-----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, UWqonW8nTyLM18+oI9e1WDg18vpp8LfczmuM8aAn6oxRucsrW2PK2OMRMpKbZgtG 2pMr6o5WBrQU8syRLhZiFA== 0001072993-99-000135.txt : 19990817 0001072993-99-000135.hdr.sgml : 19990817 ACCESSION NUMBER: 0001072993-99-000135 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990816 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: 99693743 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 FOR THE QUARTER ENDED 6/30/99 ================================================================================ 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 JUNE 30, 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 (858) 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 August 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. Condensed Consolidated 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.................. 12 Item 3. Quantitative and Qualitative Disclosures About Market Risk..... 18 PART II OTHER INFORMATION Item 1. Legal Proceedings.............................................. 19 Item 2. Changes in Securities and Use of Proceeds...................... 19 Item 3. Defaults upon Senior Securities................................ 19 Item 4. Submission of Matters to a Vote of Security Holders............ 19 Item 5. Other Information.............................................. 19 Item 6. Exhibits and Reports on Form 8-K............................... 19 SIGNATURES................................................................ 21 EXHIBIT INDEX............................................................. 22 2 PART I - FINANCIAL INFORMATION Item 1 - Financial Statements MICROELECTRONIC PACKAGING, INC. CONDENSED CONSOLIDATED BALANCE SHEETS JUNE 30, December 31, 1999 1998 - -------------------------------------------------------------------------- ASSETS (unaudited) Current assets: Cash $ 140,000 $ 469,000 Accounts receivable, net 1,489,000 1,306,000 Inventories 2,065,000 3,073,000 Other current assets 164,000 60,000 - -------------------------------------------------------------------------- TOTAL CURRENT ASSETS 3,858,000 4,908,000 Property, plant and equipment, net 2,051,000 1,806,000 Other non-current assets 117,000 171,000 - -------------------------------------------------------------------------- $ 6,026,000 $ 6,885,000 ========================================================================== LIABILITIES AND SHAREHOLDERS' DEFICIT Current liabilities: Current portion of long-term debt $ 473,000 $ 20,000 Accounts payable 3,883,000 4,045,000 Accrued liabilities 662,000 908,000 Debt and accrued interest of discontinued operations, in default, due on demand 28,059,000 27,055,000 - -------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 33,077,000 32,028,000 Long-term debt, less current portion 40,000 49,000 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' DEFICIT Common stock, no par value 40,170,000 40,143,000 Accumulated deficit (67,261,000) (65,335,000) - -------------------------------------------------------------------------- Total shareholders' deficit (27,091,000) (25,192,000) - -------------------------------------------------------------------------- $ 6,026,000 $ 6,885,000 ========================================================================== 3 MICROELECTRONIC PACKAGING, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Three months ended June 30, Six months ended June 30, --------------------------- ------------------------- 1999 1998 1999 1998 ================================================================================================== Net sales $ 2,182,000 $ 5,825,000 $ 3,924,000 $13,159,000 Cost of goods sold 1,928,000 4,559,000 3,511,000 9,940,000 - -------------------------------------------------------------------------------------------------- Gross profit 254,000 1,266,000 413,000 3,219,000 Selling, general and administrative 501,000 934,000 1,047,000 1,710,000 Engineering and product development 178,000 320,000 370,000 592,000 - -------------------------------------------------------------------------------------------------- Income (loss) from operations (425,000) 12,000 (1,004,000) 917,000 Other income (expense): Interest (expense), net (507,000) (3,000) (1,013,000) (6,0000) Other income, net 90,000 220,000 91,000 290,000 - -------------------------------------------------------------------------------------------------- Income (loss) before provision for income taxes (842,000) 229,000 (1,926,000) 1,201,000 Provision for income taxes -- -- -- (18,000) - -------------------------------------------------------------------------------------------------- Net income (loss) $ (842,000) $ 229,000 $(1,926,000) $ 1,183,000 ================================================================================================== Net income (loss) per common share - basic $ (0.08) $ 0.02 $ (0.18) $ 0.11 ================================================================================================== Net income (loss) per common share - assuming dilution $ (0.08) $ 0.02 $ (0.18) $ 0.10 ==================================================================================================
4 MICROELECTRONIC PACKAGING, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Six months ended June 30, ------------------------- 1999 1998 =================================================================================== NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ (212,000) $ 517,000 - ----------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of fixed assets (11,000) (1,024,000) Proceeds from the sale of fixed assets 10,000 - ----------------------------------------------------------------------------------- Net cash used by investing activities (11,000) (1,014,000) - ----------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on long-term debt and promissory notes (106,000) (21,000) - ----------------------------------------------------------------------------------- Net cash provided (used) by financing activities (106,000) (21,000) - ----------------------------------------------------------------------------------- NET DECREASE IN CASH (329,000) (518,000) CASH AT BEGINNING OF PERIOD 469,000 1,296,000 - ----------------------------------------------------------------------------------- CASH AT END OF PERIOD $ 140,000 $ 778,000 ===================================================================================
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 27,000 27,000 Net (loss) -- -- (1,926,000) (1,926,000) - ----------------------------------------------------------------------------------------- Balance at June 30, 1999 10,856,890 $40,170,000 $(67,261,000) $(27,091,000) =========================================================================================
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 June 30, 1999 and for the three and six month periods ended June 30, 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 periods. Certain prior year amounts have been reclassified to conform to the current year presentation. The results of operations for the three and six month periods ended June 30, 1999 are 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: June 30, 1999 December 31, 1998 ------------- ----------------- (Unaudited) Raw materials..................... $1,722,000 $2,203,000 Work-in-progress.................. 1,003,000 1,531,000 Finished goods.................... 7,000 38,000 Obsolescence reserve.............. (667,000) (699,000) ----------- ----------- $2,065,000 $3,073,000 =========== =========== A substantial portion of the Company's June 30, 1999 inventory, approximately $1.7 million, was purchased for the Company's primary customer. Under the terms of an agreement dated January 5, 1998 between the Company and the customer, the Company has been and continues to be required to maintain certain inventory levels as defined by the agreement. The agreement stipulates that the cost of such inventory will be paid to the Company should the customer terminate the business relationship. Terms of the agreement have been used in determining the carrying value of the Company's June 30, 1999 inventory. The customer can terminate the agreement with 120 days notice, the agreement is not enforceable should the company file bankruptcy, and notice expires in October 2000. 3. EFFECTS OF INCOME TAXES The Company has not recorded provisions for any income taxes for the three and six months ended June 30, 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 June 30, 1999 ---------------------------------------- Income Shares Per-Share (Numerator) (Denominator) Amount ---------------------------------------- Loss from continuing operations $(842,000) -- BASIC EPS Loss available to common shareholders $(842,000) 10,856,890 $(0.08) ========================================
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 June 30, 1998 ---------------------------------------- Income Shares Per-Share (Numerator) (Denominator) Amount ---------- ------------ --------- Income from continuing operations $229,000 -- BASIC EPS Income available to common shareholders 229,000 10,793,279 $0.02 ========= Effect of dilutive securities: Stock options -- 1,408,323 Warrants -- -- ======== ========== DILUTED EPS Income available to common shareholders + assumed conversions $229,000 12,201,602 $0.02 ======== ========== =======
Options to purchase 55,800 shares and warrants to purchase 1,227,693 shares of common stock at prices ranging from $1.00 to $6.50 were outstanding during the second 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. The options and warrants, which expire between August 1998 and June 2008 were still outstanding as of June 30, 1998.
For the six months ended June 30, 1999 ---------------------------------------- Income Shares Per-Share (Numerator) (Denominator) Amount ---------- ------------ --------- Loss from continuing operations $(1,926,000) -- Basic EPS Loss available to common shareholders $(1,926,000) 10,856,890 $(0.18) =========== ========== =========
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 by the Company. 8 Notes to Condensed Consolidated Financial Statements (unaudited) - -------------------------------------------------------------------------------
For the six months ended June 30, 1998 ---------------------------------------- Income Shares Per-Share (Numerator) (Denominator) Amount ---------- ------------ --------- Income from continuing operations $ 1,183,000 Basic EPS Income available to common shareholders 1,183,000 10,793,279 $ 0.11 ====== Effect of dilutive securities Stock options -- 1,404,777 Warrants -- -- ----------- ---------- Diluted EPS Income available to common shareholders + assumed conversions $ 1,183,000 12,201,602 $ 0.10 =========== ========== ======
Options to purchase 55,800 shares and warrants to purchase 1,227,693 shares of common stock at prices ranging from $1.00 to $6.50 were outstanding during the first six months 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 six months then ended. The options and warrants, which expire between August 1998 and June 2008 were still outstanding as of June 30, 1998. 5. COMMITMENTS AND CONTINGENCIES The Company entered into an operating lease for manufacturing facilities and corporate offices commencing September 1, 1997, and extending 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. In 1999, the Company financed the acquisition of certain machinery and equipment for a total obligation of $549,000. The amounts are payable over twelve monthly installments of $46,000 each, ending in April and June 2000. 6. ASIAN CREDITOR LOAN AGREEMENTS GUARANTEED BY MPI As further described below, and as of the date of this filing, the Company has signed agreements with each of the eight creditors of the Singapore subsidiaries which, subject to approval of the Company's shareholders, proposes to convert and cancel the approximately $28.1 million in debt and accrued interest owed to those eight creditors, for 9,362,777 shares of the Series A Convertible Preferred Stock of the Company, which will initially be convertible into 18,725,554 shares of the Company's Common Stock. A further description of this conversion is set forth below. 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 9 Notes to Condensed Consolidated Financial Statements (unaudited) - ------------------------------------------------------------------------------- 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 definitive agreements entered into between the Company and each of the eight Singapore Subsidiary Creditors during 1999 ("Definitive Agreements"). The Definitive 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") upon approval by a majority of the Company's shareholders. Based upon extension agreements which were signed by the Singapore Subsidiary Creditors during July 1999, these creditors have agreed to an extension of the deadline for the Debt to Equity Conversion to August 31, 1999. 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 $28,059,000 as of June 30, 1999, would be converted into shares of the Company's Series A Preferred Stock or reflected as a gain on the Company's Statement of Operations. Upon such conversion, the Discontinued Operations Debt would be reduced to zero. The Company currently has filed a Consent Solicitation Statement with the Securities and Exchange Commission ("SEC"). Assuming approval by the SEC, this Consent Solicitation Statement will be mailed to all shareholders of the Company in an effort to obtain shareholder approval for the Debt to Equity Conversion. If the proposal is not approved by the shareholders of the Company by August 31, 1999, the Company will request an additional extension of time beyond August 31, 1999 for a reasonable time to enable the Company to receive shareholder approval. However there is no assurance that such request for extensions will be granted. In connection with one of the Singapore Subsidiary Creditors, the Company has entered into an agreement with this 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 10 Notes to Condensed Consolidated Financial Statements (unaudited) - ------------------------------------------------------------------------------- shareholders. 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 June 30, 1999, the Company has an accumulated deficit of $67.3 million and a working capital deficiency of $29.2 million, which includes $28.1 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, the company believes such failure would be likely to require the Company and its U.S. subsidiaries to initially seek bankruptcy protection under Chapter 11 of Title 11 of the United States Code and there can be no assurance any such bankruptcy proceeding would remain as a chapter 11 proceeding. 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. 11 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 June 30, 1999, net sales were $2,182,000 as compared to net sales of $5,825,000 for the second quarter of 1998, resulting in decreased sales of $3,643,000 or 62%. The decrease in net sales is primarily the result of decreased shipments to the Company's largest customer. Sales to this one customer comprised 90% and 91% of total net sales for the second quarters of 1999 and 1998, respectively. Sales to this customer declined from $5,039,000 for the second quarter of 1998 to $1,958,000 for the second quarter of 1999, a decrease of $3,081,000 or 61%. Units shipped to this one customer declined by 47%, reflecting lower demand from the customer in the second quarter of 1999 as compared to the second quarter of 1998. Revenue in terms of dollars declined by more than revenue in terms of units because of a significant shift in product mix in 1999. Approximately 40% of sales to the Company's largest customer in 1999 were comprised of the repair and upgrade of multi-chip modules (MCMs). This repair activity generates only approximately 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 approximately 10% of sales for the second quarter of 1998. For the six months ended June 30, 1999, net sales were $3,924,000, representing a decrease of $9,235,000 or 70% over net sales of $13,159,000 for the corresponding period of 1998. The decrease in net sales is primarily the result of decreased shipments to the Company's largest customer. Sales to this one customer comprised 88% and 93% of total net sales for the six month periods ended June 30, 1999 and 1998, respectively. The dollar value of shipments to the Company's largest customer declined by 66% for the six month period ended June 30, 1999 as compared to the same period in 1998. Unit shipments to that same customer declined by 41% over the same comparative periods. Approximately 40% of sales to the Company's largest customer in the six months ended June 30, 1999 were comprised of the repair and upgrade of MCMs, as compared to less than 10% in the six months ended June 30, 1998. This repair activity caused the decline in revenue dollars to be greater than the decline in revenue units as described above. COST OF GOODS SOLD For the three months ended June 30, 1999, the cost of goods sold was $1,928,000 as compared to $4,559,000 for the second quarter of 1998, a decrease of 2,631,000 or 58%. The decrease in cost of goods sold is partially due to a 41% decline in total MCM units shipped from 1998 to 1999. 12 The decrease in units shipped was exacerbated by a 33% 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 due to the repair and upgrade activities described above. For the six months ended June 30, 1999, the cost of goods sold was $3,511,000, representing a decrease of $6,429,000 or 65% over cost of goods sold of $9,940,000 for the corresponding period of 1998. The decrease in cost of goods sold is partially due to a 37% decline in MCM units shipped from 1998 to 1999. The decrease in units shipped was exacerbated by an approximately 50% 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 due to the repair and upgrade activities described above. GROSS PROFIT Gross profit was $254,000 (12% of net sales) for the second quarter of 1999 as compared to $1,266,000 (22% of net sales) for the second quarter of 1998. The decrease in gross profit is attributable to the decrease in sales. The decrease in gross profit as a percentage of net sales is the result of the change in product mix, as discussed above, as well as the effect of the absorption of fixed manufacturing costs over lower sales revenue for the 1999 period as compared to the 1998 period. Gross profit was $413,000 (11% of net sales) for the six months ended June 30, 1999 as compared to $3,219,000 (24% of net sales) for the six months ended June 30, 1998. The decrease in gross profit as a percentage of net sales is the result of the change in product mix, as discussed above, as well as the effect of the absorption of fixed manufacturing costs over lower sales revenue for the 1999 period as compared to the 1998 period. SELLING, GENERAL AND ADMINISTRATIVE Selling, general and administrative expenses were $501,000 for the second quarter of 1999, representing a decrease of $433,000 or 46% from the second quarter of 1998. Selling, general and administrative expenses were $1,047,000 for the six months ended June 30, 1999, representing a decrease of $663,000 or 39% from the comparative period of 1998. The decreases are the result of a reduction of consulting fees which had been incurred by the Company in 1998, as well as reductions in staffing commensurate with the lower sales volume activity in 1999. ENGINEERING AND PRODUCT DEVELOPMENT Engineering and product development expenses were $178,000 for the second quarter of 1999 and $370,000 for the six months ended June 30, 1999, representing decreases of $142,000 or 44% and $222,000 or 38% from the corresponding periods of 1998, respectively. The decreases are primarily comprised of decreased use of outside consultants in 1999 as compared to 1998. 