**Exhibit 10W**

 

**THE SECURITIESREPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOTBEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.  THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OFSUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR APPLICABLE STATEBLUE SKY LAWS.  ADDITIONALLY, THETRANSFER OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE NOTEPURCHASE AGREEMENT, DATED AS OF DECEMBER 24, 2001, AMONG THE ISSUER HEREOF ANDCERTAIN OTHER SIGNATORIES THERETO, AND NO TRANSFER OF THESE SECURITIES SHALL BEVALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED.  UPON THE FULFILLMENT OF CERTAIN OF SUCHCONDITIONS, THE ISSUER HEREOF HAS AGREED TO DELIVER TO THE HOLDER HEREOF A NEWCERTIFICATE, NOT BEARING THIS LEGEND, FOR THE SECURITIES REPRESENTED HEREBYREGISTERED IN THE NAME OF THE HOLDER HEREOF. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUESTMADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE ISSUERHEREOF**.

 

**10% SENIOR SUBORDINATED CONVERTIBLE NOTE**

 
| No.                                                                                                                                                                    |   |                           |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|
| U.S. $[                            ] |   | Dated:  December 24, 2001 |

 

FOR VALUE RECEIVED, the undersigned, **MICRO COMPONENT TECHNOLOGY, INC**., aMinnesota corporation (the **“Company”**),hereby promises to pay to the order of [             ] or its assign (the **“Holder”**),with a place of business at [                              ] the principal sum of[                              $(            )] (plus anyadditional amounts payable as set forth herein) in immediately available lawfulmoney of the United States of America, payable as set forth in Section 2,with interest payable as set forth in Section 3 until such unpaidprincipal amount shall become due and payable.

 

This Note is one of the Notes(herein called the **“Notes”**)issued pursuant to the Note Purchase Agreement, dated as of December 24, 2001(as amended, supplemented or otherwise modified from time to time, the **“NotePurchase Agreement”**), by and among the Company, and the othersignatories thereto as purchasers.  TheHolder of this Note will be deemed, by its acceptance hereof: (i) to have madethe representations set forth in Article IV of the Note Purchase Agreement; and(ii) to have agreed to be bound by the terms and provisions of the NotePurchase Agreement.

 

No reference herein and no provision of this Noteshall alter or impair the obligation of the Company, which is absolute andunconditional, to pay the principal of and interest on this Note at the times,place and rate, and in the coin or currency, as prescribed herein or to convertthis Note as provided.  Capitalizedterms used herein and not otherwise defined shall have the meanings ascribedthereto in the Note Purchase Agreement.

 

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**1.  Certain Definitions.**

 

Capitalized terms used in this Note and not definedherein shall have the meanings ascribed to them in the Note PurchaseAgreement.  As used in this Note, thefollowing terms shall have the following meanings:

 

**“Changein Control”**  shallbe deemed to have occurred at such time as any of the following events shalloccur:

 

(a)           the consummation of any transactions,the result of which is that any “person” or “group” (as such terms are used inSection 13(d)(3) of the Exchange Act), owns directly or indirectly,beneficially or of record, 35% or more of the issued and outstanding CommonStock on a fully diluted basis;

 

(b)           any transaction or event occurs as aresult of which the Common Stock of the Company ceases (or will cease uponconsummation or immediately following such transaction or event) to be listedon a United States national securities exchange or approved for quotation onthe Nasdaq National Market or any similar United States system for automateddissemination of quotations of securities prices;

 

(c)           the Company consolidates with ormerges with or into another Person (other than a Subsidiary of the Company), orsells, conveys, transfers or leases all or substantially all of its propertiesand assets to any Person (other than a Subsidiary of the Company) or any Person(other than a Subsidiary of the Company) consolidates with or merges with orinto the Company, and the outstanding voting stock of the Company isreclassified into, converted for or converted into the right to receive anyother property or security;

 

(d)           any change in control (or similarevent, however denominated) with respect to the Company shall occur under andas defined in any indenture or agreement in respect of any Senior Indebtednessregardless of the amount of Senior Indebtedness involved.

 

**“ConversionNotice”** has the meaning given to such term in Section8(e) herein.

 

**“ConversionPrice”** means $2.60, subject to adjustment from time totime as set forth in Section 7(c) below.

 

**“GapAmount”** means an amount equal to $2,720,000 of theprincipal amount of this Note.

 

**“InitialAmount”** means an amount equal to $7,280,000 of theprincipal amount of this Note.

 

**“Market Price”** means the average of theclosing price of the Common Stock on the Nasdaq National Market, averaged overa period of 20 consecutive Business Days consisting of the day prior to thedate of conversion with respect to a particular Note and the 19 consecutiveBusiness Days prior to such day.

 

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** **

**“PrepaymentPrice”** means the average of the bid price of the CommonStock on the Nasdaq National Market or any other United States securitiesexchange on which the Common Stock may at the time be listed, averaged over aperiod of 20 consecutive Business Days consisting of the day prior to thedetermination of the “Prepayment Price” and the 19 consecutive Business Daysprior to such day.

 

**“Sale Price”** on any date means theclosing per share of Common Stock sale price (or, if no closing sale price isreported, the average of the bid and ask prices or, if more than one in eithercase, the average of the average bid and average ask prices) on such date asreported in composite transactions for the principal United States securitiesexchange on which the Common Stock is traded or, if the Common Stock is notlisted on a United States national or regional securities exchange, (i) asreported by the National Association of Securities Dealers Automated QuotationSystem or by the National Quotation Bureau Incorporated, or (ii) if such bidand ask prices are not reported by the National Association of SecuritiesDealers Automated Quotation System or by the National Quotation BureauIncorporated, in a manner to be determined by the Company on the basis of suchquotation as the Company considers appropriate in its sole and absolutediscretion.

