## **EXHIBIT 10.6**

##  

**FUNDS ESCROW AGREEMENT**

** **

This Funds Escrow Agreement (this “Agreement”)is dated as of July 31, 2008 among MICROCOMPONENT TECHNOLOGY, INC., a Minnesota corporation (the “Company”),Valens U.S. SPV I, LLC and ValensOffshore SPV I, Ltd. (the “Purchasers”), and Loeb & LoebLLP (the “Escrow Agent”).

 

**W**ITNESSETH:

** **

WHEREAS, LV Administrative Services, Inc., asadministrative and collateral agent for the Purchasers (the “Agent”),has advised the Escrow Agent that (a) the Company, the Agent and thePurchasers have entered into a Securities Purchase Agreement (the “PurchaseAgreement”) for the sale by the Company to the Purchasers of secured termnotes (the “Term Notes”), and (b) the Company has issued to thePurchasers common stock purchase warrants (the “Warrants”) in connectionwith the issuance of the Term Notes;

 

WHEREAS, the Company and the Purchasers wish todeliver to the Escrow Agent copies of the Documents (as hereafter defined) and,following the satisfaction of all closing conditions relating to the Documents,the Purchasers to deliver the Escrowed Payment (as hereafter defined), in eachcase, to be held and released by Escrow Agent in accordance with the terms andconditions of this Agreement; and

 

WHEREAS, the Escrow Agent is willing to serve asescrow agent pursuant to the terms and conditions of this Agreement;

 

NOW THEREFORE, the parties agree as follows:

 

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#  

# INTERPRETATION

#  

## Definitions. Whenever used in this Agreement, the following terms shall have themeanings set forth below.

##  

### **“Agreement”means this Agreement, as amended, modified and/or supplemented from time totime by written agreement among the parties hereto.**

### ** **

### **“ClosingPayment” means (a) a non-refundable payment to Valens CapitalManagement, LLC, the investment manager of the Purchasers (“VCM”) in an amountequal to $70,000.00; (ii) a non-refundable payment to the Purchasers in anamount equal to $35,000.00; (iii) an advance prepayment discount depositto the Purchasers in an amount equal to $35,000.00; and (iv) anon-refundable structuring payment to VCM in an amount equal to $30,000.00.**

### ** **

### **“CreditorParties” means collectively, the Agent and the Purchasers.**

### ** **

### **“DisbursementLetter” means that certain letter delivered to the Escrow Agent by theCompany, acceptable in form and substance to the Agent, setting forth wireinstructions and amounts to be funded at the Closing.**

### ** **

### **“Documents”means copies of the Disbursement Letter, the Purchase Agreement, the Term Notesand the Warrants.**

### ** **

### **“EscrowedPayment” means $3,500,000.**

### ** **

## EntireAgreement.  This Agreement constitutes the entireagreement among the parties hereto with respect to the arrangement with theEscrow Agent and supersedes all prior agreements, understandings, negotiationsand discussions of the parties, whether oral or written with respect to thearrangement with the Escrow Agent.  Thereare no warranties, representations and other agreements made by the parties inconnection with the arrangement with the Escrow Agent except as specificallyset forth in this Agreement.

##  

## ExtendedMeanings.  In this Agreement words importing thesingular number include the plural and vice versa; words importing themasculine gender include the feminine and neuter genders.  The word “person” includes an individual,body corporate, partnership, trustee or trust or unincorporated association,executor, administrator or legal representative.

##  

## Waiversand Amendments.  This Agreement may be amended, modified,superseded, cancelled, renewed or extended, and the terms and conditions hereofmay be waived, in each case only by a written instrument signed by all partieshereto, or, in the case of a waiver, by the party waiving compliance.  Except as expressly stated herein, no delayon the part of any party in exercising any right, power or privilege hereundershall operate as a waiver thereof, nor shall any waiver on the part of anyparty of any right, power or privilege hereunder preclude any other or futureexercise of any other right, power or privilege hereunder.

##  

## Headings. The division of this Agreement into articles, sections, subsections andparagraphs and the insertion of headings are for convenience of reference onlyand shall not affect the construction or interpretation of this Agreement.

