Exhibit 10.75
DEBT CONVERSION
AND
MUTUAL SETTLEMENT AND RELEASE AGREEMENT
THIS DEBT CONVERSION AND MUTUAL SETTLEMENT AND RELEASE AGREEMENT
("Conversion Agreement") is entered into at San Diego, California, effective as
of April 27, 1999 ("Effective Date"), between Microelectronic Packaging, Inc.
("MPI"), on behalf of itself and its predecessors, successors, former and
current subsidiaries, affiliates, shareholders, directors, officers, agents,
attorneys, representatives, insurers, employees and assigns (collectively with
MPI the "MPI Group"); and Texas Instruments Incorporated, assignee of Texas
Instruments Singapore (Pte) Ltd., ("TI") and their respective predecessors,
successors, former and current subsidiaries, affiliates, shareholders,
directors, officers, agents, attorneys, representatives, insurers, employees and
assigns (collectively with TI the "Investor Group").
WITNESSETH:
WHEREAS, pursuant to a Loan and Security Agreement dated May 16, 1995 by
and among MPI, Microelectronic Packaging (S) Pte Ltd ("MPS") and TI (including
the Form of Promissory Note executed by MPS pursuant thereto, collectively, the
"Initial Loan Agreement"), TI made a lump sum advance in the amount of Three
Million Five Hundred Thousand US Dollars (US$3,500,000) to MPS, a subsidiary of
MPI currently in liquidation, upon which certain interest amounts were
thereafter due and payable periodically under the Initial Loan Agreement as
amended by Addendum One to the Loan and Security Agreement, which was last
signed on July 15, 1996, and Addendum Two to the Loan and Security Agreement
dated April 2, 1997 (Addendum One and Addendum Two, collectively with the
Initial Loan Agreement, are referred to as the "Loan Agreement");
WHEREAS, MPI entered into a Form of Corporate Guarantee dated May 16, 1995
with TI (the "Guarantee"), pursuant to which MPI agreed to guaranty the
obligations of MPS under the Loan Agreement;
WHEREAS, MPS has defaulted on its obligations under the Initial Loan
Agreement;
WHEREAS, in an effort to restructure and settle all of MPI's obligations
under the Guarantee, MPI and TI entered into a Restructuring, Settlement and
Mutual Release Agreement dated April 24, 1998, pursuant to which MPI agreed to
make certain payments to TI, in exchange for the agreement of TI to reduce the
amount of MPI's obligations under the Guarantee ("Restructuring Agreement").
Contingent upon MPI's performance of its obligations under the Restructuring
Agreement, the Restructuring Agreement provided that all obligations of MPI
under the Guarantee would be deemed settled and TI would release MPI from any
further obligations with respect thereto.
WHEREAS, MPI is not able to comply with its payment obligations under the
Restructuring Agreement.
WHEREAS, the MPI Group with respect to the Investor Group, and the Investor
Group with respect to the MPI Group, desire to finally settle all of their
respective rights and obligations under the Loan Agreement, the Guarantee, the
Restructuring Agreement and all amendments thereto, and all other related
agreements (collectively the "Former Agreements"), terminate and release all of
their respective rights and obligations under the Former Agreements, and settle
all other disputes of any kind that may or could exist between the MPI Group and
the Investor Group with respect to the Former Agreements, all upon the terms and
conditions set forth in this Conversion Agreement.
NOW THEREFORE, in consideration of the mutual agreements contained herein
and for other good and sufficient consideration, the receipt and sufficiency of
which is hereby acknowledged, the MPI Group and the Investor Group agree as
follows:
1. Defined Terms. In addition to those terms that may be defined
-------------
elsewhere in this Conversion Agreement, the following terms shall have the
meanings defined in this Section 1.
1.1 "Conversion Date" means the date upon which the TI Conversion
occurs pursuant to the terms and conditions hereof.
1.2 "Performance Date" means June 30, 1999.
1.3 "Series A Preferred Stock" means the Series A Preferred Stock of
MPI, the rights, preferences privileges and restrictions of which are set forth
in the Certificate of Amendment to the Amended and Restated Articles of
Incorporation of MPI, in the form attached hereto as Exhibit "A" and
incorporated herein by reference.
1.4 "Transpac Conversion" means the conversion of indebtedness in the
amount of principal and interest owed by MPM Singapore Pte. Ltd and guaranteed
by MPI in the aggregate to Transpac Capital Pte. Ltd., Transpac Industrial
Holdings Ltd., Regional Investment Company Ltd. and Natsteel Equity III Pte.
Ltd. (the "Transpac Entities"), accrued as of December 31, 1997 (which is the
entire amount MPI and the Transpac Entities have agreed is due and payable),
into Four Million Thirty One Thousand Eight Hundred Twenty Six (4,031,826)
shares of Series A Preferred Stock.
1.5 "DBS Bank Conversion" means the conversion of indebtedness in the
amount of principal and interest owed by MPM Singapore Pte. Ltd and MPS and
guaranteed by MPI to Development Bank of Singapore Ltd. ("DBS"), accrued as of
December 31, 1997 (which is the entire amount MPI and DBS have agreed is due and
payable), into One Million One Hundred Fifty Four Thousand Three Hundred Eleven
(1,154,311) shares of Series A Preferred Stock.