** **

**“SeniorCredit Documents”** means the documents executed among theCompany and the lenders thereunder in connection with the Senior Indebtedness,as the same shall be amended, modified and supplemented and in effect from timeto time.

 

**“Senior Indebtedness”**  means all Obligations of the Companyunder the Senior Credit Documents; provided, however, that theaggregate principal amount of Indebtedness (or any refinancing, replacement orrefunding thereof) constituting “Senior Indebtedness” hereunder shall notexceed, at any time outstanding, $5,000,000.

** **

**“Senior Subordinated Indebtedness”**  means all Obligations of the Company tothe Holder in respect of this Note or any other Note Document.

 

**2.  Payments; Maturity; Restrictions onDistributions.**

 

(a)           Payment of principal of, and accruedand unpaid interest on, this Note or any other amounts then due to the Holderunder this Note or any other Note Document, shall be made no later than 2:00 p.m.,New York City Time, in whole, on December 24, 2006 (the **“Maturity Date”**), by wire transfer of immediately available fundsto such account as the Holder shall have specified by written notice to theCompany as provided in the Note Purchase Agreement, or in such othermanner as instructed from time to time in writing by the Holder.

 

(b)           Whenever any payment (includingprincipal of, premium, if any, or interest on this Note or other amount)hereunder or under any other Note Document shall become due, or otherwise wouldoccur, on a day that is not a Business Day, such payment shall be made on thenext succeeding Business Day, and such extension of time shall in such case beincluded in the computation of such interest, or other amount, if applicable.

 

(c)           Neither the Company nor any of itsSubsidiaries shall purchase, redeem or otherwise acquire this Note from theHolder except upon payment or prepayment thereof in accordance with thespecific terms hereof and of the Note Purchase Agreement and, in any such 

 

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purchase, redemption, prepayment or otherwise,the Company or such Subsidiary shall have offered to purchase, redeem orotherwise acquire, as the case may be, Notes from each holder of the otherNotes at the time outstanding upon the same terms and conditions and on a prorata basis (based upon the aggregate principal amount of the Notes thenheld by each such holder).  Any Notes sopurchased, redeemed or otherwise acquired by the Company or any Subsidiary ofthe Company shall be cancelled and not be deemed outstanding for any purpose.

 

(d)           Exceptto the extent otherwise provided herein, each payment of principal of the Notesby the Company shall be made for the account of the holders thereof proratain accordance with the respective unpaid principal amounts of the Notes held bythem and each payment of interest on the Notes shall be made for the account ofthe holders thereof prorata in accordance with the amounts ofinterest on such Notes then due and payable to the respective Purchasers.

 

(e)           All payments by the Company hereundershall be made without set-off or counterclaim and in such amounts as may benecessary in order that all such payments shall not be less than the amountsotherwise specified to be paid hereunder.

 

(f)            So long as any Notes shall beoutstanding, no dividend, whether in cash or property, shall be paid ordeclared, nor shall any other distribution be made, on any Common Stock of theCompany, nor shall any shares of Common Stock of the Company be purchased,redeemed, or otherwise acquired for value by the Company until all amounts thendue hereunder or any amounts hereunder in arrears shall have been paid in full,including any amounts due under Section 3(b) hereof.

 

**3**.  **Interest.**

 

(a)           Interest (computed on the basis of a360-day year consisting of twelve 30-day months) on this Note is payable incash on the unpaid principal amount hereof, accruing from the date hereof at arate of ten percent (10%) per annum, payable semi-annually in arrears each June30 and December 31, commencing June 30, 2002, until the principal hereof shallhave become due and payable; (b) if any payment (including principal of,premium, if any, or interest on this Note or other amount) due to a Holderhereunder or under any other Note Document is not paid when due hereunder orthereunder, then the overdue amount shall bear interest at a rate of (12%) perannum compounded quarterly, which interest shall accrue from the date suchoverdue amount was originally due to the date of payment of such amount,including interest thereon, has been made. All such interest on overdue amounts shall be payable upon demand.

 

**4**.  **Ranking.**

 

(a)           The obligations of the Company underthe Notes shall rank senior, including without limitation, with respect torights to principal, interest and other payments, and with respect to thedistribution of assets upon liquidation, dissolution or winding up of theCompany, whether voluntary or involuntary, to all other Indebtedness of theCompany and to all classes and series of Capital Stock of the Company, andshall be subordinate only to Senior Indebtedness of the Company only as setforth in this Section 4.

 

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(b)           The Company and the Holder, foritself and its successors and assigns, hereby agree that all of the Obligationsin respect of the Senior Subordinated Indebtedness, including, withoutlimitation, all payments in respect thereof (prior to the payment in full incash of all Obligations in respect of Senior Indebtedness (subject, however, tothe provisions of Section 4(h)) and any renewals, refinancings orextensions thereof shall be subordinate and junior in right of payment to allSenior Indebtedness as set forth and subject to the terms in this Section 4.

 

(c)           Without prejudice to Section 3(b) ofthis Note, during the continuance of any default in the payment of any SeniorIndebtedness, whether at maturity, pursuant to acceleration or otherwise (a **“Payment Default”**), no direct orindirect payment of any kind shall be accepted, received or retained withrespect to principal, interest or other amounts due under the SeniorSubordinated Indebtedness.

