EXHIBIT NO. 10.3

 

THIS NOTE (THE “NOTE”) AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS
NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS.  THIS NOTE AND THE COMMON SHARES ISSUABLE UPON
CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
NOTE UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO MICRO COMPONENT TECHNOLOGY, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED.

 

SECURED CONVERTIBLE TERM NOTE

 

FOR VALUE RECEIVED, MICRO COMPONENT TECHNOLOGY, INC., a Minnesota corporation
(the “Borrower”), hereby promises to pay to LAURUS MASTER FUND, LTD., c/o M&C
Corporate Services Limited, P.O. Box 309 GT, Ugland House, South Church Street,
George Town, Grand Cayman, Cayman Islands (the “Holder”) or its registered
assigns or successors in interest, on order, the sum of TWO MILLION FIVE HUNDRED
THOUSAND DOLLARS ($2,500,000.00), together with any accrued and unpaid interest
hereon, on April 29, 2008 (the “Maturity Date”) if not sooner paid.

 

Capitalized terms used herein without definition shall have the meanings
ascribed to such terms in that certain Securities Purchase Agreement dated as of
the date hereof between the Borrower and the Holder (the “Purchase Agreement”).

 

The following terms shall apply to this Note:

 

ARTICLE I

INTEREST & AMORTIZATION

 

1.1                                 Interest Rate and Payment.  (a) Subject to
Sections 4.10 and 5.6 hereof, interest payable on this Note shall accrue at a
rate per annum (the “Interest Rate”) equal to the “prime rate” published in The
Wall Street Journal from time to time, plus one and three-quarters percent
(1.75%). The prime rate shall be increased or decreased as the case may be for
each increase or decrease in the prime rate in an amount equal to such increase
or decrease in the prime rate; each change to be effective as of the day of the
change in such rate.  If the Company has satisfied the requirements of
Section 2.2 hereof, the Interest Rate will be subject to adjustment as set forth
in Section 1.1(b).  In no event, however, shall the Interest Rate be less than
zero percent (0.0%).  Interest shall be payable monthly in arrears commencing on
June 1, 2005, on the first day of each consecutive calendar month thereafter
(each, a “Repayment Date”), and on the Maturity Date, whether by acceleration or
otherwise.

 

(b) If, on the last business day of each month hereafter until the Maturity Date
(each a “Determination Date”), (i) the Company shall have registered the shares
of the Company’s common stock underlying the conversion of the Note and that
certain option issued to Holder in

 

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connection with the Note on a registration statement declared effective by the
SEC, and (ii) the volume weighted average price of the Common Stock as reported
by Bloomberg, L.P. on the principal market for the five (5)  trading days
immediately preceding a Determination Date (the “Market Price”) exceeds the then
applicable Fixed Conversion Price, the Interest Rate for the succeeding calendar
month shall automatically be reduced by 25 basis points (0.25%) for each
incremental twenty five percent (25%) increase in the market price of the Common
Stock above the then applicable Fixed Conversion Price.

 

1.2                                 Minimum Monthly Principal Payments.
Amortizing payments of the aggregate principal amount outstanding under this
Note at any time (the “Principal Amount”) shall begin on November 1, 2005 and
shall recur on the first calendar day of each succeeding month thereafter until
the Maturity Date (each, an “Amortization Date”).  Subject to Section 3 below,
beginning on the first Amortization Date, the Borrower shall make monthly
payments to the Holder on each Repayment Date, each in the amount of $83,333.33,
together with any accrued and unpaid interest to date on such portion of the
Principal Amount plus any and all other amounts which are then owing under this
Note but have not been paid (collectively, the “Monthly Amount”).

