Exhibit
4.7


 


THIS OFFER AND SALE OF THE SECURITIES OFFERED HEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”),
OR QUALIFIED UNDER ANY STATE OR NON-U.S. SECURITIES LAWS.  THE WARRANT IS BEING OFFERED AND SOLD IN
RELIANCE ON THE EXEMPTIONS AFFORDED BY REGULATION D PROMULGATED UNDER THE
SECURITIES ACT.  THE WARRANT MAY NOT BE
TRANSFERRED OR RESOLD WITHOUT REGISTRATION AND QUALIFICATION UNDER THE
SECURITIES ACT AND APPLICABLE STATE AND NON-U.S. SECURITIES LAWS, UNLESS AN EXEMPTION
FROM REGISTRATION AND QUALIFICATION UNDER THE SECURITIES ACT AND SUCH LAWS IS
THEN AVAILABLE.


 


THIS WARRANT AGREEMENT HAS NOT BEEN FILED WITH OR
REVIEWED OR APPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR BY THE
ATTORNEY GENERAL OR SECURITIES AGENCY OF ANY STATE OR NON-U.S.
JURISDICTION.  NONE OF THE FOREGOING HAS
PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE WARRANT.  ANY REPRESENTATION TO THE CONTRARY IS
ILLEGAL.


 


WARRANT AGREEMENT


 


between


 


W.R. HAMBRECHT + CO., LLC


 


and


 


INNOVATIVE MICRO
TECHNOLOGY, INC.,


 


as the Company


 


Dated as of January 25, 2005


 





















 


This WARRANT AGREEMENT dated as of January 25,
2005 (the “Agreement”), is made by and between W.R. Hambrecht + Co., LLC, a Delaware
limited liability company (“WRH”), and Innovative Micro Technology, Inc., a
Delaware corporation (the “Company”).


 


R E C I T A L S:


 


WHEREAS, the Company and WRH are parties to a Letter
Agreement dated as of April 16, 2004 and amended by a Letter dated January 14,
2005 (as so amended, the “Letter Agreement”), which provides that upon the
completion of a Placement (as defined in the Letter Agreement), subject to the
terms and conditions of the Letter Agreement, the Company shall issue to WRH a
warrant for the purchase of the Company’s common stock, par value $0.0001 per
share (the “Common Stock”) equal to 2% of the shares sold in the Placement; and


 


WHEREAS, on the date hereof, the Company is completing
a Placement pursuant to a Preferred Stock Purchase Agreement, for an aggregate
purchase price of $17,000,000, convertible into 5,666,666 shares of Common
Stock at a price of $3.00 per share of Common Stock on a fully converted basis.


 


NOW, THEREFORE, in consideration of the mutual
covenants, agreements, representations and warranties made herein and other
good and valuable consideration, the receipt and sufficiency of which hereby
are acknowledged, the parties hereto agree as follows:


 


ARTICLE I


Definitions


 


Section 1.1                                      Definition of Terms.


 


For all purposes of this Agreement, the following
terms shall have the meanings ascribed to them in this Section 1.1.


 


“Agreement” means this Warrant Agreement
(including the Exhibits as provided herein), as the same from time to time may
be amended, supplemented, modified or waived.


 


“Board” means the Company’s Board of Directors.


 


“Common Stock” means the common stock, par
value $0.0001 of the Company, and also shall include any securities issued or
issuable with respect to the Common Stock, by way of a stock dividend, stock
split, combination of shares, recapitalization, restructuring, merger,
consolidation or other reorganization of the Company.


 


“Company” has the meaning set forth in the
first paragraph of this Agreement.


 


“Dollars” or “$” means lawful money of
the United States of America.


 


“Investors’ Rights Agreement” means the
Investors’ Rights Agreement between the Company and the purchasers of the
Series A Redeemable Preferred Stock and Series A-1
Convertible Preferred Stock dated as of January 25, 2005.


 


1





















 


“Notice” has the meaning set forth in Section 5.2.


 


“Person” means any natural person, firm,
partnership, association, corporation, company, limited
liability company, trust, business trust, Governmental Authority or other
entity.


 


“SEC” means the United States Securities and
Exchange Commission.


 


“Securities” has the meaning set forth in Section 3.1.


 


“Securities Act” means the Securities Act of
1933, as amended.


 


“Warrant” has the meaning set forth in Section 2.1
together with any and all warrants resulting from a permitted transfer or
subdivision thereof.


 


“Warrant Shares” has the meaning set forth in Section 2.1.


 


“WRH” means W.R. Hambrecht + Co., LLC and
its transferees and assigns.


 


ARTICLE II

GRANT OF THE WARRANTS


 


Section 2.1                                      Grant of Warrants.  The Company
hereby grants to WRH a warrant for the purchase of up to 113,333 shares of
Common Stock at a price of $3.00 per share (the “Warrant”) at any time on or prior
to January 17, 2009 (the “Expiration Date”).  The shares of Common Stock issuable to WRH
upon exercise of the Warrant are sometimes collectively referred to as the “Warrant
Shares”.  The last day for exercise
of each of the respective warrants is referred to herein as the “Expiration
Date.”


