group may have against any member of the MPI
Group (or any member of the MPI Group may have against any member of the
Investor Group) for fraud or willful misconduct with respect to any of the
Former Agreements or any of the transactions contemplated by this Agreement.
However, the foregoing release provisions of this section do not apply to this
Conversion Agreement, or the Certificate of Amendment, the Registration
Agreement, (collectively the "Ancillary Agreements"), or any of the respective
rights and obligations of MPI and/or ORIX pursuant to the terms and conditions
of this Conversion Agreement or the Ancillary Agreements.
8. Representations, Warranties and Agreements of MPI. In addition to any
-------------------------------------------------
representations and warranties MPI may make to ORIX elsewhere in this Conversion
Agreement, the Ancillary Agreements or in any other document delivered to ORIX
in connection herewith, MPI represents and warrants to ORIX that the statements
contained in this Section 8 are true, accurate, complete, and not misleading in
any material respect, and also shall be so as of the Conversion Date.
8.1 Organization and Good Standing, and Other Status. MPI is a
------------------------------------------------
corporation, legally and validly incorporated, organized and existing under the
laws of the State of California. MPI is in good standing as certified by both
the California Secretary of State and the California Franchise Tax Board.
8
<PAGE>
8.2 Authority to Conduct Business. MPI possesses full corporate power
-----------------------------
and lawful authority to own, lease and operate its assets, and to carry on its
business as presently conducted. MPI is duly and legally qualified to do
business and is in good standing in each country, state, county, city or other
jurisdiction in which the failure to so qualify would have a material adverse
impact on MPI's business.
8.3 Authority Regarding this Agreement.
----------------------------------
8.3.1 MPI has the complete and unrestricted right, power,
authority and capacity to (a) execute and deliver this Conversion Agreement, the
Ancillary Agreements and every other document executed and delivered by MPI to
ORIX in connection therewith (collectively the "Transaction Documents"); and (b)
carry out and perform each of MPI's obligations pursuant to the Transaction
Documents.
8.3.2 As of the Conversion Date, no further corporate or
shareholder authority, approvals, actions or proceedings will be necessary on
the part of MPI to authorize the Transaction Documents or any of the
transactions contemplated thereby.
8.3.3 This Conversion Agreement has been, and, as of the
Conversion Date all of the other Transaction Documents will have been, duly and
validly executed and delivered by MPI, and when so executed and delivered, will
constitute legal, valid and binding obligations of MPI, enforceable in
accordance with their terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement of creditors' rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief, or
other equitable remedies, and (iii) to the extent the indemnification provisions
contained in the Registration Agreement may be limited by applicable federal or
state securities laws.
8.3.4 The execution and delivery of this Conversion Agreement
does not, the execution and delivery of the other Transaction Documents will
not, and the consummation of the transactions contemplated thereby will not,
violate any provision of MPI's Amended and Restated Articles of Incorporation or
Bylaws (as amended), or any mortgage, lien, lease, agreement, instrument, order,
judgment or decree to which MPI is a party or by which MPI or any of its assets
is bound.
8.4 Valid Issuance of Preferred and Common Stock. The Series A
---------------------------------------------
Preferred Stock, when issued and delivered in accordance with the terms of this
Conversion Agreement, will be duly and validly issued, fully paid, and
nonassessable, and will be free of restrictions on transfer other than those
stated in this Conversion Agreement and/or that may arise under applicable state
and federal securities laws. The common stock of MPI issuable upon conversion of
the Series A Preferred Stock has been duly and validly reserved for issuance
and, upon issuance in accordance with the terms of the Certificate of Amendment,
will be duly and validly issued, fully paid, and nonassessable, and will be free
of restrictions on transfer other than those stated in this Conversion Agreement
and/or that may arise under applicable state and federal securities laws.
9
<PAGE>
8.5 Consents. No consent, approval, order or authorization of, or
---------
registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority or any third party on the part of
MPI is required in connection with the consummation of the transactions
contemplated by this Conversion Agreement, except (i) the filing of the
Certificate of Amendment with the California Secretary of State; (ii) the filing
required pursuant to Section 25102(f) of the California Corporate Securities Law
of 1968, as amended, and the rules thereunder, which filing will be effected
within fifteen (15) days after the issuance of the Series A Preferred Stock
pursuant hereto.
8.6 Offering. Subject in part to the truth and accuracy of the
--------
representations of ORIX set forth in Section 9 of this Agreement, the issuance
of the Series A Preferred Stock as contemplated by the Transaction Documents is
exempt from the registration and qualification requirements of any applicable
state and federal securities laws, and neither MPI nor any authorized agent
acting on its behalf will take any action hereafter that would cause the loss of
such exemption.
8.7 Disclosure. MPI has fully provided ORIX with all information ORIX
----------
has requested for deciding whether to enter into the transactions contemplated
by the Transaction Documents, including without limitation, the acquisition of
the Series A Preferred Stock.
8.8 Brokers. MPI has not taken any actions in connection with the
-------
negotiations relating to the Transaction Documents or the transactions
contemplated thereby that could give rise to an obligation on the part of ORIX
to pay any brokerage or finder's fee, commission or similar compensation to any
party in connection therewith.
8.9 Litigation: Except as set forth in this Section 8.9, there is no
----------
action, suit, proceeding, claim, arbitration or investigation ("Action") pending
(or, to the best of MPI's knowledge, currently threatened) against MPI, its
activities, properties or assets or, to the best of MPI's knowledge, against any
officer, director or employee of MPI in connection with such officer's,
director's or employee's relationship with, or actions taken on behalf of, MPI.
To the best of MPI's knowledge, there is no factual or legal basis for any such
Action that might result, individually or in the aggregate, in any material
adverse change in the business, properties, assets, financial condition, affairs
or prospects of MPI. MPI is not a party to or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency or
instrumentality, and there is no Action by MPI currently pending or which MPI
intends to initiate (other than claims for monetary damages asserted by MPI
against International Business Machines Corporation ("IBM") under the Purchase
Option Agreement dated August 4, 1994, between IBM and MPI and the Multilayer
Technology Transfer and Licensing Agreement dated August 4, 1994, between IBM
and MPI). MPI is a defendant in a lawsuit filed on December 18, 1998, against
MPI and Schlumberger Technologies, Inc., in the United States District Court for
the Southern District of New York ("Lawsuit"). The plaintiffs in the Lawsuit are
Gary Stein and Lewis Solomon. Both Mr. Solomon and Mr. Stein are former
directors of MPI. The Lawsuit alleges the following claims against MPI:
10
<PAGE>
(a) Failure to pay an amount alleged to be not less than Thirty
Thousand Dollars ($30,000) allegedly owed to Lewis Solomon as compensation for
services performed by him as the former Chairman of MPI's Board of Directors;
(b) Failure to pay an amount alleged to be not less than Seventy
One Thousand Two Hundred Fifty Dollars ($71,250) allegedly owed in the aggregate
to Mr. Stein and Mr. Solomon as compensation under a consulting agreement;
(c) Wrongful termination of a consulting agreement, for which
wrongful termination Mr. Stein and Mr. Solomon allege damages in the aggregate
of not less than Five Hundred Thousand Dollars ($500,000);
(d) Tortious interference with Mr. Stein's and Mr. Solomon's
prospective economic relationships and business advantages as consultants and
directors of public corporations, presumably arising out of MPI's termination of
their consulting agreement, for which Mr. Stein and Mr. Solomon allege damages
in the aggregate of not less Than Five Million Dollars ($5,000,000);
(e) Costs and expenses incurred in the Lawsuit in an unspecified
amount.
MPI believes the claims made by Mr. Stein and Mr. Solomon against MPI
in the lawsuit are completely without merit. MPI is actively and vigorously
defending the lawsuit, and has made substantial counterclaims against Mr. Stein
and Mr. Solomon.
8.10 Capitalization. The capitalization of MPI immediately prior to the
--------------
Conversion Date will consist of the following:
(a) Preferred Stock. A total Of Nine Million Three Hundred Sixty
---------------
Two Thousand Seven Hundred Seventy Eight (9,362,778) authorized shares of
preferred stock, no par value per share, consisting of Nine Million Three
Hundred Sixty Two Thousand Seven Hundred Seventy Eight (9,362,778) shares
designated as Series A Preferred Stock, none of which will be issued and
outstanding. Upon the ORIX Conversion and Other Creditor Conversions, the
rights, preferences and privileges of the Series A Preferred Stock will be as
stated in MPI's Amended and Restated Articles of Incorporation, as amended by
the Certificate of Amendment, and as provided by law.
(b) Common Stock. A total of Fifty Million (50,000,000)
------------
authorized shares of common stock, no par value per share (the "Common Stock"),
of which not more than Eleven Million (11,000,000) shares will be issued and
outstanding.
(c) Options, Warrants, Reserved Shares. Except for: (i) the
----------------------------------
conversion privileges of the Series A Preferred Stock; (ii) Four Million Six
Hundred Ninety Thousand Six Hundred Thirty Two (4,690,632) shares of Common
Stock reserved for issuance under MPI's 1993 Stock Option Plan under which
options to purchase Two Million Four Hundred Twenty Four Thousand Five Hundred
(2,424,500) shares are outstanding; and (iii)
11
<PAGE>
warrants to purchase Seven Hundred Thousand (700,000) shares of Common Stock;
there is no outstanding, option, warrant, right (including conversion or
preemptive rights) or agreement for the purchase or acquisition from MPI of any
shares of its capital stock or any securities convertible into or ultimately
exchangeable or exercisable for any shares of MPI's capital stock. Apart from
the exceptions noted in this Section 8.10, and except for rights of first
refusal held by MPI to purchase shares of its stock issued under MPI's 1993
Stock Option Plan, no shares of MPI's outstanding capital stock , or stock
issuable upon exercise or exchange of any outstanding options, warrants or
rights, or other stock issuable by MPI, are subject to any preemptive rights,
rights of first refusal or other rights to purchase such stock (whether in favor
of MPI or any other person), pursuant to any agreement or commitment of MPI.
9. Representations, Warranties and Agreements of ORIX. In addition to
---------------------------------------------------
any representations and warranties ORIX may make to MPI elsewhere in this
Conversion Agreement, the Ancillary Agreements or in any other document
delivered to MPI in connection herewith ORIX, represents and warrants to MPI
that the statements contained in this Section 9 are true, accurate, complete,
and not misleading in any material respect, and also shall be so as of the
Conversion Date.
9.1 Authority Regarding this Agreement.
----------------------------------
9.1.1 ORIX has the complete and unrestricted right, power,
authority and capacity to (a) execute and deliver each Transaction Document to
which it is a party; and (b) carry out and perform each of its obligations
pursuant to such Transaction Documents.
9.1.2 As of the Conversion Date, no further corporate or
shareholder authority, approvals, actions or proceedings will be necessary on
the part of ORIX to authorize the Transaction Documents or any of the
transactions contemplated thereby.
9.1.3 This Conversion Agreement has been, and, as of the
Conversion Date all of the other Transaction Documents will have been, duly and
validly executed and delivered by ORIX, and when so executed and delivered, will
constitute legal, valid and binding obligations of ORIX, enforceable in
accordance with their terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement of creditors' rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief, or
other equitable remedies, and (iii) to the extent the indemnification provisions
contained in the Registration Agreement may be limited by applicable federal or
state securities laws.
9.2 Purchase Entirely For Own Account. MPI is entering into the
---------------------------------
Transaction Documents in reliance on the representation made by ORIX, which
representation is confirmed by ORIX's execution of this Conversion Agreement,
and ORIX hereby confirms, that the Series A Preferred Stock to be received by
ORIX, and MPI's common stock issuable upon conversion thereof (collectively the
"Securities") will be acquired for investment and not with a view to the resale
or distribution of any part thereof, and that ORIX has no present intention of
selling, granting any participation in, or otherwise distributing the same. By
executing this
12
<PAGE>
Conversion Agreement, ORIX further represents that ORIX does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Securities.