1.6 "Motorola Conversion" means the conversion of indebtedness in the
amount of principal and interest owed by MPS and guaranteed by MPI to Motorola,
Inc., accrued as of December 31, 1997 (which is the entire amount MPI and
Motorola have agreed is
2
due and payable), into Eight Hundred Sixty Nine Thousand Nine Hundred Thirty Two
(869,932) shares of Series A Preferred Stock.
1.7 "NS Electronics Conversion" means the conversion of indebtedness
in the amount of principal and interest owed by MPI to NS Electronics Bangkok
(1993) Ltd. ("NSEB"), accrued as of December 31, 1997 (which is the entire
amount MPI and NSEB have agreed is due and payable), into Two Hundred Seventy
One Thousand One Hundred Seventy Six (271,176) shares of Series A Preferred
Stock.
1.8 "ORIX Leasing Conversion" means the conversion of indebtedness in
the amount of principal and interest owed by MPM and MPS and guaranteed by MPI
to ORIX Leasing Singapore Limited, accrued as of December 31, 1997 (which is the
entire amount MPI and ORIX Leasing have agreed is due and payable) into Four
Hundred Seventy Three Thousand Five Hundred Eighty Four (473,584) shares of
Series A Preferred Stock.
1.9 "Samsung Corning Conversion" means the conversion of indebtedness
in the amount of principal and interest owed by MPS and guaranteed by MPI to
Samsung Corning Co., Ltd., accrued as of December 31, 1997 (which is the entire
amount MPI and Samsung Corning have agreed is due and payable) into One Hundred
Eighty Three Thousand Two Hundred Seventy Five (183,275) shares of Series A
Preferred Stock.
1.10 "STMicroelectronics Conversion" means the conversion of
indebtedness in the amount of principal and interest owed by MPS and guaranteed
by MPI to STMicroelectronics, Inc. (and/or any one or more assignees and/or
transferees of STMicroelectronics, Inc.), accrued as of December 31, 1997 (which
is the entire amount MPI and STMicroelectronics have agreed is due and payable)
into One Million Three Hundred Twenty Two Thousand Six Hundred Forty One
(1,322,641) shares of Series A Preferred Stock.
1.11 "TI Conversion" means the conversion of indebtedness in the
amount of principal and interest owed by MPS and guaranteed by MPI to TI,
accrued as of December 31, 1997 (which is the entire amount MPI and TI have
agreed is due and payable) into One Million Fifty Six Thousand Twenty Seven
(1,056,027) shares of Series A Preferred Stock.
1.12 "Other Creditor Conversions" means collectively the DBS Bank
Conversion, the Motorola Conversion, the NSEB Conversion, the ORIX Leasing
Conversion, the Samsung Corning Conversion, the STMicroelectronics Conversion
and the Transpac Conversion.
1.13 "Other Creditors" means collectively DBS Bank; Motorola, Inc.;
NSEB; ORIX Leasing Singapore Limited; Samsung Corning Co., Ltd.;
STMicroelectronics, Inc.; and the Transpac Entities.
1.14 "Insolvency Action" means the commencement of a voluntary or
involuntary case against MPI under the United States Bankruptcy Code ("Code") or
an assignment for the benefit of creditors by MPI, but shall not include any
involuntary case brought under the Code which is dismissed within sixty (60)
days of its commencement where no action is brought during such time period to
avoid any issuance of Series A Preferred Stock
3
by MPI or the performance by MPI of any of its other obligations pursuant to
this Conversion Agreement.
2. Duration of Conversion Agreement. This Conversion Agreement shall
--------------------------------
remain in full force and effect until the Conversion Date, subject to the
following termination provisions:
2.1 Prior to the Performance Date, no party shall have any right
to terminate this Conversion Agreement in any respect, and all of the terms and
conditions hereof shall remain in full force and effect as set forth herein.
2.2 As of and after the Conversion Date, even if the Conversion
Date occurs after the Performance Date, no party shall have any right to
terminate this Conversion Agreement in any respect, and all of the terms and
conditions hereof shall remain in full force and effect as set forth herein.
2.3 After the Performance Date, so long as the Conversion Date has
not occurred, TI shall have sole discretion (but shall not be required) to
terminate this Conversion Agreement by giving a written termination notice to
MPI ("Termination Notice"). In the event TI gives MPI a Termination Notice after
the Performance Date and prior to any occurrence of the Conversion Date, then
this Conversion Agreement shall be deemed terminated as of the date the
Termination Notice is deemed given to MPI pursuant to the provisions of Section
10.3 hereof. In the event this Conversion Agreement is terminated by TI pursuant
to the provisions of this Section 2.3, then this Conversion Agreement shall be
deemed completely void, and MPI and TI shall retain and remain subject to
whatever respective rights and obligations they may otherwise have under the
Former Agreements.