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## LawGoverning this Agreement; Consent to Jurisdiction. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THELAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OFLAWS.  With respect to any suit, actionor proceeding relating to this Agreement or to the transactions contemplatedhereby (“Proceedings”), each party hereto irrevocably submits to the exclusivejurisdiction of the courts of the County of New York, State of New York and theUnited States District court located in the county of New York in the State ofNew York.  Each party hereto 

 

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## herebyirrevocably and unconditionally (a) waives trial by jury in any Proceedingrelating to this Agreement and for any related counterclaim and (b) waivesany objection which it may have at any time to the laying of venue of anyProceeding brought in any such court, waives any claim that such Proceedingshave been brought in an inconvenient forum and further waives the right toobject, with respect to such Proceedings, that such court does not havejurisdiction over such party.  As betweenthe Company and the Purchasers, the prevailing party shall be entitled torecover from the other party its reasonable attorneys’ fees and costs.  In the event that any provision of thisAgreement is determined by a court of competent jurisdiction to be invalid orunenforceable, then the remainder of this Agreement shall not be affected andshall remain in full force and effect.

##  

## Construction. Each party acknowledges that its legal counsel participated in thepreparation of this Agreement and, therefore, stipulates that the rule ofconstruction that ambiguities are to be resolved against the drafting partyshall not be applied in the interpretation of this Agreement to favor any partyagainst the other.

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# APPOINTMENT OF ANDDELIVERIES TO THE ESCROW AGENT

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## Appointment. The Company and the Purchasers hereby irrevocably designate and appointthe Escrow Agent as their escrow agent for the purposes set forth herein, andthe Escrow Agent by its execution and delivery of this Agreement hereby acceptssuch appointment under the terms and conditions set forth herein.

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## Copiesof Documents to Escrow Agent.  On or aboutthe date hereof, the Creditor Parties and the Company shall deliver to theEscrow Agent copies of the Documents executed by such parties.

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## Deliveryof Escrowed Payment to Escrow Agent.  Following thesatisfaction of all closing conditions relating to the Documents (other thanthe funding of the Escrowed Payment), the Purchasers shall deliver to theEscrow Agent the Escrowed Payment.  Atsuch time, the Escrow Agent shall hold the Escrowed Payment as agent for theCompany, subject to the terms and conditions of this Agreement.

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## Intentionto Create Escrow Over the Escrowed Payment.  ThePurchasers and the Company intend that the Escrowed Payment shall be held inescrow by the Escrow Agent and released from escrow by the Escrow Agent only inaccordance with the terms and conditions of this Agreement.

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# RELEASE OF ESCROW

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## Releaseof Escrow.  Subject to the provisions of Section 4.2,the Escrow Agent shall release the Escrowed Payment from escrow as follows:

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### **Uponreceipt by the Escrow Agent of (i) oral instructions from David Grinand/or Eugene Grin (each of whom is a principal of the Purchasers) consentingto the release of the Escrowed Payment from escrow in accordance with theDisbursement Letter following the Escrow Agent’s receipt of the EscrowedPayment, (ii) the Disbursement Letter, and (iii) the Escrowed Payment,the Escrowed Payment shall promptly be disbursed in accordance with theDisbursement Letter.  The DisbursementLetter shall include, without limitation, Escrow Agent’s authorization toretain from the Escrowed Payment Escrow Agent’s fee for**

 

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### **actingas Escrow Agent hereunder and the Closing Payment for delivery to ValensCapital Management, LLC in accordance with the Disbursement Letter.**

### ** **

### **Uponreceipt by the Escrow Agent of a final and non-appealable judgment, order,decree or award of a court of competent jurisdiction (a “Court Order”) relatingto the Escrowed Payment, the Escrow Agent shall remit the Escrowed Payment inaccordance with the Court Order.  AnyCourt Order shall be accompanied by an opinion of counsel for the partypresenting the Court Order to the Escrow Agent (which opinion shall besatisfactory to the Escrow Agent) to the effect that the court issuing theCourt Order is a court of competent jurisdiction and that the Court Order is finaland non-appealable.**

### ** **

## Acknowledgementof Company and Purchasers; Disputes.  The Companyand the Purchasers acknowledge that the only terms and conditions upon whichthe Escrowed Payment are to be released from escrow are as set forth inSections 3 and 4 of this Agreement.  TheCompany and the Purchasers reaffirm their agreement to abide by the terms andconditions of this Agreement with respect to the release of the EscrowedPayment.  Any dispute with respect to therelease of the Escrowed Payment shall be resolved pursuant to Section 4.2or by written agreement between the Company and the Purchasers.