9.3 Disclosure of Information. ORIX believes it has received all
-------------------------
the information it considers necessary or appropriate for deciding whether to
acquire the Securities. ORIX further represents that it has had an opportunity
to ask questions and receive answers from MPI regarding the terms and conditions
of the Transaction Documents and the business, properties, prospects and
financial condition of MPI.
9.4 Investment Experience. ORIX acknowledges that it is able to
---------------------
fend for itself, can bear the economic risk of its investment, and has such
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment in the Securities. ORIX has
carefully evaluated its financial resources and investment position and the
risks associated with an investment in the Securities, and acknowledges that it
is able to bear the economic risks of this investment. ORIX further acknowledges
that its financial condition is such that it is not under any present necessity
or constraint to dispose of the securities to satisfy any existing or
contemplated debt or undertaking. ORIX also represents it has not been organized
for the purpose of acquiring the Securities.
9.5 Restricted Securities. ORIX understands that the Securities
---------------------
are characterized as "restricted securities" under the federal securities laws
of the United States, inasmuch as they are being acquired from MPI in a
transaction not involving a public offering, and that under such laws and
applicable regulations the Securities may be resold without registration only in
certain limited circumstances. In this connection, ORIX represents that it is
familiar with Securities and Exchange Commission ("SEC") Rule 144, as presently
in effect, and understands the resale limitations imposed thereby and generally
by the federal securities laws of the United States. ORIX further understands
that the Securities have not been registered under the Securities Act of 1933,
as amended ("33 Act") or qualified or otherwise registered under the applicable
securities laws of any state or other jurisdiction, that any disposition of the
Securities by ORIX is subject to restrictions imposed by federal and state laws,
that the stock certificates representing the Securities will bear a restrictive
legend stating that ORIX cannot dispose of the Securities absent such
registration and qualification, except pursuant to any available exemption from
such registration and qualification.
9.6 Further Restrictions on Transfer. Without in any way limiting
--------------------------------
the representations set forth above in this Section 9, ORIX further agrees not
to make any disposition of all or any portion of the Securities unless and until
the transferee has agreed in writing for the benefit of MPI to be bound by the
provisions of Sections 9.3 through 9.7 hereof, and the provisions of the
Registration Agreement, to the extent such sections and such agreement are then
applicable, and:
(a) There is then in effect a Registration Statement under
the 33 Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
13
<PAGE>
(b) ORIX shall have notified MPI of the proposed disposition
and shall have furnished MPI with a detailed statement of the circumstances
surrounding the proposed disposition, and if reasonably requested by MPI, ORIX
shall have furnished MPI with an opinion of counsel, reasonably satisfactory to
MPI, that such disposition will not require registration of the Securities in
question under the 33 Act.
Notwithstanding the provisions of paragraphs (a) and (b) above, no
such registration statement or opinion of counsel shall be required: (i) for any
transfer of any Securities in compliance with SEC Rule 144 or Rule 144A; or (ii)
for any transfer of any Securities by a holder thereof that is a partnership or
a corporation to: (1) a partner of such partnership or a shareholder of such
corporation; (2) a retired partner of such partnership who retires after the
date hereof; or (3) the estate of any such partner or shareholder; provided,
--------
that in each of the foregoing cases the transferee agrees in writing to be
subject to the terms of this Section 9 to the same extent as if the transferee
were an original purchaser of Securities hereunder.
9.7 Restrictive Legend. Each certificate representing the Series
------------------
A Preferred Stock or any other securities issued in respect of the Series A
Preferred Stock or upon the conversion thereof, shall be stamped or otherwise
imprinted with a legend in the following form, in addition to any legend
required pursuant to applicable state securities laws:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (AS AMENDED), NOR QUALIFIED OR OTHERWISE REGISTERED
UNDER THE APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. THESE
SECURITIES HAVE BEEN ACQUIRED ONLY FOR INVESTMENT AND MAY NOT BE OFFERED, SOLD,
TRANSFERRED, PLEDGED, OR OTHERWISE DISPOSED OF OR HYPOTHECATED (a) IN THE
ABSENCE OF BOTH (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OF 1933 (AS AMENDED), AND (ii) AN EFFECTIVE QUALIFICATION OR REGISTRATION UNDER
THE APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION, OR (b) UNLESS
AN EXEMPTION FROM ANY SUCH REGISTRATIONS OR QUALIFICATIONS IS AVAILABLE AND THE
ISSUER HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT
SUCH REGISTRATIONS OR QUALIFICATIONS ARE NOT REQUIRED.
9.8 Foreign Persons. If ORIX is not a United States person, ORIX
---------------
hereby represents that (a) it has satisfied itself as to the full observance of
the laws of its own jurisdiction in connection with any acquisition of the
Securities, including without limitation (i) the legal requirements within such
jurisdiction applicable to the acquisition of the Securities; (ii) any foreign
exchange restrictions applicable to such acquisition; (iii) any governmental or
other consents that may need to be obtained; and (iv) the income tax and other
tax consequences, if any, that may be relevant to the acquisition, holding, sale
or transfer of the Securities; and (b) ORIX's acquisition and continued
ownership of the Securities will not violate any applicable securities or other
laws of such member's jurisdiction.
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9.9 Brokers or Finders. ORIX has not taken any actions in
------------------
connection with the negotiations relating to this Conversion Agreement or the
transactions contemplated hereby that could give rise to an obligation on the
part of MPI to pay any brokerage or finder's fee, commission or similar
compensation to any party in connection therewith.
10. Miscellaneous Provisions.
------------------------
10.1 Exhibits. All exhibits described in this Conversion
--------
Agreement are incorporated by reference as if fully set forth herein, and
constitute a material part of this Conversion Agreement, whether or not such
exhibits are attached hereto.
10.2 Governing Law. This Conversion Agreement shall in all
-------------
respects be construed, interpreted and enforced in accordance with and governed
by the laws of the State of California, United States of America. Any legal
action between the parties regarding this Conversion Agreement shall be brought
in, and the parties hereby consent to the jurisdiction of and venue in, either
(a) the federal and state courts located in the County of San Diego, State of
California, United States of America; or (b) the courts located in the country
of Singapore.
10.3 Notices. Any notice, demand or other communication required
-------
or permitted under this Conversion Agreement shall be deemed given and delivered
when in writing and (a) personally served upon the receiving party, or (b) upon
the third (3rd) calendar day after mailing to the receiving party by either (i)
United States registered or certified mail, postage prepaid, or (ii) FedEx or
other comparable overnight delivery service, delivery charges prepaid, and
addressed as follows:
To MPI: Microelectronic Packaging, Inc.
9577 Chesapeake Drive
San Diego, CA 92123
Attn: Chief Executive Officer
To ORIX: ORIX Leasing Singapore Limited
331 North Bridge Road #19-01/06
Odean Towers, Singapore 188720
Attn: Managing Director
Any party may change the address specified in this section by giving the other
party notice of such new address in the manner set forth herein.
10.4 Severability. In the event that any provision of this
------------
Conversion Agreement becomes or is declared by a court of competent jurisdiction
to be illegal, unenforceable or invalid, then this Conversion Agreement shall
continue in full force and effect without said provision. If this Conversion
Agreement continues in full force and effect as provided above, the parties
shall replace the invalid provision with a valid provision which corresponds as
far as possible to the spirit and purpose of the invalid provision.
15
<PAGE>
10.5 Counterparts. This Conversion Agreement may be executed in
------------
any number of counterparts, each of which may be executed by less than all of
the parties hereto, each of which shall be enforceable against the parties
actually executing such counterparts, and all of which together shall constitute
one document.
10.6 Entire Agreement. This Conversion Agreement, the Ancillary
----------------
Agreements, and the documents and agreements contemplated herein and therein,
constitute the entire agreement between the parties with respect to the subject
matter hereof, and supersede all prior oral or written agreements,
representations or warranties between the parties other than those set forth
herein or herein provided for.
10.7 Successors and Assigns. Except as specifically permitted
----------------------
pursuant to the terms and conditions hereof, no party shall be permitted to
assign their respective rights or obligations under this Conversion Agreement
without the prior written consent of the other parties. The provisions hereof
shall inure to the benefit of, and be binding upon, the permitted successors and
assigns, heirs, executors, and administrators of the parties hereto.
10.8 Amendment and Waiver. No modification or waiver of any
--------------------
provision of this Conversion Agreement shall be binding upon the party against
whom it is sought to be enforced, unless specifically set forth in writing
signed by an authorized representative of that party. A waiver by any party of
any of the terms or conditions of this Conversion Agreement in any one instance
shall not be deemed or construed to be a waiver of such terms or conditions for
the future, or of any subsequent breach thereof. The failure by any party hereto
at any time to enforce any of the provisions of this Conversion Agreement, or to
require at any time performance of any of the provisions hereof, shall in no way
to be construed to be a waiver of such provisions or to affect either the
validity of this Conversion Agreement or the right of any party to thereafter
enforce each and every provision of this Conversion Agreement.
[The remainder of this page has been intentionally left blank.]
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10.9 Survivability. All of the representations, warranties,
-------------
agreements and obligations of the parties pursuant to this Conversion Agreement
shall survive any issuance of the Shares and/or the Option Shares by the Company
to the Buyers.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Conversion Agreement as of the date first above written.
MICROELECTRONIC PACKAGING, INC. ORIX LEASING SINGAPORE LIMITED
By: /s/ Denis J. Trafecanty By: /s/ C.T. Kwek
-------------------------------- ---------------------------
Signature Signature
Title: Senior Vice President and CFO Title: Managing Director
----------------------------- ------------------------
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17
<PAGE>
EXHIBIT 10.77
DEBT CONVERSION
AND
MUTUAL SETTLEMENT AND RELEASE AGREEMENT
THIS DEBT CONVERSION AND MUTUAL SETTLEMENT AND RELEASE AGREEMENT
("Conversion Agreement") is entered into at San Diego, California, effective as
of April 29, 1999 ("Effective Date"), between Microelectronic Packaging, Inc.
("MPI"), on behalf of itself and its predecessors, successors, former and
current subsidiaries, affiliates, shareholders, directors, officers, agents,
attorneys, representatives, insurers, employees and assigns (collectively with
MPI the "MPI Group"); and Transpac Capital Pte Ltd ("Transpac Capital"),
Transpac Industrial Holdings Ltd ("Transpac Holdings"), Regional Investment
Company Ltd ("Regional Investment"), and Natsteel Equity III Pte Ltd ("Natsteel
Equity"), and their respective predecessors, successors, former and current
subsidiaries, affiliates, shareholders, directors, officers, agents, attorneys,
representatives, insurers, employees and assigns (collectively the "Investor
Group").
WITNESSETH:
WHEREAS, MPI (as "Holding Company"); MPM Singapore Pte Ltd (as
"Company"), a wholly owned subsidiary of MPI that is in liquidation ("MPM"); the
Investor Group (as "Investors"); and Transpac Capital (as "Agent"); are parties
to an agreement entitled Convertible Loan Agreement dated March 25, 1996 ("Loan
Agreement").
WHEREAS, in connection with the Loan Agreement, MPI (as "Guarantor")
entered into a guaranty dated March 26, 1996, pursuant to which MPI guaranteed
the payment obligations of MPM pursuant to the Loan Agreement ("Guaranty").
WHEREAS, in connection with the Loan Agreement, MPI (as "Company") and
the Investor Group (as "Investors") entered into a Subscription Agreement dated
March 25, 1996, pursuant to which MPI sold and issued to the Investor Group the
aggregate number of Eight Hundred Forty Two Thousand and Thirteen (842,013)
shares of MPI's common stock for an aggregate purchase price of Two Million
Dollars ($2,000,000.00), which would be equal to a price per share of Two Point
Three Seven Five Two Six Zero Two Dollars ($2.3752602) per share ("Subscription
Agreement").
WHEREAS, MPM has not been able to comply with its payment obligations
under the Loan Agreement, is in default thereunder, and is in liquidation.