2.4 Regardless of any other provision of this Section 2, if an
Insolvency Action is commenced prior to the Conversion Date, then this
Conversion Agreement and the respective rights and obligations of MPI and TI
hereunder shall be deemed immediately terminated without notice, and MPI and TI
shall retain and remain subject to whatever respective rights and obligations
they may have under the Former Agreements.
2.5 Except as provided otherwise in Sections 7.1 or 7.2 of this
Agreement, the Former Agreements shall remain in full force and effect at all
times after the Effective Date.
3. Conditions to TI Conversion. The completion of the TI Conversion
--------------------------
pursuant to the terms and conditions of this Conversion Agreement shall be
subject to the performance and satisfaction of each of the following conditions,
either prior to or concurrently with the occurrence of the TI Conversion
("Completion Conditions"):
3.1. The completion of the Other Creditor Conversions pursuant to
agreements entered into between MPI and the Other Creditors upon terms and
conditions that are not more favorable to any of such Other Creditors than the
terms and conditions contained in this Conversion Agreement. In particular, but
without limiting the generality of the foregoing provisions of this section, the
effective price per share of the Series A Preferred Stock applicable
4
to the Other Creditor Conversions shall not be less than One Dollar And Two
Cents ($1.02), and the terms and conditions of the settlement and release
provisions applicable to the Other Creditor Conversions shall not be different
in any material respect from the terms and conditions of the settlement and
release provisions contained in this Conversion Agreement.
3.2 The material terms and conditions of the TI Conversion and
the Other Creditor Conversions shall have been approved by MPI's Board of
Directors, which approval shall be sought and obtained by MPI in accordance with
all applicable laws.
3.3 The material terms and conditions of the TI Conversion and
the Other Creditor Conversions shall have been approved by MPI's Shareholders,
which approval shall be sought and obtained by MPI in accordance with all
applicable laws.
3.4 The Certificate of Amendment of the Amended and Restated
Articles of Incorporation of MPI, in the form attached hereto as Exhibit "A" and
incorporated herein by reference ("Certificate of Amendment"), shall have been
duly adopted by all necessary corporate action of the Board of Directors and
shareholders of MPI, and shall have been duly filed with and accepted by the
California Secretary of State, upon which filing and acceptance MPI shall be
authorized to issue the Series A Preferred Stock to TI and the Other Creditors
as required pursuant to the TI Conversion and the Other Creditor Conversions.
3.5 L.H. Friend, Weinress, Frankson & Presson, Inc., an
investment banking firm who serves as financial adviser to MPI, shall have
executed and issued to MPI a written opinion, in form and substance satisfactory
to MPI in its sole discretion, concluding that the TI Conversion and the Other
Creditor Conversions are fair to MPI's Shareholders ("Fairness Opinion"), and a
copy of such Fairness Opinion shall have been provided to TI.
3.6 MPI and TI shall have performed each of their respective
obligations and conditions that this Conversion Agreement requires them to
perform on or prior to the Conversion Date.
4. Obligations of MPI for TI Conversion. MPI shall have the following
------------------------------------
affirmative obligations under this Conversion Agreement until such time as the
TI Conversion has been completed, or this Conversion Agreement has been
terminated pursuant to the provisions of Section 2 hereof:
4.1 MPI shall use its best and most diligent efforts to obtain
the agreement of each of the Other Creditors to complete the Other Creditor
Conversions pursuant to agreements entered into between MPI and the Other
Creditors upon terms and conditions that are not more favorable to such Other
Creditors than the terms and conditions contained in this Conversion Agreement.
In particular, but without limiting the generality of the foregoing provisions
of this section, MPI shall use its best and most diligent efforts to obtain the
agreement of the Other Creditors that the effective price per share of the
Series A Preferred Stock applicable to the Other Creditor Conversions shall not
be less than One Dollar And Two Cents ($1.02), and the terms and conditions of
the settlement and release provisions applicable to the Other Creditor
5
Conversions shall not be different in any material respect from the terms and
conditions of the settlement and release provisions contained in this Conversion
Agreement.
4.2 MPI shall use its best and most diligent efforts to obtain
the approval of MPI's Board of Directors of the material terms and conditions of
the TI Conversion and the Other Creditor Conversions, which approval shall be
obtained in accordance with applicable laws.
4.3 MPI shall use its best and most diligent efforts to obtain
the approval of MPI's Shareholders of the material terms and conditions of the
TI Conversion and the Other Creditor Conversions, which approval shall be
obtained in accordance with applicable laws.
4.4 MPI shall use its best and most diligent efforts to cause
the Certificate of Amendment to be approved by MPI's Board of Directors and
shareholders, which approval shall be obtained in accordance with applicable
laws, and to cause the Certificate of Amendment to be filed with and accepted by
the California Secretary of State, upon which filing and acceptance MPI shall be
authorized to issue the Series A Preferred Stock to TI and the Other Creditors
as required pursuant to the TI Conversion and the Other Creditor Conversions.
4.5 MPI shall use its best and most diligent efforts to cause
the TI Conversion to be completed as soon as reasonably possible.
4.6 MPI shall use its best and most diligent efforts at all
times prior to the Conversion Date, to conduct its business in the usual and
ordinary course.
5. [This Section has been intentionally left blank.]
