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
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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 dat
