EXHIBIT 10.80
FORBEARANCE, RESTRUCTURE
AND MUTUAL RELEASE AGREEMENT
----------------------------
This Forbearance, Restructure and Mutual Release Agreement (the
"Agreement") is entered into as of this 1st day of July, 1998, by and among
Microelectronic Packaging, Inc. ("MPI"), CTM Electronics, Inc. ("CTM") and
Microelectronic Packaging America ("MPA") and Motorola, Inc. ("Motorola").
R E C I T A L S:
WHEREAS, pursuant to two separate $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
$2,000,000 to MPS, a subsidiary of MPI currently in liquidation, which loan
amounts Motorola guaranteed and which Agreement calls for certain payments and
interest amounts were thereafter due and payable periodically;
WHEREAS, MPI, Motorola, CTM and MPA entered into an Agreement Relating to
Guarantee in connection with Motorola's guarantee of MPS' obligations under the
Loan Agreements (the "Guarantee Agreement"), 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 ("1997 Note"), pursuant to which Citicorp
loaned $2,208,538.34 to MPA, 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 Agreement.
WHEREAS, the parties wish to resolve all obligations under the Loan
Agreements and the Guarantee Agreement, the 1997 Note and all other related
agreements (collectively the "Motorola Obligations"), and settle all other
disputes that may exist between MPI, MPA and CTM, on one hand, and Motorola, on
the other hand.
NOW, THEREFORE, in consideration of the mutual promises contained herein
and for other good and sufficient consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties agree as follows:
1. Definitions.
-----------
a. "Payment Date" shall mean the calendar day after MPI completes the
full performance of its obligations under subsection 2 of this Agreement that
the payment to Motorola called for in such subsection have been received.
b. "Release Date" shall be the calendar date that is ninety (90) days
after the Payment Date.
c. "Insolvency Action" shall mean the commencement of a voluntary or
involuntary case against MPI under the United States Bankruptcy Code or an
assignment for the benefit of creditors by MPI that is not dismissed within
sixty (60) days of its commencement.
d. "Execution Date" shall mean the date on which this Agreement is
executed by all parties hereto.
e. Other defined terms shall have the meanings assigned to them herein.
2. Acknowledgment of Debt. MPI, MPA and CTM hereby acknowledge and agree
----------------------
that as of March 25, 1998 they jointly and severally owed to Motorola the sum of
$2,219,918.40 plus interest from that date (collectively the "Motorola Debt").
3. Acknowledgment of Liens. MPI, MPA and CTM hereby reaffirm and acknowledge
-----------------------
that the Motorola Debt is secured by all of the present and future assets of
MPI, MPA and CTM.
4. Discounted Payment.
------------------
a. Within six (6) calendar months of the Execution Date ("Payment
Deadline") MPI will pay to Motorola the amount of US $887,331.00 ("Discounted
Payment Amount"), by wire transfer in accordance with the wire transfer
instructions provided by Motorola.
b. The Discounted Payment Amount will constitute payment in full of the
Motorola Debt on the following terms and conditions:
(i) Discounted Payment is made on or before the Payment Deadline.
(ii) No event of default has occurred hereunder by the Release
Date.
(iii) No Insolvency Action has been commenced by the Release Date.
-2-
5. Release of Collateral. If the Motorola Debt is satisfied as provided in
---------------------
Paragraph 4.b.,
a. Motorola will return to MPI the Stock Certificates and the
Irrevocable Proxies (whereupon MPI will terminate such Irrevocable Proxies), and
will otherwise return any other assets of MPI, MPA or CTM which Motorola holds
as security under the Guarantee Agreement.
b. Further, Motorola (at no cost to Motorola) will take all steps
necessary or advisable, and provide any assistance to MPI, MPA and CTM necessary
or reasonable, to release any liens, security interests, claims or other rights
it has against any assets of MPI, MPA and CTM.