WHEREAS, in an effort to restructure and settle all of MPI's
obligations under the Loan Agreement and the Guaranty, MPI and the Investor
Group entered into a Restructuring, Settlement and Mutual Release Agreement
dated April 22, 1998, pursuant to which MPI agreed to make certain payments and
issue certain warrants to the Investor Group, in exchange for the agreement of
the Investor Group to reduce the amount of MPI's obligations under the Loan
Agreement and the Guaranty ("Restructuring Agreement"). Contingent upon MPI's
performance of its obligations under the Restructuring Agreement, the
Restructuring Agreement provided that all obligations of MPI under the Loan
Agreement and Guaranty would be deemed settled and the Investor Group would
release MPI from any further obligations with respect thereto.
<PAGE>
WHEREAS, MPI is not able to comply with its payment obligations under
the Restructuring Agreement.
WHEREAS, the MPI Group with respect to the Investor Group, and the
Investor Group with respect to the MPI Group, desire to finally settle all of
their respective rights and obligations under the Loan Agreement, the Guaranty,
the Restructuring Agreement and all amendments thereto, and all other related
agreements (collectively the "Former Agreements"), terminate and release all of
their respective rights and obligations under the Former Agreements, and settle
all other disputes of any kind that may or could exist between the MPI Group and
the Investor Group with respect to the Former Agreements, all upon the terms and
conditions set forth in this Conversion Agreement.
NOW THEREFORE, in consideration of the mutual agreements contained
herein and for other good and sufficient consideration, the receipt and
sufficiency of which is hereby acknowledged, MPI and the Investor Group agree as
follows:
1. Defined Terms. In addition to those terms that may be defined
-------------
elsewhere in this Conversion Agreement, the following terms shall have the
meanings defined in this Section 1.
1.1 "Conversion Date" means the date upon which the Transpac
Conversion occurs pursuant to the terms and conditions hereof.
1.2 "Performance Date" means June 30, 1999.
1.3 "Series A Preferred Stock" means the Series A Preferred
Stock of MPI, the rights, preferences privileges and restrictions of which are
set forth in the Certificate of Amendment to the Amended and Restated Articles
of Incorporation of MPI, in the form attached hereto as Exhibit "A" and
incorporated herein by reference.
1.4 "Transpac Conversion" means the conversion of indebtedness
in the amount of principal and interest owed by MPM and guaranteed by MPI in the
aggregate to the Investor Group, accrued as of December 31, 1997 (which is the
entire amount MPI and the Investor Group have agreed is due and payable pursuant
to the Loan Agreement and the Guaranty), into Four Million Thirty One Thousand
Eight Hundred and Twenty Six (4,031,826) shares of Series A Preferred Stock.
1.5 "DBS Bank Conversion" means the conversion of indebtedness
in the amount of principal and interest owed by MPM and Microelectronic
Packaging (S) Pte. Ltd. and guaranteed by MPI to DBS Bank, accrued as of
December 31, 1997 (which is the entire amount MPI and DBS Bank have agreed is
due and payable), into One Million One Hundred Fifty Four Thousand Three Hundred
and Eleven (1,154,311) shares of Series A Preferred Stock.
1.6 "Motorola Conversion" means the conversion of indebtedness
in the amount of principal and interest owed by MPS and guaranteed by MPI to
Motorola, Inc.,
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<PAGE>
accrued as of December 31, 1997 (which is the entire amount MPI and Motorola
have agreed is due and payable), into Eight Hundred Sixty Nine Thousand Nine
Hundred Thirty Two (869,932.00) shares of Series A Preferred Stock.
1.7 "NS Electronics Conversion" means the conversion of
indebtedness in the amount of principal and interest owed by MPI to NS
Electronics Bangkok Ltd., accrued as of December 31, 1997 (which is the entire
amount MPI and NS Electronics have agreed is due and payable), into Two Hundred
Seventy One Thousand One Hundred Seventy Six (271,176) shares of Series A
Preferred Stock.
1.8 "Orix Leasing Conversion" means the conversion of
indebtedness in the amount of principal and interest owed by MPM and MPS and
guaranteed by MPI to Orix Leasing Singapore Limited, accrued as of December 31,
1997 (which is the entire amount MPI and Orix Leasing have agreed is due and
payable) into Four Hundred Seventy Three Thousand Five Hundred Eighty Four
(473,584) shares of Series A Preferred Stock.
1.9 "Samsung Corning Conversion" means the conversion of
indebtedness in the amount of principal and interest owed by MPS and guaranteed
by MPI to Samsung Corning Co., Ltd., accrued as of December 31, 1997 (which is
the entire amount MPI and Samsung Corning have agreed is due and payable) into
One Hundred Eighty Three Thousand Two Hundred Seventy Five (183,275) shares of
Series A Preferred Stock.
1.10 "STMicroelectronics Conversion" means the conversion of
indebtedness in the amount of principal and interest owed by MPS and guaranteed
by MPI to STMicroelectronics, Inc. (and/or any one or more assignees and/or
transferees of STMicroelectronics, Inc.), accrued as of December 31, 1997 (which
is the entire amount MPI and STMicroelectronics have agreed is due and payable)
into One Million Three Hundred Twenty Two Thousand Six Hundred Forty One
(1,322,641) shares of Series A Preferred Stock.
1.11 "Texas Instruments Conversion" means the conversion of
indebtedness in the amount of principal and interest owed by MPS and guaranteed
by MPI to Texas Instruments Incorporated, accrued as of December 31, 1997 (which
is the entire amount MPI and Texas Instruments have agreed is due and payable)
into One Million Fifty Six Thousand and Twenty Seven (1,056,027) shares of
Series A Preferred Stock.
1.12 "Other Creditor Conversions" means collectively the DBS
Bank Conversion, the Motorola Conversion, the NS Electronics Conversion, the
Orix Leasing Conversion, the Samsung Corning Conversion, the STMicroelectronics
Conversion and the Texas Instruments Conversion.
1.13 "Other Creditors" means collectively DBS Bank; Motorola,
Inc.; NS Electronics Bangkok Ltd.; Orix Leasing Singapore Limited; Samsung
Corning Co., Ltd.; STMicroelectronics, Inc.; and Texas Instruments Incorporated.
1.14 "Insolvency Action" means the commencement of a voluntary
or involuntary case against MPI under the United States Bankruptcy Code ("Code")
or an
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<PAGE>
assignment for the benefit of creditors by MPI, but shall not include any
involuntary case brought under the Code which is dismissed within sixty (60)
days of its commencement where no action is brought during such time period to
avoid any issuance of Series A Preferred Stock by MPI or the performance by MPI
of any of its other obligations pursuant to this Conversion Agreement.
2. Duration of Conversion Agreement. This Conversion Agreement shall
--------------------------------
remain in full force and effect until the Conversion Date, subject to the
following termination provisions:
2.1 Prior to the Performance Date, no party shall have any right
to terminate this Conversion Agreement in any respect, and all of the terms and
conditions hereof shall remain in full force and effect as set forth herein.
2.2 As of and after the Conversion Date, even if the Conversion
Date occurs after the Performance Date, no party shall have any right to
terminate this Conversion Agreement in any respect, and all of the terms and
conditions hereof shall remain in full force and effect as set forth herein.
2.3 After the Performance Date, so long as the Conversion Date
has not occurred, Transpac Capital shall have sole discretion on behalf of the
Investor Group (but shall not be required) to terminate this Conversion
Agreement by giving a written termination notice to MPI ("Termination Notice").
In the event Transpac Capital gives MPI a Termination Notice after the
Performance Date and prior to any occurrence of the Conversion Date, then this
Conversion Agreement shall be deemed terminated as of the date the Termination
Notice is deemed given to MPI pursuant to the provisions of Section 10.3 hereof.
In the event this Conversion Agreement is terminated by Transpac Capital
pursuant to the provisions of this Section 2.3, then this Conversion Agreement
shall be deemed completely void, and MPI and the Investor Group shall retain and
remain subject to whatever respective rights and obligations they may otherwise
have under the Former Agreements.
2.4 Regardless of any other provision of this Section 2, if an
Insolvency Action is commenced prior to the Conversion Date, then this
Conversion Agreement and the respective rights and obligations of MPI and the
Investor Group hereunder shall be deemed immediately terminated without notice,
and MPI and the Investor Group shall retain and remain subject to whatever
respective rights and obligations they may have under the Former Agreements.
2.5 Except as provided otherwise in Sections 7.1 or 7.3 of this
Agreement, the Former Agreements shall remain in full force and effect at all
times after the Effective Date.
3. Conditions to Transpac Conversion. The completion of the Transpac
---------------------------------
Conversion pursuant to the terms and conditions of this Conversion Agreement
shall be subject to the performance and satisfaction of each of the following
conditions, either prior to or concurrently with the occurrence of the Transpac
Conversion ("Completion Conditions"):
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<PAGE>
3.1 The completion of the Other Creditor Conversions pursuant
to agreements entered into between MPI and the Other Creditors upon terms and
conditions that are not more favorable to any of such Other Creditors than the
terms and conditions contained in this Conversion Agreement. In particular, but
without limiting the generality of the foregoing provisions of this section, the
effective price per share of the Series A Preferred Stock applicable to the
Other Creditor Conversions shall not be less than One Dollar and Two Cents
($1.02), and the terms and conditions of the settlement and release provisions
applicable to the Other Creditor Conversions shall not be different in any
material respect from the terms and conditions of the settlement and release
provisions contained in this Conversion Agreement. Furthermore, in connection
with the STMicroelectronics Conversion, MPI will have agreed to amend the
warrants to purchase MPI's common stock held by STMicroelectronics, Inc., if at
all, only upon terms and conditions no more favorable to STMicroelectronics,
Inc., than those in the Transpac Warrant Amendments.
3.2 The material terms and conditions of the Transpac Conversion
and the Other Creditor Conversions shall have been approved by MPI's Board of
Directors, which approval shall be sought and obtained by MPI in accordance with
all applicable laws.
3.3 The material terms and conditions of the Transpac Conversion
and the Other Creditor Conversions shall have been approved by MPI's
Shareholders, which approval shall be sought and obtained by MPI in accordance
with all applicable laws.
3.4 The Certificate of Amendment of the Amended and Restated
Articles of Incorporation of MPI, in the form attached hereto as Exhibit "A" and
incorporated herein by reference ("Certificate of Amendment"), shall have been
duly adopted by all necessary corporate action of the Board of Directors and
shareholders of MPI, and shall have been duly filed with and accepted by the
California Secretary of State, upon which filing and acceptance MPI shall be
authorized to issue the Series A Preferred Stock to the Investor Group and the
Other Creditors as required pursuant to the Transpac Conversion and the Other
Creditor Conversions.
3.5 L.H. Friend, Weinress, Frankson & Presson, Inc., an
investment banking firm who serves as financial adviser to MPI, shall have
executed and issued to MPI a written opinion, in form and substance satisfactory
to MPI in its sole discretion, concluding that the Transpac Conversion and the
Other Creditor Conversions are fair to MPI's Shareholders ("Fairness Opinion"),
and a copy of such Fairness Opinion shall have been provided to Transpac
Capital.
3.6 MPI and the Investor Group shall have performed each of
their respective obligations and conditions that this Conversion Agreement
requires them to perform on or prior to the Conversion Date.
4. Obligations of MPI for Transpac Conversion. MPI shall have the
------------------------------------------
following affirmative obligations under this Conversion Agreement until such
time as the Transpac Conversion has been completed, or this Conversion Agreement
has been terminated pursuant to the provisions of Section 2 hereof:
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<PAGE>
4.1 MPI shall use its best and most diligent efforts to obtain
the agreement of each of the Other Creditors to complete the Other Creditor
Conversions pursuant to agreements entered into between MPI and the Other
Creditors upon terms and conditions that are not more favorable to such Other
Creditors than the terms and conditions contained in this Conversion Agreement.
