**EXHIBIT10DD**

 

 

THIS NOTE AND THE COMMONSHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THESECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS.  THIS NOTE AND THE COMMON SHARES ISSUABLE UPONCONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED ORHYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THISNOTE UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OFCOUNSEL REASONABLY SATISFACTORY TO MICRO COMPONENT TECHNOLOGY, INC. THAT SUCHREGISTRATION IS NOT REQUIRED.

 

SECURED CONVERTIBLE TERM NOTE

 

FOR VALUE RECEIVED, MICRO COMPONENT TECHNOLOGY, INC., a Minnesotacorporation (the “Borrower”), hereby promises to pay to LAURUS MASTER FUND,LTD., c/o Ironshore Corporate Services Ltd., P.O. Box 1234 G.T., QueensgateHouse, 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 andunpaid interest hereon, on March 9, 2007 (the “Maturity Date”) if notsooner paid.

 

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

 

The following terms shall apply to this Note:

 

ARTICLE I

INTEREST & AMORTIZATION

 

1.1           InterestRate and Payment.  (a) Subject toSections 4.10 and 5.6 hereof, interest payable on this Note shall accrue at arate per annum (the “Interest Rate”) equal to the “prime rate” published in TheWall Street Journal from time to time, plus one and three-quarters percent(1.75%).  The prime rate shall beincreased or decreased as the case may be for each increase or decrease in theprime 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 thanfive and three-quarters percent (5.75%) unless the Company shall be incompliance with Section 2.2 hereof. If the Company has satisfied therequirements of Section 2.2

 

10DD-1

----

 

hereof, the Interest Rate will be subject to adjustment as set forth inSection 1.1(b). In no event, however, shall the Interest Rate be less thanzero percent (0.0%).  Interest shall bepayable monthly in arrears commencing on April 1, 2004, on the first dayof each consecutive calendar month thereafter (each, a “Repayment Date”), andon the Maturity Date, whether by acceleration or otherwise.

 

(b) On thelast business day of each month hereafter until the Maturity Date (each a “DeterminationDate”), the Interest Rate shall be adjusted: if (i) the Company shall haveregistered the shares of the Company’s common stock underlying the conversionof the Note and that certain warrant issued to Holder on a registrationstatement declared effective by the SEC, and (ii) the volume weighted averageprice of the Common Stock as reported by Bloomberg, L.P. on theprincipal market for the five (5) trading days immediately preceding a Determination Date exceeds the thenapplicable Fixed Conversion Price, theInterest Rate for the succeeding calendar month shall automatically be reducedby the greater of  (i) 25 basis points(0.25%) or (ii) one percent (1.0%) if there is an effective RegistrationStatement (as defined in the Registration Statement), for each incrementaltwenty five percent (25%) increase in the market price of the Common Stockabove the then applicable Fixed Conversion Price.

 

1.2           Minimum Monthly PrincipalPayments. Amortizing payments of the aggregate principal amount outstandingunder this Note at any time  (the “PrincipalAmount”) shall begin on September 1, 2004 and shall recur on the first calendarday of each succeeding month thereafter until the Maturity Date (each, an“Amortization Date”).  Subject toSection 3 below, beginning on the first Amortization Date, the Borrowershall make monthly payments to the Holder on each Repayment Date, each in theamount of $66,667, together with any accrued and unpaid interest to date onsuch portion of the Principal Amount plus any and all other amounts which arethen owing under this Note but have not been paid (collectively, the “MonthlyAmount”).

 

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 Holdershall deliver to Borrower a written notice in the form of Exhibit B attachedhereto electing to convert the Monthly Amount payable on the next RepaymentDate in either cash or Common Stock, or a combination of both (each, a“Repayment Election Notice”). If a Repayment Election Notice is not deliveredby 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 incash. Any portion of the Monthly Amount paid in cash on a Repayment Date, shallbe paid to the Holder an amount equal to 101% of the principal portion of theMonthly Amount due

 

10DD-2

----

 

and owing to Holder on the Repayment Date. If the Holder converts allor a portion of the Monthly Amount in shares of Common Stock, the number ofsuch shares to be issued by the Borrower to the Holder on such Repayment Dateshall be the number determined by dividing (x) the portion of the MonthlyAmount to be paid in shares of Common Stock, by (y) the then applicable Fixed ConversionPrice.  For purposes hereof, the initial“Fixed Conversion Price” means $1.79.