6. Forbearance. Subject to the conditions specified in this Agreement,
-----------
Motorola will forbear from taking action to collect the Motorola Obligations and
to foreclose under the Security Agreement until the Payment Deadline or such
earlier date as may result from the occurrence of an Event of Default under
paragraph 11 below. (The date of such termination shall be referred to as the
"Termination Date").
7. Further Forbearance. Motorola is not obligated to grant further
-------------------
extensions of any Termination Date referred to in this Agreement.
8. No Waiver. Motorola's execution of this Agreement and the terms herein
---------
shall not constitute a waiver of any existing default nor of any right or remedy
which Motorola may have.
9. Financial Covenant. During the period beginning on the date of this
------------------
Agreement and ending on the Payment Date, MPI at all times will maintain
inventory stated at the lower of cost or market in conformity with Generally
Accepted Accounting Principles of at least $3,000,000.
10. Financial Information. MPI, MPA and CTM shall provide to Motorola such
---------------------
financial information as Motorola shall periodically request.
11. Events of Default. Any of the following shall constitute, at the sole
-----------------
option of Motorola, an "Event of Default" by MPA, MPI or CTM under this
Agreement:
a. Failure to make the Discounted Payment by the Payment Deadline;
b. Discovery that any material representation or warranty made to
Motorola by MPA, MPI or CTM was materially inaccurate at the time made.
c. If one or more judgments are entered against MPI, MPA or CTM in an
aggregate amount in excess of $500,000.00.
d. If a judgment lien attaches to any asset of MPI, MPA or CTM.
-3-
e. If any creditor which holds a lien on any asset of MPI, MPA or CTM
(other than Motorola) takes any action toward foreclosure on, or enforcement of
its lien against, any asset of MPI, MPA or CTM.
12. Remedies Upon Default. Upon the occurrence of an Event of Default
---------------------
(other than the Stated Default) Motorola may, at its option and without notice
or demand:
a. Refuse to accept the Discounted Payment referred to in paragraph
4.a. above.
b. Immediately make demand for the Motorola Debt and accelerate all
obligations owed under this Agreement, the Loan Agreements, and enforce its
rights thereunder and hereunder, and to collect the Motorola Obligations.
c. Exercise any or all of its remedies under the Loan Agreements, or
under applicable law or under any other agreement.
13. Release Procedure. Effective on the Release Date, if and only if no
-----------------
event of default has occurred hereunder on or before the Release Date:
a. Motorola agrees as follows:
(i) Motorola, fully and forever releases and discharges MPI, MPA, CTM and
their predecessors, successors, former or current subsidiaries,
affiliates, officers, directors, shareholders, agents, attorneys,
representatives, employees and assigns (collectively the "MPI
Releasees") from and against any and all claims, damages and causes of
action they may have against each such person or entity with respect to
any matter under the provisions of, arising out of or in connection
with, the Loan Documents, including any breach of any representation or
warranty or noncompliance or nonfulfillment of any covenant or agreement
set forth in such documents; provided that such release and discharge
shall not extend to any claims, damages and causes of action any
Motorola Releasee may have against any MPI Releasee for fraud or willful
misconduct with respect to any of the Loan Documents or any of the
transactions contemplated by this Agreement.
(ii) Each of the Loan Documents, regardless of whether it is in default, are
fully and completely terminated and rendered devoid of legal effect and
unenforceable, such that even provisions of the Loan Documents that,
according to their terms, survive termination, are terminated and
nullified. Further, any loan, debt, liability or other obligation
created pursuant to or arising out of the Loan Documents, as well as any
writings, agreements, notes or certificates representing such loan,
debt, liability or obligations, are canceled and rendered devoid of
force and effect.
b. MPI, MPA and CTM (collectively the "MPI Releasing Parties") each
agrees as follows:
-4-
(i) MPI, MPA and CTM each, fully and forever releases and
discharges Motorola and its predecessors, successors, former or current
subsidiaries, affiliates, officers, directors, shareholders, agents,
attorneys, representatives, employees and assigns (collectively the
"Motorola Releasees") from any claims, damages, and causes of action it
or they may have against any of them with respect to any matter under
the provisions of, arising out of or in connection with the Loan
Documents; provided that such release and discharge shall not extend to
any claims, damages and causes of action any MPI Releasing Party may
have against any Motorola Releasee for fraud or willful misconduct with
respect to any of the Loan Documents or any of the transactions
contemplated by this Agreement.