 

ARTICLE II

CONVERSION REPAYMENT OPTION

 

2.1                                 (a) Payment of Monthly Amount in Cash or
Common Stock.  Each month by the fifth (5th) business day prior to each
Amortization Date (the “Notice Date”), the Holder shall deliver to Borrower a
written notice in the form of Exhibit B attached hereto electing to convert the
Monthly Amount payable on the next Repayment Date in either cash or Common
Stock, or a combination of both (each, a “Repayment Election Notice”). If a
Repayment Election Notice is not delivered by the Holder on or before the
applicable Notice Date for such Repayment Date, then the Borrower shall pay the
Monthly Amount due on such Repayment Date in cash. Any portion of the Monthly
Amount paid in cash on a Repayment Date, shall be paid to the Holder in an
amount equal to 101% of the principal portion of the Monthly Amount due and
owing to Holder on the Repayment Date. If the Holder converts all or a portion
of the Monthly Amount in shares of Common Stock, the number of such shares to be
issued by the Borrower to the Holder on such Repayment Date shall be the number
determined by dividing (x) the portion of the Monthly Amount to be paid in
shares of Common Stock, by (y) the then applicable Fixed Conversion Price.  For
purposes hereof, the initial “Fixed Conversion Price” means $0.23 [100% of the
average closing price for the 3 trading days immediately preceding the Closing
Date].

 

(b)                                 Monthly Amount Conversion Guidelines. 
Subject to Sections 2.1(a), 2.2, and 3.2 hereof, the Holder shall elect to
convert all or a portion of the Monthly Amount due on each Repayment Date in
shares of Common Stock if the average closing price of the Common Stock as
reported by Bloomberg, L.P. on the Principal Market (as defined in Section 4.7
hereof) for the three (3) trading days immediately preceding such Repayment Date
was greater than 115% of the Fixed Conversion Price; provided that the amount of
any such conversion shall not exceed twenty five percent (25%) of the aggregate
dollar trading volume of the Common Stock for the ten (10) day trading period
immediately preceding delivery of a Repayment Election Notice to the Borrower. 
Any part of the Monthly Amount due on a Repayment Date that the Holder has

 

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not elected to convert into shares of Common Stock shall be paid by the Borrower
in cash on such Repayment Date. Any part of the Monthly Amount due on such
Repayment Date which the Holder has elected to convert into shares of Common
Stock but which must be paid in cash (because the closing price of the Common
Stock on one or more of the three (3) trading days immediately preceding the
applicable Repayment Date was less than 115% of the Fixed Conversion Price)
shall be paid in cash at the rate of 101% of the Monthly Amount otherwise due on
the Repayment Date within three (3) business days of the applicable Repayment
Date.

 

2.2                                 No Effective Registration.  Notwithstanding
anything to the contrary herein,  none of the Borrower’s obligations to the
Holder may be converted into Common Stock unless (a) either (i) an effective
current Registration Statement (as defined in the Registration Rights Agreement)
covering the shares of Common Stock to be issued in connection with satisfaction
of such obligations exists, or (ii) an exemption from registration of the Common
Stock is available to pursuant to Rule 144 of the Securities Act and (b) no
Event of Default hereunder exists and is continuing, unless such Event of
Default is cured within any applicable cure period or is otherwise waived in
writing by the Holder in whole or in part at the Holder’s option.

 

Any amounts converted by the Holder pursuant to this Section 2.2 shall be deemed
to constitute payments of outstanding principal applying to Monthly Amounts for
the remaining Repayment Dates in chronological order.

 