 

(b)           Monthly AmountConversion Guidelines.  Subject toSections 2.1(a), 2.2, and 3.2 hereof, the Holder shall elect to convert all ora portion of the Monthly Amount due on each Repayment Date in shares of CommonStock if the average closing price of the Common Stock as reported byBloomberg, L.P. on the Principal Market (as defined in Section 4.7 hereof)for the three (3) trading days immediately preceding such Repayment Date wasgreater than 115% of the Fixed Conversion Price.  Any part of the Monthly Amount due on a Repayment Date that theHolder has not elected to convert into shares of Common Stock shall be paid bythe Borrower in cash on such Repayment Date. Any part of the Monthly Amount dueon such Repayment Date which the Holder has elected to convert into shares ofCommon Stock but which must be paid in cash (as a result of the closing priceof the Common Stock on one or more of the three (3) trading days immediatelypreceding the applicable Repayment Date was less than 115% of the FixedConversion Price) shall be paid in cash at the rate of  101% of the Monthly Amount otherwise due onthe Repayment Date within three (3) business days of the applicable RepaymentDate.

 

2.2           NoEffective Registration. Notwithstanding anything to the contrary herein,  none of the Borrower’s obligations to theHolder may be converted into Common Stock unless (a) either (i) an effectivecurrent Registration Statement (as defined in the Registration RightsAgreement) covering the shares of Common Stock to be issued in connection withsatisfaction of such obligations exists, or (ii) an exemption from registrationof the Common Stock is available to pursuant to Rule 144 of the Securities Actand (b) no Event of Default hereunder exists and is continuing, unless suchEvent of Default is cured within any applicable cure period or is otherwisewaived in writing by the Holder in whole or in part at the Holder’s option.

 

Any amounts converted by theHolder pursuant to this Section 2.2 shall be deemed toconstitute payments of outstanding principal applying to Monthly Amounts forthe remaining Repayment Dates in chronological order.

 

2.3           OptionalRedemption in Cash.  The Borrowerwill have the option of prepaying this Note (“Optional Redemption”) by payingto the Holder a sum of money equal to (i) one hundred five percent (105%) ofthe principal amount of this Note if the closing price of the Common Stock onone or more of the three (3) trading days immediately preceding the OptionalRedemption date is less than or equal to 75% of the then Fixed ConversionPrice; (ii) one hundred ten percent (110%) of the principal

 

10DD-3

----

 

amount of this Note if the closing price of the Common Stock on one ormore of the three (3) trading days immediately preceding the Optional Redemptiondate 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 Noteif 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 twentypercent (120%) of the principal amount of this Note if the closing price of theCommon Stock on one or more of the three (3) trading days immediately precedingthe Optional Redemption Date is greater than 107.5% of the then FixedConversion Price, together with accrued but unpaid interest thereon and any andall 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”) outstandingon the day written notice of redemption (the “Notice of Redemption”) is givento the Holder. The Notice of Redemption shall specify the date for suchOptional 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 ofthis Note for which the Holder has a pending election to convert pursuant toSection 3.1, or for conversions elected to be made by the Holder pursuantto Section 3.1 during the Redemption Period.  The Redemption Amount shall be determined as if such Holder’sconversion elections had been completed immediately prior to the date of theNotice of Redemption. On the Redemption Payment Date, the Redemption Amountmust be paid in good funds to the Holder. In the event the Borrower fails to pay the Redemption Amount on theRedemption 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 theobligation, to convert all or any portion of the then aggregate outstandingprincipal amount of this Note, together with interest and fees due hereon, intoshares of Common Stock subject to the terms and conditions set forth in thisArticle III.  The Holder mayexercise such right by delivery to the Borrower of a written notice ofconversion not less than one (1) day prior to the date upon which suchconversion shall occur.  The date uponwhich such conversion shall occur is (the “Conversion Date”).

