Exhibit 10.20


 


Execution Copy


 


Innovative Micro Technology, Inc.


 


Right of First Refusal and Co-Sale Agreement


 


This Right of First Refusal
and Co-Sale Agreement (this “Agreement”) is made as of January 25, 2005 by
and among Innovative Micro Technology, Inc., a Delaware corporation (the “Company”),
the stockholders listed on the signature pages hereto (the “Current
Stockholders”) and the investors listed on Schedule I hereto (the “Investors”).


 


RECITALS


 


A.  As
of the date of this Agreement, each Current Stockholder owns the number of
shares (the “Shares”) of common stock, par value $0.0001 per share (the “Common
Stock”) of the Company, and has such rights to acquire additional shares of
Common Stock, as are set forth opposite each such Current Stockholder’s name on
the signature pages hereto.


 


B.  The
Investors and the Company have entered into a Preferred Stock Purchase
Agreement dated as of the date hereof (as the same may be amended from time to
time, the “Purchase Agreement”), pursuant to which the Company will sell, and
the Investors will buy, 1,000,000 shares of Series A Redeemable Preferred
Stock, 1,000,000 shares of Series A-1 Convertible Preferred Stock (the “Series A-1
Shares”) and warrants to purchase up to 500,000 shares of Common Stock, for an
aggregate purchase price of $17,000,000.


 


C.  As
a condition to the performance of their obligations under the Purchase
Agreement, the Investors will require, among other things, the Current
Stockholders and the Company to execute and deliver this Agreement.


 


D. 
Capitalized terms used but not defined herein shall have the same
meanings ascribed to them in the Purchase Agreement.


 


NOW, THEREFORE, in consideration of the
mutual premises and covenants set forth herein, the Company, the Investors and
the Current Stockholders hereby agree as follows:


 


1.                                       Definitions.  For purposes of this Agreement, the following
terms shall have the meanings set forth below:


 


“Available Shares” has the meaning set
forth in Section 2.2.


 


“Certificate of Designation” means the
Company’s Certificate of Designation of Series A Redeemable Preferred
Stock and Series A-1 Convertible Preferred Stock.


 


“Conversion Shares” means shares of
Common Stock issued or issuable on the conversion of Series A-1
Convertible Preferred Stock in accordance with the terms of the Certificate of
Designation.


 


“Common Stock” means the Company’s
Common Stock, par value $0.001 per share.


 


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“Company Notice” has the meaning set
forth in Section 2.1.


 


“Co-Sale Pro Rata Share” of an
Investor at any time shall mean, in any proposed sale of Common Stock or
Series A-1 Shares, the fraction resulting when (i) the total number
of Conversion Shares then held by or issuable to the Investor is divided by
(ii) the sum of the total number of Conversion Shares then held by or
issuable to all Investors, plus the number of Shares then held by the
Offeror.  In any proposed sale of
Series A Shares, “Co-Sale Pro Rata Share” of an Investor shall mean the
fraction resulting when the total number of Series A Shares then held by
the Investor is divided by the number of outstanding Series A Shares,


 


“Current Stockholder” has the meaning
set forth in the first paragraph of this Agreement, and also includes any
Permitted Transferee of a Current Stockholder.


 


“Exchange Act” means
the Securities Exchange Act of 1934, as amended.


 


“First Public Offering” means the
first underwritten public offering of securities of the Company, after the date
hereof, pursuant to an effective registration statement under the Securities
Act, other than a registration statement relating either to the sale of
securities to employees, directors or consultants of the Company pursuant to a
stock option, stock purchase or similar plan or a transaction under Rule 145
under the Securities Act.


 


“First Refusal Pro Rata Share” of an
Investor at any time shall mean the fraction resulting when (i) the total
number of Conversion Shares then held by or issuable to the Investor is divided
by (ii) the total number of Conversion Shares then held by or and issuable to
all Investors.


 


“Investor” shall mean a person listed
on Schedule I hereto or Schedule II hereto (if any).


 


“L-3” means L-3 Communications
Corporation, a Delaware corporation.


 


“Notice” has the meaning set forth in Section 12(c).