 


Section 2.2                                      Form of Warrant.  The Warrant
will be in the form of Exhibit A to this Agreement.


 


Section 2.3                                      Securities Act Compliance.  WRH
understands that the Company has not registered the Warrant or the Warrant
Shares under the Securities Act or any state securities law, and WRH agrees
that neither the Warrant nor the Warrant Shares shall be sold, transferred or
offered for sale without registration under the Securities Act and any
applicable state securities law, or the availability of an exemption therefrom.


 


ARTICLE III

Investor Representations and Warranties


 


WRH hereby represents and warrants to the Company
that:


 


Section 3.1                                      Purchase Entirely for Own Account.  The Warrants
and the Warrant Shares (collectively, the “Securities”) are being acquired for
investment for WRH’s own account, not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof, and WRH has no present
intention of selling, granting any participation in, or otherwise distributing
same.


 


2





















 


Section 3.2                                      Disclosure of Information.  WRH believes
it has received all the information it considers necessary or appropriate for
deciding whether to purchase the Securities. 
WRH further represents that it has had an opportunity to ask questions
and receive answers from the Company regarding the terms and conditions of the
offering of the Securities and the business, properties, prospects and
financial condition of the Company.


 


Section 3.3                                      Investment Experience.  WRH is an
investor in securities of companies in the development stage and acknowledges
that it is able to fend for itself, can bear the economic risk of its
investment, and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the investment
in the Securities.  WRH also represents
it has not been organized for the purpose of acquiring the Securities.  WRH acknowledges that any investment in the
Securities involves a high degree of risk, and represents that it is able,
without materially impairing its financial condition, to hold the Securities
for an indefinite period of time and to suffer a complete loss of its
investment.


 


Section 3.4                                      Accredited
Investor.  WRH is an “accredited
investor” within the meaning of Rule 501 of Regulation D under the Securities
Act, as presently in effect.


 


Section 3.5                                      Restricted Securities.  WRH
understands that the Warrants and the Warrant Shares are characterized as “restricted
securities” under the federal securities laws as they are being acquired from
the Company in a transaction not involving a public offering, and that under
such laws and applicable regulations such securities may be resold without
registration under the Securities Act only in limited circumstances.  In this connection, WRH represents that it is
familiar with SEC Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Securities Act.  THE INVESTOR UNDERSTANDS AND ACKNOWLEDGES
HEREIN THAT AN INVESTMENT IN THE COMPANY’S SECURITIES INVOLVES AN EXTREMELY
HIGH DEGREE OF RISK AND MAY RESULT IN A COMPLETE LOSS OF ITS INVESTMENT.  WRH understands that the Securities have not
been registered under the Securities Act or qualified under the laws of any
state and, except as provided herein, will not be registered or qualified, and
thus WRH will not be able to resell or otherwise transfer the Securities unless
they are registered under the Securities Act of 1933, as amended, and
registered or qualified under applicable state securities laws, or an exemption
from such registration or qualification is available.  WRH has no immediate need for liquidity in
connection with this investment and does not anticipate that WRH will be
required to sell Securities in the foreseeable future.


 


Section 3.6                                      Further limitations on Disposition. 
Without in any way limiting the representations set forth above, WRH
further agrees not to make any disposition of all or any portion of the Warrant
or the Warrant Shares unless and until the transferee has agreed in writing for
the benefit of the Company to be bound by this Agreement.


 


Section 3.7                                      Legends.  The
Securities shall bear legends substantially as shown in the Form of Warrant
attached hereto as Exhibit A.


 


Section 3.8                                      No Reliance on Others.  WRH
acknowledges that it is not relying upon any person, firm or corporation, other
than the Company and its officers and directors, in making its investment or
decision to invest in the Company.


 


3





















 


ARTICLE IV

Registration Rights


 


Section 4.1                                      Registration Rights.  Upon
WRH’s execution and delivery of a Joinder to the Investors’ Rights Agreement,
in the form of Exhibit B hereto, the Warrant Shares shall be deemed Registrable
Securities pursuant the Investors’ Rights Agreement,
and WRH shall be a Holder pursuant to the Investors’ Rights Agreement.


 


ARTICLE V

Miscellaneous


 


Section 5.1                                      Severability.  If any
provision of this Agreement, including any phrase, sentence, clause, Section or
subsection is inoperative or unenforceable for any reason, such circumstances
shall not have the effect of rendering the provision in question inoperative or
unenforceable in any other case or circumstance, or of rendering any other
provision or provisions herein contained invalid, inoperative, or unenforceable
to any extent whatsoever.


 


Section 5.2                                      Notices.  All notices,
requests, demands, approvals, consents, waivers and other communications
required or permitted to be given under this Agreement (each, a “Notice”)
shall be in writing and shall be (a) delivered personally, (b) mailed
by first-class or certified mail, return receipt requested, postage prepaid,
(c) sent by next-day or overnight mail or delivery, or (d) sent by
facsimile transmission, provided that the original copy thereof also is sent by
first class or certified mail or by overnight delivery.