2.3                                 Optional Redemption in Cash.  The Borrower
will have the option of prepaying this Note (“Optional Redemption”) by paying to
the Holder a sum of money equal to (i) one hundred five percent (105%) of the
principal amount of this Note if the closing price of the Common Stock on one or
more of the three (3) trading days immediately preceding the Optional Redemption
date is less than or equal to 75% of the then Fixed Conversion Price; (ii) one
hundred ten percent (110%) of the principal amount of this Note if the closing
price of the Common Stock on one or more of the three (3) trading days
immediately preceding the Optional Redemption date is between 76% and 100% of
the then Fixed Conversion Price, inclusive; or (iii) one hundred fifteen percent
(115%) of the principal amount of this Note if the closing price of the Common
Stock on one or more of the three (3) trading days immediately preceding the
Optional Redemption date is between 101% and 107.5% of the then Fixed Conversion
Price, inclusive; or (iv) one hundred twenty percent (120%) of the principal
amount of this Note if the closing price of the Common Stock on one or more of
the three (3) trading days immediately preceding the Optional Redemption Date is
greater than 107.5% of the then Fixed Conversion Price, together with accrued
but unpaid interest thereon and any and all other sums due, accrued or payable
to the Holder arising under this Note, the Security Agreement, or any Ancillary
Agreement (as defined in the Security Agreement) (the “Redemption Amount”)
outstanding on the day written notice of redemption (the “Notice of Redemption”)
is given to the Holder. The Notice of Redemption shall specify the date for such
Optional Redemption (the “Redemption Payment Date”) which date shall be ten
(10) days after the date of the Notice of Redemption (the “Redemption Period”).
A Notice of Redemption shall not be effective with respect to any portion of
this Note for which the Holder has a pending election to convert pursuant to
Section 3.1, or for conversions elected to be made by the Holder pursuant to
Section 3.1 during the Redemption Period.  The Redemption Amount shall be
determined as if such Holder’s conversion elections had been completed
immediately prior to the date of the Notice of Redemption. On the Redemption
Payment Date, the Redemption Amount must be paid in good

 

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funds to the Holder.  In the event the Borrower fails to pay the Redemption
Amount on the Redemption Payment Date, then such Redemption Notice will be null
and void.

 

ARTICLE III

CONVERSION RIGHTS

 

3.1.                              Holder’s Conversion Rights.  The Holder shall
have the right, but not the obligation, to convert all or any portion of the
then aggregate outstanding principal amount of this Note, together with interest
and fees due hereon, into shares of Common Stock subject to the terms and
conditions set forth in this Article III.  The Holder may exercise such right by
delivery to the Borrower of a written notice of conversion not less than one
(1) day prior to the date upon which such conversion shall occur.  The date upon
which such conversion shall occur is (the “Conversion Date”).

 

3.2                                 Conversion Limitation.  Notwithstanding
anything contained herein to the contrary, the Holder shall not be entitled to
convert pursuant to the terms of this Note an amount that (a) would be
convertible into that number of Conversion Shares that would exceed the
difference between the number of shares of Common Stock beneficially owned by
such Holder or issuable upon exercise of warrants held by such Holder and 4.99%
of the outstanding shares of Common Stock of the Borrower or (b) exceed twenty
five percent (25%) of the aggregate dollar trading volume of the Common Stock
for the ten (10) day trading period immediately preceding delivery of a Notice
of Conversion to the Borrower.  For the purposes of the immediately preceding
sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Exchange Act and Regulation 13d-3 thereunder.   The Holder
may void the Conversion Share limitation described in this Section 3.2 upon 75
days prior notice to the Borrower or without any notice requirement upon an
Event of Default.

 

3.3                                 Mechanics of Holder’s Conversion. (a) In the
event that the Holder elects to convert this Note into Common Stock, the Holder
shall give notice of such election by delivering an executed and completed
notice of conversion (“Notice of Conversion”) to the Borrower and such Notice of
Conversion shall provide a breakdown in reasonable detail of the Principal
Amount, accrued interest and fees being converted.  On each Conversion Date (as
hereinafter defined) and in accordance with its Notice of Conversion, the Holder
shall make the appropriate reduction to the Principal Amount, accrued interest
and fees as entered in its records and shall provide written notice thereof to
the Borrower within two (2) business days after the Conversion Date.  Each date
on which a Notice of Conversion is delivered or telecopied to the Borrower in
accordance with the provisions hereof shall be deemed a Conversion Date (the
“Conversion Date”). A form of Notice of Conversion to be employed by the Holder
is annexed hereto as Exhibit A.

 

(b)  Pursuant to the terms of the Notice of Conversion, the Borrower will issue
instructions to the transfer agent accompanied by an opinion of counsel within
one (1) business day of the date of the delivery to Borrower of the Notice of
Conversion and shall cause the transfer agent to transmit the certificates
representing the Conversion Shares to the Holder by crediting the account of the
Holder’s designated broker with the Depository Trust Corporation (“DTC”) through
its Deposit Withdrawal Agent Commission (“DWAC”) system within three
(3) business days after receipt by the Borrower of the Notice of Conversion (the
“Delivery Date”).