##  

# CONCERNING THE ESCROWAGENT

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## Dutiesand Responsibilities of the Escrow Agent.  The EscrowAgent’s duties and responsibilities shall be subject to the following terms andconditions:

##  

### **ThePurchasers and the Company acknowledge and agree that the Escrow Agent (i) shallnot be required to inquire into whether the Creditor Parties, the Company orany other party is entitled to receipt of any Document or all or any portion ofthe Escrowed Payment; (ii) shall not be called upon to construe or reviewany Document or any other document, instrument or agreement entered into inconnection therewith; (iii) shall be obligated only for the performance ofsuch duties as are specifically assumed by the Escrow Agent pursuant to thisAgreement; (iv) may rely on and shall be protected in acting or refrainingfrom acting upon any written notice, instruction, instrument, statement,request or document furnished to it hereunder and believed by the Escrow Agentin good faith to be genuine and to have been signed or presented by the properperson or party, without being required to determine the authenticity orcorrectness of any fact stated therein or the propriety or validity or theservice thereof; (v) may assume that any person purporting to give noticeor make any statement or execute any document in connection with the provisionshereof has been duly authorized to do so; (vi) shall not be responsiblefor the identity, authority or rights of any person, firm or company executingor delivering or purporting to execute or deliver this Agreement or anyDocument or any funds deposited hereunder or any endorsement thereon orassignment thereof; (vii) shall not be under any duty to give the propertyheld by Escrow Agent hereunder any greater degree of care than Escrow Agentgives its own similar property; and (viii) may consult counselsatisfactory to Escrow Agent (including, without limitation, Loeb &Loeb LLP or such other counsel of Escrow Agent’s choosing), the opinion of suchcounsel to be full and complete authorization and protection in respect of anyaction taken, suffered or omitted by Escrow Agent hereunder in good faith andin accordance with the opinion of such counsel.**

 

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### ** **

### **ThePurchasers and the Company acknowledge that the Escrow Agent is acting solelyas a stakeholder at their request and that the Escrow Agent shall not be liablefor any action taken by Escrow Agent in good faith and believed by Escrow Agentto be authorized or within the rights or powers conferred upon Escrow Agent bythis Agreement.  The Purchasers and theCompany hereby, jointly and severally, indemnify and hold harmless the EscrowAgent and any of Escrow Agent’s partners, employees, agents and representativesfrom and against any and all actions taken or omitted to be taken by EscrowAgent or any of them hereunder and any and all claims, losses, liabilities,costs, damages and expenses suffered and/or incurred by the Escrow Agentarising in any manner whatsoever out of the transactions contemplated by thisAgreement and/or any transaction related in any way hereto, including the feesof outside counsel and other costs and expenses of defending itself against anyclaims, losses, liabilities, costs, damages and expenses arising in any mannerwhatsoever out the transactions contemplated by this Agreement and/or anytransaction related in any way hereto, except for such claims, losses,liabilities, costs, damages and expenses incurred by reason of the Escrow Agent’sgross negligence or willful misconduct. The Escrow Agent shall owe a duty only to the Purchasers and the Companyunder this Agreement and to no other person.**

### ** **

### **ThePurchasers and the Company shall jointly and severally reimburse the EscrowAgent for its reasonable out-of-pocket expenses (including counsel fees (whichcounsel may be Loeb & Loeb LLP or such other counsel of the EscrowAgent’s choosing) incurred in connection with the performance of its duties andresponsibilities hereunder, which shall not (subject to Section 4.1(b))exceed $1,500.**