In particular, but without limiting the generality of the foregoing provisions
of this section, MPI shall use its best and most diligent efforts to obtain the
agreement of the Other Creditors that the effective price per share of the
Series A Preferred Stock applicable to the Other Creditor Conversions shall not
be less than One Dollar and Two Cents ($1.02), and the terms and conditions of
the settlement and release provisions applicable to the Other Creditor
Conversions shall not be different in any material respect from the terms and
conditions of the settlement and release provisions contained in this Conversion
Agreement.
4.2 MPI shall use its best and most diligent efforts to obtain
the approval of MPI's Board of Directors of the material terms and conditions of
the Transpac Conversion and the Other Creditor Conversions, which approval shall
be obtained in accordance with applicable laws.
4.3 MPI shall use its best and most diligent efforts to obtain
the approval of MPI's Shareholders of the material terms and conditions of the
Transpac Conversion and the Other Creditor Conversions, which approval shall be
obtained in accordance with applicable laws.
4.4 MPI shall use its best and most diligent efforts to cause
the Certificate of Amendment to be approved by MPI's Board of Directors and
shareholders, which approval shall be obtained in accordance with applicable
laws, and to cause the Certificate of Amendment to be filed with and accepted by
the California Secretary of State, upon which filing and acceptance MPI shall be
authorized to issue the Series A Preferred Stock to the Investor Group and the
Other Creditors as required pursuant to the Transpac Conversion and the Other
Creditor Conversions.
4.5 MPI shall use its best and most diligent efforts to cause
the Transpac Conversion to be completed as soon as reasonably possible.
4.6 MPI shall use its best and most diligent efforts at all
times prior to the Conversion Date, to conduct its business in the usual and
ordinary course.
5. [This Section has been intentionally left blank.]
6. Completion of Conversion. At such time as all of the Completion
------------------------
Conditions have been performed and satisfied by MPI, then MPI and the Investor
Group shall complete the Transpac Conversion concurrently with the completion by
MPI and the Other Creditors of the Other Creditor Conversions, by concurrently
taking the following actions:
6.1 Actions By MPI.
--------------
6
<PAGE>
(a) MPI shall duly execute and deliver to Transpac Capital
a counterpart copy of the form of Registration Rights Agreement attached to this
Conversion Agreement as Exhibit "B" and incorporated herein by reference
("Registration Agreement").
(b) MPI shall duly execute and deliver to Transpac Capital
four (4) counterpart copies of the form of First Amendment to Warrant To
Purchase Common Stock of MPI attached to this Conversion Agreement as Exhibit
"C" and incorporated herein by reference (collectively the "Transpac Warrant
Amendments"), one with respect to each of the Warrants to Purchase Common Stock
of MPI, dated April 24, 1998 (collectively the "Transpac Warrants"), issued
respectively to Transpac Capital, Transpac Holdings, Regional Investment and
Natsteel Equity.
(c) MPI shall duly execute and deliver to Transpac Capital
a counterpart copy of the form of IBM Proceeds Agreement attached to this
Conversion Agreement as Exhibit "D" and incorporated herein by reference ("IBM
Agreement").
(d) MPI's Chief Executive Officer shall duly execute and
deliver to Transpac the form of Certificate of Chief Executive Officer attached
to this Conversion Agreement as Exhibit "E" and incorporated herein by reference
("Certificate of CEO"), certifying the following matters:
(i) Any approvals of MPI's shareholders and directors
that may be required under any applicable law, in connection with the
transactions contemplated by this Conversion Agreement, have been duly obtained
and are in full force and effect as of the Conversion Date.
(ii) All of the representations and warranties of MPI
set forth in this Conversion Agreement, the Ancillary Agreements (as defined
below) or in any other document delivered to the Investor Group in connection
herewith, are true, accurate, complete, and not misleading in any material
respect as of the Conversion Date.
(iii) MPI has performed all of the duties and
obligations required to be performed by MPI on or prior to the Conversion Date,
pursuant to the provisions of this Conversion Agreement, the Ancillary
Agreements (as defined below) or in any other document delivered to the Investor
Group in connection herewith.
(e) MPI shall cause its legal counsel to duly execute and
deliver to Transpac the form of legal opinion letter attached to his Conversion
Agreement as Exhibit "F" and incorporated herein by reference ("Legal Opinion").
(f) MPI shall deliver to Transpac copies of certificates of
good standing for MPI issued by the California Secretary of State and the
California Franchise Tax Board, dated not more than five (5) days prior to the
Conversion Date.
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<PAGE>
(g) MPI shall deliver to Transpac stock certificates
representing shares of Series A Preferred Stock issued by MPI to the Investor
Group in the following names and numbers of shares:
(i) Transpac Capital Pte Ltd, 1,624,822
(ii) Transpac Industrial Holdings Ltd, 1,599,632
(iii) Regional Investment Company Ltd, 440,843
(iv) Natsteel Equity III Pte Ltd, 366,529
(h) MPI shall deliver to Transpac and its legal counsel
copies of the following documents:
(i) A copy of the Certificate of Amendment and Bylaws
of MPI (as amended through the Conversion Date), certified by the Secretary of
MPI as true and correct copies thereof as of the Conversion Date.
(ii) A copy of the resolutions of the Board of
Directors and shareholders of MPI evidencing the amendment to MPI's Amended and
Restated Articles of Incorporation providing for the authorization of the Series
A Preferred Stock and the approval of this Agreement and the other agreements,
documents, and matters contemplated hereby, certified by the Secretary of MPI to
be true, complete and correct.
6.2 Actions By Investor Group.
-------------------------
(a) Each member of the Investor Group shall duly execute
and deliver to MPI a counterpart copy of the Registration Agreement.
(b) Each member of the Investor Group shall duly execute
and deliver to MPI the counterpart copy of the Transpac Warrant Amendment that
relates to the Transpac Warrant of the respective member of the Investor Group.
(c) Each member of the Investor Group shall duly execute
and deliver to MPI a counterpart copy of the form of IBM Agreement.
6.3 Effect of Conversion. Upon the occurrence of the
--------------------
Conversion Date, (a) the debts owed by MPI to all members of the Investor Group
shall be deemed to have been converted, respectively, into the number of shares
of MPI's Series A Preferred Stock issued to each respective member of the
Investor Group, as set forth in Section 6.1; and (b) as of and after the
Conversion Date, MPI shall not owe any debt of any kind to any of the members of
the Investor Group, as set forth in more detail pursuant to Section 7 of this
Conversion Agreement.
7. Settlement and Mutual Release. If and only if the Conversion is
-----------------------------
completed pursuant to the terms and conditions of this Conversion Agreement,
then in that case
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<PAGE>
only, effective as of the Conversion Date, MPI and the Investor Group agree that
the terms and conditions of this Section 7 shall be in effect with respect to
the Former Agreements and all of the respective rights and obligations of MPI
and the Investor Group pursuant to the Former Agreements and all other related
agreements:
7.1 The Former Agreements shall be deemed to have been
voluntarily terminated pursuant to the mutual agreement of MPI and the Investor
Group, without any remaining liability to either MPI or the Investor Group.
Without limiting the generality of the foregoing provisions of this section, MPI
and the Investor Group agree that MPI shall no longer have any obligations of
any kind under the Former Agreements to pay any amount to the Investor Group,
and the Investor Group shall no longer have any rights of any kind under the
Former Agreements to convert any amounts owed under the Former Agreements into,
or to otherwise obtain ownership of, shares of MPI's stock of any class or
series.
7.2 All rights of the Investor Group described in a letter from
Wong Lin Hong to Denis Trafecanty, dated March 4, 1998, written with reference
to the Written Consent Solicitation of Shareholders, to the effect that MPI will
not issue any shares of preferred stock for an amount in excess of Two Hundred
Fifty Thousand Dollars ($250,000.00) without first obtaining the agreement of
Transpac Capital and/or the Investment Group, shall be deemed to have been
voluntarily terminated pursuant to the mutual agreement of MPI and the Investor
Group, without any remaining liability to either MPI or the Investor Group. As
of and at all times after the Conversion Date, the Investor Group agrees that
neither Transpac Capital nor any other member of the Investor Group has any
right of any kind to approve or consent to any issuance by MPI of any shares of
its stock of any class or series, except as provided otherwise under MPI's
articles of incorporation in effect from time to time, or except as provided
otherwise under applicable law. Furthermore, by executing this Conversion
Agreement, Transpac Capital and the other members of the Investment Group agree
to and approve all issuances by MPI of Series A Preferred Stock that are to be
issued in connection with the Transpac Conversion and the Other Creditor
Conversions, so long as such transactions are carried out in compliance with the
terms and conditions of this Conversion Agreement and the debt conversion
agreements between MPI and the Other Creditors
7.3 The MPI Group with respect to the Investor Group, and the
Investor Group with respect to the MPI Group, shall be deemed to have forever
released and discharged each other from and against any and all claims, damages
and caused of action they may have against each other with respect to and in
connection with the Former Agreements and any matter arising out of the terms
and conditions thereof, including without limitation, any breach of any
representation or warranty or noncompliance or nonfulfillment of any covenant or
agreement contained in or arising out of the Former Agreements; provided that
such release and discharge shall not extend to any claims, damages and causes of
action any member of the Investor Group may have against any member of the MPI
Group (or any member of the MPI Group may have against any member of the
Investor Group) for fraud or willful misconduct with respect to any of the
Former Agreements or any of the transactions contemplated by this Agreement.
However, the foregoing release provisions of this section do not apply to this
Conversion Agreement, or the Certificate of Amendment, the Registration
Agreement, the Transpac Warrants (as amended by the Transpac Warrant
Amendments), or the IBM Agreement
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<PAGE>
(collectively the "Ancillary Agreements"), or any of the respective rights and
obligations of MPI and/or the Investor Group pursuant to the terms and
conditions of this Conversion Agreement or the Ancillary Agreements.
8. Representations, Warranties and Agreements of MPI. In addition
-------------------------------------------------
to any representations and warranties MPI may make to the Investor Group
elsewhere in this Conversion Agreement, the Ancillary Agreements or in any other
document delivered to the Investor Group in connection herewith, MPI represents
and warrants to the Investor Group that the statements contained in this Section
8 are true, accurate, complete, and not misleading in any material respect, and
also shall be so as of the Conversion Date.
8.1 Organization and Good Standing, and Other Status. MPI is a
------------------------------------------------
corporation, legally and validly incorporated, organized and existing under the
laws of the State of California. MPI is in good standing as certified by both
the California Secretary of State and the California Franchise Tax Board.
8.2 Authority to Conduct Business. MPI possesses full corporate
-----------------------------
power and lawful authority to own, lease and operate its assets, and to carry on
its business as presently conducted. MPI is duly and legally qualified to do
business and is in good standing in each country, state, county, city or other
jurisdiction in which the failure to so qualify would have a material adverse
impact on MPI's business.
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<PAGE>
8.3 Authority Regarding this Agreement.
----------------------------------
8.3.1 MPI has the complete and unrestricted right, power,
authority and capacity to (a) execute and deliver this Conversion Agreement, the
Ancillary Agreements and every other document executed and delivered by MPI to
the Investor Group in connection therewith (collectively the "Transaction
Documents"); and (b) carry out and perform each of MPI's obligations pursuant to
the Transaction Documents.
8.3.2 As of the Conversion Date, no further corporate or
shareholder authority, approvals, actions or proceedings will be necessary on
the part of MPI to authorize the Transaction Documents or any of the
transactions contemplated thereby.
8.3.3 This Conversion Agreement has been, and, as of the
Conversion Date all of the other Transaction Documents will have been, duly and
validly executed and delivered by MPI, and when so executed and delivered, will
constitute legal, valid and binding obligations of MPI, enforceable in
accordance with their terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement of creditors' rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief, or
other equitable remedies, and (iii) to the extent the indemnification provisions
contained in the Registration Agreement may be limited by applicable federal or
state securities laws.
8.3.4 The execution and delivery of this Conversion
Agreement does not, the execution and delivery of the other Transaction
Documents will not, and the consummation of the transactions contemplated
thereby will not, violate any provision of MPI's Amended and Restated Articles
of Incorporation or Bylaws (as amended), or any mortgage, lien, lease,
agreement, instrument, order, judgment or decree to which MPI is a party or by
which MPI or any of its assets is bound.