(ii) Each MPI Releasing Party acknowledges and agrees that each of
the Loan Documents are fully and completely terminated and rendered
devoid of force and effect, such that even provisions of the Loan
Documents and each of their respective related agreements, letters,
documents and instruments that , according to their terms, survive
termination, are terminated and nullified.
c. MPA, MPI, CTM and Motorola (collectively the "Releasing Parties")
each understands (i) that it is possible that unknown losses or claims may exist
or (ii) that past known losses have been underestimated; nevertheless each of
the Releasing Parties is taking this risk into account in determining the
consideration it is to receive for this release through this Forbearance
Agreement. Consequently, each of the Releasing Parties expressly waives all
rights and benefits conferred by Section 1542 of the California Civil Code which
provides as follows:
"A general release does not extend to claims which
the creditor does not know or suspect to exist in
his favor at the time of executing the release which
if known by him must have materially affected his
settlement with the debtor."
d. Each of the Releasing Parties agrees that it shall not prosecute or
pursue and shall not directly or indirectly assist in the prosecution or pursuit
of any claim or cause of action or lawsuit arising from the claims or causes of
action waived or released herein.
14. Confidentiality. No party to this Agreement shall, except as may be
---------------
mandated by statutory or regulatory requirements, as may be required by legal
process in the course of actual litigation or in the case of a subpoena, as may
be necessary for MPI to negotiate with its creditors, disclose to others the
fact or terms of this settlement, the amounts referred to in this Agreement or
the fact of the payment of said amounts, except that each such party may
disclose to each such party's attorneys, accountant or other advisors to whom
the disclosure is necessary to effectuate the purposes for which such party has
consulted with such professional advisors and except that (i) MPI may file this
Agreement with any governmental or regulatory body, describe it and refer to it
in any filing it makes pursuant to federal and state securities laws or to its
Board of Directors or shareholders, and (ii) MPI may issue a press release
describing the general terms
-5-
of this Agreement in connection with any public filing it makes with any
governmental or regulatory body.
15. Representations and Warranties.
------------------------------
a. MPI Releasing Parties. MPI, MPA and CTM each represents and warrants
---------------------
that:
(i) It has all requisite corporate power and authority to execute
and deliver, and fulfill its obligations under this Agreement. This
Agreement (notwithstanding the lack of approval of MPS), upon execution and
delivery by it and assuming due and proper execution and delivery by the
other parties, will constitute a valid and binding obligation of said MPI
Releasing Party, enforceable in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, moratorium and other
laws of general application affecting the enforcement of creditors' rights.
(ii) No consent, approval, order or authorization, or registration,
qualification, designation, declaration or filing with, any federal, state
or local governmental authority on its part is required in connection with
the execution, delivery and performance of this Agreement by it, other than
state securities law filings.
(iii) No consent, approval, waiver or other action by any person
under any contract, agreement, indenture, lease, instrument or other
document to which it is a party or by which it is bound is necessary for
the execution, delivery and performance of this Agreement by MPI.
(iv) Motorola has a first priority lien on the assets of MPA, MPI
and CTM.
(v) All financial information provided to Motorola by or on behalf
of MPI is materially correct.