 


(a)                                  if to WRH, to:


 


W.R. Hambrecht + Co., LLC

539 Bryant Street

San Francisco, CA  94107-1237

Facsimile:  (415) 551-3242

Attention:  Jonathan Fayman

Chief Financial Officer


 


Attention:


 


(b)                                 if to the Company, to:


 


Innovative Micro Technology, Inc.

75 Robin Hill Road

Santa Barbara, CA 93117

Facsimile:  (805) 967-2677

Attention:  John Foster, President


 


4





















 


with a copy to (which shall not comprise Notice) to:


 


James J. Slaby, Esq.

Sheppard, Mullin, Richter & Hampton LLP

333 South Hope Street

Suite 4800

Los Angeles, CA  90071

Facsimile:  (213) 620-1398


 


or, in each case, at such other address as
may be specified in a Notice to the other party hereto.  All Notices shall be deemed effective and
given upon receipt.


 


Section 5.3                                      Attorneys’ Fees.  If any party
hereto initiates any legal action arising out of or in connection with this
Agreement, the prevailing party shall be entitled to recover from the other
party all reasonable attorneys’ fees, expert witness fees and expenses incurred
by the prevailing party in connection therewith.


 


Section 5.4                                      Liability for Transfer Taxes. The Company shall be responsible for and pay in a
timely manner all sales, use, value added, documentary, stamp, gross receipts,
registration, transfer, conveyance, excise, recording, license and other
similar taxes and fees (“Transfer Taxes”), arising out of or in
connection with or attributable to the transactions effected pursuant to this
Agreement.  Each party hereto shall
prepare and timely file all Tax Returns required to be filed in respect of
Transfer Taxes that are the primary responsibility of such party under
applicable law; provided, however, that such party’s preparation
of any such Tax Returns shall be subject to the other party’s approval, which
approval shall not be withheld or delayed unreasonably.


 


Section 5.5                                      Headings 
The
headings contained in this Agreement are for purposes of convenience only and
shall not affect the meaning or interpretation of this Agreement.


 


Section 5.6                                      Entire Agreement.  This Agreement
(including the Exhibits hereto) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter hereof.


 


Section 5.7                                      Counterparts. 
This Agreement may be executed (including by facsimile transmission)
with counterpart signature pages or in several counterparts, each of which
shall be deemed an original and all of which shall together constitute one and
the same instrument.


 


Section 5.8                                      GOVERNING LAW, ETC.


 


(a)                                  THIS AGREEMENT SHALL BE GOVERNED IN ALL
RESPECTS, INCLUDING AS TO VALIDITY, INTERPRETATION AND EFFECT, BY THE INTERNAL
LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
RULES THEREOF.


 


(b)                                 WRH AND THE COMPANY HEREBY IRREVOCABLY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF CALIFORNIA AND
THE CENTRAL DISTRICT OF CALIFORNIA OF THE FEDERAL COURTS OF THE


 


5





















 


UNITED STATES OF AMERICA SOLELY IN RESPECT OF THE INTERPRETATION AND
ENFORCEMENT OF THE PROVISIONS OF THIS AGREEMENT AND OF THE DOCUMENTS REFERRED
TO IN THIS AGREEMENT, AND HEREBY WAIVE, AND AGREE NOT TO ASSERT, AS A DEFENSE
IN ANY ACTION, SUIT OR PROCEEDING FOR THE INTERPRETATION OR ENFORCEMENT HEREOF
OR OF ANY SUCH DOCUMENT, THAT IT IS NOT SUBJECT THERETO OR THAT SUCH ACTION,
SUIT OR PROCEEDING MAY NOT BE BROUGHT OR IS NOT MAINTAINABLE IN SAID COURTS OR
THAT THE VENUE THEREOF MAY NOT BE APPROPRIATE OR THAT THIS AGREEMENT OR ANY OF
SUCH DOCUMENT MAY NOT BE ENFORCED IN OR BY SUCH COURTS, AND THE PARTIES HERETO
IRREVOCABLY AGREE THAT ALL CLAIMS WITH RESPECT TO SUCH ACTION OR PROCEEDING
SHALL BE HEARD AND DETERMINED IN SUCH A CALIFORNIA STATE OR FEDERAL COURT.  EACH OF WRH AND THE COMPANY HEREBY CONSENTS
TO AND GRANTS ANY SUCH COURT JURISDICTION OVER THE PERSON OF SUCH PARTIES AND
OVER THE SUBJECT MATTER OF ANY SUCH DISPUTE AND AGREES THAT MAILING OF PROCESS
OR OTHER PAPERS IN CONNECTION WITH ANY SUCH ACTION OR PROCEEDING IN THE MANNER
PROVIDED IN SECTION 5.2, OR IN SUCH OTHER MANNER AS MAY BE
PERMITTED BY LAW, SHALL BE VALID AND SUFFICIENT SERVICE THEREOF.