 

(d)           Without prejudice to Section 3(b) ofthis Note, subject to the provisions of paragraph (c) above, during thecontinuance of any default on or in respect of Senior Indebtedness (other thana Payment Default) that entitles the holders of such Senior Indebtedness toaccelerate the maturity of the Obligations outstanding thereunder (a **“Non-payment Default”**), no direct orindirect payment of any kind shall be accepted, received or retained withrespect to principal, interest or other amounts due under the SeniorSubordinated Indebtedness for a period (the **“BlockagePeriod”**) beginning on the date on which written notice of suchdefault (a **“Blockage Notice”**)is given to the Company by the holders of Senior Indebtedness in respect of theSenior Credit Documents, if the Senior Credit Documents are then in effect, andending on the earlier of (x) 60 days after delivery of such Blockage Notice or(y) the date on which such Non-payment Default is cured or waived, after whichperiod the Company shall be entitled to make all past-due payments and shallresume all other required payments under the Senior Subordinated Indebtedness,including any payments omitted pursuant to this Section 4; provided that(i) no event which, with the giving of notice and/or lapse of time, wouldbecome an Event of Default which existed on the date of the commencement of aBlockage Period may be used as the basis for any subsequent Blockage Noticeunless such event shall, in the interim, have been cured or waived for a periodof not less than 10 consecutive days and (ii) Blockage Notices may not be ineffect for more than 120 days in any 360-day period.  The Company agrees to deliver copies of all Blockage Notices tothe Holders immediately upon receipt, although the failure of the Company to doso shall not affect the rights of holders of Senior Indebtedness under this Section4.

 

(e)           Upon any distribution of assets ofthe Company of any kind or character upon any dissolution, winding-up, total orpartial liquidation or reorganization of the Company (whether in bankruptcy,insolvency or receivership proceedings or upon an assignment for the benefit ofcreditors or otherwise) (each, a **“DistributionEvent”**):

 

(i)    the holders of all Senior Indebtedness shallfirst be entitled to receive payment in full in cash of all Obligations inrespect thereof before the Holder is entitled to receive any payment on accountof the principal of or interest on or any other amount owing hereunder orotherwise with respect to the Senior Subordinated Indebtedness, except that theHolder will be permitted to receive and retain, and the holders of Senior Indebtednessshall have no claim to, instruments or securities issued by the Company in abankruptcy proceeding that consist of (i) shares of capital stock of theCompany as 

 

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reorganized or readjusted or any other successorcorporation or entity (provided, that the holders of Senior Indebtednessreceive instruments or securities consisting of indebtedness equal to theObligations in respect of the Senior Indebtedness); or (ii) any payment ordistribution of securities or instruments of the Company or any other successorcorporation or entity which are subordinated, to at least the same extent asthe Senior Subordinated Indebtedness, to the payment of the Senior Indebtednessoutstanding immediately prior to the commencement of any action or proceedingresulting in such Distribution Event, in each case authorized by an order ordecree giving effect, and stating in such order or decree that effect is given,to the subordination of the Senior Subordinated Indebtedness to the SeniorIndebtedness, and made by a court of competent jurisdiction in a bankruptcyproceeding; and

 

(ii)   any payment or distribution of assets to anyholder of Senior Indebtedness of any kind or character, whether in cash,property or securities, to which the Holder would be entitled except for theprovisions of this Section 4 shall be paid by the liquidating trustee oragent or other person making such payment or distribution directly to theholders of Senior Indebtedness or their representative or representatives underthe agreements pursuant to which the Senior Indebtedness may have been issuedto the extent necessary to make payment in full of all Senior Indebtednessremaining unpaid after giving effect to any concurrent payment or distributionto the holders of such Senior Indebtedness.

 

(f)            If any holder of Senior Indebtednessreceives any payment or distribution which, except for the provisions of this Section4, would have been payable or deliverable under the Senior SubordinatedIndebtedness, the Holder shall (after all Senior Indebtedness has been paid infull) be subrogated to the rights of the holders of such Senior Indebtednessagainst the Company.

 

(g)           If, at any time, all or part of anypayment with respect to Senior Indebtedness theretofore made by the Company orany other person is rescinded or must otherwise be returned by the holders ofSenior Indebtedness due to the insolvency, bankruptcy or reorganization of theCompany or such other person, the subordination provisions set forth hereinshall continue to be effective or be reinstated, as the case may be, all asthough such payment had not been made.

 

(h)           The Holder agrees and consents thatwithout notice to or assent by the Holder, and without affecting theliabilities and obligations of the Company and the rights and benefits of theholders of the Senior Indebtedness set forth in this Section 4:

 

(i)    the holders of Senior Indebtedness, and anyrepresentative or representatives acting on behalf thereof, may exercise orrefrain from exercising any right, remedy or power granted by or in connectionwith any agreements relating to the Senior Indebtedness; and

 

(ii)   any balance or balances of funds with anyholder of Senior Indebtedness at any time outstanding to the credit of any ofthe holders of Senior Indebtedness may, from time to time, in whole or in part,be surrendered or released;

 

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all as the holders of any Senior Indebtedness, or any representative orrepresentatives acting on behalf thereof, may deem advisable, and all withoutimpairing, abridging, diminishing, releasing or affecting the subordination ofthe Obligations hereunder to Senior Indebtedness.

 

(i)            The holders from time to time ofSenior Indebtedness are third party beneficiaries and shall be entitled to thebenefits of this Section 4 and, so long as any Senior Indebtednessremains outstanding, this Section 4 may not be modified, rescinded orcanceled in whole or in part without the prior written consent thereto of the holdersof a majority of the outstanding Senior Indebtedness.

 

(j)            Notwithstanding anything to thecontrary in Sections 4(c) and 4(d), if an Event of Default shallexist at any time that any Senior Indebtedness shall be outstanding, the Holdershall be permitted to take any action to accelerate or to collect payment onthe Senior Subordinated Indebtedness or to pursue any other remedy with respectto the Senior Subordinated Indebtedness in accordance with Section 8herein.