(vi) Except as set forth on Exhibit A hereto, no other creditor has
a lien (consensual or otherwise) on its assets.
b. Motorola. Motorola represents and warrants that:
--------
(i) It has all requisite corporate power and authority to execute
and deliver, and fulfill its obligations under this Agreement. This
Agreement (notwithstanding the lack of approval of MPS), upon execution and
delivery by Motorola, and assuming due and proper execution and delivery by
MPI, will constitute a valid and binding obligation of Motorola,
enforceable in accordance with its terms, except as such enforcement may be
limited by bankruptcy,
-6-
insolvency, moratorium and other laws of general application affecting
the enforcement of creditors' rights.
(ii) No consent, approval, order or authorization, or registration,
qualification, designation, declaration or filing with, any foreign,
federal, state or local governmental or other authority or third party on
the part of Motorola is required in connection with the execution,
delivery and performance of this Agreement.
(iii) No consent, approval, waiver or other action by any person
under any contract, agreement, indenture, lease, instrument or other
document or law, ordinance, statute, rule or regulation to which Motorola
is a party or by which it or its property is bound is necessary for the
execution, delivery and performance of this Agreement.
(iv) Motorola has paid all amounts owed to Citicorp under the 1997
Note.
16. Miscellaneous. MPI, MPA, CTM and Motorola hereby agree as follows:
-------------
a. Severability. If any provision of this Agreement is found to be
------------
unenforceable, it shall not affect the enforceability of the remaining
provisions and the court shall enforce all remaining provisions to the extent
permitted by law. All parties agree that, notwithstanding the lack of execution
of this agreement by MPS, this Agreement is valid, binding and enforceable on
all parties.
b. Prior Agreements. This Agreement shall supersede and amend any and
----------------
all prior agreements between MPI, MPS and the MPI Releasees, on one hand, and
Motorola and/or any Motorola Releasee, on the other hand, concerning the subject
matter contained herein; upon satisfaction of the conditions set forth in
paragraph 4 and paragraph 13, such agreements will be deemed satisfied and
terminated.
c. Successors and Assigns. This Agreement shall bind and benefit each
----------------------
of Motorola and its successors and assigns and shall also bind and benefit each
MPI and its successors and assigns. This Agreement may not be assigned by MPI,
by operation of law (e.g., merger) or otherwise (e.g., sale of substantially all
assets), without the prior written consent of Motorola, except that no such
consent shall be required after the Release Date.
d. Governing Law. This Agreement shall be deemed to have been entered
-------------
into in the State of California and shall be construed and interpreted in
accordance with the laws of California.
e. Jurisdiction. The parties to the Agreement hereby (i) irrevocably
------------
submit to the jurisdiction of the courts of the State of California and the
Federal courts of the United States sitting in the State of California for the
purpose of any action or proceeding arising out of or relating to this Agreement
and any other documents and instruments relating hereto, (ii) agree
-7-
that all claims in respect of any such action or proceeding may be heard and
determined in such courts, (iii) irrevocably waive (to the extent permitted by
applicable law) any objection which any of them now or hereafter may have to the
laying of venue of any such action or proceeding brought in any of the foregoing
courts, and any objection on the ground that any such action or proceeding in
any such court has been brought in an inconvenient forum and (iv) agree that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
permitted by law.
f. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
g. Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
h. Amendment. No amendment, modification or waiver of this Agreement or
---------
any part thereof shall be effective unless it is in writing and is signed by MPI
and Motorola. No delay on the part of any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof. Nor shall any waiver
on the part of any party of any such right, power or privilege, nor any single
or partial exercise of any such right, power or privilege, preclude any further
exercise thereof or the exercise of any other such right, power or privilege.
The rights and remedies herein provided are cumulative and are not exclusive of
any rights or remedies that any party may otherwise have at law or in equity.