13 INTEREST EXPENSE Interest expense was $507,000 for the second quarter of 1999, representing an increase of $504,000 from the corresponding quarter of 1998. Interest expense was $1,013,000 for the six months ended June 30, 1999, representing an increase of $1,007,000 from the same period 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 at the beginning of 1999. The Company has accrued but not paid this interest. No provision for this interest expense was necessary in 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 $90,000 for the second quarter of 1999, as compared to $220,000 for the second quarter of 1998. Other income was $91,000 for the six months ended June 30, 1999 as compared to $290,000 for the same period of 1998. Other income for 1999 is primarily comprised of the estimated collection of a receivable from 1997. Other income for 1998 was comprised of the amortization of deferred revenue and the collection of an insurance recovery, both of which were related to the Company's former Singapore operations, and which were reclassified to discontinued operations at December 31,1998. EFFECTS OF INCOME TAXES The Company has not recorded provisions for any income taxes for the three and six months ended June 30, 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. LIQUIDITY AND CAPITAL RESOURCES During the six months ended June 30, 1999, operating activities of continuing operations used $212,000. The source of the Company's cash flow during this period was principally the liquidation of inventory. Investing activities, consisting principally of the acquisition of fixed assets of continuing operations, used $11,000. At June 30, 1999, the Company had a working capital deficiency of $29,219,000 and an accumulated deficit of $67,261,000. At June 30, 1999, the Company had outstanding approximately $28,059,000 of principal and accrued interest under the Guaranty Obligations. 14 The Company's sources of available liquidity at June 30, 1999 consisted of inventories of $2,065,000, trade accounts receivable of $1,489,000 and its cash balance of $140,000. 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 $28,059,000 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 and 2000. 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, the Company believes such failure would be likely to require the Company and its U.S. subsidiaries to initially seek bankruptcy protection under Chapter 11 of Title 11 of the United States Code and there can be no assurance any such bankruptcy proceeding would remain as a Chapter 11 proceeding. Further, any significant increase in planned capital expenditures or other costs or any decrease in or elimination of anticipated sources of revenue could cause the Company to restrict its business and product development efforts. 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 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 believes it will initially file for reorganization under Chapter 11 of Title 11 of the United States Code or if a Chapter 11 bankruptcy cannot be completed, the company may be 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 15 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) $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 what it believes would initially be Chapter 11 of Title 11 of the United States Code or similar bankruptcy laws of Singapore however there can be no assurance it would remain a Chapter 11. 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 what it believes would initially be Chapter 11 of Title 11 of the United States Code or similar bankruptcy laws of Singapore however there can be no assurance it would remain a Chapter 11. In July 1999, the Company and Motorola signed a definitive 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 obtain Shareholder approval to complete this Debt to Equity Conversion Agreement. Reliance on Schlumberger. Sales to one customer, Schlumberger, accounted for 90% of the Company's net sales in the second quarter of 1999 and is expected to continue to account for most of the Company's net sales in 1999. Under the agreement between Schlumberger and the Company entered into in January 1998, the Company is obligated to provide Schlumberger with its 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, Schlumberger 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. 16 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 June 30, 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 has been upgraded to a newer replacement system, 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 June 30, 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 two years. 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 third 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 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 17 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 financial condition. ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company has no derivative financial instruments. The Company has outstanding indebtedness at June 30, 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. 18 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. 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 ----------- ----------- 10.81 First Amendment to Debt Conversion and Mutual Settlement and Release Agreement between Transpac Capital and the Company dated June 30, 1999. 10.82 Debt Conversion and Mutual Settlement and Release Agreement between Motorola, Inc. and the Company dated June 3, 1999. 10.83 First Amendment to Debt Conversion and Mutual Settlement and Release Agreement between Motorola, Inc. and the Company dated June 30, 1999. 10.84 First Amendment to Debt Conversion and Mutual Settlement and Release Agreement between Texas Instruments Incorporated and the Company dated June 30, 1999. 10.85 First Amendment to Debt Conversion and Mutual Settlement and Release Agreement between ORIX Leasing and the Company dated June 30, 1999. 19 10.86 Debt Conversion and Mutual Settlement and Release Agreement between The Development Bank of Singapore Limited and the Company dated April 30, 1999. 10.87 First Amendment to Debt Conversion and Mutual Settlement and Release Agreement between The Development Bank of Singapore Limited and the Company dated June 30, 1999. 10.88 Nonbinding Letter Agreement between Samsung Corning Co., Ltd. and the Company. 10.89 Debt Conversion and Mutual Settlement and Release Agreement between Samsung Corning Co., Ltd. and the Company dated May 3, 1999. 10.90 First Amendment to Debt Conversion and Mutual Settlement and Release Agreement between Samsung Corning Co., Ltd. and the Company dated June 30, 1999. 10.91 Debt Conversion and Mutual Settlement and Release Agreement between NS Electronics Bangkok (1993), Ltd. and the Company and the Company dated May 3, 1999. 10.92 First Amendment to Debt Conversion and Mutual Settlement and Release Agreement between NS Electronics Bangkok (1993), Ltd. and the Company dated June 30, 1999. 10.93 Debt Conversion and Mutual Settlement and Release Agreement between FI Financial, LLC and the Company dated June 10, 1999. 10.94 First Amendment to Debt Conversion and Mutual Settlement and Release Agreement between FI Financial, LLC and the Company dated June 30, 1999. 10.95 Nonbinding Letter Agreement between STMicroelectronics, Inc. and the Company dated April 14, 1999. 27.1 Financial Data Schedule 20 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: August 12, 1999 By: /s/ Denis J. Trafecanty --------------- -------------------------------------- Denis J. Trafecanty Senior Vice President, Chief Financial Officer and Secretary 21 EXHIBIT INDEX Number Description ------ ----------- 10.81 First Amendment to Debt Conversion and Mutual Settlement and Release Agreement between Transpac Capital and the Company dated June 30, 1999. 10.82 Debt Conversion and Mutual Settlement and Release Agreement between Motorola, Inc. and the Company dated June 3, 1999. 10.83 First Amendment to Debt Conversion and Mutual Settlement and Release Agreement between Motorola, Inc. and the Company dated June 30, 1999. 10.84 First Amendment to Debt Conversion and Mutual Settlement and Release Agreement between Texas Instruments Incorporated and the Company dated June 30, 1999. 10.85 First Amendment to Debt Conversion and Mutual Settlement and Release Agreement between ORIX Leasing and the Company dated June 30, 1999. 10.86 Debt Conversion and Mutual Settlement and Release Agreement between The Development Bank of Singapore Limited and the Company dated April 30, 1999. 10.87 First Amendment to Debt Conversion and Mutual Settlement and Release Agreement between The Development Bank of Singapore Limited and the Company dated June 30, 1999. 10.88 Nonbinding Letter Agreement between Samsung Corning Co., Ltd. and the Company. 10.89 Debt Conversion and Mutual Settlement and Release Agreement between Samsung Corning Co., Ltd. and the Company dated May 3, 1999. 10.90 First Amendment to Debt Conversion and Mutual Settlement and Release Agreement between Samsung Corning Co., Ltd. and the Company dated June 30, 1999. 10.91 Debt Conversion and Mutual Settlement and Release Agreement between NS Electronics Bangkok (1993), Ltd. and the Company dated May 3, 1999. 10.92 First Amendment to Debt Conversion and Mutual Settlement and Release Agreement between NS Electronics Bangkok (1993), Ltd. and the Company dated June 30, 1999. 10.93 Debt Conversion and Mutual Settlement and Release Agreement between FI Financial, LLC and the Company dated June 10, 1999. 10.94 First Amendment to Debt Conversion and Mutual Settlement and Release Agreement between FI Financial, LLC and the Company dated June 30, 1999. 10.95 Nonbinding Letter Agreement between STMicroelectronics, Inc. and the Company dated April 14, 1999. 22 27.1 Financial Data Schedule 23 EX-10.81 2 1ST AMENDMENT TO DEBT CONVERSION EXHIBIT 10.81 FIRST AMENDMENT TO DEBT CONVERSION AND MUTUAL SETTLEMENT AND RELEASE AGREEMENT THIS FIRST AMENDMENT TO DEBT CONVERSION AND MUTUAL SETTLEMENT AND RELEASE AGREEMENT ("First Amendment") is entered into at San Diego, California, effective as of June 30, 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, the MPI Group and the Investor Group entered into a Debt Conversion and Mutual Settlement and Release Agreement dated April 29, 1999, pursuant to which the Investor Group agreed to convert certain debt owed by MPI to the Investor Group into Four Million Thirty One Thousand Eight Hundred and Twenty Six (4,031,826) shares of MPI's Series A Preferred Stock, and MPI agreed to issue such shares of its Series A Preferred Stock to the Investor Group, all upon and subject to the terms and conditions set forth therein ("Conversion Agreement"). WHEREAS, the Conversion Agreement states that the transactions contemplated thereby must be completed not later than June 30, 1999, and if they are not completed by such date, Transpac Capital on behalf of the Investor Group has the right to terminate the Conversion Agreement by giving a written termination notice to MPI. WHEREAS, both the MPI Group and the Investor Group desire to amend the Conversion Agreement to extend the date as of which the transactions contemplated thereby must be completed, to not later than August 31, 1999. 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. Section 1.2 of the Conversion Agreement is hereby amended by deleting the date of June 30, 1999, and inserting in its place the date of August 31, 1999. 2. Except as set forth in Section 1 of this First Amendment, there are no other amendments or modifications to the Conversion Agreement, and all of the other provisions of the Conversion Agreement shall remain in full force and effect without any amendments or modifications of any kind. IN WITNESS WHEREOF, the parties hereto have duly executed this First Amendment as of the date first above written, MICROELECTRONIC PACKAGING, INC. TRANSPAC CAPITAL PTE LTD By: /s/ Denis J. Trafecanty By: /s/ Wong Lin Hong --------------------------------- ---------------------------- Signature Signature Print Print Name: Denis J. Trafecanty Name: Wong Lin Hong ------------------------------- -------------------------- Print Print Title: Senior Vice President and CFO Title: Executive Vice President ------------------------------ -------------------------- [The remainder of this page has been intentionally left blank.] 2 CONTINUATION OF SIGNATURES FOR FIRST AMENDMENT TO DEBT CONVERSION AND MUTUAL SETTLEMENT AND RELEASE AGREEMENT Dated June 30, 1999 TRANSPAC INDUSTRIAL HOLDINGS LTD REGIONAL INVESTMENT COMPANY LTD By: /s/ Wong Lin Hong By: /s/ Wong Lin Hong ----------------------------- ------------------------------- Signature Signature Print Print Name: Wong Lin Hong Name: Wong Lin Hong --------------------------- ----------------------------- Print Print Title: Executive Vice President Title: Executive Vice President -------------------------- ---------------------------- NATSTEEL EQUITY III PTE LTD By: /s/ Caroline Chan ------------------------------- Signature Print Name: Caroline Chan ----------------------------- Print Title: Senior Vice President --------------------------- 3 EX-10.82 3 DEBT CONVERSION EXHIBIT 10.82 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 June 3, 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 Motorola, Inc. ("Motorola") and their respective predecessors, successors, former and current subsidiaries, affiliates, shareholders, directors, officers, agents, attorneys, representatives, insurers, employees and assigns (collectively with Motorola the "Investor Group"). WITNESSETH: WHEREAS, pursuant to two separate One Million US Dollars (US$1,000,000) Term Loan Facility Agreements by and among Microelectronic Packaging (S) Pte Ltd ("MPS"), Motorola and Citibank, N.A., Singapore Branch ("Citibank") dated November 8, 1995 and February 1, 1996, respectively (the "Loan Agreements"), Citibank loaned Two Million US Dollars (US$2,000,000) to MPS, a subsidiary of MPI currently in liquidation, which loan amounts Motorola guaranteed and which Loan Agreements call for certain payments and interest amounts which were thereafter due and payable periodically; WHEREAS, MPI, Motorola, CTM Electronics, Inc. ("CTM") and Microelectronic Packaging America ("MPA"), entered into an Agreement Relating to Guarantee in connection with Motorola's guarantee of MPS' obligations under the Loan Agreements (the "Guarantee"), pursuant to which, among other things, (i) MPI, MPA and CTM agreed to indemnify Motorola for any payments Motorola may be required to make as guarantor under the Loan Agreements, (ii) MPI delivered to Motorola stock certificates representing all of the outstanding capital stock of each of MPA, CTM and MPS (the "Stock Certificates") and irrevocable proxies to permit Motorola to vote the shares represented by the Stock Certificates (the "Irrevocable Proxies"), and (iii) MPI, MPA and CTM granted Motorola a security interest in all of the assets of each of MPI, MPA and CTM; WHEREAS, MPA and Citicorp USA, Inc. ("Citicorp") entered into a Promissory Note dated May 13, 1997, pursuant to which Citicorp loaned Two Million Two Hundred Eight Thousand Five Hundred Thirty Eight US Dollars (US$2,208,538) to MPA "1997 Note", the proceeds which MPA used to repay in full the balance due to Citibank under the Loan Agreements. The 1997 Note calls for certain payments and interest amounts, which were thereafter due and payable periodically. The 1997 Note was amended by an Amendment dated July 11, 1997, a Second Amendment dated September 9, 1997, a Third Amendment dated December 8, 1997, and a Fourth Amendment dated January 30, 1998; WHEREAS, MPS defaulted under the 1997 Note, as amended, and Motorola has paid all amounts due to Citicorp under the 1997 Note. As a result, Motorola is subrogated to all of Citicorp's rights against MPI, CTM and MPA and any collateral therefor; and MPI, CTM and MPA are obligated to indemnify Motorola under the Guarantee. WHEREAS, in an effort to restructure and settle all of MPI's and CTM's obligations under the Guarantee, MPI, CTM and Motorola entered into a Forbearance, Restructureand Mutual Release Agreement dated July 1, 1998, pursuant to which MPI agreed to make certain payments to Motorola, in exchange for the agreement of Motorola 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 Motorola would release MPI and CTM 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 Guarantee, the 1997 Note, 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 Motorola 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 ("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 (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 3 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 Conversion, the Texas Instruments Conversion, the NS Electronics Conversion, the ORIX Leasing Conversion, the Samsung Corning Conversion, the STMicroelectronics Conversion and the Transpac Conversion. 1.13 "Other Creditors" means collectively DBS; Texas Instruments, 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 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, Motorola 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 Motorola 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 Motorola pursuant to the provisions of this Section 2.3, then this Conversion Agreement shall be deemed completely void, and MPI and Motorola 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 Motorola hereunder shall be deemed 4 immediately terminated without notice, and MPI and Motorola 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 Motorola Conversion. The completion of the Motorola --------------------------------- 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 Motorola 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 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 Motorola 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 Motorola 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 Motorola and the Other Creditors as required pursuant to the Motorola 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 Motorola 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 Motorola. 5 3.6 MPI and Motorola 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 Motorola Conversion. MPI shall have the ------------------------------------------ following affirmative obligations under this Conversion Agreement until such time as the Motorola 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. 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 Motorola 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 Motorola 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 Motorola and the Other Creditors as required pursuant to the Motorola Conversion and the Other Creditor Conversions. 4.5 MPI shall use its best and most diligent efforts to cause the Motorola 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 6. Completion of Conversion. At such time as all of the Completion ------------------------ Conditions have been performed and satisfied by MPI, then MPI and Motorola shall complete the Motorola 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 Motorola 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 Motorola 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 Documents (as defined below) or in any other document delivered to Motorola 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 Documents (as defined below) or in any other document delivered to Motorola in connection herewith. (c) MPI shall cause its legal counsel to duly execute and deliver to Motorola 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 Motorola 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 Motorola the stock certificate representing Eight Hundred Sixty Nine Thousand Nine Hundred Thirty Two (869,932) shares of Series A Preferred Stock issued by MPI to Motorola. (f) MPI shall deliver to Motorola and its legal counsel copies of the following documents: 7 (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 Motorola. -------------------- (a) Motorola shall duly execute and deliver to MPI a counterpart copy of the Registration Agreement. (b) Motorola shall deliver to MPI the originals of all of the Stock Certificates, and upon such delivery to MPI, Motorola hereby agrees that all security interests and other interests of any kind that Motorola may have had in the Stock Certificates or any of the securities represented thereby, or any of the assets of MPI or CTM, shall be deemed to have been automatically and irrevocably terminated as of the Conversion Date. Without limiting the generality of the foregoing, Motorola hereby agrees that as of the Conversion Date, all security interests of any kind that may have been created in favor of Motorola by virtue of any provision of the Guarantee, including without limitation, Section 6 of the Guarantee, shall be deemed to have been automatically and irrevocably terminated. (c) Motorola shall deliver to MPI the originals of all Assignments Separate from Certificate that may be in Motorola's possession or subject to Motorola's control, that relate to any of the Stock Certificates, and upon such delivery to MPI, Motorola hereby agrees that all interests of any kind that Motorola may have had by virtue of such documents shall be deemed to have been automatically and irrevocably terminated as of the Conversion Date. (d) Motorola shall deliver to MPI the originals of all of the Irrevocable Proxies, and upon such delivery to MPI, Motorola hereby agrees that all rights Motorola may have had under any of the Irrevocable Proxies or any of the 8 securities covered thereby, shall be deemed to have been automatically and irrevocably terminated as of the Conversion Date. (e) Motorola shall prepare, execute and deliver to MPI appropriate UCC termination statements, in form and substance sufficient in the reasonable opinion of MPI's legal counsel, to cause any UCC filings Motorola may have made with respect to the Stock Certificates or any of the assets of MPI or CTM, to be completely and irrevocably terminated on the records of any state in which any such UCC filings may have been made by Motorola. 