 


(c)                                  JURY TRIAL WAIVER.  WRH
AND THE COMPANY EACH WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING INSTITUTED BY EITHER OF THEM AGAINST THE OTHER THAT PERTAINS
DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, THE WARRANT, ANY ALLEGED TORTIOUS
CONDUCT BY THE INVESTOR OR THE COMPANY, OR IN ANY WAY, DIRECTLY OR INDIRECTLY,
ARISES OUT OF OR RELATES TO THE RELATIONSHIP BETWEEN INVESTOR AND COMPANY.


 


Section 5.9                                      Binding Effect.  This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, successors and permitted assigns.


 


Section 5.10                                Assignment.  Except as
expressly permitted herein, this Agreement shall not be assignable or otherwise
transferable by any party hereto without the prior written consent of the other
parties hereto.


 


Section 5.11                                Amendment; Waivers, etc. 
No discharge of this Agreement, and no waiver hereunder, shall be valid
or binding unless set forth in writing and duly executed by the holder of this Warrant
or, if this Warrant has been subdivided, by holders of Warrants covering a
majority of the unexercised Warrant Shares originally subject to this
Warrant.  For the purpose of determining
whether the holders of outstanding Warrants entitled to purchase a requisite
number of Warrant Shares have at any time taken any action authorized by this
Warrant, any Warrants owned by the Company or any affiliate of the Company
shall be deemed not to be outstanding. 
The terms and conditions at this Warrant Agreement may be waived or
discharged only in writing.  Any such
waiver shall constitute a waiver only with respect to the specific matter
described in such writing and shall in no way impair the rights of the party
granting such waiver in any other respect or at any other time.  Neither the waiver by any of the parties
hereto of a breach of or a default under any of the provisions of this
Agreement, nor the failure by any of the


 


6





















 


parties, on one or more occasions, to enforce any of the provisions of
this Agreement or to exercise any right or privilege hereunder, shall be
construed as a waiver of any other breach or default of a similar nature, or as
a waiver of any of such provisions, rights or privileges hereunder.  No amendment or modification of this
Agreement shall be effective unless in a writing
executed by the holders of two-thirds of the Warrant Shares, including for such
purposes Warrant Shares issuable pursuant to outstanding, exercisable Warrants.


 


The next page is the
signature page.


 


7





















 


IN WITNESS WHEREOF, the parties hereto have duly
executed this Warrant Agreement as of the date first above written.


 


	
   

  	
  W.R. HAMBRECHT + CO., LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  INNOVATIVE MICRO TECHNOLOGY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John
  Foster

  	
   

  
	
   

  	
  John Foster

  
	
   

  	
  President and Chief Executive Officer

  
					



 


1





















 


EXHIBIT A


 


Form of Warrant


 


THIS WARRANT AND THE SHARES OF COMMON STOCK
ISSUABLE UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “ACT”), OR QUALIFIED UNDER APPLICABLE STATE SECURITIES
LAWS AND MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED OR OTHERWISE DISPOSED
OF UNLESS (i) A REGISTRATION STATEMENT UNDER THE ACT, SHALL HAVE BECOME
EFFECTIVE WITH RESPECT THERETO AND ALL APPLICABLE QUALIFICATIONS UNDER STATE SECURITIES
LAWS SHALL HAVE BEEN OBTAINED WITH RESPECT THERETO; (ii) A
WRITTEN OPINION FROM COUNSEL FOR THE HOLDER REASONABLY SATISFACTORY TO THE
ISSUER HAS BEEN OBTAINED STATING THAT NO SUCH REGISTRATION OR QUALIFICATION IS
REQUIRED; OR (iii) SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.


 


WARRANT TO PURCHASE COMMON STOCK OF INNOVATIVE MICRO TECHNOLOGY,
INC.


 


For good and valuable
consideration, the receipt of which is hereby acknowledged, Innovative Micro
Technology, Inc., a Delaware corporation (the “Company”), hereby grants to WR
Hambrecht +  Co., LLC, a Delaware limited liability company, its
successors and assigns (collectively, the “Holder”), an irrevocable warrant
(the “Warrant”) to purchase, subject to the other terms hereof, 113,333 shares
of Common Stock, par value $0.0001 per share, of the Company (the “Shares”), at
the Warrant Price, as defined below, at any time beginning on January 25,
2005 and ending on January 24, 2009 (the “Expiration Date”).