 


“Offeror” has the meaning set forth in
Section 2.1.


 


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


 


“Permitted Transferee” means, as to
any person proposing to transfer securities:


 


(i)                                     a partner,
retired partner, or affiliated partner of a transferor that is a partnership;


 


(ii)                                  a member of any
transferor that is a limited liability company;


 


(iii)                               a subsidiary or
affiliate of any transferor; or


 


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(iv)                              an immediate
family member of an individual transferor, or a trust for the benefit of such
transferor or immediate family member;


 


provided that, such
transferee agrees in writing to be bound by the terms of this Agreement.


 


“Prohibited Transfer” has the meaning
set forth in Section 5.1.


 


“Put Right” has the meaning set forth
in Section 5.1.


 


“Salable Shares” has the meaning set
forth in Section 3.5.


 


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


 


“Shares” means shares of Common Stock,
or securities convertible into Common Stock including the Series A-1
Shares and, as applicable, the shares of Series A Redeemable Preferred
Stock (“Series A Shares”) sold as a linked pair with the Series A-1
Shares under the Purchase Agreement. 
Whenever “Shares” refers to securities convertible into Common Stock,
the number of such Shares shall mean the number of shares of Common Stock into
which such securities are then convertible. 
Whenever “Shares” refers to securities held by a Current Stockholder,
such term shall include securities held by such Current Stockholder on the date
hereof and securities acquired by such Current Stockholder after the date
hereof.


 


2.                                       Right of First
Refusal.


 


2.1                                 If a Current
Stockholder or Investor proposes to sell any Shares, such Current Stockholder
or Investor (the “Offeror”) shall provide Notice to the Company and the
Investors of the price, the number and class of the Shares to be offered (the “Offered
Shares”) and the conditions of the proposed sale, including the identity of
the proposed purchaser of the Shares, the anticipated closing date of such
sale, and a copy of any written proposal, term sheet, letter of intent or other
agreement relating to the proposed sale (the “Company Notice”).  If the proposed consideration for the Offered
Shares is other than cash, the Company Notice must state the equivalent cash
value.


 


2.2                                 Within ten (10)
days of the delivery of the Company Notice, the Company may elect to purchase
all or part of the Offered Shares.  If
the Company determines not to purchase all of the Offered Shares, then as to
the remaining shares (the “Available Shares”), the Offeror shall provide
Notice to each Investor (the “Sale Notice”) and the Company of the
price, terms and conditions of the proposed sale, including the identity of the
proposed purchaser of the Available Shares, the anticipated closing date of
such sale, and a copy of any written proposal, term sheet, letter of intent or
other agreement relating to the proposed sale (which shall be the same price,
terms, conditions, identity and copy specified in or included with the Company
Notice).


 


2.3                                 By a Notice
delivered by the Investor to the Offeror and the Company within twenty (20)
calendar days after the date on which the Offeror delivered the Sale Notice
(the “Sale Notice Date”), each Investor may elect to purchase or obtain
the Available Shares, at


 


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the
price and on the terms specified in the Sale Notice, in an amount up to the
Investor’s First Refusal Pro Rata Share of the Available Shares.


 


2.4                                 Upon the
expiration of the twenty (20)-day period after the Sale Notice Date, the
Offeror shall promptly send a Notice (the “Second Sale Notice”) to the
Company and the Investors that agreed to purchase their full Pro Rata Shares of
the Offered Shares (the “Electing Investors”) of any other Investors’
failure to do likewise, stating the number of Available Shares that the
Investors have not elected to purchase (the “Refused Shares”).


 


2.5                                 By Notice
delivered to the Offeror and the Company within ten (10) days after delivery by
the Offeror of the Second Sale Notice, each Electing Investor may elect to
purchase Refused Shares, at the price and on the terms specified in the Sale
Notice, in an amount up to the total number of Refused Shares.  If the Electing Investors elect to purchase a
total number of shares in excess of the Refused Shares, the Refused Shares
shall be allocated among the holders so electing on a pro rata basis, based on
the relative number of Conversion Shares held by or issuable to each Electing
Investor, up to the full amount of Refused Shares each Electing Investor has
elected to purchase, until all Offered Shares have been allocated.