 

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In the case of the exercise of the conversion rights set forth herein the
conversion privilege shall be deemed to have been exercised and the Conversion
Shares issuable upon such conversion shall be deemed to have been issued upon
the date of receipt by the Borrower of the Notice of Conversion.  The Holder
shall be treated for all purposes as the record holder of such Common Stock,
unless the Holder provides the Borrower written instructions to the contrary.

 

(c) The Borrower understands that a delay in the delivery of the shares of
Common Stock issuable upon conversion of the Note (the “Note Shares”) in the
form required pursuant to this Section 3 beyond the Delivery Date could result
in economic loss to the Holder.  In the event that the Borrower fails to direct
its transfer agent to deliver the Note Shares to the Holder via the DWAC system
within the time frame set forth in Section 3.3(b) above and the Note Shares are
not delivered to the Holder by the Delivery Date, as compensation to the Holder
for such loss, the Borrower agrees to pay late payments to the Holder for late
issuance of the Note Shares in the form required pursuant to this Section 3 upon
conversion of the Note in the amount equal to the greater of:  (i) $500 per
business day after the Delivery Date; or (ii) the Holder’s actual damages from
such delayed delivery. Notwithstanding the foregoing, the Borrower will not owe
the Holder any late payments if the delay in the delivery of the Note Shares
beyond the Delivery Date is solely out of the control of the Borrower and the
Borrower is actively trying to cure the cause of the delay.  The Borrower shall
pay any payments incurred under this Section 3.3 in immediately available funds
upon demand and, in the case of actual damages, accompanied by reasonable
documentation of the amount of such damages.  Such documentation shall show the
number of shares of Common Stock the Holder is forced to purchase (in an open
market transaction) which the Holder anticipated receiving upon such conversion,
and shall be calculated as the amount by which (A) the Holder’s total purchase
price (including customary brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (B) the aggregate principal and/or interest
amount of the Note, for which such Notice of Notice was not timely honored.

 

Nothing contained herein or in any document referred to herein or delivered in
connection herewith shall be deemed to establish or require the payment of a
rate of interest or other charges in excess of the maximum permitted by
applicable law.  In the event that the rate of interest or dividends required to
be paid or other charges hereunder exceed the maximum amount permitted by such
law, any payments in excess of such maximum shall be credited against amounts
owed by the Borrower to the Holder and thus refunded to the Borrower.

 

3.4                                 Conversion Mechanics.

 

(a)                                  The number of shares of Common Stock to be
issued upon each conversion of this Note shall be determined by dividing that
portion of the principal and interest and fees to be converted, if any, by the
then applicable Fixed Conversion Price.  In the event of any conversions of
outstanding principal amount under this Note in part pursuant to this
Article III, such conversions shall be deemed to constitute conversions of
outstanding principal amount applying to Monthly Amounts for the remaining
Repayment Dates in chronological order.

 

(b)                                 The Fixed Conversion Price and number and
kind of shares or other securities to be issued upon conversion is subject to
adjustment from time to time upon the occurrence of certain events, as follows:

 

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A.                                   Stock Splits, Combinations and Dividends. 
If the shares of Common Stock are subdivided or combined into a greater or
smaller number of shares of Common Stock, or if a dividend is paid on the Common
Stock in shares of Common Stock, the Fixed Conversion Price or the Conversion
Price, as the case may be, shall be proportionately reduced in case of
subdivision of shares or stock dividend or proportionately increased in the case
of combination of shares, in each such case by the ratio which the total number
of shares of Common Stock outstanding immediately after such event bears to the
total number of shares of Common Stock outstanding immediately prior to such
event.

 

B.                                     During the period the conversion right
exists, the Borrower will reserve from its authorized and unissued Common Stock
a sufficient number of shares to provide for the issuance of Common Stock upon
the full conversion of this Note.  The Borrower represents that upon issuance,
such shares will be duly and validly issued, fully paid and non-assessable.  The
Borrower agrees that its issuance of this Note shall constitute full authority
to its officers, agents, and transfer agents who are charged with the duty of
executing and issuing stock certificates to execute and issue the necessary
certificates for shares of Common Stock upon the conversion of this Note.