6. Completion of Conversion. At such time as all of the Completion
------------------------
Conditions have been performed and satisfied by MPI, then MPI and TI shall
complete the TI Conversion concurrently with the completion by MPI and the Other
Creditors of the Other Creditor Conversions, by concurrently taking the
following actions:
6.1 Actions By MPI.
--------------
(a) MPI shall duly execute and deliver to TI a counterpart
copy of the form of Registration Rights Agreement attached to this Conversion
Agreement as Exhibit "B" and incorporated herein by reference ("Registration
Agreement").
(b) MPI's Chief Executive Officer shall duly execute and
deliver to TI the form of Certificate of Chief Executive Officer attached to
this Conversion Agreement as Exhibit "E" and incorporated herein by reference
("Certificate of CEO"), certifying the following matters:
(i) Any approvals of MPI's shareholders and directors
that may be required under any applicable law, in connection with the
transactions contemplated
6
by this Conversion Agreement, have been duly obtained and are in full force and
effect as of the Conversion Date.
(ii) All of the representations and warranties of MPI
set forth in this Conversion Agreement,. the Ancillary Agreements (as defined
below) or in any other document delivered to TI in connection herewith, are
true, accurate, complete, and not misleading in any material respect as of the
Conversion Date.
(iii) MPI has performed all of the duties and
obligations required to be performed by MPI on or prior to the Conversion Date,
pursuant to the provisions of this Conversion Agreement, the Ancillary
Agreements (as defined below) or in any other document delivered to TI in
connection herewith.
(c) MPI shall cause its legal counsel to duly execute and
deliver to TI the form of legal opinion letter attached to his Conversion
Agreement as Exhibit "F" and incorporated herein by reference ("Legal Opinion").
(d) MPI shall deliver to TI copies of certificates of good
standing for MPI issued by the California Secretary of State and the California
Franchise Tax Board, dated not more than five (5) days prior to the Conversion
Date.
(e) MPI shall deliver to TI the stock certificate
representing One Million Fifty Six Thousand Twenty Seven (1,056,027) shares of
Series A Preferred Stock issued by MPI to TI.
(f) MPI shall deliver to TI and its legal counsel copies of
the following documents:
(i) A copy of the Certificate of Amendment and Bylaws
of MPI (as amended through the Conversion Date), certified by the Secretary of
MPI as true and correct copies thereof as of the Conversion Date.
(ii) A copy of the resolutions of the Board of
Directors and shareholders of MPI evidencing the amendment to MPI's Amended and
Restated Articles of Incorporation providing for the authorization of the Series
A Preferred Stock and the approval of this Agreement and the other agreements,
documents, and matters contemplated hereby, certified by the Secretary of MPI to
be true, complete and correct.
6.2 Actions By TI.
--------------
(a) TI shall duly execute and deliver to MPI a counterpart
copy of the Registration Agreement.
6.3 Effect of Conversion. Upon the occurrence of the Conversion
--------------------
Date, (a) the debts owed by MPI to TI shall be deemed to have been converted
into the number of shares of MPI's Series A Preferred Stock issued to TI, as set
forth in Section 6.1; and (b) as of
7
and after the Conversion Date, MPI shall not owe any debt of any kind to TI, as
set forth in more detail pursuant to Section 7 of this Conversion Agreement.
7. Settlement and Mutual Release. If and only if the Conversion is
-----------------------------
completed pursuant to the terms and conditions of this Conversion Agreement,
then in that case only, effective as of the Conversion Date, MPI and TI agree
that the terms and conditions of this Section 7 shall be in effect with respect
to the Former Agreements and all of the respective rights and obligations of MPI
and TI pursuant to the Former Agreements and all other related agreements:
7.1 The Former Agreements shall be deemed to have been
voluntarily terminated pursuant to the mutual agreement of MPI and TI, without
any remaining liability to either the MPI Group or the Investor Group. Without
limiting the generality of the foregoing provisions of this section, MPI and TI
agree that MPI shall no longer have any obligations of any kind under the Former
Agreements to pay any amount to TI, and TI shall no longer have any rights of
any kind under the Former Agreements to convert any amounts owed under the
Former Agreements into, or to otherwise obtain ownership of, shares of MPI's
stock of any class or series.
7.2 The MPI Group with respect to the Investor Group, and the
Investor Group with respect to the MPI Group, shall be deemed to have forever
released and discharged each other from and against any and all claims, damages
and causes of action they may have against each other with respect to and in
connection with the Former Agreements and any matter arising out of the terms
and conditions thereof, including without limitation, any breach of any
representation or warranty or noncompliance or nonfulfillment of any covenant or
agreement contained in or arising out of the Former Agreements; provided that
such release and discharge shall not extend to any claims, damages and causes of
action any member of the Investor Group may have against any member of the MPI
Group (or any member of the MPI Group may have against any member of the
Investor Group) for fraud or willful misconduct with respect to any of the
Former Agreements or any of the transactions contemplated by this Agreement.
However, the foregoing release provisions of this section do not apply to this
Conversion Agreement, or the Certificate of Amendment, the Registration
Agreement, (collectively the "Ancillary Agreements"), or any of the respective
rights and obligations of MPI and/or TI pursuant to the terms and conditions of
this Conversion Agreement or the Ancillary Agreements.