6.3 Effect of Conversion. Upon the occurrence of the Conversion -------------------- Date, (a) the debts owed by MPI to Motorola shall be deemed to have been converted, respectively, into the number of shares of MPI's Series A Preferred Stock issued to Motorola, 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 Motorola, 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 Motorola 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 Motorola 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 Motorola, 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 Motorola agree that MPI shall no longer have any obligations of any kind under the Former Agreements to pay any amount to Motorola, and Motorola 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 9 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 Motorola 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 Motorola elsewhere in this Conversion Agreement, the Ancillary Documents or in any other document delivered to Motorola in connection herewith, MPI represents and warrants to Motorola 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. 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 Documents and every other document executed and delivered by MPI to Motorola 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. 10 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 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 Motorola 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 Motorola with all ----------- information Motorola 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 Motorola 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 11 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) 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: 12 (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 Motorola 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) 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 Motorola. In ------------------------------------------------------- addition to any representations and warranties Motorola may make to MPI elsewhere in this Conversion Agreement, the Ancillary Documents or in any other document delivered to MPI in connection herewith Motorola, 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 Motorola 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 13 Motorola 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 Motorola, and when so executed and delivered, will constitute legal, valid and binding obligations of Motorola, 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 Motorola, which representation is confirmed by Motorola's execution of this Conversion Agreement, and Motorola hereby confirms, that the Series A Preferred Stock to be received by Motorola, 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 Motorola has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Conversion Agreement, Motorola further represents that Motorola 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. Motorola believes it has ------------------------- received all the information it considers necessary or appropriate for deciding whether to acquire the Securities. Motorola 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. Motorola 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. Motorola 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. Motorola 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. Motorola also represents it has not been organized for the purpose of acquiring the Securities. 9.5 Restricted Securities. Motorola 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, Motorola represents that it is familiar with Securities and Exchange Commission ("SEC") Rule 144, as presently in effect, 14 and understands the resale limitations imposed thereby and generally by the federal securities laws of the United States. Motorola 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 Motorola is subject to restrictions imposed by federal and state laws, that the stock certificates representing the Securities will bear a restrictive legend stating that Motorola 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, Motorola 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 (b) Motorola 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, Motorola 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, 15 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 Motorola is not a United States person, --------------- Motorola 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) Motorola'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. Motorola 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. 16 9577 Chesapeake Drive San Diego, CA 92123 Attn: Chief Executive Officer To Motorola Motorola, Inc. 3102 North 56/th/ Street Phoenix, AZ 85018 Attn: Mark Poulsen SPS Sector Controller 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 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 17 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.] 18 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. MOTOROLA, INC. By: /s/ Denis J. Trafecanty By: /s/ Mark Poulsen --------------------------------- -------------------------------- Signature Signature By: /s/ Denis J. Trafecanty By: /s/ Mark Poulsen --------------------------------- -------------------------------- Print Print Title: Senior Vice President and CFO Title: VP and Sector Controller ------------------------------ ----------------------------- [The remainder of this page has been intentionally left blank.] 19 EX-10.83 4 1ST AMENDMENT TO DEBT CONVERSION EXHIBIT 10.83 FIRST AMENDMENT TO DEBT CONVERSION AND MUTUAL SETTLEMENT AND RELEASE AGREEMENT THIS FIRST AMENDMENT TO DEBT CONVERSION AND MUTUAL SETTLEMENT AND RELEASE AGREEMENT ("First Amendment") is entered into at San Diego, California, effective as of June 30, 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 Motorola, Inc. ("Motorola") and its predecessors, successors, former and current subsidiaries, affiliates, shareholders, directors, officers, agents, attorneys, representatives, insurers, employees and assigns (collectively with Motorola the "Investor Group"). WITNESSETH: WHEREAS, the MPI Group and the Investor Group entered into a Debt Conversion and Mutual Settlement and Release Agreement dated June 4, 1999, pursuant to which the Investor Group agreed to convert certain debt owed by MPI to the Investor Group into Eight Hundred Sixty Nine Thousand Nine Hundred Thirty Two (869,932) shares of MPI's Series A Preferred Stock, and MPI agreed to issue such shares of its Series A Preferred Stock to the Investor Group, all upon and subject to the terms and conditions set forth therein ("Conversion Agreement"). WHEREAS, the Conversion Agreement states that the transactions contemplated thereby must be completed not later than June 30, 1999, and if they are not completed by such date, Motorola has the right to terminate the Conversion Agreement by giving a written termination notice to MPI. WHEREAS, both the MPI Group and the Investor Group desire to amend the Conversion Agreement to extend the date as of which the transactions contemplated thereby must be completed, to not later than August 31, 1999. 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. Section 1.2 of the Conversion Agreement is hereby amended by deleting the date of June 30, 1999, and inserting in its place the date of August 31, 1999. 2. Except as set forth in Section 1 of this First Amendment, there are no other amendments or modifications to the Conversion Agreement, and all of the other provisions of the Conversion Agreement shall remain in full force and effect without any amendments or modifications of any kind. IN WITNESS WHEREOF, the parties hereto have duly executed this First Amendment as of the date first above written. MICROELECTRONIC PACKAGING, INC. MOTOROLA, INC. By: /s/ Denis J. Trafecanty By: /s/ Mark Poulsen --------------------------------- ---------------------------- Signature Signature Print Print Name: /s/ Denis J. Trafecanty Name: /s/ Mark Poulsen ------------------------------- -------------------------- Print Print Title: Senior Vice President and CFO Title: VP and Sector Controller ------------------------------ ------------------------- 2 EX-10.84 5 1ST AMENDMENT TO DEBT CONVERSION EXHIBIT 10.84 FIRST AMENDMENT TO DEBT CONVERSION AND MUTUAL SETTLEMENT AND RELEASE AGREEMENT THIS FIRST AMENDMENT TO DEBT CONVERSION AND MUTUAL SETTLEMENT AND RELEASE AGREEMENT ("First Amendment") is entered into at San Diego, California, effective as of June 30, 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, the MPI Group and the Investor Group entered into a Debt Conversion and Mutual Settlement and Release Agreement dated April 27, 1999, pursuant to which the Investor Group agreed to convert certain debt owed by MPI to the Investor Group into One Million Fifty Six Thousand Twenty Seven (1,056,027) shares of MPI's Series A Preferred Stock, and MPI agreed to issue such shares of its Series A Preferred Stock to the Investor Group, all upon and subject to the terms and conditions set forth therein ("Conversion Agreement"). WHEREAS, the Conversion Agreement states that the transactions contemplated thereby must be completed not later than June 30, 1999, and if they are not completed by such date, TI has the right to terminate the Conversion Agreement by giving a written termination notice to MPI. WHEREAS, both the MPI Group and the Investor Group desire to amend the Conversion Agreement to extend the date as of which the transactions contemplated thereby must be completed, to not later than August 31, 1999. 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. Section 1.2 of the Conversion Agreement is hereby amended by deleting the date of June 30, 1999, and inserting in its place the date of August 31, 1999. 2. Except as set forth in Section 1 of this First Amendment, there are no other amendments or modifications to the Conversion Agreement, and all of the other provisions of the Conversion Agreement shall remain in full force and effect without any amendments or modifications of any kind. IN WITNESS WHEREOF, the parties hereto have duly executed this First Amendment 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 Print Print Name: Denis J. Trafecanty Name: Thomas J. Gentry ------------------------------- ---------------------------- Print Print Title: Senior Vice President and CFO Title: Vice President ------------------------------ --------------------------- 2 EX-10.85 6 1ST AMENDMENT TO DEBT CONVERSION EXHIBIT 10.85 FIRST AMENDMENT TO DEBT CONVERSION AND MUTUAL SETTLEMENT AND RELEASE AGREEMENT THIS FIRST AMENDMENT TO DEBT CONVERSION AND MUTUAL SETTLEMENT AND RELEASE AGREEMENT ("First Amendment") is entered into at San Diego, California, effective as of June 30, 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 its 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, the MPI Group and the Investor Group entered into a Debt Conversion and Mutual Settlement and Release Agreement dated April 16, 1999, pursuant to which the Investor Group agreed to convert certain debt owed by MPI to the Investor Group into Four Hundred Seventy Three Thousand Five Hundred Eighty Four (473,584) shares of MPI's Series A Preferred Stock, and MPI agreed to issue such shares of its Series A Preferred Stock to the Investor Group, all upon and subject to the terms and conditions set forth therein ("Conversion Agreement"). WHEREAS, the Conversion Agreement states that the transactions contemplated thereby must be completed not later than June 30, 1999, and if they are not completed by such date, ORIX has the right to terminate the Conversion Agreement by giving a written termination notice to MPI. WHEREAS, both the MPI Group and the Investor Group desire to amend the Conversion Agreement to extend the date as of which the transactions contemplated thereby must be completed, to not later than August 31, 1999. 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. Section 1.2 of the Conversion Agreement is hereby amended by deleting the date of June 30, 1999, and inserting in its place the date of August 31, 1999. 2. Except as set forth in Section 1 of this First Amendment, there are no other amendments or modifications to the Conversion Agreement, and all of the other provisions of the Conversion Agreement shall remain in full force and effect without any amendments or modifications of any kind. IN WITNESS WHEREOF, the parties hereto have duly executed this First Amendment as of the date first above written. MICROELECTRONIC PACKAGING, INC. ORIX LEASING SINGAPORE LIMITED By: /s/ Denis J. Trafecanty By: /s/ CT Kwek ---------------------------------- ------------------------------- Signature Signature Print Print Name: Denis J. Trafecanty Name: CT Kwek ------------------------------- ---------------------------- Print Print Title: Senior Vice President and CFO Title: Managing Director ------------------------------ ---------------------------- 2 EX-10.86 7 DEBT CONVERSION EXHIBIT 10.86 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 30, 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 permitted assigns (collectively with MPI the "MPI Group"); and The Development Bank of Singapore Limited ("DBS") and its successors and permitted assigns (collectively with DBS the "Investor Group"). WITNESSETH: WHEREAS, DBS and Microelectronic Packaging (S) Pte. Ltd. ("MPS") entered into a Deed of Debenture dated June 10, 1986 (the "Deed"), which was subsequently amended by supplemental deeds dated July 16, 1987, February 20, 1989, August 24, 1990, June 4, 1992, October 30, 1993 and January 11, 1994 (the "Supplemental Deeds"), such that, in connection with the Deed and the Supplemental Deeds, DBS provided certain credit facilities to MPS, and the Deed and the Supplemental Deeds call for certain payments and interest amounts on amounts loaned to MPS pursuant to such credit facilities which were thereafter due and payable periodically; WHEREAS, DBS and MPS restated the terms of such credit facilities in an agreement dated August 15, 1994 (the "Restatement"), and MPS owed DBS Four Million Two Hundred Seventy Five Thousand Singapore Dollars (S$4,275,000) as of March 8, 1998 under the Deed, the Supplemental Deeds and the Restatement; WHEREAS, DBS and MPM (S) Pte. Ltd. ("MPM") entered into a credit facilities arrangement dated December 15, 1994 (the "Facilities Arrangement" and, collectively with the Deed, the Supplemental Deeds and the Restatement, the "Loan Agreements"), such that in connection with the Facilities Arrangement, DBS provided certain credit facilities to MPM, and the Facilities Arrangement calls for certain payments and interest amounts on amounts loaned to MPM pursuant to such credit facilities which were thereafter due and payable periodically, such that MPM owed DBS Two Million One Hundred Thirty Four Thousand Singapore Dollars (S$2,134,000) as of March 8, 1998 under the Facilities Arrangement; WHEREAS, MPI guaranteed the obligations of MPS under the Deed, the Supplemental Deeds and the Restatement and the obligations of MPM under the Facilities Arrangement (the "Guarantees"), and MPS and MPM have defaulted upon such obligations, giving rise to MPI's obligations under such Guarantees; WHEREAS, NS Electronics Bangkok (1993) Ltd. ("NSEB") owes the sum of Six Hundred Seventy Three Thousand Eight Hundred Eight US Dollars (US$673,808) to MPS, which is carried on MPS' accounts as an account receivable (the "Account Receivable"), to which DBS has a priority claim in the MPS liquidation proceeding, and MPI has requested that DBS provide to NSEB a written release of the Account Receivable; WHEREAS, in an effort to restructure and settle all of MPI's obligations under the Guarantees, MPI and DBS entered into a Restructuring, Settlement and Mutual Release Agreement dated July 20, 1998, pursuant to which MPI agreed to make certain payments to DBS in exchange for the agreement of DBS 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 DBS 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 DBS Conversion has been completed pursuant to the terms and conditions of this Agreement. 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 2 (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 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 (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. 3 1.12 "Other Creditor Conversions" means collectively the Transpac 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 the Transpac Entities; 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 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, which sixty (60) day period shall not extend beyond June 30, 1999, without the prior written consent of DBS (the "Interim Period"), 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, DBS 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 DBS 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 DBS pursuant to the provisions of this Section 2.3, then this Conversion Agreement shall be deemed completely void, and MPI and DBS 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, but subject to the provisions of Section 2.5 hereof, if an Insolvency Action is commenced prior to the Conversion Date, then this Conversion Agreement and the respective rights and obligations of MPI and DBS hereunder shall be deemed immediately terminated without notice, and MPI and 4 DBS shall retain and remain subject to whatever respective rights and obligations they may have under the Former Agreements. 2.5 Notwithstanding any provision of this Conversion Agreement, during the Interim Period, MPI and DBS shall retain and remain subject to, whatever respective rights and obligations they may have under the Former Agreements. 2.6 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 DBS Conversion. The completion of the DBS ---------------------------- 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 DBS 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 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 DBS 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 DBS 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 DBS and the Other Creditors as required pursuant to the DBS 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 5 the DBS 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 DBS. 3.6 MPI and DBS 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 DBS Conversion. MPI shall have the ------------------------------------- following affirmative obligations under this Conversion Agreement until such time as the DBS 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. 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 DBS 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 DBS 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 DBS and the Other Creditors as required pursuant to the DBS Conversion and the Other Creditor Conversions. 4.5 MPI shall use its best and most diligent efforts to cause the DBS 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. 6 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 DBS shall complete the DBS Conversion concurrently with the completion by MPI and the Other Creditors of the Other Creditor Conversions, by concurrently taking the following actions: 7 6.1 Actions By MPI. -------------- (a) MPI shall duly execute and deliver to DBS 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 DBS 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"). (c) MPI's Chief Executive Officer shall duly execute and deliver to DBS 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 DBS 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 DBS in connection herewith. (d) MPI shall cause its legal counsel to duly execute and deliver to DBS the form of legal opinion letter attached to his Conversion Agreement as Exhibit "F" and incorporated herein by reference ("Legal Opinion"). (e) MPI shall deliver to DBS 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 one (1) day prior to the Conversion Date. (f) MPI shall deliver to DBS stock certificates representing One Million One Hundred Fifty Four Thousand Three Hundred Eleven (1,154,311) shares of Series A Preferred Stock issued by MPI to DBS. (g) MPI shall deliver to DBS and its legal counsel copies of the following documents: 8 (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. (iii) A written certification from MPI's legal counsel stating that all approvals required to be obtained from the SEC in connection with the transactions contemplated by this Conversion Agreement have been obtained. 