 

(k)           The Holder shall not hereafter (A)take any security or collateral to secure the Senior Subordinated Indebtednessor any other Obligations hereunder or (B) sell, assign, transfer or pledge theSenior Subordinated Indebtedness unless expressly subject to the terms of this Section4.

 

(l)            The Holder hereby undertakes andagrees for the benefit of the holders of Senior Indebtedness that, upon theoccurrence and during the continuance of any events set forth in Sections4(c) and 4(d), the Holder shall take any actions reasonablyrequested by the holders of a majority of the outstanding Senior Indebtednessto effectuate the full benefit of the subordination contained herein.

 

(m)          The Holder hereby undertakes andagrees for the benefit of the holders of Senior Indebtedness that the Holderwill not vote its claim or claims with respect to this Agreement in a mannerinconsistent with the terms of this Section 4.

 

(n)           To the extent permitted by applicablelaw, the Company and the Holder hereby waive (A) notice of acceptance hereof bythe holders of the Senior Indebtedness and (B) all diligence in the collectionor protection of or realization upon the Senior Indebtedness.

 

(o)           The Company and the Holder eachhereby expressly agree that the holders of Senior Indebtedness may enforce anyand all rights derived herein by suit, either in equity or at law, for specificperformance of any agreement contained in this Section 4 or for judgmentat law and any other relief whatsoever appropriate to such action or procedure.

 

(p)           If any payment or other distributionof assets which the Holder would otherwise have been entitled to receive butfor the provisions of this Section 4 shall have been applied to thepayment of amounts payable under or on account of the Senior Indebtedness,then, and in such case, the Holder shall be entitled to receive from theholders of such Senior Indebtedness the amount, if any, of any suchdistribution of assets received by such holders of Senior Indebtedness inexcess of the amount sufficient to pay in full in cash all amounts payable 

 

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under or in respect of the Senior Indebtedness on a proratabasis (based on the aggregate principal amounts of the Notes then outstanding).

 

(q)           This Section 4 is intended todefine the rights between the holders of Senior Indebtedness and theHolder.  Nothing contained in this Section4 shall affect the Company’s obligations hereunder and under the other NoteDocuments to repay in full all amounts owing hereunder or under any other NoteDocuments, respectively.

 

(r)            Notwithstanding the prohibitionsimposed by this Section 4, the Holder shall be entitled to appear in,join, intervene or otherwise become involved in, any judicial enforcementactions undertaken by the holders of Senior Indebtedness to the extentreasonably necessary to protect and defend the rights of the Holder withrespect to the Senior Subordinated Indebtedness, provided that the Holder shallnot in such proceeding take any action to (a) contest the validity, perfection,priority or enforceability of any Senior Indebtedness or any collateraltherefor or guaranties thereof; (b) contest the relative rights and duties ofany holders of any Senior Indebtedness established in any instruments oragreements creating or evidencing any of the Senior Indebtedness with respectto any of such collateral; or (c) contest or affect the obligations andagreements of the Holder set forth in this Section 4.

 

(s)           Nothing in this Section 4shall affect the Holder’s right to convert this Note into Common Stock pursuantto the terms hereof.

 

                The provisions of this Section 4 may be amended bythe Company with the unanimous consent of all holders of $1,000,000 or more ofprincipal amount of the Notes.

 

**5.  Optional Prepayment.**

 

(a)           If at any time after January 3, 2004,the Prepayment Price is greater than the product obtained by multiplying theConversion Price and one hundred and fifty percent (150%), the Company may, atits sole option, upon not less than sixty (60) Business Days prior writtennotice to the Holder (the **“PrepaymentNotice”**), prepay this Note in whole but not in part; and provided,further, that any such prepayment of this Note shall include the paymentin cash of the principal amount of this Note and all accrued but unpaidinterest hereon to the date of such prepayment (collectively, the **“Prepayment Amount”**).

 

(b)           Notwithstandingthe provisions of this Section 5, the Holder may, at any time during thesixty (60) Business Day period after receipt of the Prepayment Notice, convertthe full amount of the Prepayment Amount into Common Stock in accordance withthe terms of Section 8, in which case the Company shall not prepay thisNote.

 

(c)           On the Business Date that issixty-one (61) Business Days afterthe receipt of the Prepayment Notice, the Holder shall be entitled toreceive the Prepayment Amount upon physical delivery to the Company or itsagents of this Note.  On such date, allrights in respect of this Note, except the right to receive the Prepayment Amountand any applicable amounts due under Section 3(b) hereof, shall cease andterminate, and the Obligations under the Note shall no longer be deemed to beoutstanding (unless Default shall be made by the Company in the payment of thePrepayment Amount, in which event such rights shall be exercisable and such 

 

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Obligations shall be outstanding until such Default is cured), whetheror not the Note has been received by the Company.

 

(d)           Notwithstanding the provisionsof this Section 5, the Company shall only make a prepayment hereunder tothe extent that such prepayment is permissible pursuant to the terms of theSenior Credit Documents.

 

**5.A.  Prepayment at Option of Holder.**

 

(a)           If the Company in its amended Form10-Q filed with the SEC for the quarter ended September 29, 2001 reports TotalStockholders’ Equity as defined inaccordance with GAAP of less than $6,200,000, it will provide Holder with awritten notice within five (5) Business Days of such filing (the “OptionalPrepayment Notice”).