8.4 Valid Issuance of Preferred and Common Stock. The Series A
--------------------------------------------
Preferred Stock, when issued and delivered in accordance with the terms of this
Conversion Agreement, will be duly and validly issued, fully paid, and
nonassessable, and will be free of restrictions on transfer other than those
stated in this Conversion Agreement and/or that may arise under applicable state
and federal securities laws. The common stock of MPI issuable upon conversion of
the Series A Preferred Stock has been duly and validly reserved for issuance
and, upon issuance in accordance with the terms of the Certificate of Amendment,
will be duly and validly issued, fully paid, and nonassessable, and will be free
of restrictions on transfer other than those stated in this Conversion Agreement
and/or that may arise under applicable state and federal securities laws.
8.5 Consents. No consent, approval, order or authorization of,
--------
or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority or any third party on the part of
MPI is required in connection with the consummation of the transactions
contemplated by this Conversion Agreement, except (i) the filing of the
Certificate of Amendment with the California Secretary of State; (ii) the filing
required pursuant to Section 25102(f) of the California Corporate Securities Law
of 1968, as
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amended, and the rules thereunder, which filing will be effected within 15 days
after the issuance of the Series A Preferred Stock pursuant hereto.
8.6 Offering. Subject in part to the truth and accuracy of the
--------
representations of the Investor Group set forth in Section 9 of this Agreement,
the issuance of the Series A Preferred Stock as contemplated by the Transaction
Documents is exempt from the registration and qualification requirements of any
applicable state and federal securities laws, and neither MPI nor any authorized
agent acting on its behalf will take any action hereafter that would cause the
loss of such exemption.
8.7 Disclosure. MPI has fully provided each member of the
----------
Investor Group with all information each such party has requested for deciding
whether to enter into the transactions contemplated by the Transaction
Documents, including without limitation, the acquisition of the Series A
Preferred Stock.
8.8 Brokers. MPI has not taken any actions in connection with
-------
the negotiations relating to the Transaction Documents or the transactions
contemplated thereby that could give rise to an obligation on the part of any
member of the Investor Group to pay any brokerage or finder's fee, commission or
similar compensation to any party in connection therewith.
8.9 Litigation: Except as set forth in this Section 8.9, there
----------
is no action, suit, proceeding, claim, arbitration or investigation ("Action")
pending (or, to the best of MPI's knowledge, currently threatened) against MPI,
its activities, properties or assets or, to the best of MPI's knowledge, against
any officer, director or employee of MPI in connection with such officer's,
director's or employee's relationship with, or actions taken on behalf of, MPI.
To the best of MPI's knowledge, there is no factual or legal basis for any such
Action that might result, individually or in the aggregate, in any material
adverse change in the business, properties, assets, financial condition, affairs
or prospects of MPI. MPI is not a party to or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency or
instrumentality, and there is no Action by MPI currently pending or which MPI
intends to initiate (other than claims for monetary damages asserted by MPI
against International Business Machines Corporation ("IBM") under the Purchase
Option Agreement dated August 4, 1994, between IBM and MPI and the Multilayer
Technology Transfer and Licensing Agreement dated August 4, 1994, between IBM
and MPI). MPI is a defendant in a lawsuit filed on December 18, 1998, against
MPI and Schlumberger Technologies, Inc., in the United States District Court for
the Southern District of New York ("Lawsuit"). The plaintiffs in the Lawsuit are
Gary Stein and Lewis Solomon. Both Mr. Solomon and Mr. Stein are former
directors of MPI. The Lawsuit alleges the following claims against MPI:
(a) Failure to pay an amount alleged to be not less than
Thirty Thousand Dollars ($30,000.00) allegedly owed to Lewis Solomon as
compensation for services performed by him as the former Chairman of MPI's Board
of Directors;
12
<PAGE>
(b) Failure to pay an amount alleged to be not less than
Seventy One Thousand Two Hundred Fifty Dollars ($71,250.00) allegedly owed in
the aggregate to Mr. Stein and Mr. Solomon as compensation under a consulting
agreement;
(c) Wrongful termination of a consulting agreement, for
which wrongful termination Mr. Stein and Mr. Solomon allege damages in the
aggregate of not less than Five Hundred Thousand Dollars ($500,000.00);
(d) Tortious interference with Mr. Stein's and Mr. Solomon's
prospective economic relationships and business advantages as consultants and
directors of public corporations, presumably arising out of MPI's termination of
their consulting agreement, for which Mr. Stein and Mr. Solomon allege damages
in the aggregate of not less than Five Million Dollars ($5,000,000.00);
(e) Costs and expenses incurred in the Lawsuit in an
unspecified amount.
MPI believes the claims made by Mr. Stein and Mr. Solomon against
MPI in the lawsuit are completely without merit. MPI is actively and vigorously
defending the lawsuit, and has made substantial counterclaims against Mr. Stein
and Mr. Solomon.
8.10 Capitalization. The capitalization of MPI immediately
--------------
prior to the Conversion Date will consist of the following:
(a) Preferred Stock. A total of 9,362,778 authorized
---------------
shares of preferred stock, no par value per share, consisting of 9,362,778
shares designated as Series A Preferred Stock, none of which will be issued and
outstanding. Upon the Transpac Conversion and Other Creditor Conversions, the
rights, preferences and privileges of the Series A Preferred Stock will be as
stated in MPI's Amended and Restated Articles of Incorporation, as amended by
the Certificate of Amendment, and as provided by law.
(b) Common Stock. A total of Fifty Million (50,000,000)
------------
authorized shares of common stock, no par value per share (the "Common Stock"),
of which not more than Eleven Million (11,000,000) shares will be issued and
outstanding.
(c) Options, Warrants, Reserved Shares. Except for: (i) the
----------------------------------
conversion privileges of the Series A Preferred Stock; (ii) the rights of first
refusal granted to Transpac Capital, Transpac Holdings, Regional Investment and
Natsteel Equity under Section 8.1 of the Subscription Agreement; (iii) Four
Million Six Hundred Ninety Thousand Six Hundred Thirty Two (4,690,632) shares of
Common Stock reserved for issuance under MPI's 1993 Stock Option Plan under
which options to purchase Two Million Four Hundred Twenty Four Thousand Five
Hundred (2,424,500) shares are outstanding; and (iv) warrants to purchase Seven
Hundred Thousand (700,000) shares of Common Stock; there is no outstanding,
option, warrant, right (including conversion or preemptive rights) or agreement
for the purchase or acquisition from MPI of any shares of its capital stock or
any securities convertible into or ultimately exchangeable or exercisable for
any shares of MPI's capital stock. Apart from the
13
<PAGE>
exceptions noted in this Section 8.10, and except for rights of first refusal
held by MPI to purchase shares of its stock issued under MPI's 1993 Stock Option
Plan, no shares of MPI's outstanding capital stock , or stock issuable upon
exercise or exchange of any outstanding options, warrants or rights, or other
stock issuable by MPI, are subject to any preemptive rights, rights of first
refusal or other rights to purchase such stock (whether in favor of MPI or any
other person), pursuant to any agreement or commitment of MPI.
9. Representations, Warranties and Agreements of the Investor Group.
----------------------------------------------------------------
In addition to any representations and warranties the Investor Group may make to
MPI elsewhere in this Conversion Agreement, the Ancillary Agreements or in any
other document delivered to MPI in connection herewith, the members of the
Investor Group severally as to themselves, but not jointly, represent and
warrant to MPI that the statements contained in this Section 9 are true,
accurate, complete, and not misleading in any material respect, and also shall
be so as of the Conversion Date.
9.1 Authority Regarding this Agreement.
----------------------------------
9.1.1 Each member of the Investor Group has the complete
and unrestricted right, power, authority and capacity to (a) execute and deliver
each Transaction Document to which it is a party; and (b) carry out and perform
each of their respective obligations pursuant to such Transaction Documents.
9.1.2 As of the Conversion Date, no further corporate or
shareholder authority, approvals, actions or proceedings will be necessary on
the part of any member of the Investor Group to authorize the Transaction
Documents or any of the transactions contemplated thereby.
9.1.3 This Conversion Agreement has been, and, as of the
Conversion Date all of the other Transaction Documents will have been, duly and
validly executed and delivered by each member of the Investor Group which is a
party to such agreements or documents, and when so executed and delivered, will
constitute legal, valid and binding obligations of each member of the Investor
Group which is a party to such agreements or documents, enforceable in
accordance with their terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement of creditors' rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief, or
other equitable remedies, and (iii) to the extent the indemnification provisions
contained in the Registration Agreement may be limited by applicable federal or
state securities laws.
9.2 Purchase Entirely For Own Account. MPI is entering into the
---------------------------------
Transaction Documents in reliance on the representation made by each member of
the Investor Group, which representation is respectively confirmed by each such
member's execution of this Conversion Agreement, and each such member hereby
confirms, that the Series A Preferred Stock to be received by each respective
member of the Investor Group, and MPI's common stock issuable upon conversion
thereof (collectively the "Securities") will be acquired for investment and not
with a view to the resale or distribution of any part thereof, and that such
member has no
14
<PAGE>
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Conversion Agreement, each member of
the Investor Group further represents that such member does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Securities. Notwithstanding the foregoing, MPI
acknowledges and understands that Transpac Capital may hold the Securities on
behalf of, for the benefit of or as the nominee for, certain affiliated or
related entities, and thus may distribute the Securities to such entities.
9.3 Disclosure of Information. Each respective member of the
-------------------------
Investor Group believes it has received all the information it considers
necessary or appropriate for deciding whether to acquire the Securities. Each
member of the Investor Group further represents that it has had an opportunity
to ask questions and receive answers from MPI regarding the terms and conditions
of the Transaction Documents and the business, properties, prospects and
financial condition of MPI.
9.4 Investment Experience. Each member of the Investor Group
---------------------
acknowledges that it is able to fend for itself, can bear the economic risk of
its investment, and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the investment
in the Securities. Each member of the Investor Group has carefully evaluated
such member's financial resources and investment position and the risks
associated with an investment in the Securities, and acknowledges that such
member is able to bear the economic risks of this investment. Each member of the
Investor Group further acknowledges that such member's financial condition is
such that the member is not under any present necessity or constraint to dispose
of the securities to satisfy any existing or contemplated debt or undertaking.
If other than an individual, each member of the Investor Group also represents
it has not been organized for the purpose of acquiring the Securities.
9.5 Restricted Securities. Each member of the Investor Group
---------------------
understands that the Securities are characterized as "restricted securities"
under the federal securities laws of the United States, inasmuch as they are
being acquired from MPI in a transaction not involving a public offering, and
that under such laws and applicable regulations the Securities may be resold
without registration only in certain limited circumstances. In this connection,
each member of the Investor Group represents that it is familiar with Securities
and Exchange Commission ("SEC") Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and generally by the federal
securities laws of the United States. Each member of the Investor Group further
understands that the Securities have not been registered under the Securities
Act of 1933, as amended ("33 Act") or qualified or otherwise registered under
the applicable securities laws of any state or other jurisdiction, that any
disposition of the Securities by such Buyer is subject to restrictions imposed
by federal and state laws, that the stock certificates representing the
Securities will bear a restrictive legend stating that such member cannot
dispose of the Securities absent such registration and qualification, except
pursuant to any available exemption from such registration and qualification.
9.6 Further Restrictions on Transfer. Without in any way
--------------------------------
limiting the representations set forth above in this Section 9, each member of
the Investor Group further agrees not to make any disposition of all or any
portion of the Securities unless and until the
15
<PAGE>
transferee has agreed in writing for the benefit of MPI to be bound by the
provisions of Sections 9.3 through 9.7 hereof, and the provisions of the
Registration Agreement, to the extent such sections and such agreement are then
applicable, and:
(a) There is then in effect a Registration Statement under
the 33 Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) The member of the Investor Group disposing of the
Securities shall have notified MPI of the proposed disposition and shall have
furnished MPI with a detailed statement of the circumstances surrounding the
proposed disposition, and if reasonably requested by MPI, such member shall have
furnished MPI with an opinion of counsel, reasonably satisfactory to MPI, that
such disposition will not require registration of the Securities in question
under the 33 Act.