### ** **

### **TheEscrow Agent may at any time resign as Escrow Agent hereunder by giving five (5) businessdays prior written notice of resignation to the Purchasers and the Company.  Prior to the effective date of resignation asspecified in such notice, the Purchasers and Company will issue to the EscrowAgent a joint instruction authorizing delivery of the Documents and theEscrowed Payment to a substitute Escrow Agent selected by the Purchasers andthe Company.  If no successor EscrowAgent is named by the Purchasers and the Company, the Escrow Agent may apply toa court of competent jurisdiction in the State of New York for appointment of asuccessor Escrow Agent, and deposit the Documents and the Escrowed Payment withthe clerk of any such court, and/or otherwise commence an interpleader orsimilar action for a determination of where to deposit the same.**

### ** **

### **TheEscrow Agent does not have and will not have any interest in the Documents andthe Escrowed Payment, but is serving only as escrow agent, having onlypossession thereof.**

### ** **

### **TheEscrow Agent shall not be liable for any action taken or omitted by it in goodfaith and reasonably believed by it to be authorized hereby or within therights or powers conferred upon it hereunder, nor for action taken or omittedby it in good faith, and in accordance with advice of counsel (which counselmay be Loeb & Loeb LLP or such other counsel of the Escrow Agent’schoosing), and shall not be liable for any mistake of fact or error of judgmentor for any acts or omissions of any kind except to the extent any suchliability arose from its own willful misconduct or gross negligence.**

### ** **

### **ThisAgreement sets forth exclusively the duties of the Escrow Agent with respect toany and all matters pertinent thereto and no implied duties or obligationsshall be read into this Agreement.**

 

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### **TheEscrow Agent shall be permitted to act as counsel for the Creditor Parties orthe Company, as the case may be, in any dispute as to the disposition of theDocuments and the Escrowed Payment, in any other dispute between the CreditorParties and the Company, whether or not the Escrow Agent is then holding theDocuments and/or the Escrowed Payment and continues to act as the Escrow Agenthereunder.**

### ** **

### **Theprovisions of this Section 4.1 shall survive the resignation of the EscrowAgent or the termination of this Agreement.**

### ** **

## DisputeResolution; Judgments.  Resolution of disputes arisingunder this Agreement shall be subject to the following terms and conditions:

##  

### **Ifany dispute shall arise with respect to the delivery, ownership, right ofpossession or disposition of the Documents and/or the Escrowed Payment, or ifthe Escrow Agent shall in good faith be uncertain as to its duties or rightshereunder, the Escrow Agent shall be authorized, without liability to anyone,to (i) refrain from taking any action other than to continue to hold theDocuments and the Escrowed Payment pending receipt of a joint instruction fromthe Purchasers and the Company, (ii) commence an interpleader or similaraction, suit or proceeding for the resolution of any such dispute; and/or (iii) depositthe Documents and the Escrowed Payment with any court of competent jurisdictionin the State of New York, in which event the Escrow Agent shall give writtennotice thereof to the Purchasers and the Company and shall thereupon berelieved and discharged from all further obligations pursuant to thisAgreement.  The Escrow Agent may, butshall be under no duty to, institute or defend any legal proceedings whichrelate to the Documents and the Escrowed Payment.  The Escrow Agent shall have the right toretain counsel if it becomes involved in any disagreement, dispute orlitigation on account of this Agreement or otherwise determ**ines that it isnecessary to consult counsel which such counsel may be Loeb & Loeb LLPor such other counsel of the Escrow Agent’s choosing.

### ** **

### **TheEscrow Agent is hereby expressly authorized to comply with and obey any CourtOrder.  In case the Escrow Agent obeys orcomplies with a Court Order, the Escrow Agent shall not be liable to theCreditor Parties, the Company or any other person, firm, company or entity byreason of such compliance.**

### ** **

# **GENERAL MATTERS**

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## Termination. This escrow shall terminate upon disbursement of the Escrowed Payment inaccordance with the terms of this Agreement or earlier upon the agreement inwriting of the Purchasers and the Company or resignation of the Escrow Agent inaccordance with the terms hereof.