 

## ***3.2***           ConversionLimitation. Notwithstanding anything contained herein to the contrary, the Holdershall not be entitled to convert pursuant to the terms of this Note an amountthat (a) would be convertible into that number of Conversion Shares that wouldexceed the difference between the number of shares of Common Stock beneficiallyowned by such Holder or issuable upon exercise of warrants held by such Holderand 4.99% of the outstanding shares of Common Stock of the Borrower or (b)exceed twenty five percent (25%)

 

10DD-4

----

 

## ***of the aggregatedollar trading volume of the Common Stock for the ten (10) day trading periodimmediately preceding delivery of a Notice of Conversion to the Borrower.  For the purposes of the immediatelypreceding sentence, beneficial ownership shall be determined in accordance withSection 13(d) of the Exchange Act and Regulation 13d-3 thereunder.   The Holder may void the Conversion Sharelimitation described in this Section 3.2 upon 75 days prior notice to theBorrower or without any notice requirement upon an Event of Default.***

## *** ***

## ***3.3***           Mechanicsof Holder’s Conversion. (a) In the event that the Holderelects to convert this Note into Common Stock, the Holder shall give notice ofsuch election by delivering an executed and completed notice of conversion(“Notice of Conversion”) to the Borrower and such Notice of Conversion shallprovide a breakdown in reasonable detail of the Principal Amount, accruedinterest and fees being converted.  Oneach Conversion Date (as hereinafter defined) and in accordance with its Noticeof Conversion, the Holder shall make the appropriate reduction to the PrincipalAmount, accrued interest and fees as entered in its records and shall providewritten notice thereof to the Borrower within two (2) business days after theConversion Date.  Each date on which aNotice of Conversion is delivered or telecopied to the Borrower in accordancewith the provisions hereof shall be deemed a Conversion Date (the “ConversionDate”). A form of Notice of Conversion to be employed by the Holder is annexedhereto as Exhibit A.

 

## ***(b) Pursuant to the terms of the Notice of Conversion, theBorrower will issue instructions to the transfer agent accompanied by anopinion of counsel within one (1) business day of the date of the delivery toBorrower of the Notice of Conversion and shall cause the transfer agent totransmit the certificates representing the Conversion Shares to the Holder bycrediting the account of the Holder’s designated broker with the DepositoryTrust Corporation (“DTC”) through its Deposit Withdrawal Agent Commission(“DWAC”) system within three (3) business days after receipt by the Borrower ofthe Notice of Conversion (the “Delivery Date”).  In the case of the exercise of the conversion rights set forthherein the conversion privilege shall be deemed to have been exercised and theConversion Shares issuable upon such conversion shall be deemed to have beenissued upon the date of receipt by the Borrower of the Notice ofConversion.  The Holder shall be treatedfor all purposes as the record holder of such Common Stock, unless the Holderprovides the Borrower written instructions to the contrary.***

## *** ***

## ***(c) The Borrower understands that a delay in the delivery ofthe shares of Common Stock issuable upon conversion of the Note (the “NoteShares”) in the form required pursuant to this Section 3 beyond theDelivery Date could result in economic loss to the Holder.  In the event that the Borrower fails todirect its transfer agent to deliver the Note Shares to the Holder via the DWACsystem within the time frame set forth in Section 3.3(b) above and theNote Shares are not delivered to the Holder by the Delivery Date, ascompensation to the Holder for such loss, the Borrower agrees to pay latepayments to the Holder for late issuance of the Note Shares in the formrequired pursuant to this Section 3 upon conversion of the Note in theamount equal to the greater of:  (i)$500 per business day after the Delivery Date; or (ii) the Holder’s actualdamages from such delayed delivery. Notwithstanding the foregoing, the Borrowerwill not owe the Holder any late payments if the delay in the delivery of theNote Shares beyond the Delivery Date is solely out of the control of theBorrower and the Borrower***

 

10DD-5

----

 

## ***is activelytrying to cure the cause of the delay. The Borrower shall pay any payments incurred under this Section 3.3in 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 ofshares of Common Stock the Holder is forced to purchase (in an open markettransaction) which the Holder anticipated receiving upon such conversion, andshall be calculated as the amount by which (A) the Holder’s total purchaseprice (including customary brokerage commissions, if any) for the shares of CommonStock so purchased exceeds (B) the aggregate principal and/or interest amountof the Note, for which such Notice of Notice was not timely honored.***