 


1.                                       Exercise; Issuance of Certificates;
Payment for Shares.  This Warrant may be exercised by the Holder,
in whole or in part, and on one or more occasions, by written notice to the
Company, in the form attached as Exhibit A hereto, at any time prior to
5:00 p.m., Santa Barbara time, on the Expiration Date, and by payment to the
Company by wire transfer (in accordance with the wire transfer instructions
attached hereto as Exhibit B) of the aggregate Warrant Price for the
number of Shares designated by the Holder (but not more than the number of
Shares for which this Warrant then remains subject and unexercised).  Consideration received by the Company under a
broker-assisted sale and remittance program acceptable to the Company may also
be used to exercise this Warrant. 
Certificates for the Shares so purchased will be delivered to the Holder
within a reasonable time, not exceeding fifteen (15) business days, after
this Warrant has been exercised, and, unless this Warrant has expired, it will
continue in effect with respect to the number of Shares, if any, as to which it
has not then been exercised and which remain covered by this Warrant as herein
provided.  Each exercise of this Warrant
shall be deemed to have been effected immediately prior to the close of
business on the business day on which the Notice is given to the Company.  At such time, the person or persons in whose
name or names any certificate for the Shares shall be issuable upon such
exercise shall be deemed to have become the holder or holders of record of the
Shares represented by such certificate or certificates, and to be entitled to
all rights of a Stockholder with respect to such Shares, including without
limitation voting rights.


 


2





















 


2.                                       Shares to be Fully
Paid; Reservation of Shares.  The Company
covenants and agrees as follows:


 


2.1.                              All Shares issued upon the exercise of
this Warrant will, upon issuance, be fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issuance thereof.


 


2.2.                              During the period within which this
Warrant may be exercised, the Company will at all times have authorized and
reserved for the purpose of issuance or transfer upon exercise of this Warrant
a sufficient number of Shares to provide for the exercise of this Warrant.


 


2.3.                              The Company will take all actions
necessary to assure that the Shares issuable upon the exercise of this Warrant
may be so issued without violation of any applicable law or regulation, or of
any requirements of any securities exchange upon which the shares of the
Company may then be listed.


 


3.                                       Warrant Price.


 


3.1.                              Initial Warrant Price; Subsequent
Adjustment of Price and Number of Purchasable Shares. 
The initial Warrant Price (“Initial Warrant Price”) will be three
dollars ($3.00) per Share, and will be adjusted from time to time as provided
below.  The Initial Warrant Price or, if
such price has been adjusted, the price per Share as last adjusted pursuant to
the terms hereof, is referred to as the “Warrant Price” herein.


 


3.2.                              Subdivision or Combination of Shares. 
If the Company at any time while this Warrant, or any portion hereof,
remains outstanding and unexpired shall split, subdivide or combine the
securities as to which purchase rights under this Warrant exist, into a
different number of securities of the same class, the number of Shares for
which this Warrant may be exercised shall be adjusted to represent the
aggregate number of securities that, if this Warrant had been exercised immediately
prior to such event, the Holder would have owned upon such dividend, distribution,
subdivision, combination or reclassification, and the Warrant Price for such
securities shall be proportionately decreased in the case of a split or
subdivision or proportionately increased in the case of a combination.


 


3.3.                              Reclassification. 
If the Company, at any time while this Warrant, or any portion hereof,
remains outstanding and unexpired, by reclassification of securities or
otherwise shall change any of the securities as to which purchase rights under
this Warrant exist into the same or a different number of securities of any
other class or classes, this Warrant shall thereafter represent the right to
acquire such number and kind of securities as would have been issuable as the
result of such change with respect to the securities that were subject to the
purchase rights under this Warrant immediately prior to such reclassification
or other change and the Warrant Price therefor shall be appropriately adjusted.


 


3.4.                              Adjustments for Dividends in Stock or
Other Securities or Property.  If while this
Warrant, or any portion hereof, remains outstanding and unexpired holders of
the securities as to which purchase rights under this Warrant exist at the time
shall have received, or, on or after the record date fixed for the
determination of eligible stockholders, shall have become


 


3





















 


entitled to receive, without payment therefor, other or additional
stock or other securities or property (other than cash) of the Company by way
of dividend, then and in each case, this Warrant shall represent the right to
acquire, in addition to the number of shares of the security receivable upon
exercise of this Warrant, and without payment of any additional consideration
therefor, the amount of such other or additional stock or other securities or
property (other than cash) of the Company that the Holder would hold on the
date of such exercise had it been holder of record of the security receivable
upon exercise of this Warrant on the date hereof and had thereafter, during the
period from the date hereof to and including the date of such exercise,
retained such shares and/or all other additional securities available to it as
aforesaid during such period, giving effect to all adjustments called for
during such period.


 


