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


 





















 


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


 


2





















 


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


 


3





















 


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”).


 


4





















 


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:


 


5





















 


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.


 


6





















 


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


 


7





















 


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,


 


8





















 


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


 


9





















 


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