##  

## Notices. All notices, requests, demands and other communications required orpermitted hereunder shall be in writing and shall be deemed to have been dulygiven one (1) day after being sent by telecopy (with copy delivered byovernight courier, regular or certified mail):

 
| If to the Company, to: |   | Micro Component Technology, Inc. |
|------------------------|--------|---------------------------------------|
|                   |   | 2340 West County Road C               |
|                   |   | St. Paul, Minnesota 55113-2528        |
|                   |   | Attention:Chief Financial Officer     |
|                   |   | Fax: (651) 697-4200                   |

 

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| With a copy to:             |   | Best & Flanagan,  LLP           |
|-----------------------------|--------|------------------------------------------|
|                        |   | 225 South Sixth St.,  Suite 4000,   |
|                        |   | Minneapolis, Minnesota  55402            |
|                        |   | Attention: James C.  Diracles, Esq. |
|                        |   | Fax: (612) 339-5897                      |
|                        |   |                                     |
| If to the Purchasers, to:   |   | c/o Valens Capital Management LLC        |
|                        |   | 335 Madison Avenue, 10th Floor           |
|                        |   | New York, New York 10017                 |
|                        |   | Attention: Portfolio Services            |
|                        |   | Fax: 212-581-5037                        |
|                        |   |                                     |
| If to the Escrow Agent, to: |   | Loeb & Loeb LLP                 |
|                        |   | 345 Park Avenue                          |
|                        |   | New York, New York 10154                 |
|                        |   | Attention: Scott J. Giordano, Esq.  |
|                        |   | Fax: (212) 407-4990                      |

 

or tosuch other address as any of them shall give to the others by notice madepursuant to this Section 5.2.

 

## Interest. The Escrowed Payment shall not be held in an interest bearing accountnor will interest be payable in connection therewith.

##  

## Assignment;Binding Agreement.  Neither this Agreement nor any right orobligation hereunder shall be assignable by any party without the prior writtenconsent of the other parties hereto. This Agreement shall inure to the benefit of and be binding upon theparties hereto and their respective legal representatives, successors andassigns.

##  

## Invalidity. In the event that any one or more of the provisions contained herein, orthe application thereof in any circumstance, is held invalid, illegal, orunenforceable in any respect for any reason, the validity, legality andenforceability of any such provision in every other respect and of theremaining provisions contained herein shall not be in any way impaired thereby,it being intended that all of the rights and privileges of the parties heretoshall be enforceable to the fullest extent permitted by law.

##  

## Counterparts/Execution. This Agreement may be executed in any number of counterparts and bydifferent signatories hereto on separate counterparts, each of which, when soexecuted, shall be deemed an original, but all such counterparts shallconstitute but one and the same agreement. This Agreement may be executed by facsimile or electronic transmission.

##  

[Signature Page to Follow]

 

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IN WITNESS WHEREOF, the parties hereto have executedthis Funds Escrow Agreement as of the date and year first above written.

 

 
|   | COMPANY:                         |                       |
|--------|----------------------------------|----------------------------|
|   |                             |                       |
|   |                             |                       |
|   | MICRO COMPONENT TECHNOLOGY, INC. |
|   |                             |                       |
|   |                             |                       |
|   | By:                              |                       |   |
|   |                             | Name:                      | Roger E. Gower |
|   |                             | Title:                     | Chief Executive Officer |
|   |                             |                       |   |
|   |                             |                       |   |
|   | PURCHASERS:                      |
|   |                             |                       |   |
|   |                             |                       |   |
|   | VALENS U.S. SPV I, LLC           |
|   |                             |                       |   |
|   |                             |                       |   |
|   | By:                              | Valens Capital Management, |
|   |                             | its investment manager     |
|   |                             |                       |   |
|   |                             |                       |   |
|   | By:                              |                       |   |
|   | Name:                            |                       |
|   | Title:                           |                       |
|   |                             |                       |   |
|   | VALENS OFFSHORE SPV I, LTD.      |
|   |                             |                       |   |
|   |                             |                       |   |
|   | By:                              | Valens Capital Management, |
|   |                             | its investment manager     |
|   |                             |                       |   |
|   | By:                              |                       |   |
|   | Name:                            |                       |
|   | Title:                           |                       |
|   |                             |                       |   |
|   |                             |                       |   |
|   | ESCROW AGENT:                    |
|   |                             |                       |   |
|   |                             |                       |   |
|   | LOEB & LOEB LLP         |
|   | By:                              |                       |   |
|   | Name:                            |                       |
|   | Title:                           |                       |
|        |                                  |                            |  |  |  |

 

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