Exhibit 10.14

SECURED PROMISSORY NOTE

$1,500,000                                                                                                   March 15, 2004

 

FOR VALUE RECEIVED, the undersigned, INNOVATIVE MICRO TECHNOLOGY, INC., a
Delaware corporation ("Borrower"), hereby PROMISES TO PAY to the order of L-3
COMMUNICATIONS CORPORATION, a Delaware corporation ("Lender") or its designee,
at its offices at 600 Third Avenue, New York, New York 10016, or at such other
place as Lender may designate from time to time in writing, in lawful money of
the United States of America and in immediately available funds, the amount of
$1,500,000.

 Interest on the principal amount of the indebtedness evidenced hereby shall
accrue on a daily basis from the date hereof to and including the date of
repayment at a rate per annum equal to the Base Rate (as defined below) plus 2%,
calculated on the basis of a 365-day year or a 366-day year, as applicable.
Accrued and unpaid interest shall be compounded on a quarterly basis on each
Interest Compounding Date. Notwithstanding any provision to the contrary
contained herein, any amounts (whether principal or interest) that are not paid
to Lender as and when they become due hereunder (whether by acceleration or
otherwise) shall thereafter bear interest until and including the date of
payment at a rate per annum equal to the Base Rate plus 4%, calculated on the
basis of a 365-day year or a 366-day year, as applicable.

The principal amount of the indebtedness evidenced hereby and all interest
accrued and unpaid thereon shall be payable in whole (or at the election of the
Lender from time to time in part) upon two (2) business days prior written
demand from Lender to Borrower. Lender shall have the right, in its sole
discretion, to demand repayment either in cash or in shares of Borrower's common
stock (with each such share valued at $5.35 per share). Any such shares so
issued shall constitute "Registrable Securities" for purposes of the Stock
Purchase Agreement dated August 1, 2002 between Borrower and Lender (except that
such shares shall cease to be "Registrable Securities" at such time as provided
for under the proviso to the definition of "Registrable Securities" contained in
such agreement). Borrower hereby covenants and agrees that at all times until
repayment in full of all principal and unpaid interest accrued hereunder, it
shall (a) reserve and keep available for issuance such number of its authorized
but unissued shares of common stock as will from time to time be sufficient to
satisfy repayment in full of all principal and unpaid interest accrued hereunder
and (b) take all action necessary to increase the authorized number of shares of
its common stock if at any time there shall be insufficient authorized but
unissued shares of its common stock to permit such reservation. Borrower further
covenants and agrees that it shall take all action necessary to cause all shares
issued to Lender in response to any demand hereunder to be validly issued to
Lender, and to be fully-paid, non-assessable and free and clear of any liens at
the time of issuance.

Borrower may voluntarily prepay this note by paying the principal amount of the
indebtedness evidenced hereby and all interest accrued and unpaid thereon in
cash upon one (1) business day prior written notice to Lender; provided, that
Borrower may not prepay in cash any amount payable hereunder as to which Lender
has previously demanded repayment in shares of Borrower's common stock.

The obligations represented by this Note are secured by a security interest in
certain collateral of the Borrower, which security interest was granted by the
Borrower to the Lender pursuant to the terms of a security agreement dated on or
prior to the date hereof between the Borrower and the Lender (the "Security
Agreement").

For purposes of this Note: (i) the term "Interest Compounding Date" means the
last business day of each March, June, September and December; and (ii) the term
"Base Rate" means, (a) for any day between the date hereof and the first
Interest Compounding Date thereafter, the prime rate as published in the Wall
Street Journal on the date hereof and (b) for any subsequent day, the prime rate
as published in the Wall Street Journal as of the most recent prior Interest
Payment Date.

Upon and after the occurrence of an Event of Default (as defined in the Security
Agreement) and at the sole discretion of Lender, the principal amount of the
indebtedness evidenced hereby and all interest accrued and unpaid thereon may,
without demand, notice or legal process of any kind, be declared, and, upon such
declaration, immediately shall become, due and payable.

If a payment hereunder becomes due and payable on a Saturday, Sunday or legal
holiday under the laws of the State of New York, the due date thereof shall be
extended to the next succeeding business day, and the interest shall be payable
thereon during such extension at the applicable rate specified herein. In no
event whatsoever shall interest charged hereunder, however such interest may be
characterized or computed, exceed the highest rate permissible under any law
which a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. In the event that such a court determines that Lender has
received interest hereunder in excess of the highest rate applicable hereto,
such excess shall be applied to the payment of the principal amount of this Note
or refunded to Borrower.

Whenever possible each provision of this Note shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Note shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
hereof. This Note shall be binding upon the successors and assigns of Borrower
and shall inure to the benefit of the successors and assigns of Lender;
provided, that Borrower may not assign, transfer or delegate any of its rights
or obligations under this Agreement without the prior written consent of Lender.

Borrower shall not offset against any principal or interest payable hereunder
any claims or defenses, by way of abatement, set off, defense, counterclaim,
recoupment or otherwise, which Borrower may have except the defense of payment.

Borrower, for itself and its legal representatives, successors and assigns,
expressly waives to the fullest extent permitted by law presentment, demand,
protest, notice of dishonor, notice of non-payment, notice of maturity, notice
of protest, presentment for the purposes of accelerating maturity, diligence in
collection, and the benefit of any exemption or any insolvency laws.

All notices contemplated hereunder shall be given in accordance with the
provisions for the giving of notices contained in the Security Agreement. None
of the terms and provisions of this Note may be waived, altered, modified or
amended except by an instrument in writing executed by the Borrower and the
Lender. A waiver of any breach or default hereof will not constitute a waiver of
any other or subsequent breach or default, whether or not similar in nature.

This Note shall be governed by, and construed and enforced in accordance with,
the laws of the State of New York applicable to contracts made and performed
entirely within such State and without regard to conflict of law principles.

 

     INNOVATIVE MICRO TECHNOLOGY, INC.          By:  /s/ John S. Foster         
Name:  John S. Foster      Title:  Chief Executive Officer