3.5.                              Reorganization, Reclassification,
Consolidation, Merger or Sale.  If, while
this Warrant, or any portion hereof, remains outstanding and unexpired, any
capital reorganization or reclassification of the stock of the Company, or any
consolidation or merger of the Company with another corporation or entity, or
the sale of all or substantially all of the Company’s assets to another
corporation will be effected in such a way that holders of the securities for
which this Warrant is exercisable will be entitled to receive shares,
securities or assets with respect to or in exchange for such securities, then,
upon exercise of this Warrant, the Holder will thereafter have the right to
receive such shares, securities or assets as may be issued or payable with
respect to or in exchange for a number of outstanding securities equal to the
number of securities purchasable and receivable upon the exercise of this
Warrant immediately prior to such event. 
If a purchase, tender or exchange offer is made to and accepted by holders
of more than 50% of the outstanding capital stock of the Company (on an
as-converted to Common Stock basis), the Company will not effect any
consolidation, merger or sale with the Person, as defined below, making such
offer or with any Affiliate, as defined below, of such Person, unless, before
the consummation of such consolidation, merger or sale, the Holder of this
Warrant is given at least ten (10) business days’ notice prior to the
scheduled closing date (the “Closing Date”) of such transaction (which notice
shall specify the material terms of such transaction and the proposed Closing
Date).  In the event the Holder elects to
exercise this Warrant or any portion thereof following such notice and such
consolidation, merger or sale is not consummated within ten (10) days of
the proposed Closing Date (or any subsequent proposed Closing Date), then the
Holder may rescind its exercise of this Warrant by providing
written notice thereof to the Company, the Company shall take all actions
consistent therewith (including without limitation the immediate return of the
Warrant Price paid with respect to such rescinded exercise) and this Warrant
shall continue in full force and effect. 
As used in this paragraph, the term “Person” includes an individual, a
partnership, a corporation, a trust, a joint venture, a limited liability
company, an unincorporated organization and a government or any department or
agency thereof, and an “Affiliate” of a Person means any Person directly or
indirectly controlling, controlled by or under direct or indirect common
control with, such other Person.  A
Person will be deemed to control a corporation or other business entity if such
Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such corporation, whether through
the ownership of voting securities, by contract or otherwise.


 


3.6.                              Notice of Adjustment. 
Upon any adjustment of the number of Shares or the Warrant Price, the
Company will give written notice thereof, by first-class mail, postage
prepaid, addressed to the Holder at the Holder’s address as shown on the books
of the Company,


 


4





















 


which notice will state (i) the Warrant Price resulting from such
adjustment and the increase or decrease, if any, in the number of Shares
purchasable at such price upon the exercise of this Warrant, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based, and (ii) whether, after giving effect to such
adjustment, the maximum number of Shares issuable upon the exercise of this
Warrant will constitute more than 5% of the total number of the then issued and
outstanding Shares (including in such total number the maximum number of Shares
issuable upon the exercise of this Warrant).


 


3.7.                              Other Notices. 
If at any time:


 


3.7.1.                     the Company declares a cash dividend on its
Common Stock payable at a rate in excess of the rate of the last cash dividend
theretofore paid;


 


3.7.2.                     the Company declares a dividend on its
Common Stock payable in securities or pays a special dividend or other
distribution (other than regular cash dividends) to holders of its Shares;


 


3.7.3.                     the Company offers for subscription to
holders of any of its Common Stock additional shares of any class or other
rights;


 


3.7.4.                     there is a reorganization, reclassification,
consolidation or merger of the Company with, or sale of all or substantially
all of its assets to, another corporation or other entity; or


 


3.7.5.                     there is a voluntary or involuntary dissolution,
liquidation or winding up of the Company; then the Company will give, as
provided in paragraph 14 below, to the Holder’s address as shown on the books
of the Company, (i) at least ten (10) business days’ prior written notice
of the date on which the books of the Company will close or a record will be
taken for such dividend, distribution or subscription rights or for determining
rights to vote in respect of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, and
(ii) in the case of such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, at least ten (10)
business days’ prior written notice of the date when the same will take
place.  Any notice required by
clause (i) will also specify, in the case of any such dividend,
distribution or subscription rights, the date on which the Holder will be
entitled thereto, and any notice required by (ii) will also specify the
anticipated date on which the Holder will be entitled to exchange its Shares
for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be.


 


4.                                       Listing.  If any Shares
required to be reserved for the purpose of issuance upon the exercise of this
Warrant require registration with or approval of any governmental authority
under any federal or state law (other than the filing of a Registration Statement
under the Securities Act of 1933, as then in effect (the “Securities Act”), or
any similar law then in effect), or listing on any securities exchange, before
such Shares may be issued upon such exercise, the Company will, at its expense
and as expeditiously as possible, use its commercially reasonable efforts to
cause such Shares to be duly registered or approved or listed on the relevant
securities exchange, as the case may be.


 


5





















 


5.                                       Closing of Books. 
The Company will at no time close its transfer books against the
transfer of this Warrant or of any Shares issued or issuable upon the exercise
of this Warrant in any manner which interferes with the timely exercise of this
Warrant.


 


6.                                       Definition of Common Stock. 
As used in this Warrant the term “Common Stock” includes the Company’s
authorized Common Stock, par value $0.0001 per share, as constituted on the
date hereof and also includes any shares of any class of stock or other equity
securities of the Company thereafter authorized which will not be limited to a
fixed sum or percentage of par value in respect of the rights of holders
thereof to participate in dividends or in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the Company.


 


7.                                       Definition of Shares. 
Except as provided in paragraph 3.5, the Shares purchasable
pursuant to this Warrant will include only Shares designated as “common stock”
of the Company or, in the case of any reclassification of the outstanding
Shares, the Shares, securities or assets provided for in paragraph 3.5.


 


8.                                       No Voting Rights. 
This Warrant will not entitle the Holder to any voting rights or other
rights as a stockholder of the Company.