8. Representations, Warranties and Agreements of MPI. In addition to
-------------------------------------------------
any representations and warranties MPI may make to TI elsewhere in this
Conversion Agreement, the Ancillary Agreements or in any other document
delivered to TI in connection herewith, MPI represents and warrants to TI that
the statements contained in this Section 8 are true, accurate, complete, and not
misleading in any material respect, and also shall be so as of the Conversion
Date.
8.1 Organization and Good Standing, and Other Status. MPI
------------------------------------------------
is a corporation, legally and validly incorporated, organized and existing under
the laws of the State
8
of California. MPI is in good standing as certified by both the California
Secretary of State and the California Franchise Tax Board.
8.2 Authority to Conduct Business. MPI possesses full corporate power
-----------------------------
and lawful authority to own, lease and operate its assets, and to carry on its
business as presently conducted. MPI is duly and legally qualified to do
business and is in good standing in each country, state, county, city or other
jurisdiction in which the failure to so qualify would have a material adverse
impact on MPI's business.
8.3 Authority Regarding this Agreement.
----------------------------------
8.3.1 MPI has the complete and unrestricted right, power,
authority and capacity to (a) execute and deliver this Conversion Agreement, the
Ancillary Agreements and every other document executed and delivered by MPI to
TI in connection therewith (collectively the "Transaction Documents"); and (b)
carry out and perform each of MPI's obligations pursuant to the Transaction
Documents.
8.3.2 As of the Conversion Date, no further corporate or
shareholder authority, approvals, actions or proceedings will be necessary on
the part of MPI to authorize the Transaction Documents or any of the
transactions contemplated thereby.
8.3.3 This Conversion Agreement has been, and, as of the
Conversion Date all of the other Transaction Documents will have been, duly and
validly executed and delivered by MPI, and when so executed and delivered, will
constitute legal, valid and binding obligations of MPI, enforceable in
accordance with their terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement of creditors' rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief, or
other equitable remedies, and (iii) to the extent the indemnification provisions
contained in the Registration Agreement may be limited by applicable federal or
state securities laws.
8.3.4 The execution and delivery of this Conversion Agreement
does not, the execution and delivery of the other Transaction Documents will
not, and the consummation of the transactions contemplated thereby will not,
violate any provision of MPI's Amended and Restated Articles of Incorporation or
Bylaws (as amended), or any mortgage, lien, lease, agreement, instrument, order,
judgment or decree to which MPI is a party or by which MPI or any of its assets
is bound.
8.4 Valid Issuance of Preferred and Common Stock. The Series A
--------------------------------------------
Preferred Stock, when issued and delivered in accordance with the terms of this
Conversion Agreement, will be duly and validly issued, fully paid, and
nonassessable, and will be free of restrictions on transfer other than those
stated in this Conversion Agreement and/or that may arise under applicable state
and federal securities laws. The common stock of MPI issuable upon conversion of
the Series A Preferred Stock has been duly and validly reserved for issuance
and, upon issuance in accordance with the terms of the Certificate of Amendment,
will be duly and validly issued, fully paid, and nonassessable, and will be free
of restrictions on transfer other than
9
those stated in this Conversion Agreement and/or that may arise under applicable
state and federal securities laws.
8.5 Consents. No consent, approval, order or authorization of, or
--------
registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority or any third party on the part of
MPI is required in connection with the consummation of the transactions
contemplated by this Conversion Agreement, except (i) the filing of the
Certificate of Amendment with the California Secretary of State; (ii) the filing
required pursuant to Section 25102(f) of the California Corporate Securities Law
of 1968, as amended, and the rules thereunder, which filing will be effected
within fifteen (15) days after the issuance of the Series A Preferred Stock
pursuant hereto.
8.6 Offering. Subject in part to the truth and accuracy of the
--------
representations of TI set forth in Section 9 of this Agreement, the issuance of
the Series A Preferred Stock as contemplated by the Transaction Documents is
exempt from the registration and qualification requirements of any applicable
state and federal securities laws, and neither MPI nor any authorized agent
acting on its behalf will take any action hereafter that would cause the loss of
such exemption.
8.7 Disclosure. MPI has fully provided TI with all information TI has
----------
requested for deciding whether to enter into the transactions contemplated by
the Transaction Documents, including without limitation, the acquisition of the
Series A Preferred Stock.
8.8 Brokers. MPI has not taken any actions in connection with the
-------
negotiations relating to the Transaction Documents or the transactions
contemplated thereby that could give rise to an obligation on the part of TI to
pay any brokerage or finder's fee, commission or similar compensation to any
party in connection therewith.
8.9 Litigation: Except as set forth in this Section 8.9, there is no
----------
action, suit, proceeding, claim, arbitration or investigation ("Action") pending
(or, to the best of MPI's knowledge, currently threatened) against MPI, its
activities, properties or assets or, to the best of MPI's knowledge, against any
officer, director or employee of MPI in connection with such officer's,
director's or employee's relationship with, or actions taken on behalf of, MPI.