 

(b)           The Holder may at any time during theten (10) Business Days after receipt of the Optional Prepayment Notice providewritten notice to the Company to prepay this Note and all accrued but unpaidinterest through the date of Prepayment. After receipt of such request for prepayment, the Company shall, withinten (10) Business Days thereafter, deliver the Prepayment Amount upon physicaldelivery to the Company or its agents of this Note.  On such date, all rights with respect to the Note except the rightto receive the Prepayment Amount and any applicable amounts due under Section 3hereof, shall cease and terminate, and the Obligation under the Note shall nolonger be deemed to be outstanding (unless Default shall be made by the Companyin the payment of the Prepayment Amount in which event such Obligations shallbe outstanding until such Default is cured) whether or not the Note has beenreceived by the Company.

 

(c)           The Company shall not enter intoSenior Indebtedness as set forth in Section 4 prior to the filing of theamended Form 10-Q for the quarter ended September29, 2001.

 

**6.  Change in Control Prepayment.**

 

(a)           Notice of Change in Control.  The Company shall, within five (5) daysfollowing the occurrence of the Change in Control, give written notice of suchChange in Control (a **“Change in ControlNotice”**) to the Holder and such Change in Control Notice shallspecify (i) the aggregate principal amount of the Indebtedness then outstandinghereunder, (ii) the amount of unpaid interest that will have accrued withrespect to such Indebtedness to beprepaid as of the thirtieth (30th) day following the date of the Change inControl Notice (the **“Change in ControlPrepayment Date”**) and (iii) the event or events constitutingsuch Change of Control.

 

(b)           Right to Prepayment.  Notwithstanding any other terms of thisNote, the Holder shall have the right, but not the obligation, to require theCompany to prepay all, but not less than all, of the Indebtedness (includingaccrued and unpaid interest) outstanding hereunder, by delivering to theCompany within fifteen (15) days after the Holder’s receipt of a Change inControl Notice, written notice of the Holder’s demand for prepayment (“Change in Control Prepayment Notice”).

 

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(c)           Prepayment of Obligations.  In the event that the Holder has delivered aChange in Control Prepayment Notice, on the Change in Control Prepayment Datethe Company shall, notwithstanding any other terms of this Note, pay to theHolder, in cash, a repayment price equal to the sum of (i) the principal amountof the Indebtedness then outstanding hereunder, plus (ii) all accrued andunpaid interest to the Change in Control Prepayment Date.

 

**7.  Mandatory Prepayment.**

 

(a)           Prepayment.  Notwithstanding any other terms of thisNote, any other Note Document or any other Obligation of the Company, in theevent that the conditions set forth in Sections 6.6(a) and 6.6(b) of the NotePurchase Agreement are not fully satisfied by April 30, 2002, the Companyshall, within ten (10) Business Days after April 30, 2002, without any actionrequired on the part of the Holder, prepay an amount equal to the Gap Amount,plus all accrued but unpaid interest thereon to the date of such prepayment; provided,however, that any such prepayment shall be subject to the provisions of Section2(c) and 2(d) above.  Until the dateof prepayment or the date the conditions in Sections 6.6(a) and 6.6(b) ofthe Purchase Agreement are satisfied, whichever is earlier, the Company shallkeep the entire Gap Amount invested in cash or cash equivalents.

 

(b)           Penalty.  In addition to the amounts payable underSection 7(a), the Company shall pay, to each Holder on a pro rata basis, anamount equal to twenty percent (20%) of the Gap Amount less any interest thathas accrued and been paid thereon from the date of issuance through the date ofsuch penalty payment (including the interest paid pursuant to Section 7(a)).

 

(c)           Extension.  Notwithstanding paragraphs (a) or (b), theHolders of 71 percent or more of the principal amount of the Notes thenoutstanding may, by written notice to the Company at least five (5) businessdays prior to April 30, 2002 (and any extensions of such date), extend one ormore times the date the Company must make such prepayment and penalty andpenalty payments to the Holders by 30 days or more provided, however, that anysuch extension of such date of payment shall not otherwise affect theobligation of the Holders under this Note or the other Note documents.

 

**8.  Conversion.**

 

(a)           Conversion.  Subject to and in compliance with theapplicable provisions of this Section 8, the Holder shall have theright, at such Holder’s option, at any time and from time to time, to convertall or any portion of the principal amount of this Note in increments of$100,000 (the “Conversion Amount”) intothat number of fully paid and nonassessable shares of Common Stock equal to thequotient obtained by dividing (x) the portion of the Conversion Amount beingconverted by (y) the Conversion Price (as defined above), as last adjustedpursuant to Section 8(d) and then in effect, by surrender of thisNote.  Conversion shall be deemed tohave been effected on the date when delivery of this Note is made pursuant tothe provisions of the previous sentence. All accrued but unpaid interest due on the Conversion Amount shall bepaid in cash to the Holder in the manner specified in Section 2(a) onthe date that such conversion shall be deemed to have been made pursuant to Section8(e).

 

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(b)           Fractional Shares.  The Company shall not issue fractionalshares of Common Stock or scrip upon any conversion of this Note.  The number of full shares of Common Stockissuable upon conversion shall be computed on the basis of the portion of theConversion Amount to be converted. Instead of any fractional shares of Common Stock which would otherwisebe issuable upon conversion of the full amount of the Conversion Amount, theCompany shall pay a cash adjustment in respect of such fractional interest inan amount equal to the product of (i) the Market Price of one share of suchCommon Stock and (ii) such fractional interest.

 

(c)           Adjustments to Conversion Price.