 


9.                                       Warrant Transferable. 
This Warrant and all rights hereunder are transferable, in whole or in
part, without charge to the Holder, by written notice to the Company at
the address referred to in paragraph 14 below by the Holder, in person or
by duly authorized attorney; provided that (i) a written opinion of
counsel for the Holder reasonably satisfactory to the Company has been obtained
stating that such transfer will not violate the registration requirements of
the Securities Act or any applicable state securities laws, and (ii) the
transferee has delivered to the Company a written agreement to be bound by
the terms and conditions hereof; provided that a written opinion shall not be
required in a transfer by the Holder to an entity controlling, controlled by or
under common control with the Holder. 
The Holder agrees that after such notice, the Holder may be treated by
the Company and all other persons dealing with this Warrant as the absolute
owner hereof for any purpose and as the person entitled to exercise the rights
represented by this Warrant, or to further assign this Warrant, any notice to
the contrary notwithstanding; but until receipt of any such notice of
assignment, the Company may treat the Holder as shown on its records as the
owner for all purposes.  Nothing in this
paragraph 9 shall be deemed to limit the effect of any agreement among the
Holder, the Company and other security holders of the Company restricting the
transfer of this Warrant or the Shares.


 


10.                                 Mutilation or Loss of Warrant. 
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) receipt of reasonably satisfactory indemnification,
and (in the case of mutilation) upon surrender and cancellation of this
Warrant, the Company will execute and deliver a new Warrant of like tenor and
date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon
become void.


 


11.                                 Taxes.  The Company
shall any transfer tax attributable to the issuance of this Warrant or of the
Warrant Shares.


 


6





















 


12.                                 No Limitation on Corporate Action; No
Impairment


 


12.1.                        No provision of this Warrant and no right
or option granted or conferred hereunder shall in any way limit, affect or
abridge the exercise by the Company of any of its corporate rights or powers to
recapitalize, amend its certificate of incorporation, reorganize, consolidate
or merge with or into another entity, or to transfer, all or any part of its
property or assets, or the exercise or any other of its corporate rights and
powers.


 


12.2.                        The Company will not, by amendment of its
certificate of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
action, avoid or seek to avoid the observance or performance of any of the
terms to be observed or performed by the Company under this Warrant, but will
at all times in good faith assist in the carrying out of all of the provisions
of this Warrant and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder under this Warrant
against impairment.


 


13.                                 Transfer to Comply with the Securities
Act.  This Warrant has not been registered under
the Act, or qualified under applicable state securities laws and has been
issued to the Holder for investment and not with a view to the distribution of
either the Warrant or the Shares.  Neither
this Warrant nor any of the Shares or any other security issued or issuable
upon exercise of this Warrant may be sold, transferred, pledged or hypothecated
in the absence of an effective registration statement under the Act and
qualification under applicable state securities laws relating to such security
or an opinion of counsel satisfactory to the Company that registration is not
required under the Act and qualification is not required under applicable state
securities laws.  Each certificate for
the Shares and any other security issued or issuable upon exercise of this
Warrant shall contain a legend on the face thereof, in form and substance
satisfactory to counsel for the Company, setting forth the restrictions on
transfer contained in this Section.


 


14.                                 Notices.  All notices,
requests, demands and other communications required or permitted to be given
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon receipt, if delivered personally, (ii) upon confirmation of receipt, if
given by electronic facsimile and (iii) on the third business day following
mailing, if mailed, postage prepaid, certified mail, return receipt requested
,to the following address (or at such other address for a party as shall be
specified by like notice):


 


(i)                                     if
to the Company, to:


 


Innovative Micro Technology, Inc.

75 Robin Hill Rd.

Santa Barbara, CA  93117

Facsimile:  805-967-2677

Attention:  John Foster, President


 


With a copy (which shall not constitute
notice) to:


 


Sheppard, Mullin, Richter & Hampton LLP

333 S. Hope Street, 48th Floor Los Angeles, CA 
90017

Facsimile:  (213) 620-1398

Attention:  James J. Slaby, Esq.


 


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(ii)                                  if
to the Holder, to:


 


W.R. Hambrecht + Co., LLC

539 Bryant Street

San Francisco, CA  94107-1237

Facsimile:  (415) 551-3242

Attention:  Jonathan Fayman

Chief Financial Officer


 


15.                                 Supplements and Amendments; Whole
Agreement.  This Warrant may be amended or supplemented
only by an instrument in writing signed by the Company and the Holder.  This Warrant contains the full understanding
of the Company and the Holder with respect to the subject matter hereof and
thereof and there are no representations, warranties, agreements or
understandings other than expressly contained herein and therein.


 


16.                                 Governing Law. 
This Warrant shall be deemed to be a contract made under the laws of the
State of California and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State, without regard to its conflicts of laws
rules.


 


17.                                 Descriptive Headings. 
Descriptive headings of the several Sections of this Warrant are
inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.


 


18.                                 No Fractional Shares. 
No fractional Shares shall be issued upon exercise of this Warrant.  In lieu of any fractional Shares to which the
Holder would otherwise be entitled, the Company shall pay cash equal to the
product of such fraction multiplied by Warrant Price.


