EXHIBIT NO.
10.3
THIS NOTE (THE
“NOTE”) AND THE COMMON SHARES ISSUABLE UPON CONVERSION
OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THIS NOTE AND
THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE
UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO MICRO COMPONENT
TECHNOLOGY, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
SECURED CONVERTIBLE TERM
NOTE
FOR VALUE
RECEIVED, MICRO COMPONENT TECHNOLOGY, INC., a Minnesota corporation
(the “ Borrower
”), hereby promises to pay to LAURUS MASTER FUND, LTD., c/o
M&C Corporate Services Limited, P.O. Box 309 GT, Ugland
House, South Church Street, George Town, Grand Cayman, Cayman
Islands (the “ Holder ”) or its registered
assigns or successors in interest, on order, the sum of TWO MILLION
FIVE HUNDRED THOUSAND DOLLARS ($2,500,000.00), together with any
accrued and unpaid interest hereon, on April 29, 2008 (the
“ Maturity Date
”) if not sooner paid.
Capitalized terms
used herein without definition shall have the meanings ascribed to
such terms in that certain Securities Purchase Agreement dated as
of the date hereof between the Borrower and the Holder (the “
Purchase Agreement
”).
The following terms
shall apply to this Note:
ARTICLE I
INTEREST &
AMORTIZATION
1.1
Interest Rate and Payment . (a) Subject to
Sections 4.10 and 5.6 hereof, interest payable on this Note shall
accrue at a rate per annum (the “Interest Rate”) equal
to the “prime rate” published in The Wall Street
Journal from time to time, plus one and three-quarters percent
(1.75%). The prime rate shall be increased or decreased as the case
may be for each increase or decrease in the prime rate in an amount
equal to such increase or decrease in the prime rate; each change
to be effective as of the day of the change in such rate. If
the Company has satisfied the requirements of Section 2.2
hereof, the Interest Rate will be subject to adjustment as set
forth in Section 1.1(b). In no event, however, shall the
Interest Rate be less than zero percent (0.0%). Interest
shall be payable monthly in arrears commencing on June 1,
2005, on the first day of each consecutive calendar month
thereafter (each, a “ Repayment Date ”), and on the
Maturity Date, whether by acceleration or otherwise.
(b) If, on
the last business day of each month hereafter until the Maturity
Date (each a “Determination Date”), (i) the
Company shall have registered the shares of the Company’s
common stock underlying the conversion of the Note and that certain
option issued to Holder in
connection with
the Note on a registration statement declared effective by the SEC,
and (ii) the volume weighted average price of the
Common Stock as reported by Bloomberg, L.P. on the principal market
for the five (5) trading days immediately preceding a
Determination Date (the “Market Price”) exceeds the
then applicable Fixed Conversion Price, the Interest Rate for the
succeeding calendar month shall automatically be reduced by 25
basis points (0.25%) for each incremental twenty five percent (25%)
increase in the market price of the Common Stock above the then
applicable Fixed Conversion Price.
1.2
Minimum Monthly Principal Payments . Amortizing payments of
the aggregate principal amount outstanding under this Note at any
time (the “ Principal
Amount ”) shall begin on November 1, 2005 and
shall recur on the first calendar day of each succeeding month
thereafter until the Maturity Date (each, an “
Amortization Date
”). Subject to Section 3 below, beginning on the
first Amortization Date, the Borrower shall make monthly payments
to the Holder on each Repayment Date, each in the amount of
$83,333.33, together with any accrued and unpaid interest to date
on such portion of the Principal Amount plus any and all other
amounts which are then owing under this Note but have not been paid
(collectively, the “ Monthly Amount ”).
ARTICLE II
CONVERSION REPAYMENT
OPTION
2.1
(a) Payment of Monthly Amount in Cash or Common Stock
. Each month by the fifth (5 th ) business day
prior to each Amortization Date (the “ Notice Date ”), the Holder
shall deliver to Borrower a written notice in the form of
Exhibit B attached hereto electing to convert the Monthly
Amount payable on the next Repayment Date in either cash or Common
Stock, or a combination of both (each, a “ Repayment Election Notice ”).
If a Repayment Election Notice is not delivered by the Holder on or
before the applicable Notice Date for such Repayment Date, then the
Borrower shall pay the Monthly Amount due on such Repayment Date in
cash. Any portion of the Monthly Amount paid in cash on a Repayment
Date, shall be paid to the Holder in an amount equal to 101% of the
principal portion of the Monthly Amount due and owing to Holder on
the Repayment Date. If the Holder converts all or a portion of the
Monthly Amount in shares of Common Stock, the number of such shares
to be issued by the Borrower to the Holder on such Repayment Date
shall be the number determined by dividing (x) the portion of the
Monthly Amount to be paid in shares of Common Stock, by (y) the
then applicable Fixed Conversion Price. For purposes hereof,
the initial “ Fixed
Conversion Price ” means $0.23 [100% of the
average closing price for the 3 trading days immediately preceding
the Closing Date].
(b)
Monthly Amount Conversion Guidelines . Subject to
Sections 2.1(a), 2.2, and 3.2 hereof, the Holder shall elect to
convert all or a portion of the Monthly Amount due on each
Repayment Date in shares of Common Stock if the average closing
price of the Common Stock as reported by Bloomberg, L.P. on the
Principal Market (as defined in Section 4.7 hereof) for the
three (3) trading days immediately preceding such Repayment
Date was greater than 115% of the Fixed Conversion Price; provided
that the amount of any such conversion shall not exceed twenty five
percent (25%) of the aggregate dollar trading volume of the Common
Stock for the ten (10) day trading period immediately
preceding delivery of a Repayment Election Notice to the
Borrower. Any part of the Monthly Amount due on a Repayment
Date that the Holder has
2
not elected to convert
into shares of Common Stock shall be paid by the Borrower in cash
on such Repayment Date. Any part of the Monthly Amount due on such
Repayment Date which the Holder has elected to convert into shares
of Common Stock but which must be paid in cash (because the closing
price of the Common Stock on one or more of the three
(3) trading days immediately preceding the applicable
Repayment Date was less than 115% of the Fixed Conversion Price)
shall be paid in cash at the rate of 101% of the Monthly Amount
otherwise due on the Repayment Date within three (3) business
days of the applicable Repayment Date.