The rights and remedies of any party based upon, arising out of or otherwise in
respect of any inaccuracy in or breach or nonfulfillment of or noncompliance
with any representation, warranty, covenant or agreement contained in this
Agreement shall in no way be limited by the fact that the act, omission,
occurrence or other state of facts upon which any claim of any such inaccuracy
or breach is based may also be the subject matter of any other representation,
warranty, covenant or agreement contained in this Agreement (or in any other
agreement between the parties) as to which there is no inaccuracy or breach.
i. Termination. This agreement may be terminated upon the mutual
-----------
written consent of MPI and Motorola. Motorola may terminate this Agreement upon
three (3) business days' written notice to MPI in the event (i) an Insolvency
Action occurs or (ii) MPI commits a material breach of this Agreement. Unless
previously terminated pursuant to Section 3 of this Agreement, the Loan
Documents including the Guarantee Agreement shall remain in full force and
effect upon any termination of this Agreement.
j. Survival of Representations, Warranties, Covenants and Agreements.
-----------------------------------------------------------------
The representations, warranties, covenants and agreements contained in this
Agreement shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
k. Notices. All notices, demands or other communications to be given or
-------
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be
-8-
deemed to have been given when delivered personally to the recipient, sent to
the recipient by reputable overnight courier service (charges prepaid), mailed
to the recipient by certified or registered mail, return, receipt requested and
postage prepaid, or transmitted by facsimile (with request for immediate
confirmation of receipt in a manner customary for communications of such type
and with physical delivery of the communication being made by one of the other
means specified in this Section as promptly as practicable thereafter). Such
notices, demands and other communications shall be addressed as follows:
If to Motorola:
Bernard Gutman
SCG Group Controller
Motorola, Inc.
Semiconductor Component Group
5005 East McDowell Rd.
MD C210
Phoenix, AZ 85008
Telephone: (602) 244-3886
Telecopy: (602) 244-7250
with a copy to
Peter S. Munoz
Jackson Tufts Cole & Black, LLP
650 California Street
San Francisco, CA 94108
Telephone: (415) 433-1950
Telecopy: (415) 392-3494
If to MPI:
Microelectronic Packaging, Inc.
9577 Chesapeake Drive
San Diego, CA 92123
Attn: President
Telephone: (619) 292-7000
Telecopy: (619) 292-7881
with a copy to:
Brobeck, Phleger & Harrison LLP
550 West C Street
Suite 1300
-9-
San Diego, CA 92101
Attention: John Cook, Esq.
Telephone: (619)
Telecopy: (619) 234-3848
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party
(provided that notice of a change of address shall be effective only upon
receipt thereof).
l. Advice of Attorney. Each of the parties hereto expressly declares
------------------
that it knows and understands the contents of this Agreement and has had an
opportunity to consult with an attorney regarding its form and content.
m. No Other Beneficiaries. Except for the releases contained in
----------------------
paragraph 13 above, nothing contained in this Agreement is intended, nor shall
it be construed or deemed, to confer any rights, powers or privileges on any
person, firm, partnership, corporation or other entity who or which is not an
express party herein or a successor-in-interest to any party hereto.
n. Neutral Construction. Each of the parties hereto has been involved
--------------------
in the negotiation, review and execution of this Agreement; and each has had the
opportunity to receive independent legal advice from an attorney or attorneys of
its choice with respect to the advisability of making and executing this
Agreement. In the event of any dispute of controversy regarding this Agreement,
the parties hereto shall be considered to be the joint authors of this Agreement
and no provision of this Agreement shall be interpreted against a party hereto
because of authorship.
IN WITNESS WHEREOF, parties hereto have executed this Agreement on and as
of the day and year first above written.
MICROELECTRONIC PACKAGING, INC. CTM ELECTRONICS, INC.
By: /s/ Denis J. Trafecanty By: /s/ Denis J. Trafecanty
---------------------------- ----------------------------------
Denis J. Trafecanty
Chief Financial Officer
MOTOROLA, INC.
MICROELECTRONIC PACKAGING AMERICA
By: /s/ B. Gutmann
----------------------------------
Name:Bernard Gutmann
By: /s/ Denis J. Trafecanty Its:SCG Group Controller
-----------------------
-10-