 


2.6                                 In the event
any Investor makes a timely election to acquire any of the Available Shares,
the Investor shall make payment therefor to the Offeror in cash on or prior to
the date thirty-five (35) days after the Sale Notice Date (the “Settlement
Date”); provided that if the proposed sale is
for consideration other than cash, the Investor may elect to deliver such other
consideration or the equivalent cash value set forth in the Sale Notice.


 


3.                                       Co-Sale Right.


 


3.1                                 An Offeror may
not sell any of the Offered Shares until each of the Investors shall have been
given the right (a “Co-Sale Right”), exercisable by Notice delivered to
the Company and the Offeror within twenty (20) days from the date of the
Company Notice, to sell to the proposed purchaser or purchasers (including, as
applicable, the Company and any Electing Investors), upon the same terms and conditions
offered by the Offeror, a number of shares up to the Investor’s Co-Sale Pro
Rata Share of the Offered Shares (the “Co-Sale Shares”).


 


3.2                                 Any Investor
who fails to notify the Company and Offeror within twenty (20) days after the
Sale Notice of the exercise of the Investor’s Co-Sale Right (or who has
exercised purchase rights under Section 2), shall have thereby waived
Co-Sale Rights with respect to the Offered Shares.


 


3.3                                 If any Investor
has made a timely exercise of a Co-Sale Right, to the extent that any
prospective purchaser or purchasers prohibits such assignment or otherwise
refuses to purchase shares or other securities from an Investor exercising its
rights of
co-sale hereunder (a “Co-Selling Investor”), the Offeror shall not sell
to such prospective purchaser or purchasers any Shares unless and until,
simultaneously with such sale, the Offeror purchases such Co-Sale Shares from
such Co-Selling Investor for the same consideration and on the same terms and
conditions as the proposed transfer described in the Sale Notice.


 


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3.4                                 Each Co-Selling
Investor shall, promptly after exercising a Co-Sale Right, deliver to the
Offeror for transfer to the prospective purchaser or purchasers one or more
certificates, properly endorsed for transfer, evidencing the Co-Sale Shares,
Series A-1 Shares convertible into Co-Sale Shares or any combination of
the two (and, if the Offered Shares included Series A Shares, the number
of Series A Shares comprising Co-Sale Shares).  If a prospective purchaser objects to the
delivery of preferred stock in lieu of Common Stock, any Co-Selling Investor
shall convert the Series A-1 Shares into Common Stock and deliver Common
Stock as provided above.  The Company
agrees to make any such conversion concurrent with the actual sale of such
shares to the proposed purchaser. 
Series A Shares may not be delivered to exercise a Co-Sale Right
with respect to offered Common Stock or offered Series A-1 Shares.


 


3.5                                 If the
Investors have not elected to purchase all of the Available Shares pursuant to Section 2,
the Offeror may, during the 60-day period following the Settlement Date, offer
the remaining unsold portion of the Available Shares (as reduced by any
exercised Co-Sale Rights, the “Salable Shares”), along with any Co-Sale
Shares, on terms and conditions (other than the time permitted to close the
purchase) no more favorable to the Offeree than those specified in the Sale
Notice, to the purchaser or purchasers identified in the Sale Notice. If the
Offeror does not enter into an agreement for the sale of any of the Salable
Shares and Co-Sale Shares within such period, or if such agreement is not
consummated within thirty (30) days of its execution, the right provided under
Sections 2 and 3 shall be revived as to the unsold Offered Shares,
which shall not be sold unless first reoffered to the Company and the Investors
in accordance with Sections 2 and 3.  Any partial sale of Shares made pursuant to
this Section 3.5 shall be allocated on a pro rata basis among
Salable Shares and Co-Sale Shares.