 

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

 

3.4           ConversionMechanics.

 

(a)           Thenumber of shares of Common Stock to be issued upon each conversion of this Noteshall be determined by dividing that portion of the principal and interest andfees to be converted, if any, by the then applicable Fixed ConversionPrice.  In the event of any conversionsof outstanding principal amount under this Note in part pursuant to thisArticle III, such conversions shall be deemed to constitute conversions ofoutstanding principal amount applying to Monthly Amounts for the remainingRepayment 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 amountprior to the first Repayment Date, then (1) the principal amount of the MonthlyAmount due on the first Repayment Date would equal $0.00, (2) the principalamount 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 thirdRepayment Date would be $66,667.00.

 

(b)           TheFixed Conversion Price and number and kind of shares or other securities to beissued upon conversion is subject to adjustment from time to time upon theoccurrence of certain events, as follows:

 

A.            StockSplits, Combinations and Dividends. If the shares of Common Stock are subdivided or combined into a greateror smaller number of shares of Common Stock, or if a dividend is paid on theCommon Stock in shares of Common Stock, the Fixed Conversion Price or theConversion Price, as the case may be, shall be proportionately reduced in caseof subdivision of shares or stock dividend or proportionately increased in thecase of combination of shares, in each such case by the ratio

 

10DD-6

----

 

which the total number of shares of Common Stock outstanding immediatelyafter such event bears to the total number of shares of Common Stockoutstanding immediately prior to such event.

 

B.            Duringthe period the conversion right exists, the Borrower will reserve from itsauthorized and unissued Common Stock a sufficient number of shares to providefor 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 andnon-assessable.  The Borrower agreesthat its issuance of this Note shall constitute full authority to its officers,agents, and transfer agents who are charged with the duty of executing andissuing stock certificates to execute and issue the necessary certificates forshares of Common Stock upon the conversion of this Note.

 

C.            ShareIssuances.  Subject to theprovisions of this Section 3.4, if the Borrower shall at any time prior tothe conversion or repayment in full of the Principal Amount issue any shares ofCommon Stock to a person other than the Holder (except (i) pursuant toSubsections A or B above; (ii) pursuant to options, warrants, or otherobligations to issue shares outstanding on the date hereof as disclosed toHolder in writing; or (iii) pursuant to options that may be issued under any employeeincentive stock option and/or any qualified stock option plan adopted by theBorrower) for a consideration per share (the “Offer Price”) less than the FixedConversion Price in effect at the time of such issuance, then the FixedConversion Price shall be immediately reset to such lower Offer Price forpurposes hereof, the issuance of any security of the Borrower convertible intoor exercisable or exchangeable for Common Stock shall result in an adjustmentto the Fixed Conversion Price at the time of issuance of such securities.

 

D.            Reclassification, etc.  If the Borrower at any time shall, byreclassification or otherwise, change the Common Stock into the same or adifferent number of securities of any class or classes, this Note, as to theunpaid Principal Amount and accrued interest thereon, shall thereafter bedeemed to evidence the right to purchase an adjusted number of such securitiesand kind of securities as would have been issuable as the result of such changewith respect to the Common Stock immediately prior to such reclassification orother change.

 

3.5           Issuanceof New Note.  Upon any partialconversion of this Note, a new Note containing the same date and provisions ofthis Note shall, at the request of the Holder, be issued by the Borrower to theHolder for the principal balance of this Note and interest which shall not havebeen converted or paid. The Borrower will pay no costs, fees or any otherconsideration to the Holder for the production and issuance of a new Note.

 

10DD-7

----

 

ARTICLE IV

EVENTS OFDEFAULT

 

Upon the occurrence and continuance of an Event of Default beyond anyapplicable grace period, the Holder may make all sums of principal, interestand other fees then remaining unpaid hereon and all other amounts payablehereunder due and payable within five (5) days after written notice from Holderto Borrower (each occurrence being a “Default Notice Period”).  In the event of such an acceleration, theamount due and owing to the Holder shall be 130% of the outstanding principalamount of the Note (plus accrued and unpaid interest and fees, if any).  If, with respect to any Event of Defaultother than a payment default described in Section 4.1 below, within theDefault Notice Period the Borrower cures the Event of Default, the Event ofDefault will be deemed to no longer exist and any rights and remedies of Holderpertaining 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           Failureto 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 topay when due any amount due under any other promissory note issued by Borrower.