To the best of MPI's knowledge, there is no factual or legal basis for any such
Action that might result, individually or in the aggregate, in any material
adverse change in the business, properties, assets, financial condition, affairs
or prospects of MPI. MPI is not a party to or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency or
instrumentality, and there is no Action by MPI currently pending or which MPI
intends to initiate (other than claims for monetary damages asserted by MPI
against International Business Machines Corporation ("IBM") under the Purchase
Option Agreement dated August 4, 1994, between IBM and MPI and the Multilayer
Technology Transfer and Licensing Agreement dated August 4, 1994, between IBM
and MPI). MPI is a defendant in a lawsuit filed on December 18, 1998, against
MPI and Schlumberger Technologies, Inc., in the United States District Court for
the Southern District of New York ("Lawsuit"). The plaintiffs in the Lawsuit are
Gary Stein and Lewis Solomon. Both Mr. Solomon and Mr. Stein are former
directors of MPI. The Lawsuit alleges the following claims against MPI:
10
(a) Failure to pay an amount alleged to be not less than Thirty
Thousand Dollars ($30,000) allegedly owed to Lewis Solomon as compensation for
services performed by him as the former Chairman of MPI's Board of Directors;
(b) Failure to pay an amount alleged to be not less than Seventy
One Thousand Two Hundred Fifty Dollars ($71,250) allegedly owed in the aggregate
to Mr. Stein and Mr. Solomon as compensation under a consulting agreement;
(c) Wrongful termination of a consulting agreement, for which
wrongful termination Mr. Stein and Mr. Solomon allege damages in the aggregate
of not less than Five Hundred Thousand Dollars ($500,000);
(d) Tortious interference with Mr. Stein's and Mr. Solomon's
prospective economic relationships and business advantages as consultants and
directors of public corporations, presumably arising out of MPI's termination of
their consulting agreement, for which Mr. Stein and Mr. Solomon allege damages
in the aggregate of not less than Five Million Dollars ($5,000,000);
(e) Costs and expenses incurred in the Lawsuit in an unspecified
amount.
MPI believes the claims made by Mr. Stein and Mr. Solomon against MPI
in the lawsuit are completely without merit. MPI is actively and vigorously
defending the lawsuit, and has made substantial counterclaims against Mr. Stein
and Mr. Solomon.
8.10 Capitalization. The capitalization of MPI immediately prior to
--------------
the Conversion Date will consist of the following:
(a) Preferred Stock. A total of Nine Million Three Hundred
---------------
Sixty Two Thousand Seven Hundred Seventy Eight (9,362,778) authorized shares of
preferred stock, no par value per share, consisting of Nine Million Three
Hundred Sixty Two Thousand Seven Hundred Seventy Eight (9,362,778) shares
designated as Series A Preferred Stock, none of which will be issued and
outstanding. Upon the TI Conversion and Other Creditor Conversions, the rights,
preferences and privileges of the Series A Preferred Stock will be as stated in
MPI's Amended and Restated Articles of Incorporation, as amended by the
Certificate of Amendment, and as provided by law.
(b) Common Stock. A total of Fifty Million (50,000,000)
------------
authorized shares of common stock, no par value per share (the "Common Stock"),
of which not more than Eleven Million (11,000,000) shares will be issued and
outstanding.
(c) Options, Warrants, Reserved Shares. Except for: (i) the
----------------------------------
conversion privileges of the Series A Preferred Stock; (ii) Four Million Six
Hundred Ninety Thousand Six Hundred Thirty Two (4,690,632) shares of Common
Stock reserved for issuance under MPI's 1993 Stock Option Plan under which
options to purchase Two Million Four
11
Hundred Twenty Four Thousand Five Hundred (2,424,500) shares are outstanding;
and (iii) warrants to purchase Seven Hundred Thousand (700,000) shares of Common
Stock; there is no outstanding, option, warrant, right (including conversion or
preemptive rights) or agreement for the purchase or acquisition from MPI of any
shares of its capital stock or any securities convertible into or ultimately
exchangeable or exercisable for any shares of MPI's capital stock. Apart from
the exceptions noted in this Section 8.10, and except for rights of first
refusal held by MPI to purchase shares of its stock issued under MPI's 1993
Stock Option Plan, no shares of MPI's outstanding capital stock , or stock
issuable upon exercise or exchange of any outstanding options, warrants or
rights, or other stock issuable by MPI, are subject to any preemptive rights,
rights of first refusal or other rights to purchase such stock (whether in favor
of MPI or any other person), pursuant to any agreement or commitment of MPI.
9. Representations, Warranties and Agreements of TI. In addition to
------------------------------------------------
any representations and warranties TI may make to MPI elsewhere in this
Conversion Agreement, the Ancillary Agreements or in any other document
delivered to MPI in connection herewith TI, represents and warrants to MPI that
the statements contained in this Section 9 are true, accurate, complete, and not
misleading in any material respect, and also shall be so as of the Conversion
Date.
9.1 Authority Regarding this Agreement.
----------------------------------
9.1.1 TI has the complete and unrestricted right, power,
authority and capacity to (a) execute and deliver each Transaction Document to
which it is a party; and (b) carry out and perform each of its obligations
pursuant to such Transaction Documents.