 

C.                                     Share Issuances.  Subject to the
provisions of this Section 3.4, if the Borrower shall at any time prior to the
conversion or repayment in full of the Principal Amount issue any shares of
Common Stock to a person other than the Holder (except (i) pursuant to
Subsections A or B above; (ii) pursuant to options, warrants, or other
obligations to issue shares outstanding on the date hereof as disclosed to
Holder in writing; or (iii) pursuant to options that may be issued under any
employee incentive stock option and/or any qualified stock option plan adopted
by the Borrower) for a consideration per share (the “Offer Price”) less than the
Fixed Conversion Price in effect at the time of such issuance, then the Fixed
Conversion Price shall be immediately reset to such lower Offer Price. For
purposes hereof, the issuance of any security of the Borrower convertible into
or exercisable or exchangeable for Common Stock shall result in an adjustment to
the Fixed Conversion Price at the time of issuance of such securities.

 

D.            Reclassification, etc.  If the Borrower at any time shall, by
reclassification or otherwise, change the Common Stock into the same or a
different number of securities of any class or classes, this Note, as to the
unpaid Principal Amount and accrued interest thereon, shall thereafter be deemed
to evidence the right to purchase an adjusted number of such securities and kind
of securities as would have been issuable as the result of such change with
respect to the Common Stock immediately prior to such reclassification or other
change.

 

3.5                                 Issuance of New Note.  Upon any partial
conversion of this Note, a new Note containing the same date and provisions of
this Note shall, at the request of the Holder, be issued by the Borrower to the
Holder for the principal balance of this Note and interest which shall not have
been converted or paid. The Borrower will pay no costs, fees or any other
consideration to the Holder for the production and issuance of a new Note.

 

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ARTICLE IV

EVENTS OF DEFAULT

 

Upon the occurrence and continuance of an Event of Default beyond any applicable
grace period, the Holder may make all sums of principal, interest and other fees
then remaining unpaid hereon and all other amounts payable hereunder due and
payable within five (5) days after written notice from Holder to Borrower (each
occurrence being a “Default Notice Period”).  In the event of such an
acceleration, the amount due and owing to the Holder shall be 130% of the
outstanding principal amount of the Note (plus accrued and unpaid interest and
fees, if any).  If, with respect to any Event of Default other than a payment
default described in Section 4.1 below, within the Default Notice Period the
Borrower cures the Event of Default, the Event of Default will be deemed to no
longer exist and any rights and remedies of Holder pertaining to such Event of
Default will be of no further force or effect.

 

The occurrence of any of the following events set forth in any of Sections 4.1
through 4.10, inclusive, below is an “Event of Default”:

 

4.1                                 Failure to Pay Principal, Interest or other
Fees.  The Borrower fails to pay when due any installment of principal, interest
or other fees hereon in accordance herewith, or the Borrower or any of its
Subsidiaries fails to pay when due any amount due under any other promissory
note issued by Borrower.

 

4.2                                 Breach of Covenant.  The Borrower or any of
its Subsidiaries breaches any material covenant or other term or condition of
this Note, the Purchase Agreement or any Related Agreement in any material
respect and such breach, if subject to cure, continues for a period of thirty
(30) days after the occurrence thereof.

 

4.3                                 Breach of Representations and Warranties. 
Any material representation or warranty of the Borrower made herein, in the
Purchase Agreement, or in any Related Agreement shall be materially false or
misleading and shall not be cured for a period of ten (10) days after the
occurrence thereof.

 

4.4                                 Receiver or Trustee.  The Borrower or any of
its Subsidiaries shall make an assignment for the benefit of creditors, or apply
for or consent to the appointment of a receiver or trustee for it or for a
substantial part of its property or business; or such a receiver or trustee
shall otherwise be appointed.