Notwithstanding the provisions of paragraphs (a) and (b) above,
no such registration statement or opinion of counsel shall be required: (i) for
any transfer of any Securities in compliance with SEC Rule 144 or Rule 144A; or
(ii) for any transfer of any Securities by a holder thereof that is a
partnership or a corporation to: (1) a partner of such partnership or a
shareholder of such corporation; (2) a retired partner of such partnership who
retires after the date hereof; or (3) the estate of any such partner or
shareholder; provided, that in each of the foregoing cases the transferee agrees
--------
in writing to be subject to the terms of this Section 9 to the same extent as if
the transferee were an original purchaser of Securities hereunder.
9.7 Restrictive Legend. Each certificate representing the
------------------
Series A Preferred Stock or any other securities issued in respect of the Series
A Preferred Stock or upon the conversion thereof, shall be stamped or otherwise
imprinted with a legend in the following form, in addition to any legend
required pursuant to applicable state securities laws:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (AS AMENDED), NOR QUALIFIED OR OTHERWISE REGISTERED
UNDER THE APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. THESE
SECURITIES HAVE BEEN ACQUIRED ONLY FOR INVESTMENT AND MAY NOT BE OFFERED, SOLD,
TRANSFERRED, PLEDGED, OR OTHERWISE DISPOSED OF OR HYPOTHECATED (a) IN THE
ABSENCE OF BOTH (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OF 1933 (AS AMENDED), AND (ii) AN EFFECTIVE QUALIFICATION OR REGISTRATION UNDER
THE APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION, OR (b) UNLESS
AN EXEMPTION FROM ANY SUCH REGISTRATIONS OR QUALIFICATIONS IS AVAILABLE AND THE
ISSUER HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT
SUCH REGISTRATIONS OR QUALIFICATIONS ARE NOT REQUIRED.
9.8 Foreign Persons. If a member of the Investor Group is not a
---------------
United States person, such member hereby represents that (a) they have satisfied
themselves as to
16
<PAGE>
the full observance of the laws of their own jurisdiction in connection with any
acquisition of the Securities, including without limitation (i) the legal
requirements within such jurisdiction applicable to the acquisition of the
Securities; (ii) any foreign exchange restrictions applicable to such
acquisition; (iii) any governmental or other consents that may need to be
obtained; and (iv) the income tax and other tax consequences, if any, that may
be relevant to the acquisition, holding, sale or transfer of the Securities; and
(b) such member's acquisition and continued ownership of the Securities will not
violate any applicable securities or other laws of such member's jurisdiction.
9.9 Brokers or Finders. The member of the Investor Group have
------------------
not taken any actions in connection with the negotiations relating to this
Conversion Agreement or the transactions contemplated hereby that could give
rise to an obligation on the part of MPI to pay any brokerage or finder's fee,
commission or similar compensation to any party in connection therewith.
9.10 Transpac Capital as Agent. Each member of the Investor
-------------------------
Group hereby appoints Transpac Capital to act as its agent for purposes of this
Conversion Agreement. Each member of the Investor Group hereby authorizes
Transpac Capital to take such actions and exercise such rights, powers and
discretions as are specifically delegated to Transpac Capital pursuant to this
Conversion Agreement, and to take such other actions and exercise such other
rights, powers and discretions as are reasonably incidental thereto. However,
Transpac Capital shall not commence any legal action or other legal proceeding
in the name of any other member of the Investor Group without such member's
consent. The relationship between Transpac Capital and the Other Investors for
this purpose is that of agent and principal only. Transpac Capital shall not, by
virtue of any provision of this Conversion Agreement, be deemed to be a trustee
for any other member of the Investor Group, nor an agent or trustee for MPI.
10. Miscellaneous Provisions.
------------------------
10.1 Exhibits. All exhibits described in this Conversion
--------
Agreement are incorporated by reference as if fully set forth herein, and
constitute a material part of this Conversion Agreement, whether or not such
exhibits are attached hereto.
10.2 Governing Law. This Conversion Agreement shall in all
-------------
respects be construed, interpreted and enforced in accordance with and governed
by the laws of the State of California, United States of America. Any legal
action between the parties regarding this Conversion Agreement shall be brought
in, and the parties hereby consent to the jurisdiction of and venue in, either
(a) the federal and state courts located in the County of San Diego, State of
California, United States of America; or (b) the courts located in the country
of Singapore.
10.3 Notices. Any notice, demand or other communication
-------
required or permitted under this Conversion Agreement shall be deemed given and
delivered when in writing and (a) personally served upon the receiving party, or
(b) upon the third (3rd) calendar day after mailing to the receiving party by
either (i) United States registered or certified mail, postage prepaid, or (ii)
FedEx or other comparable overnight delivery service, delivery charges prepaid,
and addressed as follows:
17
<PAGE>
To MPI: Microelectronic Packaging, Inc.
9577 Chesapeake Drive
San Diego, CA 92123
Attn: Chief Executive Officer
To any member of Transpac Capital Pte Ltd
the Investor Group 6 Shenton Way
#20-09 DBS Building
Tower Two
Singapore 068809
Attn: Wong Lin Hong
Any party may change the address specified in this section by giving the other
party notice of such new address in the manner set forth herein.
10.4 Severability. In the event that any provision of this
------------
Conversion Agreement becomes or is declared by a court of competent jurisdiction
to be illegal, unenforceable or invalid, then this Conversion Agreement shall
continue in full force and effect without said provision. If this Conversion
Agreement continues in full force and effect as provided above, the parties
shall replace the invalid provision with a valid provision which corresponds as
far as possible to the spirit and purpose of the invalid provision.
10.5 Counterparts. This Conversion Agreement may be executed in
------------
any number of counterparts, each of which may be executed by less than all of
the parties hereto, each of which shall be enforceable against the parties
actually executing such counterparts, and all of which together shall constitute
one document.
10.6 Entire Agreement. This Conversion Agreement, the Ancillary
----------------
Agreements, and the documents and agreements contemplated herein and therein,
constitute the entire agreement between the parties with respect to the subject
matter hereof, and supersede all prior oral or written agreements,
representations or warranties between the parties other than those set forth
herein or herein provided for.
10.7 Successors and Assigns. Except as specifically permitted
----------------------
pursuant to the terms and conditions hereof, no party shall be permitted to
assign their respective rights or obligations under this Conversion Agreement
without the prior written consent of the other parties. The provisions hereof
shall inure to the benefit of, and be binding upon, the permitted successors and
assigns, heirs, executors, and administrators of the parties hereto.
10.8 Amendment and Waiver. No modification or waiver of any
--------------------
provision of this Conversion Agreement shall be binding upon the party against
whom it is sought to be enforced, unless specifically set forth in writing
signed by an authorized representative of that party. A waiver by any party of
any of the terms or conditions of this Conversion Agreement in any one instance
shall not be deemed or construed to be a waiver of such terms or conditions for
the future, or of any subsequent breach thereof. The failure by any party hereto
at any time to enforce any of the provisions of this Conversion Agreement, or to
18
<PAGE>
require at any time performance of any of the provisions hereof, shall in no way
to be construed to be a waiver of such provisions or to affect either the
validity of this Conversion Agreement or the right of any party to thereafter
enforce each and every provision of this Conversion Agreement.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
19
<PAGE>
10.9 Survivability. All of the representations, warranties,
-------------
agreements and obligations of the parties pursuant to this Conversion Agreement
shall survive any issuance of the Shares and/or the Option Shares by the Company
to the Buyers.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Conversion Agreement as of the date first above written.
MICROELECTRONIC PACKAGING, INC. TRANSPAC CAPITAL PTE LTD
By: Denis J. Trafecanty By: /s/ Caroline Chan
------------------------------------ ------------------------------
Signature Signature
Title: Senior Vice President and CFO Title: Senior Vice President
-------------------------------- ---------------------------
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
20
<PAGE>
CONTINUATION OF SIGNATURES FOR
DEBT CONVERSION
AND
MUTUAL SETTLEMENT AND RELEASE AGREEMENT
dated April 29, 1999
TRANSPAC INDUSTRIAL HOLDINGS LTD REGIONAL INVESTMENT COMPANY LTD
By: /s/ Caroline Chan By: /s/ Caroline Chan
------------------------------------ ------------------------------
Signature Signature
Title: Company Secretary Title: Authorized Signatory
-------------------------------- ---------------------------
NATSTEEL EQUITY III PTE LTD
By: /s/ Kwa Lay Keng
------------------------------
Signature
Title: Authorized Signatory
---------------------------
21
<PAGE>
EXHIBIT 10.78
ASSIGNMENT OF INTEREST
UNDER
LETTER AGREEMENT
WITH
STMICROELECTRONICS, INC.
THIS ASSIGNMENT OF INTEREST UNDER LETTER AGREEMENT WITH
STMICROELECTRONICS, INC. ("Assignment"), is entered into effective as of April
21, 1999 ("Effective Date"), between FI Financial, LLC ("FIF"), and the party
whose name appears below, which party is referred to herein as the "Assignee":
_____________________________________________________________________________
PRINT NAME OF "ASSIGNEE"
Unless otherwise defined herein, all capitalized terms appearing in
this Assignment shall have the meanings defined for such terms in the letter
agreement dated April 14, 1999, entered into between FIF, STMicroelectronics,
Inc. ("ST"), and Microelectronic Packaging, Inc. ("MPI") ("Letter Agreement").
Pursuant to the Letter Agreement, FIF and ST have opened an escrow
with Mission Valley Escrow ("Escrow Account"), and FIF has deposited into the
Escrow Account the amount of Five Hundred Thousand Dollars ($500,000.00).
Pursuant to this Assignment, Assignee desires to acquire from FIF an
interest in the Escrow Account, and a corresponding interest under the Letter
Agreement, all in accordance with the provisions of this Assignment.
FOR VALUE RECEIVED, FIF hereby assigns and transfers to Assignee, and
Assignee hereby accepts from FIF, an interest in the Escrow Account ("Assigned
Interest") in the dollar amount appearing below, which dollar amount is referred
to herein as the "Escrow Reimbursement":
______________________________________________________________________________
PRINT APPLICABLE DOLLAR AMOUNT FOR "ESCROW REIMBURSEMENT"
In exchange for receiving the Assigned Interest, Assignee hereby
directs Ross, Dixon & Bell, LLP ("RDB") to withdraw the amount of the Escrow
Reimbursement from RDB's Client Trust Account, which amount was received by RDB
from Assignee for the purpose of acquiring the Assigned Interest, and
immediately pay the amount of the Escrow Reimbursement to FIF or its assignee,
which assignee may be designated by James T. Waring.
<PAGE>
By executing this Assignment where indicated below, Assignee confirms
that Assignee has acquired the Assigned Interest in exchange for the Escrow
Reimbursement, and FIF confirms that FIF has in fact assigned and transferred
the Assigned Interest to Assignee, which shall be deemed to be a portion of the
Escrow Account in an amount equal to the Escrow Reimbursement.
Furthermore, by executing this Assignment where indicated below,
Assignee hereby authorizes FIF to act as the agent for Assignee in connection
with all matters pertaining to the Escrow Account, subject to the limitation
that Assignee's portion of the Escrow Account in an amount equal to the Escrow
Reimbursement ("Assignee's Balance") shall be withdrawn from the Escrow Account
only for the following purposes ("Authorized Purposes"): (a) to pay the amount
of Assignee's Balance to ST pursuant to the terms and conditions of the Letter
Agreement, but only after Assignee has executed and delivered to MPI a
counterpart copy of the Debt Conversion and Mutual Settlement and Release
Agreement and the other agreements related thereto, that pertain to the shares
of MPI's Series A Preferred Stock that are being acquired by Assignee in
exchange for Assignee's Balance ("ST Transaction"); or (b) in the event the ST
Transaction for any reason is not completed on or before June 30, 1999 (or such
later date as may be agreed upon in writing by Assignee), to pay the amount of
Assignee's Balance to Assignee upon the closing of the Escrow Account.