6.2 Actions By DBS. -------------- (a) DBS shall duly execute and deliver to MPI a counterpart copy of the Registration Agreement. (b) DBS 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 DBS shall be deemed to have been converted, respectively, into the number of shares of MPI's Series A Preferred Stock issued to DBS, 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 DBS, 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 DBS 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 DBS 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 DBS, 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 DBS agree that MPI shall no longer have any obligations of any kind under the Former Agreements to pay any amount to DBS, and DBS 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 9 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, or the IBM Agreement (collectively the "Ancillary Agreements"), or any of the respective rights and obligations of MPI and/or DBS 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 DBS elsewhere in this Conversion Agreement, the Ancillary Agreements or in any other document delivered to DBS in connection herewith, MPI represents and warrants to DBS 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. 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 DBS 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. 10 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, delivery and performance of this Conversion Agreement by MPI and the consummation by MPI of the transactions contemplated herein do not (a) violate any provision of MPI's Restated Articles of Incorporation or Bylaws, (b) conflict with or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which MPI is a party, (c) create or impose a lien, charge, or encumbrance on any material property of MPI under any agreement or any commitment to which MPI is a party or by which MPI is bound or by which any of its properties or assets are bound, or (d) result in a violation of any federal, state, local, or to the best of MPI's knowledge, any foreign statute, rule regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to MPI or any of its subsidiaries or by which any property or asset of MPI or any of its subsidiaries are bound or affected, the violation of which would have a material adverse effect. MPI is not required under federal, state or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Conversion Agreement, or to issue or sell the Series A Preferred Stock or the Common Stock issuable upon conversion of the Series A Preferred Stock in accordance with the terms thereof, except for such filings as the Company may be required to make with the SEC and/or the California Department of Corporations and/or any other applicable authority ("Required Filings"). The Company hereby represents and warrants that the Required Filings will be made in the manner required by law in connection with the transactions contemplated by this Conversion Agreement. For purposes of this Section 8.3.4, the term "material adverse effect" means any effect on the business, operations, properties or financial condition of MPI that is material and adverse to MPI and its subsidiaries and affiliates, taken as a whole, and/or any condition, circumstance or situation that would prohibit or otherwise interfere with the ability of MPI to enter into and perform any of its obligations under this Conversion Agreement or the other Transaction Documents in any material respect. 8.4 Valid Issuance of Preferred and Common Stock. Prior to the --------------------------------------------- issuance thereof the Series A Preferred Stock will have been duly authorized by all necessary corporate action and, 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 by all 11 necessary corporate action 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 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 DBS 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. To the best of MPI's knowledge, neither this ---------- Conversion Agreement, the Transaction Documents nor any document MPI has filed or will file with the SEC that is furnished to DBS by or on behalf of MPI or any subsidiary of MPI in connection with the transactions contemplated by this Conversion Agreement, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made herein or therein, in light of the circumstances under and at the time at which they were made herein or therein, not misleading. 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 DBS 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, 12 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) 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 DBS 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. 13 (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) 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 DBS. DBS ------------------------------------------------- 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 DBS 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 DBS 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 DBS, and when so executed and delivered, will constitute legal, valid and binding obligations of DBS, 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. 14 9.2 Purchase Entirely For Own Account. MPI is entering into the --------------------------------- Transaction Documents in reliance on the representation made by DBS, which representation is confirmed by DBS' execution of this Conversion Agreement, and DBS hereby confirms, that the Series A Preferred Stock to be received by DBS, and MPI's common stock issuable upon conversion thereof (collectively the "Securities") will be acquired for investment, and that DBS has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Conversion Agreement, DBS further represents that DBS 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. DBS believes it has received all ------------------------- the information from MPI for deciding whether to acquire the Securities. 9.4 Investment Experience. DBS 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, and has so evaluated the merits and risks of an investment in the Securities based solely on the information made available to DBS by MPI. 9.5 Restricted Securities. DBS 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, DBS 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. DBS 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 DBS is subject to restrictions imposed by federal and state laws, that the stock certificates representing the Securities will bear a restrictive legend stating that DBS 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, DBS 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 15 (b) DBS 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, DBS 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 DBS is not a United States person, DBS --------------- 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) DBS' acquisition and continued ownership of the Securities will not violate any applicable securities or other laws of its own jurisdiction. 10. Miscellaneous Provisions. ------------------------ 16 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 fifth (5th) business 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 17 To DBS DBS Bank Institutional Banking 6 Shenton Way DBS Building, Tower One Singapore 068809 Attn: Managing Director, Singapore Corporate 1 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 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. 18 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. 10.10 Further Assurances. From and after the date of this ------------------ Conversion Agreement, upon the request of MPI or DBS, each of MPI and DBS shall execute and deliver such instruments, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Conversion Agreement. IN WITNESS WHEREOF, the parties hereto have duly executed this Conversion Agreement as of the date first above written. MICROELECTRONIC PACKAGING, INC. THE DEVELOPMENT BANK OF SINGAPORE LIMITED By: /s/ Denis J. Trafecanty By: /s/ Joan Ting-Wong --------------------------------- ---------------------------- Signature Signature By: Denis J. Trafecanty By: Joan Ting-Wong --------------------------------- ---------------------------- Print Print Title: Senior Vice President and CFO Title: Managing Director ------------------------------ ------------------------- 19 EX-10.87 8 1ST AMENDMENT TO DEBT CONVERSION EXHIBIT 10.87 FIRST AMENDMENT TO DEBT CONVERSION AND MUTUAL SETTLEMENT AND RELEASE AGREEMENT THIS FIRST AMENDMENT TO DEBT CONVERSION AND MUTUAL SETTLEMENT AND RELEASE AGREEMENT ("First Amendment") is entered into at San Diego, California, effective as of June 30, 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 The Development Bank of Singapore Limited ("DBS") and its successors and permitted assigns (collectively with DBS the "Investor Group") WITNESSETH: WHEREAS, the MPI Group and the Investor Group entered into a Debt Conversion and Mutual Settlement and Release Agreement dated June 30, 1999, pursuant to which the Investor Group agreed to convert certain debt owed by MPI to the Investor Group into One Million One Hundred Fifty Four Thousand Three Hundred Eleven (1,154,311) shares of MPI's Series A Preferred Stock, and MPI agreed to issue such shares of its Series A Preferred Stock to the Investor Group, all upon and subject to the terms and conditions set forth therein ("Conversion Agreement"). WHEREAS, the Conversion Agreement states that the transactions contemplated thereby must be completed not later than June 30, 1999, and if they are not completed by such date, DBS has the right to terminate the Conversion Agreement by giving a written termination notice to MPI. WHEREAS, both the MPI Group and the Investor Group desire to amend the Conversion Agreement to extend the date as of which the transactions contemplated thereby must be completed, to not later than August 31, 1999. 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. Section 1.2 of the Conversion Agreement is hereby amended by deleting the date of June 30, 1999, and inserting in its place the date of August 31, 1999. 2. Except as set forth in Section 1 of this First Amendment, there are no other amendments or modifications to the Conversion Agreement, and all of the other provisions of the Conversion Agreement shall remain in full force and effect without any amendments or modifications of any kind. IN WITNESS WHEREOF, the parties hereto have duly executed this First Amendment as of the date first above written. MICROELECTRONIC PACKAGING, INC. THE DEVELOPMENT BANK OF SINGAPORE LIMITED By: /s/ Denis J. Trafecanty By: /s/ Joan Ting-Wong --------------------------------- --------------------------- Signature Signature Print Print Name: Denis J. Trafecanty Name: Joan Ting-Wong ------------------------------- ------------------------- Print Print Title: Senior Vice President and CFO Title: Managing Director ------------------------------ ------------------------- 2 EX-10.88 9 CONDITIONAL AGREEMENT EXHIBIT 10.88 February 18, 1999 Mr. Jong-Won Chang Legal Team Samsung, Corning Co., Ltd. 472 Shin-dong Paldal-gu Suwon Si Kyunggi-do Korea RE: Conditional Agreement Reached on Conversion of Debt to Equity Dear Mr.Chang: As of today, Transpac, Texas Instruments, ORIX Leasing, DBS Bank, NS Electronics and our secured creditor Motorola conditionally agreed to the debt-for-equity conversion essentially as outlined in this 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 these creditors is conditional upon agreement of the same proposal by the remaining creditors. In addition, in fairness to all the creditors and due to financial constraints, MPI could not complete this conversion without the acceptance by all of the creditors. We are hopeful that Samsung Corning ("Samsung") 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 as soon as possible. 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 one-for-one basis at $0.51 per share. Considering Samsung's Settled Debt amount of US$186,940.00, Samsung would receive sufficient Preferred Stock to convert into a minimum of 366,549 shares of MPI Common Stock. Now that the creditors listed above have 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 $0.51 per share; this will be so noted in the agreement between MPI and each creditor. Mr. Chang Page 2 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, 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/ JW Chang - -------------------- -------------------- Signature Date EX-10.89 10 DEBT CONVERSION EXHIBIT 10.89 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 May 3, 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 Samsung Corning Co., Ltd. ("Samsung Corning") and their respective predecessors, successors, former and current subsidiaries, affiliates, shareholders, directors, officers, agents, attorneys, representatives, insurers, employees and assigns (collectively with Samsung Corning the "Investor Group"). WITNESSETH: WHEREAS, pursuant to the Supplemental Deed by and between Microelectronic Packaging (S) Pte. Ltd. ("MPS") and the Development Bank of Singapore Limited ("DBS") (the "Loan Agreement"), DBS loaned One Million US Dollars (US $1,000,000) to MPS, a subsidiary of MPI currently in liquidation, which Loan Agreement calls for certain payments and interest amounts which were thereafter due and payable periodically; WHEREAS, MPI and Samsung Corning entered into a Guarantee and Indemnity with DBS in connection with the Loan Agreement (the "Guarantee"), pursuant to which MPI and Samsung Corning agreed to guaranty the obligations of MPS under the Loan Agreement; WHEREAS, in an effort to restructure and settle all of MPI's obligations under the Guarantee, MPI and Samsung Corning entered into a Restructuring, Settlement and Mutual Release Agreement dated May 19, 1998, pursuant to which MPI agreed to make certain payments to Samsung Corning, in exchange for the agreement of Samsung Corning 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 Samsung Corning 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 Samsung Corning 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 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, 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 (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. 2 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 Seven (1,322,647) 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 Texas Instruments Conversion, the NS Electronics Conversion, the ORIX Leasing Conversion, the Motorola Conversion, the STMicroelectronics Conversion and the Transpac Conversion. 1.13 "Other Creditors" means collectively DBS Bank; Texas Instruments, Inc.; NS Electronics Bangkok Ltd.; ORIX Leasing Singapore Limited; Motorola, Inc.; 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 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: 3 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, Samsung Corning 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 Samsung Corning 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 Samsung Corning pursuant to the provisions of this Section 2.3, then this Conversion Agreement shall be deemed completely void, and MPI and Samsung Corning 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 Samsung Corning hereunder shall be deemed immediately terminated without notice, and MPI and Samsung Corning 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 Samsung Corning Conversion. The completion of the ---------------------------------------- Samsung Corning 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 Samsung Corning 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 Samsung Corning 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 Samsung Corning 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 Samsung Corning and the Other Creditors as required pursuant to the Samsung Corning 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 Samsung Corning 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 Samsung Corning. 3.6 MPI and Samsung Corning 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 Samsung Corning Conversion. MPI shall have ------------------------------------------------- the following affirmative obligations under this Conversion Agreement until such time as the Samsung Corning 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 5 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 Samsung Corning 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 Samsung Corning 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 Samsung Corning and the Other Creditors as required pursuant to the Samsung Corning Conversion and the Other Creditor Conversions. 4.5 MPI shall use its best and most diligent efforts to cause the Samsung Corning 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 Samsung Corning shall complete the Samsung Corning 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 Samsung Corning 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 Samsung Corning 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: 6 (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 Samsung Corning 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 Samsung Corning in connection herewith. (c) MPI shall cause its legal counsel to duly execute and deliver to Samsung Corning 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 Samsung Corning 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 Samsung Corning the stock certificate representing One Hundred Eighty Three Thousand Two Hundred Seventy Five (183,275) shares of Series A Preferred Stock issued by MPI to Samsung Corning. (f) MPI shall deliver to Samsung Corning 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 Samsung Corning. --------------------------- (a) Samsung Corning shall duly execute and deliver to MPI a counterpart copy of the Registration Agreement. 7 6.3 Effect of Conversion. Upon the occurrence of the Conversion -------------------- Date, (a) the debts owed by MPI to Samsung Corning shall be deemed to have been converted, respectively, into the number of shares of MPI's Series A Preferred Stock issued to Samsung Corning, 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 Samsung Corning, 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 Samsung Corning 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 Samsung Corning 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 Samsung Corning, 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 Samsung Corning agree that MPI shall no longer have any obligations of any kind under the Former Agreements to pay any amount to Samsung Corning, and Samsung Corning 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 Samsung Corning 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 Samsung Corning elsewhere in this Conversion Agreement, the Ancillary Agreements or in any other document delivered to Samsung Corning in connection herewith, MPI represents and warrants to Samsung Corning 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 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. 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 Samsung Corning 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 9 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 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 Samsung Corning 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 Samsung Corning with all ---------- information Samsung Corning 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 Samsung Corning 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, 10 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) 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 Samsung Corning 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. 11 (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) 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 Samsung Corning. ------------------------------------------------------------- In addition to any representations and warranties Samsung Corning may make to MPI elsewhere in this Conversion Agreement, the Ancillary Agreements or in any other document delivered to MPI in connection herewith Samsung Corning, 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 Samsung Corning 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 Samsung Corning 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 Samsung Corning, and when so executed and delivered, will constitute legal, valid and binding obligations of Samsung Corning, 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. 