9.1.2 As of the Conversion Date, no further corporate or
shareholder authority, approvals, actions or proceedings will be necessary on
the part of TI to authorize the Transaction Documents or any of the transactions
contemplated thereby.
9.1.3 This Conversion Agreement has been, and, as of the
Conversion Date all of the other Transaction Documents will have been, duly and
validly executed and delivered by TI, and when so executed and delivered, will
constitute legal, valid and binding obligations of TI, enforceable in accordance
with their terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent the indemnification provisions contained in
the Registration Agreement may be limited by applicable federal or state
securities laws.
9.2 Purchase Entirely For Own Account. MPI is entering into the
---------------------------------
Transaction Documents in reliance on the representation made by TI, which
representation is confirmed by TI's execution of this Conversion Agreement, and
TI hereby confirms, that the Series A Preferred Stock to be received by TI, and
MPI's common stock issuable upon conversion thereof (collectively the
"Securities") will be acquired for investment and not with a view to the resale
or distribution of any part thereof, and that TI has no present intention of
selling, granting any participation in, or otherwise distributing the same. By
executing this
12
Conversion Agreement, TI further represents that TI does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Securities.
9.3 Disclosure of Information. TI believes it has received all the
-------------------------
information it considers necessary or appropriate for deciding whether to
acquire the Securities. TI further represents that it has had an opportunity to
ask questions and receive answers from MPI regarding the terms and conditions of
the Transaction Documents and the business, properties, prospects and financial
condition of MPI.
9.4 Investment Experience. TI acknowledges that it is able to fend
---------------------
for itself, can bear the economic risk of its investment, and has such knowledge
and experience in financial or business matters that it is capable of evaluating
the merits and risks of the investment in the Securities. TI has carefully
evaluated its financial resources and investment position and the risks
associated with an investment in the Securities, and acknowledges that it is
able to bear the economic risks of this investment. TI further acknowledges that
its financial condition is such that it is not under any present necessity or
constraint to dispose of the securities to satisfy any existing or contemplated
debt or undertaking. TI also represents it has not been organized for the
purpose of acquiring the Securities.
9.5 Restricted Securities. TI understands that the Securities are
---------------------
characterized as "restricted securities" under the federal securities laws of
the United States, inasmuch as they are being acquired from MPI in a transaction
not involving a public offering, and that under such laws and applicable
regulations the Securities may be resold without registration only in certain
limited circumstances. In this connection, TI represents that it is familiar
with Securities and Exchange Commission ("SEC") Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and generally by
the federal securities laws of the United States. TI further understands that
the Securities have not been registered under the Securities Act of 1933, as
amended ("33 Act") or qualified or otherwise registered under the applicable
securities laws of any state or other jurisdiction, that any disposition of the
Securities by TI is subject to restrictions imposed by federal and state laws,
that the stock certificates representing the Securities will bear a restrictive
legend stating that TI cannot dispose of the Securities absent such registration
and qualification, except pursuant to any available exemption from such
registration and qualification.
9.6 Further Restrictions on Transfer. Without in any way limiting the
--------------------------------
representations set forth above in this Section 9, TI further agrees not to make
any disposition of all or any portion of the Securities unless and until the
transferee has agreed in writing for the benefit of MPI to be bound by the
provisions of Sections 9.3 through 9.7 hereof, and the provisions of the
Registration Agreement, to the extent such sections and such agreement are then
applicable, and:
(a) There is then in effect a Registration Statement under the
33 Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
13
(b) TI shall have notified MPI of the proposed disposition and
shall have furnished MPI with a detailed statement of the circumstances
surrounding the proposed disposition, and if reasonably requested by MPI, TI
shall have furnished MPI with an opinion of counsel, reasonably satisfactory to
MPI, that such disposition will not require registration of the Securities in
question under the 33 Act.
Notwithstanding the provisions of paragraphs (a) and (b) above, no
such registration statement or opinion of counsel shall be required: (i) for any
transfer of any Securities in compliance with SEC Rule 144 or Rule 144A; or (ii)
for any transfer of any Securities by a holder thereof that is a partnership or
a corporation to: (1) a partner of such partnership or a shareholder of such
corporation; (2) a retired partner of such partnership who retires after the
date hereof; or (3) the estate of any such partner or shareholder; provided,
--------
that in each of the foregoing cases the transferee agrees in writing to be
subject to the terms of this Section 9 to the same extent as if the transferee
were an original purchaser of Securities hereunder.