 

If, after the Issue Date of the Notes, theCompany:

 

(1)     pays a dividend or makes a distribution onits Common Stock payable in shares of its Common Stock or shares of otherCapital Stock;

 

(2)     subdivides its shares of Common Stock;

 

(3)     combines its shares of Common Stock;

 

(4)     issues by reclassification of its CommonStock any shares of its Capital Stock (other than rights, warrants or optionsfor its Capital Stock);

 

(5)     makes a distribution to all holders of itsCommon Stock of rights to purchase shares of its Common Stock for a periodexpiring within 60 days after the record date for such distribution at lessthan the Conversion Price at the time of the distribution; or

 

(6)     makes a distribution to the holders of itsCommon Stock of its assets including shares of any Subsidiary or business unitof the Company or debt securities or rights to purchase the Notes (excludingordinary cash dividends from current or retained earnings);

 

then the conversion privilege and the Conversion Pricein effect immediately prior to such action shall be adjusted so that the Holderof a Note thereafter converted may receive the number of shares of Common Stockand/or assets of the Company which such  Holder would have owned immediately following such action if such Holderhad converted the Note immediately prior to such action.  The adjustment shall become effectiveimmediately after the record date in the case of a dividend or distribution andimmediately after the effective date in the case of a subdivision, combinationor reclassification.

 

If after an adjustment a Holder of a Note uponconversion of such Note may receive shares of two or more classes of CaptialStock of the Company, the Conversion Price shall thereafter be subject toadjustment upon the occurrence of an action taken with respect to any suchclass of Capital Stock as is contemplated by this subsection (c) with respectto the Common Stock, on terms comparable to those applicable to Common Stock inthis subsection (c).

 

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(d)           Notice of Adjustment.  Upon each adjustment of the ConversionPrice, the Company shall give prompt written notice thereof to the Holder,which notice shall state the Conversion Price resulting from such adjustmentand the increase or decrease, if any, in the number of shares issuable upon theconversion of this Note, setting forth in reasonable detail the method ofcalculation and the facts upon which such calculation is based.

 

(e)           Exercise of Conversion Right.  In order to exercise the Holder’s conversionright hereunder, the Holder shall surrender this Note to the office of theCompany and shall deliver to the Company written notice of such conversion (the“Conversion Notice”) at least two (2) Business Days prior to theintended exercise thereof specifying the portion of the Conversion Amount to beconverted into Common Stock.  Uponreceipt of any Conversion Notice, the Company shall within two (2) BusinessDays (or at such later time as to which the Company and the Holder may agree)deliver to the address of the Holder as set forth above, (i) at the Company’sexpense (including any stamp taxes or similar governmental charges), theappropriate number of duly or validly issued and fully paid and nonassessableshares of Common Stock and one or more stock certificates therefor (in suchnumber and registered in such names as the Holder may direct), (ii) to theextent this Note is converted in part only, a new Note (with the same terms asthis Note) in principal amount equal to the unconverted portion of such Noteand, to the extent that the entire Conversion Amount is converted andfractional shares would otherwise be issued, cash pursuant to Section 8(b).  Such conversion shall be deemed to have beenmade immediately at the close of business on the Business Day of such surrenderof this Note, and the Holder shall be treated for all purposes as the recordholder of such shares of Common Stock as of such date.

 

(f)            Sufficient Shares of EquitySecurities. Upon receipt of any Conversion Notice, the Company shall takeall necessary measures, including the filing of an amendment to its Articles ofIncorporation, to make available enough shares of Common Stock to allow theconversion to occur as promptly as practicable.  If at any time the number of authorized but unissued shares ofCommon Stock shall not be sufficient to effect such conversion, the Companywill take such corporate actions as may, in the opinion of Holder’s counsel, benecessary to increase the Company’s authorized, unreserved and unissued sharesof Common Stock to such number of shares as shall be sufficient for suchpurposes.  Upon delivery, such sharesshall be duly and validly issued and fully paid and nonassessable.

 

(g)           Restrictions on Conversion of GapAmount.  Notwithstanding any otherprovision of this Note or any other Note Document, each Holder may not convertany portion of the principal amount of its Note in excess of its pro rata shareof the Initial Amount until such time as the conditions set forth in Sections6.6(a) and 6.6(b) of the Note Purchase Agreement have been fully satisfied.

 

(h)           Merger, Reorganization, etc.  If at any time or from time to time whileany principal amount of this Note is outstanding, there is a capitalreorganization of the Common Stock or the merger or consolidation of theCompany with or into another corporation or another entity or person or arecapitalization, subdivision, combination, reclassification, exchange orsubstitution of shares, as a part of such capital reorganization, provisionshall be made so that the Holder shall thereafter be entitled to receive uponconversion of this Note the number of shares of stock or other securities orproperty of the Company to which a holder of the number of shares 

 

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of Common Stock deliverable upon conversion would have been entitled onsuch capital reorganization.  In anysuch case, appropriate adjustment shall be made in the application of theprovision of this subsection (h) with respect to the rights of the Holder afterthe capital reorganization to the end that the provisions of this Section 8(including adjustment of the Conversion Price then in effect and the number ofshares issuable upon conversion of the Note) shall be applicable after thatevent and be as nearly equivalent as practicable.

 

**9.  Events of Default.**

 

If any of the following events (each an “Event ofDefault”) shall occur and be continuing:

 

(a)           Payment of Principal.  The Company shall fail to make any paymentof principal on this Note when and as the same shall become due and payableincluding at the due date thereof, by acceleration or otherwise.

 

(b)           Payment of Interest and Fees.  The Company shall fail to make any paymentof interest on this Note, or any fee or any other amount payable hereunder orunder this Note when and as the same shall become due and payable including atthe due date thereof, by acceleration or otherwise, and such failure shallcontinue unremedied for five (5) Business Days after the due date thereof.