12 9.2 Purchase Entirely For Own Account. MPI is entering into the --------------------------------- Transaction Documents in reliance on the representation made by Samsung Corning, which representation is confirmed by Samsung Corning's execution of this Conversion Agreement, and Samsung Corning hereby confirms, that the Series A Preferred Stock to be received by Samsung Corning, 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 Samsung Corning has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Conversion Agreement, Samsung Corning further represents that Samsung Corning 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. Samsung Corning believes it has ------------------------- received all the information it considers necessary or appropriate for deciding whether to acquire the Securities. Samsung Corning 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. Samsung Corning 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. Samsung Corning 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. Samsung Corning 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. Samsung Corning also represents it has not been organized for the purpose of acquiring the Securities. 9.5 Restricted Securities. Samsung Corning 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, Samsung Corning 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. Samsung Corning 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 Samsung Corning is subject to restrictions imposed by federal and state laws, that the stock certificates representing the Securities will bear a restrictive legend stating that Samsung Corning cannot dispose of the Securities absent such registration and qualification, except pursuant to any available exemption from such registration and qualification. 13 9.6 Further Restrictions on Transfer. Without in any way -------------------------------- limiting the representations set forth above in this Section 9, Samsung Corning 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 (b) Samsung Corning 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, Samsung Corning 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. 14 9.8 Foreign Persons. If Samsung Corning is not a United States --------------- person, Samsung Corning 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) Samsung Corning'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. Samsung Corning 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 Samsung Corning: Samsung Corning Co., Ltd. 472 Shin-dong Paldal-gu Suwon Si Kyunggi-do Korea 442-390 15 Attn: Jong-Won Chang, Legal Team 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 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. SAMSUNG CORNING CO., LTD. By: /s/ Denis J. Trafecanty By: /s/ Se June Oh ---------------------------------- ------------------------------ Signature Signature By: Denis J. Trafecanty By: Se June Oh ---------------------------------- ------------------------------ Print Print Title: Senior Vice President and CFO Title: Director of Management & ------------------------------- --------------------------- Planning Team -------------- [The remainder of this page has been intentionally left blank.] 17 EX-10.90 11 1ST AMENDMENT TO DEBT CONVERSION EXHIBIT 10.90 FIRST AMENDMENT TO DEBT CONVERSION AND MUTUAL SETTLEMENT AND RELEASE AGREEMENT THIS FIRST AMENDMENT TO DEBT CONVERSION AND MUTUAL SETTLEMENT AND RELEASE AGREEMENT ("First Amendment") is entered into at San Diego, California, effective as of June 30, 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 Samsung Corning Co.,Ltd. ("Samsung Corning") and its predecessors, successors, former and current subsidiaries, affiliates, shareholders, directors, officers, agents, attorneys, representatives, insurers, employees and assigns (collectively with Samsung Corning the "Investor Group"). WITNESSETH: WHEREAS, the MPI Group and the Investor Group entered into a Debt Conversion and Mutual Settlement and Release Agreement dated May 18, 1999, pursuant to which the Investor Group agreed to convert certain debt owed by MPI to the Investor Group into One Hundred Eighty Three Thousand Two Hundred Seventy Five (183,275) shares of MPI's Series A Preferred Stock, and MPI agreed to issue such shares of its Series A Preferred Stock to the Investor Group, all upon and subject to the terms and conditions set forth therein ("Conversion Agreement"). WHEREAS, the Conversion Agreement states that the transactions contemplated thereby must be completed not later than June 30, 1999, and if they are not completed by such date, Samsung Corning has the right to terminate the Conversion Agreement by giving a written termination notice to MPI. WHEREAS, both the MPI Group and the Investor Group desire to amend the Conversion Agreement to extend the date as of which the transactions contemplated thereby must be completed, to not later than August 31, 1999. 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. Section 1.2 of the Conversion Agreement is hereby amended by deleting the date of June 30, 1999, and inserting in its place the date of August 31, 1999. 2. Except as set forth in Section 1 of this First Amendment, there are no other amendments or modifications to the Conversion Agreement, and all of the other provisions of the Conversion Agreement shall remain in full force and effect without any amendments or modifications of any kind. IN WITNESS WHEREOF, the parties hereto have duly executed this First Amendment as of the date first above written. MICROELECTRONIC PACKAGING, INC. SAMSUNG CORNING CO., LTD. By: /s/ Denis J. Trafecanty By: /s/ Se June Oh --------------------------------- ---------------------------------- Print Print Name: Denis J. Trafecanty Name: Se June Oh ------------------------------- -------------------------------- Print Print Title: Senior Vice President and CFO Title: Director Management & Planning ------------------------------ ------------------------------- 2 EX-10.91 12 DEBT CONVERSION Exhibit 10.91 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 May 3, 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 NS Electronics Bangkok (1993), Ltd. ("NSEB") and their respective predecessors, successors, former and current subsidiaries, affiliates, shareholders, directors, officers, agents, attorneys, representatives, insurers, employees and assigns (collectively with NSEB the "Investor Group"). WITNESSETH: WHEREAS, NSEB and MPI entered into the Loan and Security Agreement dated May 30, 1995 (the "Loan Agreement") and, in connection with the Loan Agreement, NSEB loaned One Million Five Hundred Thousand US Dollars (US$1,500,000) to MPI pursuant to a Secured Promissory Note (the "Note") of even date with the Loan Agreement, which Note calls for certain payments and interest amounts which were thereafter due and payable periodically; WHEREAS, MPI and NSEB entered into an Amended Loan and Security Agreement (the "Amended Loan Agreement") and, in connection with the Amended Loan Agreement, NSEB loaned One Million Two Hundred Fifty Thousand US Dollars (US$1,250,000) to MPI pursuant to a Second Secured Promissory Note (the "Second Note" and, collectively with the Loan Agreement, the Note and the Amended Loan Agreement, the "Loan Agreements") of even date with the Amended Loan Agreement, which proceeds were used to pay off and cancel the Note, and which Second Note calls for certain payments and interest amounts which were thereafter due and payable periodically, such that as of December 31, 1997 the balance of principal and unpaid interest owed pursuant to the Second Note was One Million Four Hundred Twenty One Thousand Eight Hundred Seventy Five US Dollars (US$1,421,875); WHEREAS, NSEB owes the sum of Six Hundred Sixty Five Thousand US Dollars (US$665,000) to Microelectronic Packaging (S) Pte Ltd., a subsidiary of MPI currently in liquidation ("MPS"), which is carried on MPS' accounts as an account receivable (the "Account Receivable"), to which the Development Bank of Singapore Limited ("DBS") has a priority claim in the MPS liquidation proceeding, and NSEB wishes to satisfy its obligation to repay the Account Receivable by offsetting it against the amounts owed to NSEB by MPI under the Loan Agreements in connection with any settlement of the amounts due under the Loan Agreements; and WHEREAS, in an effort to restructure and settle all of MPI's obligations under the various Loan Agreements, MPI and NSEB entered into a Restructuring, Settlement and Mutual Release Agreement dated May 29, 1998, pursuant to which MPI agreed to make certain payments to NSEB, in exchange for the agreement of NSEB to reduce the amount of MPI's obligations under the Loan Agreements ("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 Agreements would be deemed settled and NSEB 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 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 NSEB 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 DBS, accrued as of December 31, 1997 (which is the entire amount MPI and DBS have agreed is due 2 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 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 Texas Instruments Conversion, the Samsung Corning Conversion, the ORIX Leasing Conversion, the Motorola Conversion, the STMicroelectronics Conversion and the Transpac Conversion. 3 1.13 "Other Creditors" means collectively DBS; Texas Instruments, Incorporated.; Samsung Corning Co., Ltd.; ORIX Leasing Singapore Limited; Motorola, Inc.; 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 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, NSEB 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 NSEB 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 NSEB pursuant to the provisions of this Section 2.3, then this Conversion Agreement shall be deemed completely void, and MPI and NSEB 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 NSEB hereunder shall be deemed immediately terminated without notice, and MPI and NSEB 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. 4 3. Conditions to NSEB Conversion. The completion of the NSEB ----------------------------- 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 NSEB 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 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 NSEB 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 NSEB 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 NSEB and the Other Creditors as required pursuant to the NSEB 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 NSEB 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 NSEB. 3.6 MPI and NSEB 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 NSEB Conversion. MPI shall have the -------------------------------------- following affirmative obligations under this Conversion Agreement until such time as the NSEB 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 NSEB 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 NSEB 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 NSEB and the Other Creditors as required pursuant to the NSEB Conversion and the Other Creditor Conversions. 4.5 MPI shall use its best and most diligent efforts to cause the NSEB 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 NSEB shall complete the NSEB 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 NSEB 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 NSEB 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 NSEB 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 NSEB in connection herewith. (c) MPI shall cause its legal counsel to duly execute and deliver to NSEB 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 NSEB 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 NSEB the stock certificate representing Two Hundred Seventy One Thousand One Hundred Seventy Six (271,176) shares of Series A Preferred Stock issued by MPI to NSEB. (f) MPI shall deliver to NSEB 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 7 this Agreement and the other agreements, documents, and matters contemplated hereby, certified by the Secretary of MPI to be true, complete and correct. (g) MPI shall deliver to NSEB a written release executed by DBS providing that NSEB is no longer liable for the Account Receivable. 6.2 Actions By NSEB. ---------------- (a) NSEB 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 NSEB shall be deemed to have been converted, respectively, into the number of shares of MPI's Series A Preferred Stock issued to NSEB, 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 NSEB, 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 NSEB 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 NSEB 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 NSEB, 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 NSEB agree that MPI shall no longer have any obligations of any kind under the Former Agreements to pay any amount to NSEB, and NSEB 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, 8 (collectively the "Ancillary Agreements"), or any of the respective rights and obligations of MPI and/or NSEB 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 NSEB elsewhere in this Conversion Agreement, the Ancillary Agreements or in any other document delivered to NSEB in connection herewith, MPI represents and warrants to NSEB 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. 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 NSEB 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 9 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 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 NSEB 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 NSEB with all ----------- information NSEB 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 NSEB 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 10 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) 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 11 Seven Hundred Seventy Eight (9,362,778) shares designated as Series A Preferred Stock, none of which will be issued and outstanding. Upon the NSEB 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) 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 NSEB. In addition --------------------------------------------------- to any representations and warranties NSEB may make to MPI elsewhere in this Conversion Agreement, the Ancillary Agreements or in any other document delivered to MPI in connection herewith NSEB, 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 NSEB 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 NSEB 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 12 executed and delivered by NSEB, and when so executed and delivered, will constitute legal, valid and binding obligations of NSEB, 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 NSEB, which representation is confirmed by NSEB's execution of this Conversion Agreement, and NSEB hereby confirms, that the Series A Preferred Stock to be received by NSEB, 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 NSEB has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Conversion Agreement, NSEB further represents that NSEB 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. NSEB believes it has received all ------------------------- the information it considers necessary or appropriate for deciding whether to acquire the Securities. NSEB 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. NSEB 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. NSEB 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. NSEB 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. NSEB also represents it has not been organized for the purpose of acquiring the Securities. 9.5 Restricted Securities. NSEB 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, NSEB 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. NSEB 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 NSEB is subject to restrictions imposed by federal and state laws, that the stock certificates 13 representing the Securities will bear a restrictive legend stating that NSEB 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, NSEB 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 (b) NSEB 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, NSEB 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 14 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 NSEB is not a United States person, --------------- NSEB 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) NSEB'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. NSEB 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 NSEB: NS Electronics Bangkok (1993) Ltd. 40/10 Soi Lasalle, Sukhumvit 105 15 Bangua, Prakanong Bangkok 10260, Thailand Attn: Dr. Ted Nunthirapakorn, Ph.D. Chief Financial Officer 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 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. NS ELECTRONICS BANGKOK, LTD. By /s/ Denis J. Trafecanty By: /s/ Thavisakdi Thangsupanich, Thakol Nunthirapakorn -------------------------------------- ----------------------------------------------------- Signature Signature By: Denis J. Trafecanty By: Thavisakdi Thangsupanich, Thakol Nunthirapakorn -------------------------------------- ----------------------------------------------------- Print Print Title: Senior Vice President and CFO Title: CEO & CFO ---------------------------------- --------------------------------------------------