9.7 Restrictive Legend. Each certificate representing the Series A
------------------
Preferred Stock or any other securities issued in respect of the Series A
Preferred Stock or upon the conversion thereof, shall be stamped or otherwise
imprinted with a legend in the following form, in addition to any legend
required pursuant to applicable state securities laws:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (AS AMENDED), NOR QUALIFIED OR OTHERWISE REGISTERED
UNDER THE APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. THESE
SECURITIES HAVE BEEN ACQUIRED ONLY FOR INVESTMENT AND MAY NOT BE OFFERED, SOLD,
TRANSFERRED, PLEDGED, OR OTHERWISE DISPOSED OF OR HYPOTHECATED (a) IN THE
ABSENCE OF BOTH (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OF 1933 (AS AMENDED), AND (ii) AN EFFECTIVE QUALIFICATION OR REGISTRATION UNDER
THE APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION, OR (b) UNLESS
AN EXEMPTION FROM ANY SUCH REGISTRATIONS OR QUALIFICATIONS IS AVAILABLE AND THE
ISSUER HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT
SUCH REGISTRATIONS OR QUALIFICATIONS ARE NOT REQUIRED.
9.8 (This Section has been intentionally left blank.)
9.9 Brokers or Finders. TI has not taken any actions in connection
------------------
with the negotiations relating to this Conversion Agreement or the transactions
contemplated hereby that could give rise to an obligation on the part of MPI to
pay any brokerage or finder's fee, commission or similar compensation to any
party in connection therewith.
14
10. Miscellaneous Provisions.
------------------------
10.1 Exhibits. All exhibits described in this Conversion Agreement
--------
are incorporated by reference as if fully set forth herein, and constitute a
material part of this Conversion Agreement, whether or not such exhibits are
attached hereto.
10.2 Governing Law. This Conversion Agreement shall in all respects
-------------
be construed, interpreted and enforced in accordance with and governed by the
laws of the State of California, United States of America. Any legal action
between the parties regarding this Conversion Agreement shall be brought in, and
the parties hereby consent to the jurisdiction of and venue in, either (a) the
federal and state courts located in the County of San Diego, State of
California, United States of America; or (b) the courts located in the country
of Singapore.
10.3 Notices. Any notice, demand or other communication required or
-------
permitted under this Conversion Agreement shall be deemed given and delivered
when in writing and (a) personally served upon the receiving party, or (b) upon
the third (3rd) calendar day after mailing to the receiving party by either (i)
United States registered or certified mail, postage prepaid, or (ii) FedEx or
other comparable overnight delivery service, delivery charges prepaid, and
addressed as follows:
To MPI: Microelectronic Packaging, Inc.
9577 Chesapeake Drive
San Diego, CA 92123
Attn: Chief Executive Officer
To TI Texas Instruments Incorporated
PO Box 650311
MS 3994
Dallas, TX 75265
Attn: Mr. Thomas J. Gentry
Vice President
Any party may change the address specified in this section by giving the other
party notice of such new address in the manner set forth herein.
10.4 Severability. In the event that any provision of this Conversion
------------
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or invalid, then this Conversion Agreement shall continue
in full force and effect without said provision. If this Conversion Agreement
continues in full force and effect as provided above, the parties shall replace
the invalid provision with a valid provision which corresponds as far as
possible to the spirit and purpose of the invalid provision.
10.5 Counterparts. This Conversion Agreement may be executed in any
-------------
number of counterparts, each of which may be executed by less than all of the
parties hereto,
15
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one document.
10.6 Entire Agreement. This Conversion Agreement, the Ancillary
----------------
Agreements, and the documents and agreements contemplated herein and therein,
constitute the entire agreement between the parties with respect to the subject
matter hereof, and supersede all prior oral or written agreements,
representations or warranties between the parties other than those set forth
herein or herein provided for.
10.7 Successors and Assigns. Except as specifically permitted
----------------------
pursuant to the terms and conditions hereof, no party shall be permitted to
assign their respective rights or obligations under this Conversion Agreement
without the prior written consent of the other parties. The provisions hereof
shall inure to the benefit of, and be binding upon, the permitted successors and
assigns, heirs, executors, and administrators of the parties hereto.
10.8 Amendment and Waiver. No modification or waiver of any provision
--------------------
of this Conversion Agreement shall be binding upon the party against whom it is
sought to be enforced, unless specifically set forth in writing signed by an
authorized representative of that party. A waiver by any party of any of the
terms or conditions of this Conversion Agreement in any one instance shall not
be deemed or construed to be a waiver of such terms or conditions for the
future, or of any subsequent breach thereof. The failure by any party hereto at
any time to enforce any of the provisions of this Conversion Agreement, or to
require at any time performance of any of the provisions hereof, shall in no way
to be construed to be a waiver of such provisions or to affect either the
validity of this Conversion Agreement or the right of any party to thereafter
enforce each and every provision of this Conversion Agreement.
[The remainder of this page has been intentionally left blank.]
16
10.9 Survivability. All of the representations, warranties,
-------------
agreements and obligations of the parties pursuant to this Conversion Agreement
shall survive any issuance of the Shares and/or the Option Shares by the Company
to the Buyers.
IN WITNESS WHEREOF, the parties hereto have duly executed this Conversion
Agreement as of the date first above written.
MICROELECTRONIC PACKAGING, INC. TEXAS INSTRUMENTS INCORPORATED
By: /s/ Denis J. Trafecanty By: /s/ Thomas J. Gentry
------------------------------------ -------------------------------
Signature Signature
Title: Senior Vice President and CFO Title: Vice President
---------------------------------- ----------------------------
[The remainder of this page has been intentionally left blank.]
17