 

(c)           Covenant Defaults.  The Company or any of its Subsidiaries shalldefault in the due observance or performance of any covenant or agreement to beobserved or performed under any Note Document (other than a covenant which isdealt with specifically elsewhere in this Section 8) and such defaultshall continue unremedied for thirty (30) days after the occurrence of suchdefault; provided, however, that the failure to fully satisfy theconditions set forth in Sections 6.6(a) and 6.6(b) of the NotePurchase Agreement shall not constitute a default if the Company fullysatisfies its obligations pursuant to Section 7 hereof; provided,further that the failure of the Company to satisfy its obligationspursuant to Section 7 hereof shall immediately upon the failure thereofbe deemed to be a default hereunder.

 

(d)           Misrepresentations.  Any representation, warranty or otherstatement made or furnished to the Purchasers by or on behalf of the Company orany of its Subsidiaries, any Note Document or any instrument, certificate orfinancial statement furnished (in compliance with or in reference thereto)proves to have been false or misleading in any material respect when made orfurnished and could be reasonably expected to result in a Material AdverseEffect.

 

(e)           Other Defaults.  The Company or any of its Subsidiaries shallbe in payment default on any Indebtedness (including any of the other Notes)which is outstanding in a principal amount in excess of $250,000 in theaggregate beyond any applicable period of grace, or if any event shall occur orcondition shall exist in respect of any Indebtedness which is outstanding in aprincipal amount in excess of $250,000 or under any evidence of any suchIndebtedness or of any mortgage, indenture or other agreement relating thereto,which shall have caused the acceleration of the payment of such Indebtednesswithout such Indebtedness being discharged or such acceleration having beencured, waived, rescinded or annulled.

 

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(f)            Voluntary Insolvency and RelatedProceedings.  The Company or any ofits Subsidiaries shall (i) voluntarily commence any proceeding or file anypetition seeking relief or reorganization under Title 11 of the United StatesCode, or any other federal, state or foreign bankruptcy, insolvency or similarlaw, (ii) consent to the institution of, or fail to controvert in a timely andappropriate manner, any such proceeding or the filing of any such petition,(iii) apply for, consent to the appointment of, or a court of competentjurisdiction shall enter an order appointing, a receiver, trustee, custodian,sequestrator or officer with similar powers of itself or for any substantialpart of its property or assets, (iv) file an answer admitting the materialallegations of a petition filed against it in any such proceeding, (v) make ageneral assignment for the benefit of creditors, (vi) fail generally to pay itsdebts as they become due, (vii) shall be adjudicated insolvent or (viii) takeany corporate or stockholder action in furtherance of any of the foregoing.

 

(g)           Involuntary Insolvency and RelatedProceedings.  (i) An involuntaryproceeding shall be commenced or an involuntary petition shall be filed in acourt of competent jurisdiction seeking (x) relief in respect of the Company orany of its Subsidiaries or of any substantial part of the property or assetsthereof, under Title 11 of the United States Code or any other federal, stateor foreign bankruptcy, insolvency or similar law, (y) the appointment of areceiver, trustee, custodian, sequestrator or similar official for any suchPerson or for any substantial part of its property or (z) the winding-up orliquidation of any such Person, and any such proceeding, petition or ordershall continue unstayed and in effect for a period of sixty (60) consecutivedays or (ii) a warrant of attachment, execution or similar process shall beissued against any substantial part of the Property of the Company or any ofits Subsidiaries and the enforcement of such attachment, execution or similarprocess is not stayed pending appeal.

 

(h)           Business Disruption: Condemnation.  There shall occur a cessation of asubstantial part of the business of the Company or any of its Subsidiaries fora period which significantly affects the Company’s capacity to continue itsbusiness, on a profitable basis; or the Company or any of its Subsidiariesshall suffer the loss or revocation of any license or permit now held orhereafter acquired by the Company or such Subsidiaries which is necessary tothe continued or lawful operation of its business; or the Company or suchSubsidiaries shall be enjoined, restrained or in any way prevented by court,governmental or administrative order from conducting all or any material partof its business affairs; or any material lease or agreement pursuant to whichthe Company or such Subsidiary leases, uses or occupies any Property shall becanceled or terminated prior to the expiration of its stated term; or anymaterial portion of any Property of the Company or any Subsidiary of theCompany shall be taken through condemnation or the value of such Property shallbe impaired through condemnation.

 

(i)            Challenge to Note Document.  This Note or any other Note Document shallcease to be in full force and effect and enforceable in accordance with itsterms, or the Company or any of its Subsidiaries shall assert the invalidity ofany of the foregoing.

 

(j)            Judgments.  A judgment or judgments  for the payment of money in excess of$200,000 in the aggregate shall be rendered against the Company and/or anySubsidiary of the Company and the same shall not (i) be fully covered byinsurance or other comparable bond, or (ii) within sixty (60) days after theentry thereof, have been discharged or execution thereof stayed pending appeal,or shall not have been discharged within sixty (60) days after the 

 

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expiration of any such stay; then, and in any such event (other than anevent described in paragraphs (f) or (g) above), and at any time thereafterduring the continuance of such event, the Holder may, take any of the followingactions and at the same or different times: (i) declare this Note to be forthwith due and payable, whereupon theentire unpaid principal of this Note, together with accrued but unpaid interestthereon and all other Obligations under the Note Documents, shall becomeforthwith due and payable in full in cash, without presentment, demand, protestor any other notice of any kind, all of which are hereby expressly waived bythe Company, anything contained herein or in any other Note Document to thecontrary notwithstanding, or (ii) exercise any and all other remedies providedunder any Note Document upon the occurrence and continuance of an Event ofDefault; provided, however, that with respect to the occurrenceof an Event of Default described in paragraphs (g) or (h) above, the principalof this Note, together with accrued but unpaid interest and fees hereon and anyother liabilities of the Company and any of their Subsidiaries to the Holderaccrued hereunder or any other Note Document, shall automatically become dueand payable in full in cash, all without presentment, demand, protest or othernotice of any kind, all of which are hereby expressly waived by the Company,anything contained herein or in any other Note Document to the contrarynotwithstanding.