 

4.5                                 Judgments.  Any money judgment, writ or
similar final process shall be entered or filed against the Borrower or any of
its Subsidiaries or any of its property or other assets for more than $250,000,
and shall remain unvacated, unbonded or unstayed for a period of ninety (90)
days, other than any judgment disclosed to Holder in writing as of the date
hereof.

 

4.6                                 Bankruptcy.  Bankruptcy, insolvency,
reorganization or liquidation proceedings or other proceedings or relief under
any bankruptcy law or any law for the relief of debtors shall be instituted by
or against the Borrower or any of its Subsidiaries.

 

4.7                                 Stop Trade.  An SEC stop trade order or
Principal Market trading suspension of the Common Stock shall be in effect for 5
consecutive days or 5 days during a period of 10 consecutive days, excluding in
all cases a suspension of all trading on a Principal Market, provided that the
Borrower shall not have been able to cure such trading suspension within 30 days
of the notice thereof or list the Common Stock on another Principal Market
within 60 days

 

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of such notice.  The “Principal Market” for the Common Stock shall include the
NASD OTC Bulletin Board, NASDAQ SmallCap Market, NASDAQ National Market System,
American Stock Exchange, or New York Stock Exchange (whichever of the foregoing
is at the time the principal trading exchange or market for the Common Stock).

 

4.8                                 Failure to Deliver Common Stock or
Replacement Note.  The Borrower’s failure to timely deliver Common Stock to the
Holder pursuant to and in the form required by this Note, and Section 9 of the
Purchase Agreement, if such failure to timely deliver Common Stock shall not be
cured within two (2) days.  If Borrower is required to issue a replacement Note
to Holder and Borrower shall fail to deliver such replacement Note within seven
(7) Business Days.

 

4.9                     Default Under Related Agreements.  The occurrence and
continuance of any Event of Default as defined in (v) the Related Agreements,
(w) that certain Security Agreement, dated as of March 9, 2004, by and between
the Borrower and the Holder (as amended, modified or supplemented from time to
time, the “2004 Security Agreement”), (x) any Ancillary Agreement referred to in
the 2004 Security Agreement, (y) that certain Securities Purchase Agreement,
dated as of March 9, 2004, by and between the Borrower and the Holder (as
amended, modified or supplemented from time to time, the “2004 Purchase
Agreement”) or (z) any Related Agreement referred to in the 2004 Purchase
Agreement.

 

4.10               Authorized Shares.                                         
The failure by the Borrower to obtain shareholder approval to increase the
authorized shares of Common Stock of the Borrower to 55,000,000 on or prior to
July 31, 2005.

 

DEFAULT RELATED PROVISIONS

 

4.11                           Payment Grace Period.  The Borrower shall have a
three (3) business day grace period to pay any monetary amounts due under this
Note or the Purchase Agreement or any Related Document, after which grace period
a default interest rate of two percent (2%) per month shall apply to the
monetary amounts due hereunder.

 

4.12                           Conversion Privileges.  The conversion privileges
set forth in Article III shall remain in full force and effect immediately from
the date hereof and until this Note is paid in full.

 

4.13                           Cumulative Remedies.  The remedies under this
Note shall be cumulative.

 

ARTICLE V

MISCELLANEOUS

 

5.1                                 Failure or Indulgence Not Waiver.  No
failure or delay on the part of the Holder hereof in the exercise of any power,
right or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege.  All
rights and remedies existing hereunder are cumulative to, and not exclusive of,
any rights or remedies otherwise available.

 

5.2                                 Notices.  Any notice herein required or
permitted to be given shall be in writing and shall be deemed effectively given:
 (a) upon personal delivery to the party notified, (b) when sent by confirmed
telex or facsimile if sent during normal business hours of the recipient, if
not, then on the next business day, (c) five days after having been sent by
registered or certified mail,

 

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return receipt requested, postage prepaid, or (d) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt.  All communications shall be sent to the
Borrower at the address provided in the Purchase Agreement executed in
connection herewith, and to the Holder at the address provided in the Purchase
Agreement for such Holder, with a copy to John E. Tucker, Esq., 825 Third
Avenue, 14th Floor, New York, New York 10022, facsimile number (212) 541-4434,
or at such other address as the Borrower or the Holder may designate by ten days
advance written notice to the other parties hereto.  A Notice of Conversion
shall be deemed given when made to the Borrower pursuant to the Purchase
Agreement.