 


3.6                                 On consummation
of the sale of the Offered Shares and Co-Sale Shares, the Offeror shall
transfer to the purchaser the stock certificate or certificates that the
Investor has delivered to the Offeror pursuant to Section 3.4.  The Offeror shall, upon receipt, remit to the
Co-Selling Investor that portion of the sale proceeds to which such Investor is
entitled by reason of its participation in such sale.  To the extent that any prospective purchaser
or purchasers prohibit such assignment or otherwise refuse to purchase shares
or other securities from a Co-Selling Investor, the Offeror shall not sell any
Offered Shares to the prospective purchaser unless, simultaneously with such
sale, the Offeror purchases the Co-Sale Shares from such Investor.


 


4.                                       Exceptions.  The restrictions set forth in Sections 2 and
3 shall not apply in any of the following offers, sales or proposed
transactions by an Offeror:


 


4.1                                 a sale to a
Permitted Transferee;


 


4.2                                 the sale of
Shares to the Company pursuant to a repurchase right, redemption, or right of
first refusal held by the Company;


 


4.3                                 a bona fide gift of up to an aggregate maximum of 5% of the of
the Shares held by any Current Stockholder as of the date hereof (as adjusted
for any stock splits, reverse stock splits and similar transactions) excluding
any Shares sold or transferred pursuant to


 


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subsections
4.1 and 4.2, provided that any such transferee
first becomes a party to this Agreement and bound as a “Current Stockholder”;


 


4.4                                 the public
resale of shares in an offering registered by the Company under the Securities
Act, provided the Investors have an opportunity to include any of their Shares
in such offering prior to and in preference to the Current Stockholders;


 


4.5                                 a sale pursuant
to a tender offer made for all voting shares of the Company in conformance with
Rule 14D under the Exchange Act;


 


4.6                                 a sale pursuant
to an exchange offer for all of the equity securities of the Company; or


 


4.7                                 a sale pursuant
to the consolidation or merger of the Company with or into any other business
entity pursuant to which stockholders of the Company prior to such
consolidation or merger hold less than 50% of the voting equity of the
surviving or resulting entity.


 


5.                                       Prohibited
Transfers.


 


5.1                                 In the event
any Offeror sells any Shares in contravention of the Co-Sale Rights of the
Investors under Section 3 (a “Prohibited Transfer”), the Investors,
in addition to such other remedies as may be available at law, shall each have
the right (the “Put Right”) to sell to the Offeror, and the Offeror
shall be obligated to purchase from each Investor who validly exercises a Put
Right, a number of Shares equal to the number of Shares such Investor would
have been entitled to transfer to the purchaser in the Prohibited Transfer
under Section 3 hereof had the Prohibited Transfer been effected pursuant
to and in compliance with the terms hereof.


 


5.2                                 A sale pursuant
to the exercise of a Put Right shall be made on the following terms and
conditions:


 


(a)                                  The price per
share at which the Offeror must purchase the Shares subject to the Put Right
shall be equal to the price per share paid by the purchaser to the Offeror in
the Prohibited Transfer.


 


(b)                                 Within 90 days
after the later of (i) the date on which an Investor receives Notice of the
Prohibited Transfer or (ii) the date on which an Investor otherwise
becomes aware of the Prohibited Transfer, each Investor shall, if exercising
the Put Right created hereby, deliver to the Offeror the certificate or
certificates representing the Shares to be sold, in the form of Common Stock
certificates, Series A-1 Convertible Preferred Stock certificates (and, as
applicable, the Series A Shares certificates), or any combination, at the
Investor’s option, each certificate to be properly endorsed for transfer.


 


(c)                                  The Offeror
shall, upon receipt of the certificate or certificates for the Shares to be
sold by an Investor pursuant to this Section 5.2, pay the aggregate
purchase price therefor, as specified in Section 5.2(a), in cash or
by other means acceptable to the Investor. 
The Offeror shall also reimburse the Investor for any and all


 


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reasonable fees and expenses,
including reasonable legal fees and expenses, incurred pursuant to the exercise
of such Investor’s rights hereunder.