 

4.2           Breachof Covenant.  The Borrower breachesany material covenant or other term or condition of this Note or the PurchaseAgreement 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           Breachof Representations and Warranties. Any material representation or warranty of the Borrower made herein, inthe Purchase Agreement, or in any Related Document (as defined in the PurchaseAgreement) shall be materially false or misleading and shall not be cured for aperiod of ten (10) days after the occurrence thereof.

 

4.4           Receiveror Trustee.  The Borrower shall makean assignment for the benefit of creditors, or apply for or consent to theappointment of a receiver or trustee for it or for a substantial part of itsproperty or business; or such a receiver or trustee shall otherwise beappointed.

 

4.5           Judgments.  Any money judgment, writ or similar finalprocess shall be entered or filed against the Borrower or any of its propertyor other assets for more than $250,000, and shall remain unvacated, unbonded orunstayed for a period of ninety (90) days.

 

10DD-8

----

 

4.6           Bankruptcy.  Bankruptcy, insolvency, reorganization orliquidation proceedings or other proceedings or relief under any bankruptcy lawor any law for the relief of debtors shall be instituted by or against theBorrower.

 

4.7           StopTrade.  An SEC stop trade order orPrincipal Market trading suspension of the Common Stock shall be in effect for5 consecutive days or 5 days during a period of 10 consecutive days, excludingin all cases a suspension of all trading on a Principal Market, providedthat the Borrower shall not have been able to cure such trading suspensionwithin 30 days of the notice thereof or list the Common Stock on anotherPrincipal Market within 60 days of such notice.  The “Principal Market” for the Common Stock shall include theNASD OTC Bulletin Board, NASDAQ SmallCap Market, NASDAQ National Market System,American Stock Exchange, or New York Stock Exchange (whichever of the foregoingis 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 Stockis then being listed or traded.

 

4.8   Failure to Deliver Common Stock or Replacement Note.  The Borrower’s failure to timely deliverCommon 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 deliverCommon Stock shall not be cured within two (2) days.  If Borrower is required to issue a replacement Note to Holder andBorrower shall fail to deliver such replacement Note within seven (7) BusinessDays.

 

4.9  Default Under Related Agreements.  The occurrence and continuance of any Eventof Default as defined in the Related Agreements.

 

DEFAULT RELATED PROVISIONS

 

4.10         PaymentGrace Period.  The Borrower shallhave a three (3) business day grace period to pay any monetary amounts dueunder this Note or the Purchase Agreement or any Related Document, after whichgrace period a default interest rate of two percent (2%) per month shall applyto the monetary amounts due hereunder.

 

4.11         ConversionPrivileges.  The conversionprivileges set forth in Article III shall remain in full force and effectimmediately from the date hereof and until this Note is paid in full.

 

4.12         CumulativeRemedies.  The remedies under thisNote shall be cumulative.

 

10DD-9

----

 

ARTICLE V

MISCELLANEOUS

 

5.1           Failureor Indulgence Not Waiver.  Nofailure 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 anysingle or partial exercise of any such power, right or privilege preclude otheror further exercise thereof or of any other right, power or privilege.  All rights and remedies existing hereunderare cumulative to, and not exclusive of, any rights or remedies otherwiseavailable.

 

5.2           Notices.  Any notice herein required or permitted tobe given shall be in writing and shall be deemed effectively given:  (a) upon personal delivery to the partynotified, (b) when sent by confirmed telex or facsimile if sent during normalbusiness hours of the recipient, if not, then on the next business day, (c)five days after having been sent by registered or certified mail, returnreceipt requested, postage prepaid, or (d) one day after deposit with a nationallyrecognized overnight courier, specifying next day delivery, with writtenverification of receipt.  Allcommunications shall be sent to the Borrower at the address provided in the PurchaseAgreement executed in connection herewith, and to the Holder at the addressprovided in the Purchase Agreement for such Holder, with a copy to John E.Tucker, Esq., 825 Third Avenue, 14th Floor, New York, New York10022, facsimile number (212) 541-4434, or at such other address as theBorrower or the Holder may designate by ten days advance written notice to theother parties hereto.  A Notice ofConversion shall be deemed given when made to the Borrower pursuant to thePurchase Agreement.