Assignee agrees that FIF has consented to act as agent for Assignee in
connection with the Escrow Account solely for the convenience of Assignee, and
that FIF shall not have any liabilities or obligations of any kind to Assignee
in connection with the Escrow Account, unless and only unless FIF authorizes
Assignee's Balance to be withdrawn from the Escrow Account for any reason other
than the Authorized Purposes, without Assignee's written approval.
Assignee agrees that all of the funds on deposit in the Escrow Account
are being invested at a nominal rate of interest roughly equivalent to the rate
of interest generally paid by national banks on funds deposited in passbook
savings accounts, and that for the convenience of the parties, FIF shall be
entitled to collect and retain all of the interest earned on the funds deposited
in the Escrow Account. FIF expects the amount of such interest to be minor and
nominal, and Assignee agrees that the amount of such interest will not be
material to Assignee under the circumstances and should be paid to FIF for the
convenience of the parties.
IN WITNESS WHEREOF, the undersigned have executed this Assignment as
of the Effective Date.
FI FINANCIAL, LLC ASSIGNEE
By:________________________________ ____________________________________
James T. Waring, Manager Signature
____________________________________
Print Name
2
<PAGE>
EXHIBIT 10.79
April 14, 1999
VIA FAX TRANSMISSION
- --------------------
(972) 466-7044
- --------------
AND REGULAR MAIL
- ----------------
Steven K. Rose, Esq.
Vice President, Secretary and
General Counsel
STMicroelectronics, Inc.
1310 Electronics Drive
M. S. 2346
Carrollton, Texas 75006
Re: Microelectronic Packaging, Inc.
Dear Mr. Rose:
The purpose of this letter is to provide a statement of the good faith
intent and agreement of STMicroelectronics, Inc. ("ST"), Microelectronic
Packaging, Inc. ("MPI") and FI Financial, LLC ("FIF"), with respect to the
complete assignment and transfer by ST to FIF (and by FIF at its discretion to
certain employees of Microelectronic Packaging, Inc. ("MPI") and certain non-
employees of MPI ("Investor Group")), of all of ST's rights, title, claims and
interests in, under and pursuant to the following agreements and documents: (a)
Deed of Guarantee and Indemnity dated August 17, 1995, entered into between MPI
and SGS-Thompson Microelectronics Pte Limited ("SGS") ("Guaranty"); (b) a
document entitled "Charge" dated August 17, 1995, entered into between
Microelectronic Packaging (S) PTE LTD ("MPS"), and SGS ("Charge"); (c) Supply
Guarantee and Preferred Allocation Agreement dated July, 1995, between MPS and
SGS ("Supply Agreement"); (d) Supplemental Agreement to Supply Guarantee and
Preferred Allocation Agreement dated August 17, 1995 and October 19, 1995,
entered into between MPS and SGS ("Supplemental Agreement"); (e) Warrant to
Purchase Common Stock of MPI dated September 24, 1998, pursuant to which ST is
entitled to purchase an aggregate of Two Hundred Thousand (200,000) shares of
MPI's common stock at a price of One Dollar ($1.00) per share ("Warrant"); (f)
the Judgment by Confession and Stipulated Judgment dated September 24, 1998,
between MPI and ST, and all agreements and documents related thereto
("Judgments"); and (g) Restructuring, Settlement and Mutual Release Agreement
dated September 24, 1998, entered into between, among others, ST and MPI
("Settlement Agreement") (all of the foregoing agreements and documents are
referred to collectively in this letter as the "ST Agreements").
<PAGE>
1. In addition to those terms that may be defined elsewhere in
this letter, the following terms shall have the meanings defined in this Section
1.
1.1 "Transpac Conversion" means the conversion of indebtedness
in the amount of principal and interest owed by MPM (S) Pte. Ltd. ("MPM") and
guaranteed by MPI in the aggregate to Transpac Capital Pte Ltd ("Transpac
Capital"), Transpac Industrial Holdings Ltd ("Transpac Holdings"), Regional
Investment Company Ltd ("Regional Investment"), and Natsteel Equity III Pte Ltd
("Natsteel Equity") (collectively the "Transpac Entities"), accrued as of
December 31, 1997 (which is the entire amount MPI and the Transpac Entities have
agreed is due and payable), into Four Million Thirty One Thousand Eight Hundred
and Twenty Six (4,031,826) shares of Series A Preferred Stock, or such other
amounts as may be agreed upon between such parties.
1.2 "DBS Conversion" means the conversion of indebtedness in the
amount of principal and interest owed by MPM and MPS and guaranteed by MPI to
Development Bank of Singapore Limited ("DBS"), accrued as of December 31, 1997
(which is the entire amount MPI and DBS have agreed is due and payable), into
One Million One Hundred Fifty Four Thousand Three Hundred and Eleven (1,154,311)
shares of Series A Preferred Stock, or such other amounts as may be agreed upon
between such parties.
1.3 "Motorola Conversion" means the conversion of indebtedness
in the amount of principal and interest owed by MPS and guaranteed by MPI to
Motorola, Inc. ("Motorola"), accrued as of December 31, 1997 (which is the
entire amount MPI and Motorola have agreed is due and payable), into Eight
Hundred Sixty Nine Thousand Nine Hundred Thirty Two (869,932) shares of Series A
Preferred Stock, or such other amounts as may be agreed upon between such
parties.
1.4 "NS Electronics Conversion" means the conversion of
indebtedness in the amount of principal and interest owed by MPI to NS
Electronics Bangkok (1993) Ltd. ("NS Electronics"), accrued as of December 31,
1997 (which is the entire amount MPI and NS Electronics have agreed is due and
payable), into Two Hundred Seventy One Thousand One Hundred Seventy Six
(271,176) shares of Series A Preferred Stock, or such other amounts as may be
agreed upon between such parties.
1.5 "Orix Leasing Conversion" means the conversion of
indebtedness in the amount of principal and interest owed by MPM and MPS and
guaranteed by MPI to Orix Leasing Singapore Limited ("Orix Leasing"), accrued as
of December 31, 1997 (which is the entire amount MPI and Orix Leasing have
agreed is due and payable) into Four Hundred Seventy Three Thousand Five Hundred
Eighty Four (473,584) shares of Series A Preferred Stock, or such other amounts
as may be agreed upon between such parties.
1.6 "Samsung Corning Conversion" means the conversion of
indebtedness in the amount of principal and interest owed by MPS and guaranteed
by MPI to Samsung Corning Co., Ltd. ("Samsung Corning"), accrued as of December
31, 1997 (which is the entire amount MPI and Samsung have agreed is due and
payable) into One Hundred Eighty
2
<PAGE>
Three Thousand Two Hundred Seventy Five (183,275) shares of Series A Preferred
Stock, or such other amounts as may be agreed upon between such parties.
1.7 "Texas Instruments Conversion" means the conversion of
indebtedness in the amount of principal and interest owed by MPS and guaranteed
by MPI to Texas Instruments Incorporated ("Texas Instruments"), accrued as of
December 31, 1997 (which is the entire amount MPI and Texas Instruments have
agreed is due and payable) into One Million Fifty Six Thousand and Twenty Seven
(1,056,027) shares of Series A Preferred Stock, or such other amounts as may be
agreed upon between such parties.
1.8 "Other Creditor Conversions" means collectively the Transpac
Conversion, the DBS Conversion, the Motorola Conversion, the NS Electronics
Conversion, the Orix Leasing Conversion, the Samsung Corning Conversion, and the
Texas Instruments Conversion.
1.9 "Other Creditors" means collectively the Transpac Entities,
DBS; Motorola ; NS Electronics; Orix Leasing; Samsung Corning; and Texas
Instruments.
2. None of the funds to be paid by FIF or any member of the Investor
Group to ST in exchange for the assignment and transfer of the ST Agreements
will have been obtained from MPI.
3. Assuming the terms and conditions of this letter and the Escrow
Instructions (as hereafter defined) are satisfied, all of the rights, title,
claims and interests of ST in, under and pursuant to the ST Agreements will be
transferred to FIF, and none of such rights, title, claims and interests will be
transferred to MPI. ST agrees that, pursuant to agreements that will be entered
into between FIF and members of the Investor Group, certain portions of the
interests obtained by FIF in the ST Agreements will be assigned by FIF to
members of the Investor Group. However, the respective rights and obligations of
FIF and ST pursuant to this letter and the Escrow Instructions (as hereafter
defined) shall not be affected in any manner by any assignment or lack of
assignment by FIF to members of the Investor Group or any other party, of any
portion of FIF's interests in the ST Agreements. Regardless of any other
provision of this letter, the Escrow Instructions (as hereafter defined) or the
Assignment Agreement (as hereafter defined), FIF represents, warrants and agrees
that:
3.1 FIF is a sophisticated and experienced investor who has the
capability to evaluate the risks of the transactions described in and
contemplated by this letter, and has the ability to protect FIF's own interests
in connection therewith.
3.2 FIF has performed whatever due diligence review FIF deems
necessary and/or appropriate in connection with the transactions described in
and contemplated by this letter, and is satisfied with the results of such due
diligence review.
3.3 FIF has not requested that ST make, and ST has not made and
is not making, any representations or warranties of any kind regarding the
propriety of FIF's
3
<PAGE>
contemplated acquisition of the ST Agreements, the value or enforceability of
any rights ST may have under the ST Agreements, the value or enforceability of
any rights FIF may have as an assignee of the ST Agreements, the value or
enforceability of any rights FIF may have to acquire shares of capital stock of
MPI by virtue of FIF's acquisition of the ST Agreements, or the current or
potential value of any of such shares of capital stock.
4. Subject to the terms and conditions of this letter and the Escrow
Instructions (as hereafter defined), not later than June 30, 1999, FIF will pay
to ST in cash in one lump sum, the amount of Five Hundred Thousand United States
Dollars (US$500,000.00) ("Investor Payment"), in exchange for ST's complete
assignment and transfer to FIF of all of ST's rights, title, claims and
interests in, under and pursuant to the ST Agreements ("ST Assignment"). The ST
Assignment will be evidenced by an assignment agreement in the form of Exhibit
"A" attached hereto and incorporated herein by reference ("Assignment
Agreement"). ST agrees that, pursuant to agreements that will be entered into
between FIF and members of the Investor Group, certain portions of the interests
obtained by FIF under the Assignment Agreement will be assigned by FIF to
members of the Investor Group. However, the respective rights and obligations of
FIF and ST pursuant to this letter and the Escrow Instructions (as hereafter
defined) shall not be affected in any manner by any assignment or lack of
assignment by FIF to members of the Investor Group or any other party, of any
portion of FIF's interests under the Assignment Agreement.
5. FIF shall not have any obligations to pay the Investor Payment to
ST until such time as all of the following conditions have been completely
satisfied:
5.1 MPI has obtained the approval of its Board of Directors and
Shareholders with respect to the Other Creditor Conversions and the conversion
of the ST Agreements by FIF (and its assignees) into an aggregate of One Million
Three Hundred Twenty Two Thousand Six Hundred Forty Seven (1,322,647) shares of
MPI's Series A Preferred Stock, or such other amounts as may be agreed upon
between such parties.
5.2 ST shall have duly executed the Assignment Agreement and
delivered such originally executed copy to the Escrow Agent (as hereafter
defined).
5.3 ST shall have delivered to the Escrow Agent (as hereafter
defined) (a) the originally executed copies of the Warrant, the Judgments and
the Settlement Agreement; and (b) all of the originally executed copies, or in
the alternative the cleanest copies in ST's possession, of the remainder of the
ST Agreements (collectively "ST Agreement Copies").