2.2
No Effective Registration . Notwithstanding anything
to the contrary herein, none of the Borrower’s
obligations to the Holder may be converted into Common Stock unless
(a) either (i) an effective current Registration
Statement (as defined in the Registration Rights Agreement)
covering the shares of Common Stock to be issued in connection with
satisfaction of such obligations exists, or (ii) an exemption
from registration of the Common Stock is available to pursuant to
Rule 144 of the Securities Act and (b) no Event of
Default hereunder exists and is continuing, unless such Event of
Default is cured within any applicable cure period or is otherwise
waived in writing by the Holder in whole or in part at the
Holder’s option.
Any amounts converted by the Holder pursuant to
this Section 2.2 shall be deemed to constitute payments
of outstanding principal applying to Monthly Amounts for the
remaining Repayment Dates in chronological order .
2.3
Optional Redemption in Cash . The Borrower will have
the option of prepaying this Note (“ Optional Redemption ”) by
paying to the Holder a sum of money equal to (i) one hundred
five percent (105%) of the principal amount of this Note if the
closing price of the Common Stock on one or more of the three
(3) trading days immediately preceding the Optional Redemption
date is less than or equal to 75% of the then Fixed Conversion
Price; (ii) one hundred ten percent (110%) of the principal
amount of this Note if the closing price of the Common Stock on one
or more of the three (3) trading days immediately preceding
the Optional Redemption date is between 76% and 100% of the then
Fixed Conversion Price, inclusive; or (iii) one hundred
fifteen percent (115%) of the principal amount of this Note if the
closing price of the Common Stock on one or more of the three
(3) trading days immediately preceding the Optional Redemption
date is between 101% and 107.5% of the then Fixed Conversion Price,
inclusive; or (iv) one hundred twenty percent (120%) of the
principal amount of this Note if the closing price of the Common
Stock on one or more of the three (3) trading days immediately
preceding the Optional Redemption Date is greater than 107.5% of
the then Fixed Conversion Price, together with accrued but unpaid
interest thereon and any and all other sums due, accrued or payable
to the Holder arising under this Note, the Security Agreement, or
any Ancillary Agreement (as defined in the Security Agreement) (the
“ Redemption
Amount ”) outstanding on the day written notice of
redemption (the “ Notice
of Redemption ”) is given to the Holder. The
Notice of Redemption shall specify the date for such Optional
Redemption (the “ Redemption Payment Date ”)
which date shall be ten (10) days after the date of the Notice
of Redemption (the “ Redemption Period ”). A Notice
of Redemption shall not be effective with respect to any portion of
this Note for which the Holder has a pending election to convert
pursuant to Section 3.1, or for conversions elected to be made
by the Holder pursuant to Section 3.1 during the Redemption
Period. The Redemption Amount shall be determined as if such
Holder’s conversion elections had been completed immediately
prior to the date of the Notice of Redemption. On the Redemption
Payment Date, the Redemption Amount must be paid in good
3
funds to the
Holder. In the event the Borrower fails to pay the Redemption
Amount on the Redemption Payment Date, then such Redemption Notice
will be null and void.
ARTICLE III
CONVERSION
RIGHTS
3.1.
Holder’s Conversion Rights . The Holder shall
have the right, but not the obligation, to convert all or any
portion of the then aggregate outstanding principal amount of this
Note, together with interest and fees due hereon, into shares of
Common Stock subject to the terms and conditions set forth in this
Article III. The Holder may exercise such right by
delivery to the Borrower of a written notice of conversion not less
than one (1) day prior to the date upon which such conversion
shall occur. The date upon which such conversion shall occur
is (the “ Conversion
Date ”).
3.2
Conversion Limitation . Notwithstanding anything
contained herein to the contrary, the Holder shall not be entitled
to convert pursuant to the terms of this Note an amount that
(a) would be convertible into that number of Conversion Shares
that would exceed the difference between the number of shares of
Common Stock beneficially owned by such Holder or issuable upon
exercise of warrants held by such Holder and 4.99% of the
outstanding shares of Common Stock of the Borrower or
(b) exceed twenty five percent (25%) of the aggregate dollar
trading volume of the Common Stock for the ten (10) day
trading period immediately preceding delivery of a Notice of
Conversion to the Borrower. For the purposes of the
immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the
Exchange Act and Regulation 13d-3 thereunder. The
Holder may void the Conversion Share limitation described in this
Section 3.2 upon 75 days prior notice to the Borrower or
without any notice requirement upon an Event of Default.
3.3
Mechanics of Holder’s Conversion . (a) In the
event that the Holder elects to convert this Note into Common
Stock, the Holder shall give notice of such election by delivering
an executed and completed notice of conversion (“Notice of
Conversion”) to the Borrower and such Notice of Conversion
shall provide a breakdown in reasonable detail of the Principal
Amount, accrued interest and fees being converted. On each
Conversion Date (as hereinafter defined) and in accordance with its
Notice of Conversion, the Holder shall make the appropriate
reduction to the Principal Amount, accrued interest and fees as
entered in its records and shall provide written notice thereof to
the Borrower within two (2) business days after the Conversion
Date. Each date on which a Notice of Conversion is delivered
or telecopied to the Borrower in accordance with the provisions
hereo
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