 


6.                                       Changes in
Stock.  If,
from time to time during the term of this Agreement, (i) there is a stock
split, reverse split, stock dividend or other change in the character or amount
of any of the outstanding securities of the Company, or (ii) there is any
consolidation or merger immediately following which stockholders of the Company
hold more than 50% of the voting equity securities of the surviving
corporation, then, in such event, any and all new, substituted or additional
securities or other property to which any Offeror is entitled by reason of his
or her ownership of Shares shall be immediately subject to the provisions of
this Agreement and be included in the meaning of the term “Shares” for all
purposes of this Agreement with the same force and effect as the Shares
presently subject to this Agreement.


 


7.                                       Legends.  All certificates of
the Current Stockholders and Investors representing any Shares subject to the
provisions of this Agreement shall have endorsed thereon a legend to
substantially the following effect:


 


“THE RIGHT TO SELL THE
SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS WHICH
INCLUDE RIGHT OF FIRST REFUSAL AND CO-SALE RESTRICTIONS ON THE SALE OF THE
SHARES, SET FORTH IN A RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT, A COPY OF
WHICH IS ON FILE AT THE CORPORATION’S PRINCIPAL PLACE OF BUSINESS.”


 


At any time at which a
Current Stockholder’s and/or Investor’s Shares are no longer subject to this
Agreement, the holder of the certificate representing such Shares may surrender
the certificate to the Company for removal of the legend, and the Company shall
duly issue a replacement certificate without such legend.


 


8.                                       Transfer of
Stock.  The
Company shall not, without the approval of the Investors holding at least a
majority of the Series A-1 Shares and Series A Shares (including any
Common Stock issued upon thereof, as applicable), (i) permit any transfer on
its books of any Shares which shall have been sold in violation of any of the
provisions set forth in this Agreement or (ii) treat as the owner of the
Shares any transferee to whom the Shares shall have been sold in violation of
any of the provisions set forth in this Agreement, or accord the right to vote
as an owner or pay dividends to such transferee.


 


9.                                       Termination.  This Agreement shall
terminate upon the earliest to occur of the following:


 


9.1                                 a written
agreement terminating this Agreement signed by (i) the Company and
(ii) the Investors holding at least a majority of the Series A-1
Shares and Series A Shares (including any Common Stock issued upon
thereof, as applicable);


 


9.2                                 the effective
date of the First Public Offering;


 


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9.3                                 the time when
the Company lists its shares of Common Stock on any national stock exchange or
Nasdaq; and


 


9.4                                 the effective
date of a Liquidating Transaction, as defined in the Certificate of Designation
(except as set forth in subsection (ii) of such definition, and except for
a transaction with a subsidiary or a transaction the primary purpose of which
is to effect the reincorporation of the Company into a different jurisdiction).


 


10.                                 Transfer of
Rights.  The
rights of an Investor hereunder are not assignable, except to a Permitted
Transferee of an Investor.


 


11.                                 Additional
Investors.  If a Second
Closing takes place pursuant to the Purchase Agreement, the purchasers of
additional Series A-1 Shares and Series A Shares at the Second
Closing shall, after signing this Agreement and agreeing to be bound by its
terms, and performing their obligations under the Purchase Agreement, become
Investors as if original parties to this Agreement to the extent they own
Series A-1 Shares and Series A Shares (and Common Stock issued on
conversion thereof, as applicable) pursuant to such Second Closing.  The Company shall append a Schedule II
to this Agreement listing the name, address, facsimile number, Series A-1
Shares and Conversion Shares held by each such additional Investor.  The original Investors and Current
Stockholders hereby consent to the Additional Investors’ becoming parties to
this Agreement on such terms, and consent to the Company’s delivery to the
Additional Investors of this Agreement and Schedule II, along with any
endorsements necessary to confirm the rights of the Additional Investors under
this Agreement.


 


12.                                 Miscellaneous.


 


(a)                                  Aggregation of
Stock.  When determining the number of
Shares held by any Current Stockholder or Investor for purposes of the rights
and obligations under this Agreement, the Shares held by any person shall be
aggregated with the Shares held or acquired by any affiliate, and all such
securities shall be deemed to be held by a single person.


 


(b)                                 Severability.  If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.