 

5.3           AmendmentProvision.  The term “Note” and allreference thereto, as used throughout this instrument, shall mean thisinstrument as originally executed, or if later amended or supplemented, then asso amended or supplemented, and any successor instrument issued pursuant toSection 3.5 hereof, as it may be amended or supplemented.

 

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

 

5.5           GoverningLaw.  This Note shall be governed byand construed in accordance with the laws of the State of New York, withoutregard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactionscontemplated by this Agreement shall be brought only in the state courts of NewYork or in the federal courts located in the state of New York.  Both parties and the individual signing thisNote on behalf of the Borrower agree to submit to the jurisdiction of suchcourts.  The prevailing party shall beentitled to recover from the other party its reasonable attorney’s fees andcosts.  In the event that any provisionof this Note is invalid or unenforceable under any applicable statute or ruleof law, then such provision shall be deemed inoperative to the extent that itmay conflict therewith

 

10DD-10

----

 

and shall be deemed modified to conform with such statute or rule oflaw. Any such provision which may prove invalid or unenforceable under any lawshall not affect the validity or unenforceability of any other provision ofthis Note. Nothing contained herein shall be deemed or operate to preclude theHolder from bringing suit or taking other legal action against the Borrower inany other jurisdiction to collect on the Borrower’s obligations to Holder, torealize on any collateral or any other security for such obligations, or toenforce a judgment or other court in favor of the Holder.

 

5.6           MaximumPayments.  Nothing contained hereinshall be deemed to establish or require the payment of a rate of interest orother charges in excess of the maximum permitted by applicable law.  In the event that the rate of interestrequired to be paid or other charges hereunder exceed the maximum permitted bysuch law, any payments in excess of such maximum shall be credited againstamounts owed by the Borrower to the Holder and thus refunded to the Borrower.

 

5.7           SecurityInterest.  The holder of this Notehas been granted a security interest in certain assets of the Borrower morefully described in a Security Agreement dated as ofMarch       , 2004.

 

5.8                           Construction.  Each party acknowledges that its legalcounsel participated in the preparation of this Note and, therefore, stipulatesthat the rule of construction that ambiguities are to be resolved against thedrafting party shall not be applied in the interpretation of this Note to favorany party against the other.

 

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

 

 

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

 
|   | MICRO COMPONENT TECHNOLOGY, INC. |
|--------|----------------------------------|
|   |                             |
|   |                             |
|   | By:                              | /s/Thomas P. Maun |   |
|   | Name:                            |   |   |
|   | Title:                           | CFO |   |
|        |                                  |  |  |  |  |

 

10DD-11

----

 
| WITNESS:       |
|----------------|
|           |
|           |
| /s/ Lori Faber |   |

 

10DD-12

----

 

EXHIBIT A

 

NOTICE OF CONVERSION

 

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

 

[Name and Address of Holder]

 

 

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

 

1.        Date of Conversion                                                      

 

2.        Shares To Be Delivered:                                                      

 

 
|   | By:    |   |   |
|--------|--------|--------|--------|
|   | Name:  |   |   |
|   | Title: |   |   |
|        |        |        |        |  |  |

 

10DD-13

----

 

EXHIBIT B

 

CONVERSION ELECTION NOTICE

 

(To be executed by the Holder in order to convert all or part of aMonthly 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 theConvertible Term Note issued by MICRO COMPONENT TECHNOLOGY, INC. datedMarch 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 suchNote.

 

 

1.             FixedConversion Price:      $                                              

 

2.             Amountto be paid:              $                                              

 

3.             SharesTo Be Delivered (2 divided by 1):                                                      

 

4.             Cashpayment to be made by Borrower :         $                                              

 

 
| Date:  |    |   | LAURUS MASTER FUND, LTD. |
|--------|---------|--------|--------------------------|
|   |    |
|   |    |
|   | By:     |   |                     |
|   | Name:   |   |                     |
|   | Tittle: |   |                     |
|        |         |        |                          |  |  |  |

 

10DD-14

----