 


19.                                 Waivers Strictly Construed. 
With regard to any power, remedy or right provided herein or otherwise
available to any party hereunder (i) no waiver or extension of time shall
be effective unless expressly contained in a writing signed by the waiving
party; and (ii) no alteration, modification or impairment shall be implied
by reason of any previous waiver, extension of time, delay or omission in
exercise, or other indulgence.


 


20.                                 Severability. 
The validity, legality or enforceability of the remainder of this
Warrant shall not be affected even if one or more of its provisions shall be
held to be invalid, illegal or unenforceable in any respect.


 


The next page is the signature page.


 


8





















 


IN WITNESS WHEREOF, the Company has caused this
Warrant to be signed by its duly authorized officer, as of January 25,
2005.


 


	
   

  	
  INNOVATIVE MICRO TECHNOLOGY, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  John Foster

  
	
   

  	
   

  	
  President

  



 


9





















 


FORM OF


 


NOTICE OF EXERCISE OF WARRANT


 


The “Holder” designated below, subject to the
conditions set forth in that certain Warrant to Purchase Common stock of
Innovative Micro Technology, Inc. (the “Company”), dated as of January 25,
2005 (the “Warrant”), hereby elects to exercise the right, represented by the
Warrant, to purchase shares of the Common Stock of the Company  and tenders herewith payment as follows:


 


AGGREGATE WARRANT PRICE:  $__________________________ (Payment shall be
made by wire transfer in accordance with the wire transfer instructions
attached to the Warrant as Exhibit A.)


 


Please deliver the stock certificate to: ____________________________________


 


___________________________________________________________________


 


___________________________________________________________________


 


The Holder hereby represents and warrants to the
Company as follows:


 


1.                                       The Holder has sufficient knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of its prospective investment in the shares of Common
Stock of the Company.


 


2.                                       The Holder understands that it is
purchasing the shares of Common Stock of the Company pursuant to an exemption
from the registration requirements of the Securities Act of 1933, as amended
(the “Act”) and without registration under the Act or any state securities or
Blue Sky laws.


 


3.                                       The Holder is an “accredited investor” as
defined in Rule 501(a) of Regulation D under the Act.


 


Dated: ______________ , 200__


 


“Holder”


 


 


	
   

  	
   

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
			



 





















 


WIRE INSTRUCTIONS


 


On the exercise of the Warrant the aggregate Warrant
Price shall be paid to the Company by wire transfer to the following address,
or such other address as may be provided by the Company hereafter:


 





















 


EXHIBIT B


 


Form of Joinder to
Investors’ Rights Agreement


 


Innovative Micro Technology
Inc. (the “Company”) and W.R. Hambrecht + Co., LLC (“WRH”) are entering into
this Joinder to Investors’ Rights Agreement (“Joinder Agreement”), dated as of January 25,
2004, pursuant to Section 5.2 of the Investors’ Rights Agreement dated as
of January 25, 2005 (the “ Investors’ Rights
Agreement “) by and between the Company and the Investors listed on Schedule I
attached thereto.


 


Any capitalized terms used
but not defined herein shall have the meanings ascribed to them in the
Investors’ Rights Agreement.


 


a.               The Company hereby agrees that, subject to paragraph 2
hereof and the terms, conditions and limitations of the Investors’ Rights
Agreement, WRH shall be joined to the Investors’ Rights agreement as a “Holder”
under Articles II, IV and VI thereof, and shall have, on a pro rata basis, the
same rights as other Holders with respect to Registrable Securities under
Articles II, IV and VI.


 


b.              WRH hereby agrees to become a party to the Investors’
Rights Agreement, to be bound by the same conditions, limitations and
obligations as the other Holders pursuant to the Investors’ Rights Agreement,
and to comply with the provisions of the Investors’ Rights Agreement in the
same manner as if it were an original signatory to such agreement.


 


c.               Notices pursuant to this Joinder Agreement and the
Investors’ Rights Agreement shall be provided as set forth in Section 6.3
of the Investors’ Rights Agreement, to the following addresses:


 


1.               if to the Company, to any Investor or to
any Holder other than WRH, to their respective addresses provided in the
Investors’ Rights Agreement pursuant to Section 6.3 thereof;


 


2.               if to WRH, to the address set forth below
WRH’s signature below.


 


The next page is the signature
page.


 


2





















 


IN WITNESS WHEREOF, the
parties hereto have executed and delivered this Joinder Agreement as of the
25th  day of January, 2005.


 


	
  By: W.R. HAMBRECHT + CO., LLC

  
	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  
	
  Telephone:

  	
   

  	
   

  
	
  Facsimile:

  	
   

  	
   

  
	
   

  
	
   

  
	
  ACKNOWLEDGED:

  
	
   

  
	
  INNOVATIVE MICRO TECHNOLOGY, INC.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name: John Foster

  
	
  Title: President and CEO

  
	
  Date: January 25, 2005

  
									



 


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