6. Not later than April 19, 1999, FIF shall have deposited the
entire amount of the Investor Payment in trust with Mission Valley Escrow
Company in San Diego, California ("Escrow Agent"), pursuant to written escrow
instructions ("Escrow Instructions") that have been approved and executed by
both FIF and ST ("Escrow Account"), and the entire amount of the Investor
Payment shall continually remain on deposit in the Escrow Account at all times
during the term of this letter. MPI shall pay all fees and expenses charged by
the Escrow Agent. All interest or other amounts earned or accrued with respect
to the Escrow Account prior to the
4
<PAGE>
payment of the Investor Payment to ST, shall remain the property of FIF and its
assignees. The Escrow Instructions shall include the following provisions, in
addition to any other provisions that may be jointly approved by FIF and ST:
6.1 At such time during the term of the Escrow Account as the
conditions stated in Sections 5.1, 5.2 and 5.3 above have been satisfied, the
Escrow Agent shall (a) deliver the Investor Payment to ST; and (b) concurrently
deliver the original executed copy of the Assignment Agreement and the ST
Agreement Copies to FIF.
6.2 In the event the Investor Payment has not been paid to ST at
or before 5:00 p.m. California time on June 30, 1999 ("Escrow Termination
Date"), then the Escrow Account shall be deemed to have been automatically
terminated as of that specific time, without the need for any further
instructions from or actions taken by either ST or FIF, and the Escrow Agent
shall thereupon immediately return all funds in the Escrow Account to FIF, and
immediately return the originally executed copy of the Assignment Agreement and
the ST Agreement Copies to ST.
6.3 The Escrow Termination Date shall not be extended beyond
June 30, 1999, except pursuant to the written agreement of ST and FIF.
7. Once the Investor Payment has been deposited in the Escrow
Account pursuant to the provisions of Section 6 hereof, this letter shall remain
in full force and effect until 5:00 p.m. California time on June 30, 1999, or
until such earlier time as the Investor Payment has been paid to ST. In the
event the Investor Payment is not deposited in the Escrow Account pursuant to
the provisions of Section 6 hereof, then this letter shall be deemed void and of
no force or effect.
8. Once the Investor Payment has been deposited in the Escrow
Account pursuant to the provisions of Section 6 hereof, if thereafter the
Investor Payment has not been paid to ST at or before 5:00 p.m. California time
on June 30, 1999, then as of that specific time, this letter shall immediately
terminate ("Automatic Termination").
9. Once the Investor Payment has been deposited in the Escrow
Account pursuant to the provisions of Section 6 hereof, until such time as there
has been an Automatic Termination, ST hereby specifically agrees that ST will
not seek to enforce any of the ST Agreements, or any of ST's rights pursuant
thereto, including without limitation, any rights ST may have pursuant to the
Judgments. However, MPI agrees that no provision of this letter or the Escrow
Instructions, and no actions taken or omitted to be taken by ST in connection
therewith, nor any other fact or circumstance existing in connection with any of
the foregoing, shall constitute or be construed to constitute any (a) waiver by
ST of any rights ST may have under the ST Agreements prior to the time ST has
received the Investor Payment; or (b) basis for the allegation of any defense by
MPI against the enforcement of the ST Agreements in accordance with their terms,
including without limitation, any defense based on theories of estoppel or
laches.
5
<PAGE>
10. MPI agrees that concurrently with the Escrow Agent's delivery
of the Investor Payment to ST as described herein, MPI will duly execute and
deliver to ST a release agreement in a form that is substantially the same as
the releases granted by MPI to ST pursuant to the provisions of the Settlement
Agreement.
11. The parties intend that the provisions of this letter be binding
upon each of them in accordance with their respective rights and obligations as
set forth herein.
By executing this letter where indicated below, ST, FIF and MPI are
indicating their agreement to be bound by the terms and conditions of this
letter.
STMICROELECTRONICS, INC. FI FINANCIAL, LLC
By: /s/ Steven K. Rose By: /s/ James T. Waring
----------------------------- -----------------------------
Vice President Manager
MICROELECTRONIC PACKAGING, INC.
By: /s/ Denis J. Trafecanty
-----------------------------
Senior Vice President
Chief Financial Officer
6
<PAGE>
EXHIBIT "A"
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT is entered into effective as of June _____,
1999 ("Effective Date"), between STMicroelectronics, Inc. ("ST"), and FI
Financial, LLC ("FIF"), with respect to the payment by FIF of a cash lump sum in
the amount of Five Hundred Thousand United States Dollars (US$500,000.00)
("Investor Payment"), in exchange for the assignment by ST to FIF pursuant to
the terms and conditions hereof, of all of ST's rights, title, claims and
interest in, under and pursuant to each and every one of the following
agreements and documents: (a) Deed of Guarantee and Indemnity dated August 17,
1995, entered into between Microelectronic Packaging, Inc. ("MPI") and SGS-
Thompson Microelectronics Pte Limited ("SGS") ("Guaranty"); (b) a document
entitled "Charge" dated August 17, 1995, entered into between Microelectronic
Packaging (S) PTE LTD ("MPS") and SGS ("Charge"); (c) Supply Guarantee and
Preferred Allocation Agreement dated July, 1995, between MPS and SGS ("Supply
Agreement"); (d) Supplemental Agreement to Supply Guarantee and Preferred
Allocation Agreement dated August 17, 1995 and October 19, 1995, entered into
between MPS and SGS ("Supplemental Agreement"); (e) Warrant to Purchase Common
Stock of MPI dated September 24, 1998, pursuant to which ST is entitled to
purchase an aggregate of Two Hundred Thousand (200,000) shares of MPI's common
stock at a price of One Dollar ($1.00) per share ("Warrant"); (f) the Judgment
by Confession and Stipulated Judgment dated September 24, 1998, between MPI and
ST, and all agreements and documents related thereto ("Judgments"); and (g)
Restructuring, Settlement and Mutual Release Agreement dated September 24, 1998,
entered into between, among others, ST and MPI (all of the foregoing agreements
and documents are referred to collectively in this letter as the "ST
Agreements").
FOR VALUE RECEIVED, and in consideration of the payment to ST of the
Investor Payment, ST hereby completely assigns, conveys and transfers to FIF,
all of ST's rights, title, claims and interests in, under and pursuant to each
and every one of the ST Agreements ("Assignment").
In connection with the Assignment, ST represents and warrants to FIF
that as of the Effective Date, ST is the sole and exclusive owner of all of the
rights, title, claims and interests of SGS and ST in, under and pursuant to the
ST Agreements, and that ST has not assigned, conveyed or otherwise transferred
any interest in or any portion of the ST Agreements to any party other than FIF.
Otherwise, ST does not make any additional representations or warranties of any
kind with respect to the ST Agreements. Regardless of any other provision of
this Assignment Agreement, FIF represents, warrants and agrees that:
(a) FIF is a sophisticated and experienced investor who has the
capability to evaluate the risks of the transactions contemplated by this
Assignment Agreement, and has the ability to protect FIF's own interests in
connection therewith.
7
<PAGE>
(b) FIF has performed whatever due diligence review FIF deems
necessary and/or appropriate in connection with the transactions contemplated by
this Assignment Agreement, and is satisfied with the results of such due
diligence review.
(c) FIF has not requested that ST make, and ST has not made and is not
making, any representations or warranties of any kind regarding the propriety of
FIF's contemplated acquisition of the ST Agreements, the value or enforceability
of any rights ST may have under the ST Agreements, the value or enforceability
of any rights FIF may have as an assignee of the ST Agreements, the value or
enforceability of any rights FIF may have to acquire shares of capital stock of
MPI by virtue of FIF's acquisition of the ST Agreements, or the current or
potential value of any of such shares of capital stock
IN WITNESS WHEREOF, ST and FIF have executed and delivered this Assignment
Agreement as of the Effective Date.
STMICROELECTRONICS, INC. FI FINANCIAL, LLC
By: /s/ Steven K. Rose By: /s/ James T. Waring
----------------------------- -----------------------------
8
<PAGE>
EXHIBIT 10.80
VIA FAX
April 15, 1999
Mr. James T. Waring, Manager
FI Financial, LLC
c/o Ross Dixon & Bell
550 West B Street, Suite 400
San Diego, CA 92101-3599
RE: Conditional Agreement Reached on Conversion of Debt to Equity
Dear Mr. Waring:
On Friday, January 15, 1999, Transpac and our secured creditor conditionally
agreed to a debt-for-equity conversion essentially as outlined in the proposal
submitted by Microelectronic Packaging, Inc. ("MPI") and its investment banker
and financial advisors, L. H, Friend, Weinress, Frankson & Presson, Inc. ("LH
Friend"). The acceptance of the attached proposal by Transpac and our secured
creditor is conditional upon agreement of the same proposal by the majority of
the remaining creditors. In addition, in fairness to all seven creditors and
due to financial constraints, MPI could not complete this conversion without the
acceptance by all of the creditors.
In connection with the attached Letter of Intent, signed today between MPI and
STMicroelectronics ("ST"), ST has agreed to the assignment of all of its rights
pursuant to their creditor position with MPI and subsidiaries. Assuming this
agreement is finalized with ST, FI Financial, LLC ("FI") then will have assumed
the ST creditor position. If and when that occurs, we are hopeful that FI will
accept the attached proposal. If you agree, your acceptance of this proposal
will, of course, be subject to 1) the completion and execution of a definitive
agreement to be drafted by MPI's legal counsel, and 2) the approval by MPI's
shareholders. MPI will obtain a fairness opinion relating to conversion on
these terms from LH Friend, and MPI anticipates its shareholders will approve
the conversion at a special meeting of shareholders to be held in mid to late
June 1999.
In the attached proposal summary, MPI will convert the Asian debt into MPI
Preferred Stock which will be convertible into MPI Common Stock on a two-for-one
basis. Considering ST's Settled Debt amount of $1,349,100, FI would receive
sufficient Preferred Stock to convert into a minimum of 2,645,294 shares of MPI
Common Stock. For your information, MPI's common shares closed at $0.37 on
Tuesday, April 13, 1999.
<PAGE>
Please understand that MPI's offer to increase the Settled Debt amount from
$1,137,044 to $1,349,100 is contingent upon the agreement of FI to terminate the
ST Warrants outstanding to purchase 200,000 shares of MPI Common Stock at $1.00
per share.
Now that Transpac and our secured creditor has conditionally agreed to this
proposal, we need your concurrence by signing your acceptance at the bottom of
this letter. As indicated, we will immediately commence preparation of the
legal documents for you and your legal advisors' review. All creditors will
receive the identical conversion rate of $1.02 per share; this will be so noted
in the agreement between MPI and each creditor.
Thank you kindly for all your help in our efforts to complete this debt-for-
equity conversion. Please call me at 619-292-7000, extension 3014 if you have
any questions or desire further information.
Best Regards,
/s/ Denis J. Trafecanty
- -----------------------------------
Senior Vice President
Chief Financial Officer
CC: Andrew K. Wrobel, Chairman, CEO and President, MPI
Robert W. Campbell, Managing Director, LH Friend
Van E. Haynie, Esq., Ross, Dixon & Bell
AGREED AND ACCEPTED:
/s/ James T. Waring April 15, 1999
- ----------------------------------- -------------------------
Signature Date
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET AS OF MARCH 31, 1999 AND THE STATEMENTS OF OPERATIONS, CASH FLOWS AND
SHAREHOLDERS EQUITY FOR THE PERIOD ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 129
<SECURITIES> 0
<RECEIVABLES> 1,130
<ALLOWANCES> 0
<INVENTORY> 2,742
<CURRENT-ASSETS> 4,167
<PP&E> 1,654
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,965
<CURRENT-LIABILITIES> 32,177
<BONDS> 45
0
0
<COMMON> 40,162
<OTHER-SE> (66,419)
<TOTAL-LIABILITY-AND-EQUITY> 5,965
<SALES> 1,743
<TOTAL-REVENUES> 1,743
<CGS> 1,584
<TOTAL-COSTS> 1,584
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 506
<INCOME-PRETAX> (1,084)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,084)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,084)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