 

5.3                                 Amendment Provision.  The term “Note” and
all reference thereto, as used throughout this instrument, shall mean this
instrument as originally executed, or if later amended or supplemented, then as
so amended or supplemented, and any successor instrument issued pursuant to
Section 3.5 hereof, as it may be amended or supplemented.

 

5.4                                 Assignability.  This Note shall be binding
upon the Borrower and its successors and assigns, and shall inure to the benefit
of the Holder and its successors and assigns, and may be assigned by the Holder
in accordance with the requirements of the Purchase Agreement.

 

5.5                                 Governing Law.  This Note shall be governed
by and construed in accordance with the laws of the State of New York, without
regard to principles of conflicts of laws.  Any action brought by either party
against the other concerning the transactions contemplated by this Agreement
shall be brought only in the state courts of New York or in the federal courts
located in the state of New York.  Both parties and the individual signing this
Note on behalf of the Borrower agree to submit to the jurisdiction of such
courts.  The prevailing party shall be entitled to recover from the other party
its reasonable attorney’s fees and costs.  In the event that any provision of
this Note is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or unenforceability of any other provision
of this Note. Nothing contained herein shall be deemed or operate to preclude
the Holder from bringing suit or taking other legal action against the Borrower
in any other jurisdiction to collect on the Borrower’s obligations to Holder, to
realize on any collateral or any other security for such obligations, or to
enforce a judgment or other court in favor of the Holder.

 

5.6                                 Maximum Payments.  Nothing contained herein
shall be deemed to establish or require the payment of a rate of interest or
other charges in excess of the maximum permitted by applicable law.  In the
event that the rate of interest required to be paid or other charges hereunder
exceed the maximum permitted by such law, any payments in excess of such maximum
shall be credited against amounts owed by the Borrower to the Holder and thus
refunded to the Borrower.

 

5.7                                 Security Interest and Guarantee.  The Holder
has been granted a security interest (i) in certain assets of the Borrower and
its Subsidiaries as more fully described in the Master Security Agreement dated
as of the date hereof and (ii) in the equity interests of the Borrowers’
Subsidiaries pursuant to the Stock Pledge Agreement dated as of the date
hereof.  The

 

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obligations of the Borrower under this Note are guaranteed by certain
Subsidiaries of the Company pursuant to the Subsidiary Guaranty dated as of the
date hereof.

 

5.8                                 Construction.  Each party acknowledges that
its legal counsel participated in the preparation of this Note and, therefore,
stipulates that the rule of construction that ambiguities are to be resolved
against the drafting party shall not be applied in the interpretation of this
Note to favor any party against the other.

 

5.9                                 Cost of Collection.  If default is made in
the payment of this Note, the borrower shall pay to Holder reasonable costs of
collection, including reasonable attorney’s fees.

 

5.10                           Authorized Shares.  Notwithstanding any provision
herein to the contrary, nothing in this Agreement shall require Borrower to
issue any shares pursuant hereto in excess of the number of shares Borrower
currently has authorized and unreserved for issuance.  Borrower agrees to seek
shareholder approval of an increase in its authorized shares from 40,000,000 to
55,000,000 at its annual meeting to be held on June 23, 2005.  Failure to obtain
such approval by July 31, 2005 shall constitute an Event of Default under, and
as defined in, this Note.

 

IN WITNESS WHEREOF,  Borrower has caused this Convertible Term Note to be signed
in its name effective as of this 29th  day of April, 2005.

 

 

 

MICRO COMPONENT TECHNOLOGY, INC.

 

 

 

 

 

By:

/s/ Roger E. Gower

 

 

Name:

 

 

 

Title: Chief Executive Officer

 

 

WITNESS:

 

 

 

 

 

/s/ Thomas P. Maun

 

 

 

10

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