[The remainder of this page has been intentionally left blank.] 17 EX-10.92 13 1ST AMENDMENT TO DEBT CONVERSION EXHIBIT 10.92 FIRST AMENDMENT TO DEBT CONVERSION AND MUTUAL SETTLEMENT AND RELEASE AGREEMENT THIS FIRST AMENDMENT TO DEBT CONVERSION AND MUTUAL SETTLEMENT AND RELEASE AGREEMENT ("First Amendment") is entered into at San Diego, California, effective as of June 30, 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 NS Electronics Bangkok (1993), Ltd. ("NSEB") and its predecessors, successors, former and current subsidiaries, affiliates, shareholders, directors, officers, agents, attorneys, representatives, insurers, employees and assigns (collectively with NSEB the "Investor Group"). WITNESSETH: WHEREAS, the MPI Group and the Investor Group entered into a Debt Conversion and Mutual Settlement and Release Agreement dated May 3, 1999, pursuant to which the Investor Group agreed to convert certain debt owed by MPI to the Investor Group into Two Hundred Seventy One Thousand One Hundred Seventy Six (271,176) shares of MPI's Series A Preferred Stock, and MPI agreed to issue such shares of its Series A Preferred Stock to the Investor Group, all upon and subject to the terms and conditions set forth therein ("Conversion Agreement"). WHEREAS, the Conversion Agreement states that the transactions contemplated thereby must be completed not later than June 30, 1999, and if they are not completed by such date, NSEB on behalf of the Investor Group has the right to terminate the Conversion Agreement by giving a written termination notice to MPI. WHEREAS, both the MPI Group and the Investor Group desire to amend the Conversion Agreement to extend the date as of which the transactions contemplated thereby must be completed, to not later than August 31, 1999. 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. Section 1.2 of the Conversion Agreement is hereby amended by deleting the date of June 30, 1999, and inserting in its place the date of August 31, 1999. 2. Except as set forth in Section 1 of this First Amendment, there are no other amendments or modifications to the Conversion Agreement, and all of the other provisions of the Conversion Agreement shall remain in full force and effect without any amendments or modifications of any kind. IN WITNESS WHEREOF, the parties hereto have duly executed this First Amendment as of the date first above written. MICROELECTRONIC PACKAGING, INC. NS ELECTRONICS BANKOK, LTD By: /s/ Denis J. Trafecanty By: /s/ Thakol Nonthirapakorn --------------------------------- ----------------------------- Signature Signature Print Print Name: Denis J. Trafecanty Name: Thakol Nonthirapakorn ------------------------------- --------------------------- Print Print Title: Senior Vice President and CFO Title: Chief Financial Officer ------------------------------ -------------------------- 2 EX-10.93 14 DEBT CONVERSION EXHIBIT 10.93 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 June 10, 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 FI Financial, LLC ("FIF") and their respective predecessors, successors, former and current subsidiaries, affiliates, shareholders, directors, officers, agents, attorneys, representatives, insurers, employees and assigns (collectively with FIF the "Investor Group"). WITNESSETH: WHEREAS, pursuant to a Supply Guarantee and Preferred Allocation Agreement dated August 17, 1995 by and among MPI, Microelectronic Packaging (S) Pte Ltd ("MPS") and STMicroelectronics Pte. Ltd. (formerly known as SGS-Thomson Microelectronics, Pte. Ltd.) ("ST-Singapore") (including the Charge agreement executed by MPS pursuant thereto, collectively, the "Initial Loan Agreement"), ST-Singapore made a lump sum advance in the amount of Four Million US Dollars (US$4,000,000) to MPS, a subsidiary of MPI, upon which certain interest amounts were thereafter due and payable periodically under the Initial Loan Agreement as amended by Supplemental Agreement to the Supply Guarantee and Preferred Allocation Agreement dated August 17, 1995, which Supplemental Agreement was itself dated October 19, 1995 (collectively with the Initial Loan Agreement, the "Loan Agreement"); WHEREAS, MPI entered into a Deed of Guarantee and Indemnity dated August 17, 1995 with ST-Singapore (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 Loan Agreement giving rise to MPI's obligations under the Guarantee; and WHEREAS, ST-Singapore has assigned its rights under the Loan Agreement and Guarantee to STMicroelectronics, Inc. (formerly known as SGS-Thomson Microelectronics, Inc.) ("ST"); and WHEREAS, in an effort to restructure and settle all of MPI's obligations under the Guarantee, MPI and ST entered into a Restructuring, Settlement and Mutual Release Agreement dated September 24, 1998, pursuant to which MPI agreed to make certain payments to ST, in exchange for the agreement of ST 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 ST 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, in connection with a Letter of Intent, signed on April 15, 1999, ST has agreed to the assignment of all of its rights pursuant to their creditor position with MPI and its subsidiaries to FIF. 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 FIF 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 DBS, accrued as of December 31, 1997 (which is the entire amount MPI and DBS have agreed is due 2 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 (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 "FIF Conversion" means the conversion of indebtedness in the amount of principal and interest owed by MPS and guaranteed by MPI to FIF (and/or any one or more assignees and/or transferees of FIF, accrued as of December 31, 1997 (which is the entire amount MPI and FIF have agreed is due and payable) into One Million Three Hundred Twenty Two Thousand Six Hundred Forty Seven (1,322,647) 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 Texas Instruments Conversion, the Samsung Corning Conversion, the ORIX Leasing Conversion, the Motorola Conversion, the NS Electronics Conversion and the Transpac Conversion. 3 1.13 "Other Creditors" means collectively DBS Bank; Texas Instruments, Inc.; Samsung Corning Company, Ltd.; ORIX Leasing Singapore Limited; Motorola, Inc.; NS Electronics Bangkok, Ltd.; 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 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, FIF 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 FIF 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 FIF pursuant to the provisions of this Section 2.3, then this Conversion Agreement shall be deemed completely void, and MPI and FIF 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 FIF hereunder shall be deemed immediately terminated without notice, and MPI and FIF 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. 4 3. Conditions to FIF Conversion. The completion of the FIF 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 FIF 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 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 FIF 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 FIF 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 FIF and the Other Creditors as required pursuant to the FIF 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 FIF 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 FIF. 3.6 MPI and FIF 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 FIF Conversion. MPI shall have the following ------------------------------------- affirmative obligations under this Conversion Agreement until such time as the FIF 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 FIF 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 FIF 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 FIF and the Other Creditors as required pursuant to the FIF Conversion and the Other Creditor Conversions. 4.5 MPI shall use its best and most diligent efforts to cause the FIF 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 FIF shall complete the FIF 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 FIF 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 FIF 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 FIF 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 FIF in connection herewith. (c) MPI shall cause its legal counsel to duly execute and deliver to FIF 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 FIF 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 FIF the stock certificate representing One Million Three Hundred Twenty Two Thousand Six Hundred Forty Seven (1,322,647) shares of Series A Preferred Stock issued by MPI to FIF. (f) MPI shall deliver to FIF 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 7 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 FIF. --------------- (a) FIF 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 FIF shall be deemed to have been converted, respectively, into the number of shares of MPI's Series A Preferred Stock issued to FIF, 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 FIF, 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 FIF 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 FIF 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 FIF, 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 FIF agree that MPI shall no longer have any obligations of any kind under the Former Agreements to pay any amount to FIF, and FIF 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 FIF pursuant to the terms and conditions of this Conversion Agreement or the Ancillary Agreements. 8 8. Representations, Warranties and Agreements of MPI. In addition to any ------------------------------------------------- representations and warranties MPI may make to FIF elsewhere in this Conversion Agreement, the Ancillary Agreements or in any other document delivered to FIF in connection herewith, MPI represents and warrants to FIF 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. 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 FIF 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, 9 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 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 FIF 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 FIF with all information FIF 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 FIF 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, 10 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) 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 FIF Conversion and Other Creditor Conversions, the rights, preferences and privileges of the Series A Preferred Stock will be as 11 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) 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 FIF. In addition to any -------------------------------------------------- representations and warranties FIF may make to MPI elsewhere in this Conversion Agreement, the Ancillary Agreements or in any other document delivered to MPI in connection herewith FIF, 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 FIF 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 FIF 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 FIF, and when so executed and delivered, will constitute legal, valid and binding obligations of FIF, enforceable in accordance with their terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general 12 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 FIF, which representation is confirmed by FIF's execution of this Conversion Agreement, and FIF hereby confirms, that the Series A Preferred Stock to be received by FIF, 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 FIF has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Conversion Agreement, FIF further represents that FIF 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. FIF believes it has received all the ------------------------- information it considers necessary or appropriate for deciding whether to acquire the Securities. FIF 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. FIF 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. FIF 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. FIF 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. FIF also represents it has not been organized for the purpose of acquiring the Securities. 9.5 Restricted Securities. FIF 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, FIF 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. FIF 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 FIF is subject to restrictions imposed by federal and state laws, that the stock certificates representing the Securities will bear a restrictive legend stating that FIF cannot dispose of the Securities absent such registration and qualification, except pursuant to any available exemption from such registration and qualification. 13 9.6 Further Restrictions on Transfer. Without in any way limiting the -------------------------------- representations set forth above in this Section 9, FIF 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 (b) FIF 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, FIF 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. 14 9.8 Foreign Persons. If FIF is not a United States person, FIF 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) FIF'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. FIF 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 FIF: FI Financial, LLC c/o Ross, Dixon and Bell 550 West B Street, #400 San Diego, CA 92101 Attn: James T. Waring, Esq. 15 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 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. FI FINANCIAL, LLC By: /s/ Denis J. Trafecanty By: /s/ James T. Waring ----------------------------- ------------------------------- Signature Signature By: Denis J. Trafecanty By: James T. Waring ----------------------------- ------------------------------- Print Print Title: Senior Vice President and CFO Title: Manager ------------------------------- ---------------------------- [The remainder of this page has been intentionally left blank.] 17 EX-10.94 15 1ST AMENDMENT TO DEBT CONVERSION Exhibit 10.94 FIRST AMENDMENT TO DEBT CONVERSION AND MUTUAL SETTLEMENT AND RELEASE AGREEMENT THIS FIRST AMENDMENT TO DEBT CONVERSION AND MUTUAL SETTLEMENT AND RELEASE AGREEMENT ("First Amendment") is entered into at San Diego, California, effective as of June 30, 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 FI Financial, LLC ("FIF") and their respective predecessors, successors, former and current subsidiaries, affiliates, shareholders, directors, officers, agents, attorneys, representatives, insurers, employees and assigns (collectively with FIF the "Investor Group"). WITNESSETH: WHEREAS, the MPI Group and the Investor Group entered into a Debt Conversion and Mutual Settlement and Release Agreement dated June 10, 1999, pursuant to which the Investor Group agreed to convert certain debt owed by MPI to the Investor Group into One Million One Hundred Fifty Four Thousand Three Hundred Eleven (1,154,311) shares of MPI's Series A Preferred Stock, and MPI agreed to issue such shares of its Series A Preferred Stock to the Investor Group, all upon and subject to the terms and conditions set forth therein ("Conversion Agreement"). WHEREAS, the Conversion Agreement states that the transactions contemplated thereby must be completed not later than June 30, 1999, and if they are not completed by such date, FIF has the right to terminate the Conversion Agreement by giving a written termination notice to MPI. WHEREAS, both the MPI Group and the Investor Group desire to amend the Conversion Agreement to extend the date as of which the transactions contemplated thereby must be completed, to not later than August 31, 1999. 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. Section 1.2 of the Conversion Agreement is hereby amended by deleting the date of June 30, 1999, and inserting in its place the date of August 31, 1999. 2. Except as set forth in Section 1 of this First Amendment, there are no other amendments or modifications to the Conversion Agreement, and all of the other provisions of the Conversion Agreement shall remain in full force and effect without any amendments or modifications of any kind. IN WITNESS WHEREOF, the parties hereto have duly executed this First Amendment as of the date first above written. MICROELECTRONIC PACKAGING, INC. FI FINANCIAL, LLC By: /s/ Denis J. Trafecanty By: /s/ James T. Waring ------------------------------------- ------------------------------ Print Print Name: Denis J. Trafecanty Name: James T. Waring ----------------------------------- ---------------------------- Print Print Title: Senior Vice President and CFO Title: Manager ---------------------------------- --------------------------- 2 EX-10.95 16 STATEMENT OF INTENT & AGREEMENT Exhibit 10.95 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 contemplated acquisition of the ST Agreements, the value or enforceability of any rights ST may 3 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 August 31, 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 payment of the Investor Payment to ST, shall remain the property of FIF and its assignees. The 4 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 August 31, 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 August 31, 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 August 31, 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 August 31, 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. 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 5 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. 12. The parties agree that the provisions of this letter will not be binding upon any of the parties until such time as all of ST, FIF and MPI have executed a copy of this letter. 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 /s/ James T Waring ---------------------------------------- -------------------------------- Signature Signature Steven K. Rose, Vice President James T. Waring, Manager MICROELECTRONIC PACKAGING, INC. By: /s/ Denis J. Trafecanty ---------------------------------------- Signature Denis Trafecanty, Senior Vice President and Chief Financial Officer 6 EX-10.96 17 CERTIFICATE OF AMENDMENT Exhibit 10.96 EXHIBIT "A" CERTIFICATE OF AMENDMENT OF AMENDED AND RESTATED ARTICLES OF INCORPORATION OF MICROELECTRONIC PACKAGING, INC. a California corporation Andrew Wrobel and Denis Trafecanty certify that: 1. They are the President and the Secretary, respectively, of MICROELECTRONIC PACKAGING, INC., a California corporation. 2. Article III of the Restated Articles of Incorporation of this corporation is amended to read as follows: ARTICLE III ----------- This corporation is authorized to issue two classes of shares to be designated respectively "Common Stock" and "Preferred Stock." The number of shares of Common Stock this corporation is authorized to issue is Fifty Million (50,000,000), without par value. The number of shares of Preferred Stock this corporation is authorized to issue is 9,362,777, without par value, all of which are designated as "Series A Preferred Stock." 1. Rights, Preferences, Privileges and Restrictions of Common Stock. ----------------------------------------------------------------- The rights, preferences, privileges and restrictions granted to and imposed on this corporation's Common Stock are as follows: A. Dividend Rights. Subject to any rights, preferences and --------------- privileges that have been granted to the Series A Preferred Stock, the holders of the Common Stock shall be entitled to receive, when and as declared by the Board of Directors, out of any assets of the corporation legally available therefor, such dividends as may be declared from time to time by the Board of Directors. B. Liquidation Rights. Subject to any rights, preferences and ------------------ privileges that have been granted to the Series A Preferred Stock, in the event of any voluntary or involuntary liquidation, dissolution or winding up of the corporation, the holders of shares of the Common Stock shall be entitled to receive all of the assets of the corporation available for distribution to its shareholders, ratable in proportion to the number of shares of the Common Stock held by them. C. Redemption. The Common Stock is not redeemable. ---------- D. Voting Rights. Subject to any rights, preferences and ------------- privileges that have been granted to the Series A Preferred Stock, the holders of shares of Common Stock shall be entitled to vote on all matters at all meetings of the shareholders of the corporation and shall be entitled to one vote for each share of Common Stock entitled to vote at such meeting. 2. Rights, Preferences, Privileges and Restrictions of Series A ------------------------------------------------------------ Preferred Stock. The rights, preferences, privileges and restrictions granted to - --------------- and imposed on this corporation's Series A Preferred Stock are as follows: A. Dividends. --------- 1. Fixed Amount. Out of any assets legally available ------------ therefor, the Board shall have discretion (but shall not be required) to declare a dividend on the outstanding Series A Preferred Stock at the fixed rate of Three Point Five Seven Cents ($0.0357) per share per annum (subject to adjustment to equitably account for any stock splits, stock dividends, combinations, recapitalizations or the like, and not compounded from one year to the next) ("Fixed Amount Dividends"). Fixed Amount Dividends shall be payable only when, as, and if declared by the Board. Fixed Amount Dividends payable to the holders of Series A Preferred Stock pursuant hereto, whether or not declared by the Board, shall at all times be cumulative until paid in full, and shall be paid in preference and priority to any Common Equivalent Dividends (as that term is defined in Section A(2) below), and any dividend or other distribution being paid or distributed to the holders of Common Stock. 2. Common Equivalent. Subject to the priority of the Fixed ----------------- Amount Dividends, in the event the Board declares a dividend on or other distribution with respect to the corporation's outstanding common stock ("Common Stock"), which is payable other than in Common Stock and/or other securities or rights convertible into or entitling the holder thereof to receive, directly or indirectly, additional shares of Common Stock, then out of any assets legally available therefor, the holders of Series A Preferred Stock shall concurrently receive dividends or other distributions in an amount equal to (a) the amount of the dividend or other distribution payable on one share of Common Stock; multiplied by (b) the number of shares of Common Stock, rounded to the nearest whole number (with one half being rounded upward), into which the total number of shares of Series A Preferred Stock held by such holder could be converted on the record date for determining which holders of Common Stock are entitled to receive the dividend or other distribution in question ("Common Equivalent Dividends"). Common Equivalent Dividends payable to the holders of Series A Preferred Stock pursuant hereto shall at all times be cumulative until paid in full, and shall be paid in preference and priority to any dividend or other distribution being paid or distributed to the holders of Common Stock. 