-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S7WZyCVHQNC5GT9JqVca2rj/4scvimZbtD4Li95joJtNDAuU3K9/IE3J+cQXnLWY tMRQYY6Sn5mA8ctD+YftSg== 0000944209-99-000813.txt : 19990517 0000944209-99-000813.hdr.sgml : 19990517 ACCESSION NUMBER: 0000944209-99-000813 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MICROELECTRONIC PACKAGING INC /CA/ CENTRAL INDEX KEY: 0000916232 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 943142624 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23562 FILM NUMBER: 99623874 BUSINESS ADDRESS: STREET 1: 9577 CHESAPEAKE DRIVE CITY: SAN DIEGO STATE: CA ZIP: 92123 BUSINESS PHONE: 6192927000 MAIL ADDRESS: STREET 1: 9577 CHESAPEAKE DRIVE CITY: SAN DIEGO STATE: CA ZIP: 92123 10-Q 1 FORM 10-Q ================================================================================ 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. ================================================================================
INDEX PAGE NO. - ----- -------- 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
2 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS MICROELECTRONIC PACKAGING, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, December 31, 1999 1998 - -------------------------------------------------------------------------------------------------------------------- ASSETS (UNAUDITED) 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 ====================================================================================================================
3 MICROELECTRONIC PACKAGING, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Three months ended March 31, --------------------------------------------- 1999 1998 - ---------------------------------------------------------------------------------------------------------------------- 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 ======================================================================================================================
4 MICROELECTRONIC PACKAGING, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Three months ended March 31, --------------------------------------------- 1999 1998 - ---------------------------------------------------------------------------------------------------------------------- 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 ======================================================================================================================
5 MICROELECTRONIC PACKAGING, INC. CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT (unaudited)
Common Stock Accumulated --------------------------------------- Shares Amount Deficit Total ----------------- ----------------- ------------------ ------------------ 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) ============================================================================================================================
6 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:
MARCH 31, 1999 December 31, 1998 ---------------------------- ---------------------------- (UNAUDITED) 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 ============================ ============================
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 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- 4. NET INCOME (LOSS) PER SHARE
For the three months ended March 31, 1999 -------------------------------------------- Income Shares Per-Share (Numerator) (Denominator) Amount ------------ ------------ --------- Loss from continuing operations $(1,084,000) BASIC EPS Loss available to common shareholders $ (0.10) $(1,084,000) 10,856,890 ========
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.
For the three months ended March 31, 1998 --------------------------------------------------------- Income Shares Per-Share (Numerator) (Denominator) Amount ----------------- --------------- ----------------- 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 ================= =============== =================
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 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 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 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 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 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 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 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 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 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 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 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 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 EX-10.75 2 DEBT CONVERSION RELEASE AGREEMENT/TEXAS INST. 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. 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 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 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 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 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 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 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 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 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 (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 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 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 (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 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 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 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 EX-10.76 3 DEBT CONVERSION RELEASE AGREEMENT/ORIX 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 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 (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 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 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 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 (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 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 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 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 (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 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 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 (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. 14 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 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.] 16 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 ----------------------------- ------------------------ [The remainder of this page has been intentionally left blank.] 17 EX-10.77 4 DEBT CONVERSION RELEASE AGREEMENT/TRANSPAC 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. 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., 2 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 3 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"): 4 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: 5 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 (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. 7 (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 8 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 9 (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. 10 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 11 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 (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 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 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 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 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 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 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 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 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 EX-10.78 5 ASSIGNMENT OF INTEREST/STMICROELECTRONICS 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. 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 EX-10.79 6 APRIL 14, 1999 LETTER 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"). 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 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 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 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 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 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 (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 EX-10.80 7 CONDITIONAL AGREEMENT 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. 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 EX-27.1 8 FINANCIAL DATA SCHEDULE
5 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. 1,000 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 129 0 1,130 0 2,742 4,167 1,654 0 5,965 32,177 45 0 0 40,162 (66,419) 5,965 1,743 1,743 1,584 1,584 0 0 506 (1,084) 0 (1,084) 0 0 0 (1,084) (0.10) (0.10)
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