 

(k)           (i) Any Reportable Event with respectto a Plan shall occur; (ii) the Company of any ERISA Affiliate shall benotified by the sponsor of a Multiemployer Plan that it has incurred WithdrawalLiability to such Mulitemployer Plan in an amount which, when aggregated withall other Withdrawal Liabilities incurred by the Company or any ERISA Affiliate(determined as of the date of such notification) has or is reasonably likely tohave a Material Adverse Effect; (iii) the Company or any ERISA Affiliate shallbe notified by the sponsor of a Mulitemployer Plan that such Multiemployer Planis in reorganization or is being terminated, partitioned or reorganized, withinthe meaning of Title IV of ERISA, if liability of the Company and its ERISAAffiliates resulting from such reorganization, termination, partitioning orreorganization has or is reasonably likely to have a Material Adverse Effect;or (iv) the Company or any ERISA Affiliate incur aggregate liabilities inconnection with a withdrawal from a Multiple Employer Plan or the terminationof a Multiple Employer Plan that have or are reasonably likely to have aMaterial Adverse Effect.

 

**10.  Amendments, etc.**

 

No amendment or waiver of any provision of this Note,nor consent to any departure by the Company therefrom, shall in any event beeffective unless the same shall be in writing and signed by the Holder and thensuch waiver or consent shall be effective only in the specific instance and forthe specific purpose for which given.

 

**11.  Notices, etc.**

 

All notices required or permitted hereunder shall bein writing and shall be deemed effectively given: (i) upon personal delivery tothe party to be notified; (ii) when sent by confirmed facsimile if sent duringnormal business hours of the recipient, if not, then on the next business day;(iii) five (5) days after having been sent by registered or certified mail,return receipt requested, postage prepaid; or (iv) one (1) day after depositwith a nationally recognized 

 

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overnight courier, specifying next day delivery, with writtenverification of receipt.  Allcommunications shall be sent to the address as set forth on the first pagehereof or at such other address as such party may designate by five (5) daysadvance written notice to the other parties hereto.

 

**12.  Lost, Etc. Securities.**

 

Upon receipt of evidence reasonably satisfactory tothe Company (an affidavit of the Holder being satisfactory) of the ownershipand the loss, theft, destruction or mutilation of this Note, and in the case ofany such loss, theft or destruction, upon receipt of an indemnity reasonablysatisfactory to the Company (if the Holder is a financial institution or otherinstitutional investor, its own agreement being satisfactory) or, in the caseof any such mutilation, upon surrender of this Note, the Company shall, withoutcharge, issue, register and deliver in lieu of such Note a new Note of likekind representing the same rights represented by and dated the date of suchlost, stolen, destroyed or mutilated Note. Any such new Note shall constitute an original contractual obligation ofthe Company, whether or not the allegedly lost, stolen, mutilated or destroyed Noteshall be at any time enforceable by any Person.

 

**13.  No Waiver; Remedies.**

 

No failure on the part of the Holder to exercise, andno delay in exercising, any right hereunder or under this Note shall operate asa waiver hereof, nor shall any single or partial exercise of any righthereunder or under this Note preclude any other or further exercise thereof orthe exercise of any other right.  Theremedies herein provided are cumulative and not exclusive of any remediesprovided by law.

** **

**14.  Costs, Expenses and Taxes.**

 

The Company agrees to pay the Holder on demand afterand during the continuation of an Event of Default all reasonable costs andexpenses arising in connection with the administration, enforcement andcollection of this Note and the other documents to be delivered hereunder, including,without limitation, reasonable attorneys’ fees and expenses and court costs ofthe Holder with respect thereto and with respect to advising the Holder as toits rights and responsibilities under this Note.  In addition, the Company shall pay any and all stamp and othertaxes payable or determined to be payable in connection with the execution anddelivery of this Note, or the conversion of this Note to Common Stock pursuantto Section 7 hereof, and any other documents to be delivered hereunder,and agrees to save the Holder harmless from and against any and all liabilitieswith respect to or resulting from any delay in paying or omission to pay suchtaxes.

 

**15.  Entire Agreement.**

 

This Note and the Note Purchase Agreement contain theentire agreement and understanding among the parties hereto with respect to thesubject matter hereof and supersedes and preempts any prior understandings,agreements or representations by or among the parties, written or oral, whichmay have related to the subject matter hereof in any way.

 

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**16.  Successors and Assigns.**

 

The respective rights and obligations of the Companyand the Holder shall be binding upon and inure to the benefit of theirrespective successors and assigns, except that the Company may not assign thisNote without the consent of the Holder; provided, however, thatsubject to the provisions of this Note, such consent shall not be required inconnection with a merger of the Company with or into another Person or the saleof all or substantially all of the assets of the Company.

 

**17.  Governing Law.**

 

This Note shall be governed by and construed inaccordance with, and the rights of the parties shall be governed by, the lawsof the State of New York, as if this Note were an agreement to be fullyperformed in New York.

 

IN WITNESS WHEREOF, the Company has caused this 10%Senior Subordinated Convertible Note to be executed by its duly authorizedrepresentative as of the date first above written.

 

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|   | **MICRO COMPONENT TECHNOLOGY, INC**. |                                  |
|--------|--------------------------------------|---------------------------------------|
|   |                                 |                                  |
|   | By:                                  |                                  |
|   |                                 | Name:   Jeffrey S. Mathiesen     |
|   |                                 | Title:  Chief  Financial Officer |
|        |                                      |                                       |  |

 

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