3. Treatment Upon Conversion. Upon any conversion of the ------------------------- Series A Preferred Stock pursuant to the provisions of Section D hereof entitled Conversion ("Triggering Conversion"), any Fixed Amount Dividends and/or Common - ---------- Equivalent Dividends payable with respect to the shares of Series A Preferred Stock being converted (collectively "Conversion Dividends"), shall concurrently be converted into that number of shares of this corporation's fully paid and nonassessable Common Stock determined by dividing the dollar amount of the Conversion Dividends by the Conversion Price applicable to the Triggering Conversion ("Dividend Conversion Shares"). Otherwise, the provisions of Section D hereof entitled Conversion shall be applicable to the Dividend Conversion ---------- Shares in the same manner as 2 such provisions are applicable to any other shares of Common Stock to be issued pursuant to the Triggering Conversion. 3 4. Waiver. Pursuant to the affirmative vote, written ------ consent or agreement of the holders of a majority of the then outstanding Series A Preferred Stock ("Approving Preferred Majority"), the Approving Preferred Majority shall be entitled on behalf of all holders of Series A Preferred Stock, to waive any dividend such holders would otherwise be entitled to receive, including without limitation, any Fixed Amount Dividends and/or Common Equivalent Dividends (collectively the "Preferred Dividends"). B. Liquidation Preference. In the event of any liquidation, ---------------------- dissolution or winding up of this corporation, either voluntary or involuntary: 1. Priority Distribution. The holders of Series A --------------------- Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets or funds of this corporation to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the sum of (a) One Dollar and Two Cents ($1.02) for each outstanding share of Series A Preferred Stock (subject to adjustment to equitably account for any stock splits, stock dividends, combinations, recapitalizations or the like) ("Original Series A Issue Price"), plus (b) an amount equal to any declared but unpaid dividends on such share, including without limitation, any accumulated balance of Preferred Dividends ("Priority Distribution"). If the assets and funds thus distributed among the holders of the Series A Preferred Stock shall be insufficient to permit payment to such holders of the full amount of the Priority Distribution, then the entire assets and funds of this corporation legally available for distribution shall be distributed ratably among the holders of the Series A Preferred Stock in proportion to the amount of such stock owned by each such holder. 2. Acquisition or Sale. For purposes of this Section B ------------------- entitled Liquidation Preference, a liquidation, dissolution or winding up of ---------------------- this corporation shall be deemed to be occasioned by, or to include (unless an Approving Preferred Majority shall determine otherwise), (a) the acquisition of this corporation by another entity by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger or consolidation) that results in the transfer of fifty percent (50%) or more of the outstanding voting power of this corporation; or (b) a sale of all or substantially all of the assets of this corporation (collectively "Acquisition or Sale"). In the event of any Acquisition or Sale, if the consideration received by this corporation or its shareholders is other than cash, the value of the non-cash consideration will be deemed to be equal to its fair market value, except that the value of any securities received in any Acquisition or Sale shall be determined as follows: (a) For securities not subject to an investment letter or other similar restriction on free marketability covered by Section B(2)(b) below: (i) If traded on a securities exchange or through the Nasdaq National Market, the value shall be deemed to be the average of the closing prices of the securities on such exchange or system over the thirty (30) day period ending three (3) days prior to the closing of the Acquisition or Sale; (ii) If actively traded over-the-counter, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the thirty (30) day period ending three (3) days prior to the closing of the Acquisition or Sale; or (iii) If there is no active public market, the value 4 shall be the fair market value thereof, as mutually determined by the Board and an Approving Preferred Majority. (b) The method of valuation of securities subject to an investment letter or other restriction on free marketability (other than restrictions arising solely by virtue of a shareholder's status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined above in Section B(2)(a), to reflect the approximate fair market value thereof, as mutually determined by the Board and an Approving Preferred Majority. (c) In the event the requirements of this Section B(2)(c) are not complied with, this corporation shall forthwith either: (i) cause the closing of the Acquisition or Sale to be postponed until the time such requirements have been complied with; or (ii) cancel the Acquisition or Sale, in which event the rights, preferences, privileges and restrictions of the holders of Series A Preferred Stock shall revert to and be the same as such rights, preferences, privileges and restrictions existing immediately prior to the date the first Transaction Notice (as hereafter defined) is given. This corporation shall give each holder of record of Series A Preferred Stock written notice of any impending Acquisition or Sale not later than (i) twenty (20) days prior to the shareholders' meeting called to approve such Acquisition or Sale, or (ii) twenty (20) days prior to the closing of such Acquisition or Sale, whichever is earlier, and shall also notify such holders in writing of the final approval of such Acquisition or Sale (any of the foregoing a "Transaction Notice"). The first Transaction Notice to be given shall describe the material terms and conditions of the impending Acquisition or Sale, and this corporation shall thereafter give holders of record of the Series A Preferred Stock prompt notice of any material changes in such material terms and conditions ("Material Change Notice"). The Acquisition or Sale shall in no event take place sooner than twenty (20) days after this corporation has given the first Transaction Notice, or sooner than ten (10) days after this corporation has given any Material Change Notice; provided, however, that such periods may be shortened by an Approving Preferred Majority. C. Redemption. To the extent it may otherwise lawfully do so, ---------- this corporation shall be entitled, in the sole discretion of the Board, to redeem all or any part of the outstanding shares of Series A Preferred Stock, in accordance and compliance with the following provisions: 1. Notice. Not less than twenty (20) and not more than ------ thirty (30) days prior to the date as of which the Board intends to give effect to a redemption of some or all of the shares of Series A Preferred Stock ("Redemption Date"), a written notice shall be mailed, first class postage prepaid, to each holder of record (at the close of business on the business day next preceding the day on which notice is mailed) of the Series A Preferred Stock to be redeemed, at the address last shown on the records of this corporation for such holder, notifying such holder of the redemption to be effected on the applicable Redemption Date, specifying each of the following: (a) the number of shares to be redeemed from such holder ("Redemption Shares"); (b) the Redemption Date; (c) the Series A Redemption Price (as that term is hereafter defined); (d) the then applicable Conversion Price (as that term is hereafter defined); (e) the date of termination of the right to convert the Redemption Shares into shares of Common Stock, which date shall not be earlier than five (5) days prior to the Redemption Date ("Conversion Termination Date"); and (e) the place at which payment may be obtained; and shall call upon such holder to surrender to this corporation, in the manner and at the place designated, his, her or 5 its certificate or certificates representing the shares to be redeemed ("Redemption Notice"). 2. Partial Redemptions to be Pro-Rata. In the event a ---------------------------------- Redemption Notice specifies that less than all of the outstanding shares of Series A Preferred Stock are to be redeemed, then the number of shares of Series A Preferred Stock to be redeemed shall be allocated pro-rata among all of the holders thereof, based on the proportionate number of shares of Series A Preferred Stock held by each such holder. 3. Conversion Prior to Redemption. Upon receiving a ------------------------------ Redemption Notice, at any time prior the to Conversion Termination Date stated therein, each holder of Series A Preferred Stock shall be entitled to convert some or all of the Redemption Shares into shares of Common Stock pursuant to the provisions of Section D(1) below. Any such conversion shall be deemed to take place on the Redemption Date. Any shares of Series A Preferred Stock not converted to shares of Common Stock pursuant hereto shall remain subject to redemption pursuant to the provisions of this Section C entitled Redemption, and ---------- as set forth in the Redemption Notice. If this corporation fails to carry out the redemption of any Redemption Shares that are not converted to shares of Common Stock pursuant to this Section C(3), then in such event, the redemption described in the Redemption Notice shall be deemed null and void, and any conversion of shares of Series A Preferred Stock into shares of Common Stock pursuant hereto, shall also be deemed null and void. 4. Redemption Price. The price per share required to be ---------------- paid by the corporation upon the redemption of any share of Series A Preferred Stock pursuant hereto shall be equal to the sum of (a) the Original Series A Issue Price (subject to adjustment to equitably account for any stock splits, stock dividends, combinations, recapitalizations or the like), plus (b) an amount equal to any declared but unpaid dividends on such share, including without limitation, any accumulated balance of Preferred Dividends ("Series A Redemption Price"). 5. Certificates. On or after the Redemption Date, each ------------ holder of Redemption Shares that have not been converted into shares of Common Stock pursuant to Section C(3) hereof, shall surrender to this corporation the certificate or certificates representing such Redemption Shares ("Redemption Certificates"), in the manner and at the place designated in the Redemption Notice, and thereupon the applicable Series A Redemption Price shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be canceled. In the event less than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. If on the Redemption Date the funds necessary for the redemption of the Redemption Shares shall be available therefor, then any Redemption Shares so called for redemption for which Redemption Certificates are not surrendered, shall nevertheless be considered redeemed, and all rights of the holders thereof shall be terminated, except for only the right to receive the Redemption Price without interest upon the surrender of the Redemption Certificates. 6. Payment. Concurrently with receiving the Redemption ------- Certificates, this corporation shall pay the Series A Redemption Price to the person whose name appears on the Redemption Certificates, in cash in one lump sum. 7. No Previous Redemption of Common Stock. At all times -------------------------------------- while 6 any shares of Series A Preferred Stock are outstanding, this corporation shall not redeem any shares of Common Stock, unless such redemption has been authorized by an Approving Preferred Majority. 8. Good Faith Modification. Regardless of any of the ----------------------- provisions of this Section C entitled Redemption, the holders of the outstanding ---------- shares of Series A Preferred Stock shall consider in good faith any request of the Board to modify the rights, preferences and privileges of such holders pursuant to this Section C entitled Redemption, if the Board deems such ---------- modification reasonably necessary to permit this corporation to obtain financing or credit from a financial institution. D. Conversion. The holders of the Series A Preferred Stock shall ---------- have conversion rights as follows ("Conversion Rights"): 1. Voluntary Conversion. Each share of Series A Preferred -------------------- Stock shall be convertible, (i) at the sole option of the holder thereof, at any time after the date of issuance of such share, or (ii) at the sole option of the holder thereof, on or prior to the fifth (5th) day prior to the Redemption Date, if any, as may have been fixed in any Redemption Notice with respect to such share of the Series A Preferred Stock, at the office of this corporation or any transfer agent for such stock and in the manner provided in Section 2(D)(3) hereof ("Voluntary Conversion"), into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Original Series A Issue Price by the Conversion Price applicable to such share, determined as hereafter provided, in effect on the date the certificate is surrendered for conversion. The initial Conversion Price per share for shares of Series A Preferred Stock shall be Fifty One Cents ($0.51); provided, however, that the Conversion Price for the Series A Preferred Stock shall be subject to adjustment as set forth in Section D(4) below. 2. Automatic Conversion. In addition to the right of -------------------- Voluntary Conversion provided in Section 2(D)(1) hereof, each share of Series A Preferred Stock shall automatically be converted into shares of Common Stock at the Conversion Price in effect at that time for the Series A Preferred Stock, immediately upon this corporation's receipt of the written consent of the Approving Preferred Majority to the conversion of all then outstanding Series A Preferred Stock under this Section D. 3. Mechanics of Conversion. Before any holder of Series A ----------------------- Preferred Stock shall be entitled to convert the same into shares of Common Stock, he or she shall surrender the certificate or certificates therefor, duly endorsed, at the office of this corporation or of any transfer agent for the Series A Preferred Stock, and shall give written notice to this corporation at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued. This corporation shall, within two (2) days after receipt of such written notice, issue and deliver at such office to such holder of Series A Preferred Stock, or to the nominee or nominees of such holder, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series A Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date. 7 Regardless of any of the foregoing provisions, this corporation shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such conversion unless certificates evidencing the shares of Series A Preferred Stock being converted are either delivered to the corporation or any transfer agent as provided herein, or the holder notifies the corporation or any transfer agent that such certificates have been lost, stolen, or destroyed and executes an agreement reasonably satisfactory to the corporation to indemnify the corporation from any loss reasonably incurred by it in connection therewith. 4. Conversion Price Adjustments of Preferred Stock for --------------------------------------------------- Certain Dilutive Issuances, Splits and Combinations. The Conversion Price of the - --------------------------------------------------- Series A Preferred Stock shall be subject to adjustment from time to time as follows: (a) If this corporation shall issue, after the date upon which any shares of Series A Preferred Stock were first issued ("Purchase Date"), any Additional Stock (as hereafter defined) without consideration or for a consideration per share less than the Conversion Price for the Series A Preferred Stock in effect immediately prior to the issuance of such Additional Stock, the Conversion Price for the Series A Preferred Stock in effect immediately prior to each such issuance shall forthwith (except as otherwise provided in this Section D(4)) be adjusted to a price determined by multiplying such Conversion Price by a fraction, (i) the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to the issuance of the Additional Stock in question (including shares of Common Stock deemed to be issued pursuant to Section D(4)(f)(i) or (ii) hereof, but not including shares excluded from the definition of Additional Stock by Section D(4)(g)(ii) hereof), plus the number of shares of Common Stock that the aggregate consideration received by this corporation for such issuance would purchase at such Conversion Price; and (ii) the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such issuance (including shares of Common Stock deemed to be issued pursuant to Section D(4)(f)(i) or (ii) hereof, but not including shares excluded from the definition of Additional Stock by Section D(4)(g)(ii) hereof), plus the number of shares of Additional Stock in question. (b) No adjustment of the Conversion Price for the Series A Preferred Stock shall be made in an amount less than one cent per share, provided that any adjustments that are not required to be made by reason of this sentence shall be carried forward and shall be either taken into account in any subsequent adjustment made prior to three (3) years from the date of the event giving rise to the adjustment being carried forward, or shall be made at the end of three (3) years from the date of the event giving rise to the adjustment being carried forward. (c) Except to the extent provided for in Section D(4)(f)(iii) and (iv) hereof, and Section D(4)(i) hereof, no adjustment of the Conversion Price pursuant to this Section D(4) shall have the effect of increasing the Conversion Price above the Conversion Price in effect immediately prior to such adjustment. (d) In the case of the issuance of Common Stock for cash, the consideration shall be deemed to be the amount of cash paid therefor before deducting any reasonable discounts, commissions or other expenses allowed, paid or incurred by this corporation for any underwriting or otherwise in connection with the issuance and sale thereof. (e) In the case of the issuance of the Common Stock for a 8 consideration in whole or in part other than cash, the consideration shall be deemed to be the fair market value thereof as determined in good faith by the Board irrespective of any accounting treatment. (f) In the case of the issuance (whether before, on or after the applicable Purchase Date) of options to purchase or rights to subscribe for Common Stock, securities by their terms ultimately convertible into or exchangeable for Common Stock, or options to purchase or rights to subscribe for such convertible or exchangeable securities, the following provisions shall apply for all purposes of Sections D(4)(a) through (g) hereof: (i) The aggregate maximum number of shares of Common Stock deliverable upon exercise (assuming the satisfaction of any conditions to exercisability, including without limitation, the passage of time, but without taking into account potential antidilution adjustments), to the extent then exercisable, of such options to purchase or rights to subscribe for Common Stock shall be deemed to have been issued at the time such options or rights were issued and for a consideration equal to the consideration (determined in the manner provided in Section D(4)(d) and (e) hereof), if any, received by this corporation upon the issuance of such options or rights plus the minimum exercise price provided for in such options or rights (without taking into account potential antidilution adjustments) for the Common Stock covered thereby. (ii) The aggregate maximum number of shares of Common Stock deliverable upon conversion of, or in exchange for (assuming the satisfaction of any conditions to convertibility or exchangeability, including, without limitation, the passage of time, but without taking into account potential antidilution adjustments), to the extent then convertible or exchangeable, any such convertible or exchangeable securities, or upon the exercise of options to purchase or rights to subscribe for such convertible or exchangeable securities and the subsequent conversion or exchange thereof, shall be deemed to have been issued at the time such securities were issued or such options or rights were issued and for a consideration equal to (1) the consideration, if any, received by this corporation for any such securities and related options or rights (excluding any cash received on account of accrued interest or accrued dividends); plus (2) the minimum additional consideration, if any, to be received by this corporation (without taking into account potential antidilution adjustments) upon the conversion or exchange of such securities or the exercise of any related options or rights (the consideration in each case to be determined in the manner provided in Sections D(4)(d) and (e) hereof). (iii) In the event of any change in the number of shares of Common Stock deliverable or in the consideration payable to this corporation upon exercise of such options or rights or upon conversion of or in exchange for such convertible or exchangeable securities, including, but not limited to, a change resulting from the antidilution provisions thereof, then the Conversion Price of the Series A Preferred Stock, to the extent in any way affected by or computed using such options, rights or securities, shall be recomputed to reflect such change, but no further adjustment shall be made for the actual issuance of Common Stock or any payment of such consideration upon the exercise of any such options or rights or the conversion or exchange of such securities. However, in no event shall (1) the amount of any increase in the Conversion Price that may result from any recomputation pursuant to this Section 2.D.4(f)(iii) of this Article III, as a proportion of the Conversion Price in effect at the time such recomputation takes place ("Proportionate Increase"); be greater than (2) the amount of any decrease in the Conversion Price that occurred as a result of the issuance of the options, rights, or 9 convertible or exchangeable securities in question, as a proportion of the Conversion Price in effect at the time such decrease took place ("Proportionate Decrease"). (iv) Upon the expiration of any such options or rights, the termination of any such rights to convert or exchange or the expiration of any options or rights related to such convertible or exchangeable securities, the Conversion Price of the Series A Preferred Stock, to the extent in any way affected by or computed using such options, rights or securities or options or rights related to such securities, shall be recomputed to reflect the issuance of only the number of shares of Common Stock (and convertible or exchangeable securities that remain in effect) actually issued upon the exercise of such options or rights, upon the conversion or exchange of such securities or upon the exercise of the options or rights related to such securities. However, in no event shall (1) the amount of any increase in the Conversion Price that may result from any recomputation pursuant to this Section 2.D.4(f)(iv) of this Article III, as a proportion of the Conversion Price in effect at the time such recomputation takes place ("Proportionate Increase"); be greater than (2) the amount of any decrease in the Conversion Price that occurred as a result of the issuance of the options, rights, or convertible or exchangeable securities in question, as a proportion of the Conversion Price in effect at the time such decrease took place ("Proportionate Decrease"). (v) The number of shares of Common Stock deemed issued and the consideration deemed paid therefor pursuant to Sections D(4)(f)(i) and (ii) hereof, shall be appropriately adjusted to reflect any change, termination or expiration of the type described in either Section D(4)(f)(iii) and (iv) hereof. (g) For purposes of this Section D(4), the term "Additional Stock" shall mean any shares of Common Stock issued (or deemed to have been issued pursuant to Section D(4)(f)) by this corporation after the Purchase Date, except for any of the following: (i) Common Stock issued pursuant to a transaction described in Section D(4)(h) below; or (ii) Common Stock issuable or issued to (1) employees, consultants or directors of this corporation directly or pursuant to a stock option plan or restricted stock plan, and such issuance has been approved by the Board, or (2) vendors or joint venture partners of this corporation, but only if such issuance is in a transaction with primarily a non- financing purpose, and has been approved by the Board. (h) In the event this corporation should at any time or from time to time after the Purchase Date fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (collectively referred to as "Common Stock Equivalents") without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend distribution, split or subdivision if no record date is fixed), the Conversion Price of the Series A Preferred Stock shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in 10 proportion to such increase of the aggregate of shares of Common Stock outstanding and those issuable with respect to such Common Stock Equivalents (with the number of shares issuable with respect to Common Stock Equivalents determined from time to time in the manner provided for deemed issuances in Section D(4)(f) hereof). (i) If the number of shares of Common Stock outstanding at any time after the Purchase Date is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Conversion Price for the Series A Preferred Stock shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in outstanding shares. 5. Other Distributions. In the event this corporation ------------------- shall declare a distribution payable in securities of other persons, evidences of indebtedness issued by this corporation or other persons, assets (excluding cash dividends) or options or rights not referred to in Section D(4)(h) hereof, then, in each such case for the purpose of this Section D(5), the holders of the Series A Preferred Stock shall be entitled to a proportionate share of any such distribution as though they were the holders of the number of shares of Common Stock of this corporation into which their shares of Series A Preferred Stock are convertible as of the record date fixed for the determination of the holders of Common Stock of this corporation entitled to receive such distribution. 6. Recapitalizations. If at any time or from time to ----------------- time there shall be a recapitalization or reclassification of the Common Stock (other than a subdivision, combination or merger or sale of assets transaction provided for elsewhere in this Section D entitled Conversion, or in Section B ---------- hereof entitled Liquidation Preference, provision shall be made so that the ---------------------- holders of the Series A Preferred Stock shall thereafter be entitled to receive upon conversion of the Series A Preferred Stock the number of shares of stock or other securities or property of this corporation or otherwise, to which a holder of Common Stock deliverable upon conversion would have been entitled on such recapitalization or reclassification. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section D entitled Conversion, with respect to the rights of the holders of the Series A Preferred - ---------- Stock after the recapitalization or reclassification, to the end that the provisions of this Section D entitled Conversion (including adjustment of the ---------- Conversion Price then in effect and the number of shares purchasable upon conversion of the Series A Preferred Stock) shall be applicable after that event as nearly equivalent as may be practicable. 7. No Impairment. This corporation will not, by ------------- amendment or restatement of its Articles of Incorporation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issuance or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by this corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section D entitled Conversion, and in the taking of all such action as may be necessary or ---------- appropriate in order to protect the Conversion Rights of the holders of the Series A Preferred Stock against impairment. 8. No Fractional Shares. No fractional shares shall -------------------- be issued upon the conversion of any share or shares of the Series A Preferred Stock, and the number of shares of Common Stock to be issued shall be rounded to the nearest whole share (with one half being 11 rounded upward). Whether or not fractional shares are issuable upon such conversion shall be determined on the basis of the total number of shares of Series A Preferred Stock the holder is at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion. 9. Certificate of Adjustment. Upon the occurrence of ------------------------- each adjustment or readjustment of the Conversion Price of Series A Preferred Stock pursuant to this Section D entitled Conversion, this corporation, at its ---------- expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Series A Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. This corporation shall, upon the written request at any time of any holder of Series A Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (a) such adjustment and readjustment, (b) the Conversion Price for such series of Preferred Stock at the time in effect, and (c) the number of shares of Common Stock and the amount, if any, of other property that at the time would be received upon the conversion of a share of Series A Preferred Stock. 10. Notices of Record Date. In the event of any taking ---------------------- by this corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, this corporation shall mail to each holder of Series A Preferred Stock, at least twenty (20) days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right. 11. Reservation of Stock Issuable Upon Conversion. --------------------------------------------- This corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series A Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series A Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series A Preferred Stock, in addition to such other remedies as shall be available to the holder of such Series A Preferred Stock, this corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite shareholder approval of any necessary amendment to the corporation's articles of incorporation. 12. Notices. Any notice required by the provisions of ------- this Section D entitled Conversion, to be given to the holders of shares of ---------- Series A Preferred Stock shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each holder of record at his address appearing on the books of this corporation. E. Voting Rights. ------------- 1. Generally. The holder of each share of Series A --------- Preferred 12 Stock shall have the right to one vote for each share of Common Stock into which such Series A Preferred Stock could then be converted, and with respect to such vote, such holder shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, and shall be entitled, notwithstanding any provision hereof, to notice of any shareholders' meeting in accordance with the bylaws of this corporation, and shall be entitled to vote, together with holders of Common Stock, with respect to any question upon which holders of Common Stock have the right to vote. Fractional votes shall not, however, be permitted and any fractional voting rights available on an as- converted basis (after aggregating all shares into which shares of Series A Preferred Stock held by each holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded upward). 2. Board of Directors Election and Removal. --------------------------------------- (a) Election. So long as any shares of Series A -------- Preferred Stock are outstanding: (i) the holders of the Series A Preferred Stock, voting as a separate series (with cumulative voting rights as among themselves in accordance with Section 708 of the California Corporations Code), shall be entitled to elect one (1) director of this corporation; and (ii) the holder of the Series A Preferred Stock and the Common Stock, voting together as a single class (with cumulative voting rights as among themselves in accordance with Section 708 of the California Corporations Code), shall be entitled to elect the remaining directors of this corporation. (b) Quorum; Required Vote. --------------------- (i) Quorum. At any meeting held for the ------ purpose of electing directors, the presence in person or by proxy: (A) of the holders of a majority of the shares of the Series A Preferred Stock shall constitute a quorum of the Series A Preferred Stock for the election of directors to be elected solely by the holders of the Series A Preferred Stock; and (B) of holders of Series A Preferred Stock and Common Stock representing a majority of the voting power of all the then-outstanding shares of the directors to be elected jointly by the holders of the Series A Preferred Stock and the Common Stock. (ii) Required Vote. With respect to the ------------- election of any director or directors by the holders of the outstanding shares of a specified series, series', class or classes of stock given the right to elect such director or directors pursuant to Section E(2)(a) above (the "Specified Stock"), that candidate or those candidates (as applicable), shall be elected who either: (i) in the case of any such vote conducted at a meeting of the holders of such Specified Stock, receive the highest number of affirmative votes of the outstanding shares of such Specified Stock, up to the number of directors to be elected by such Specified Stock; or (ii) in the case of any such vote taken by written consent without a meeting, are elected by the unanimous written consent of the holders of the shares of such Specified Stock, except that, if such vote is to fill a vacancy on the Board other than a vacancy created by removal of a director, such vacancy may be filled election by the written consent of the holders of a majority of the outstanding shares of such Specified Stock. (c) Vacancy. If there shall be any vacancy in ------- the office of a director elected by the holders of any Specified Stock pursuant to Section E(2)(a), then a successor to hold office for the unexpired term of such director may be elected by either: (i) the remaining director or directors (if any) in the office that were so elected by the holders of such Specified Stock, by the affirmative vote of a majority of such directors (or by the sole remaining director elected by the holders of such 13 Specified Stock if there be but one); or (ii) the required vote of holders of the shares of such Specified Stock specified in Section E(2)(b)(ii) above that are entitled to elect such director under Section E(2)(a). (d) Removal. Subject to Section 303 of the California Corporations Code, any director who shall have been elected to the Board by the holders of any Specified Stock pursuant to Section E(2)(a) or by any director or directors elected by holder of any Specified Stock as provided in Subsection E(2)(c), may be removed during his or her term of office, either with or without cause, by, and only by, the affirmative vote of shares representing a majority of the voting power of all the outstanding shares of such Specified Stock entitled to vote given either at a meeting of such shareholders duly called for that purpose or pursuant to a written consent of shareholders without a meeting, and any vacancy created by such removal may be filled only in the manner provided in Section E(2)(c). (e) Procedures. Any meeting of the holders of any ---------- Specified Stock, and any action taken by the holders of any Specified Stock written consent without a meeting, in order to elect or remove a director under this Section E(2), shall be held in accordance with the procedures and provisions of this corporation's bylaws, the California Corporations Code and applicable law regarding shareholder meetings and shareholder actions by written consent, as such are then in effect (including, but not limited to, procedures for determining the record date for shares entitled to vote). F. Protective Provisions. So long as any shares of Series A --------------------- Preferred Stock are outstanding, this corporation shall not without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least two thirds (2/3) of the then outstanding shares of Series A Preferred Stock: 1. Sell, convey, or otherwise dispose of all or substantially all of its property or business or merge into or consolidate with any other corporation (other than a wholly-owned subsidiary corporation) or effect any transaction or series of related transactions in which more than fifty percent (50%) of the voting power of this corporation is disposed of; 2. Alter or change the rights, preferences or privileges of the shares of Series A Preferred Stock. 3. Increase or decrease (other than by redemption or conversion) the total number of authorized shares of Series A Preferred Stock; 4. Authorize or issue, or obligate itself to issue, any other equity security, including any other security convertible into or exercisable for any equity security senior to or on a parity with the Series A Preferred Stock with respect to dividends, liquidation, redemption or voting; 5. Redeem, purchase or otherwise acquire (or pay into or set aside for a sinking fund for such purpose) any share or shares of the capital stock of this corporation; provided, however, that this restriction shall not apply to (i) the repurchase of shares of Common Stock from employees, officers, directors, consultants or other persons performing services for this corporation or any subsidiary pursuant to agreements under which this corporation has the option to repurchase such shares at cost, or at cost upon the occurrence of certain events, such as 14 the termination of employment, or (ii) the redemption of any share or shares of Preferred Stock in accordance with the provisions of Section C hereof entitled Redemption; - ---------- 6. Amend or otherwise modify this corporation's articles of incorporation in such a manner as to alter or change the rights, preferences or privileges of the shares of Series A Preferred Stock so as to adversely affect such shares; 7. Declare or pay any dividends or other distributions of any kind on or with respect to shares of Common Stock (other than such a dividend payable solely in the form of shares of Common Stock); 8. Declare or pay any dividends or other distributions of any kind on or with respect to shares of Series A Preferred Stock, except for Fixed Amount Dividends. 9. Take any other action with respect to which the holders of Series A Preferred Stock are entitled to vote and/or grant approval as a separate class or series under the applicable laws of the State of California. 15 10. Reclassify any outstanding shares of securities of this corporation into shares having rights, preferences or privileges senior to or on a parity with the Series A Preferred Stock. G. Status of Redeemed or Converted Stock. In the event any ------------------------------------- shares of Series A Preferred Stock shall be redeemed or converted pursuant to Section C hereof entitled Redemption, or Section D hereof entitled Conversion, ---------- ---------- the shares so redeemed or converted shall be canceled. 3. The foregoing amendment of Amended and Restated Articles of Incorporation has been duly approved by the Board of Directors. 4. The foregoing amendment of Amended and Restated Articles of Incorporation has been duly approved by the required vote of shareholders in accordance with Section 902 and Section 903 of the California Corporations Code. The total number of outstanding shares of this corporation's Common Stock is 10,856,890. There are no outstanding shares of this corporation's Preferred Stock. The number of shares of this corporation's Common Stock [The remainder of this page has been intentionally left blank.] 16 voting in favor of the Amendment equaled or exceeded the vote required. The percentage vote required was more than fifty percent (50%). The undersigned further declare under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct of their own knowledge. Date: ______________, 1999 ___________________________________ _________________________________ Andrew Wrobel, President Denis Trafecanty, Secretary 17 This redlined draft, generated by CompareRite (TM) - The Instant Redliner, shows the differences between - original document : R:\CLIENTS\M\MICROELECTRONIC PACKAGING\01 GENERAL BUSINESS\DOCUMENTS\DBS\ARTSAMEND02.WPD and revised document: R:\CLIENTS\M\MICROELECTRONIC PACKAGING\01 GENERAL BUSINESS\DOCUMENTS\DBS\ARTSAMEND04.WPD CompareRite found 11 change(s) in the text CompareRite found 0 change(s) in the notes Deletions appear as Strikethrough text Additions appear as Bold text 18 EX-27.1 18 FINANCIAL DATA SCHEDULE
5 This Schedule contains summary financial information extracted from balance sheet as of June 30, 1999 and the statements of operations, cash flows and shareholders equity for the Period ended June 30, 1999 and is qualified in its entirety by reference to such financial statements. 3-MOS DEC-31-1999 APR-01-1999 JUN-30-1999 140 0 1,489 0 2,065 3,858 2,051 0 6,026 33,077 40 0 0 40,170 (67,261) 6,026 2,182 2,182 1,928 1,928 0 0 507 (842) 0 (842) 0 0 0 (842) (0.08) (0.08)
-----END PRIVACY-ENHANCED MESSAGE-----