EXHIBIT 10DD

 

 

THIS 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
Ironshore Corporate Services Ltd., P.O. Box 1234 G.T., Queensgate House, South
Church Street, Grand Cayman, Cayman Islands, Fax: 345-949-9877 (the “Holder”) or
its registered assigns or successors in interest, on order, the sum of TWO
MILLION DOLLARS ($2,000,000.00), together with any accrued and unpaid interest
hereon, on March 9, 2007 (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.  The
Interest Rate shall not be less than five and three-quarters percent (5.75%)
unless the Company shall be in compliance with Section 2.2 hereof. If the
Company has satisfied the requirements of Section 2.2

 

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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
April 1, 2004, 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) On the last business day of each month hereafter until the Maturity Date
(each a “Determination Date”), the Interest Rate shall be adjusted: if (i) the
Company shall have registered the shares of the Company’s common stock
underlying the conversion of the Note and that certain warrant issued to Holder
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 exceeds the then applicable Fixed Conversion Price, the
Interest Rate for the succeeding calendar month shall automatically be reduced
by the greater of  (i) 25 basis points (0.25%) or (ii) one percent (1.0%) if
there is an effective Registration Statement (as defined in the Registration
Statement), 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 September 1, 2004 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 $66,667, 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 an amount equal to 101% of the
principal portion of the Monthly Amount due

 

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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 $1.79.

 

(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.  Any part of the Monthly Amount due on a Repayment Date
that the Holder has 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 (as a result of 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

 

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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 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%)

 

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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”).  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

 

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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.  By way of example, if the original principal amount of
this Note is $2,000,000, the Holder converted $100,000 of such original
principal amount prior to the first Repayment Date, then (1) the principal
amount of the Monthly Amount due on the first Repayment Date would equal $0.00,
(2) the principal amount of the Monthly Amount due on the second Repayment Date
would equal $33,334.00 and (3) the principal amount of the Monthly Amount due on
the third Repayment Date would be $66,667.00.

 

(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:

 

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

 

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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 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 fails to pay when due any amount
due under any other promissory note issued by Borrower.

 

4.2           Breach of Covenant.  The Borrower breaches any material covenant
or other term or condition of this Note or the Purchase 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 Document (as defined in the Purchase 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 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 property or other
assets for more than $250,000, and shall remain unvacated, unbonded or unstayed
for a period of ninety (90) days.

 

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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.

 

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 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, or any
securities exchange or other securities market on which the Common Stock is then
being listed or traded.

 

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 the Related Agreements.

 

DEFAULT RELATED PROVISIONS

 

4.10         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.

 

4.11         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.

 

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

 

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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, 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

 

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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.  The holder of this Note has been granted a
security interest in certain assets of the Borrower more fully described in a
Security Agreement dated as of March       , 2004.

 

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.

 

 

IN WITNESS WHEREOF,  Borrower has caused this Convertible Term Note to be signed
in its name effective as of this 9th day of March, 2004.

 

 

MICRO COMPONENT TECHNOLOGY, INC.

 

 

 

 

 

By:

/s/Thomas P. Maun

 

 

Name:

 

 

 

Title:

CFO

 

 

10DD-11

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WITNESS:

 

 

/s/ Lori Faber

 

 

10DD-12

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EXHIBIT A

 

NOTICE OF CONVERSION

 

(To be executed by the Holder in order to convert all or part of the Note into
Common Stock

 

[Name and Address of Holder]

 

 

The Undersigned hereby elects to convert  $                  of the principal
due on [specify applicable Repayment Date] under the Convertible Term Note
issued by MICRO COMPONENT TECHNOLOGY, INC. dated March 9, 2004 by delivery of
Shares of Common Stock of MICRO COMPONENT TECHNOLOGY, INC. on and subject to the
conditions set forth in Article III of such Note.

 

1.        Date of Conversion
                                                      

 

2.        Shares To Be Delivered:
                                                      

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

10DD-13

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EXHIBIT B

 

CONVERSION ELECTION NOTICE

 

(To be executed by the Holder in order to convert all or part of a Monthly
Amount into Common Stock)

 

[Name and Address of Holder]

 

 

Holder hereby elects to convert  $                  of the Monthly Amount due on
[specify applicable Repayment Date] under the Convertible Term Note issued by
MICRO COMPONENT TECHNOLOGY, INC. dated March 9, 2004 by delivery of Shares of
Common Stock of MICRO COMPONENT TECHNOLOGY, INC. on and subject to the
conditions set forth in Article III of such Note.

 

 

1.             Fixed Conversion Price:     
$                                              

 

2.             Amount to be paid:             
$                                              

 

3.             Shares To Be Delivered (2 divided by 1):        
                                             

 

4.             Cash payment to be made by Borrower :        
$                                              

 

 

Date:

 

 

LAURUS MASTER FUND, LTD.

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Tittle:

 

 

 

10DD-14

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