 


(c)                                  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
(i) delivered personally, (ii) mailed by first-class mail or
certified mail, return receipt requested, postage prepaid, (iii) sent by
next-day or overnight mail or delivery, or (iv) sent by facsimile
transmission, provided that a confirmation
statement is retained by sender, in each case as follows:


 


(i)                                     if to an
Investor, to the address or facsimile number for that Investor provided in Schedule I
or Schedule II;


 


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(ii)                                  if to L-3, to


 


L-3 Communications
Corporation

600 Third Avenue

New York, New York  10016

Facsimile:  (212) 805-5494

Attention:  Christopher Cambria, Esq.


 


(iii)                               if to a Current
Stockholder employed by the Company, to such Current Stockholder at the address
for Notice to the Company;


 


(iv)                              if to a Current
Stockholder (other than L-3) who is not employed by the Company, to the address
of such Current Stockholder on the stock register of the Company;


 


(v)                                 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):


 


Sheppard, Mullin, Richter
& Hampton LLP

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

Facsimile:  (213) 620-1398

Attention:  James J. Slaby, Esq.


 


(vi)                              or, for each
party described in subsection (i) through (v) above, at such other address
as may be specified from time to time in a Notice to the other parties hereto.


 


(vii)                           Any Notice to a
party having its address for Notices outside the United States shall be given
by facsimile.


 


(d)                                 Except as may
be otherwise provided herein, all notices, requests, waivers and other
communications made pursuant to this Agreement shall be in writing and shall be
conclusively deemed to have been duly given (a) when hand delivered to the
other party; (b) on the day when sent by facsimile to the number set forth on
the signature page or Schedule I if sent between 12:00 a.m. and 5:00 p.m.
recipient’s local time on a business day, or on the next business day if sent
by facsimile to the number set forth on Schedule I at another time or on a
non-business day; (c) three business days after deposit in the U.S. Mail with
first class postage prepaid and addressed to the other party at the address set
forth on the signature page, Schedule I or Schedule II to this
Agreement, or (d) the next business day after deposit with a national overnight
delivery service, postage


 


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prepaid, addressed to the
parties as set forth below with next business day delivery guaranteed.


 


(e)                                  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.


 


(f)                                    Headings.  The headings contained in this Agreement are
for purposes of convenience only and shall not affect the meaning or interpretation
of this Agreement or any of its terms.


 


(g)                                 Counterparts.  This Agreement may be signed (including by
facsimile) in one or more counterpart signature pages, each of which shall be
deemed an original and all of which shall together constitute one and the same
instrument.


 


(h)                                 Governing Law,
Jurisdiction and Venue.  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.  Each Investor and the Company hereby
irrevocably submits to the jurisdiction of the courts of the State of
California, and the federal courts of the United States of America located in
the Central District of California, 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 those 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 Court or federal
court.  Each Investor, each Current Stockholder
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
agree that mailing of process or other papers in connection with any such
action or proceeding in the manner provided in Section 12(c), or in
such other manner as may be permitted by law, shall be valid and sufficient
service thereof.


 


(i)                                     WAIVER OF JURY
TRIAL.  IF ANY DISPUTE BETWEEN THE
INVESTORS, THE CURRENT STOCKHOLDERS AND THE COMPANY ARISES OUT OF THIS
AGREEMENT OR ANY RELATED TRANSACTION, WITH RESPECT TO ANY LITIGATION THE
PARTIES EXPRESSLY WAIVE ANY RIGHT THEY MAY HAVE TO A JURY TRIAL AND AGREE THAT
ANY SUCH LITIGATION SHALL BE TRIED BY A JUDGE WITHOUT A JURY.


 


(j)                                     Successors and
Assigns.  Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the successors and Permitted Transferees of the parties.  Nothing in this Agreement,


 


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express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and Permitted Transferees any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.


 


(k)                                  No Third Party
Beneficiaries.  Nothing in
this Agreement shall confer any rights upon any Person other than the parties
to this Agreement and their heirs, legal representatives, successors and
Permitted Transferees.


 


(l)                                     Amendments and
Waivers.  Any term of this Agreement may
be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of (a) as to the Company, only by
the Company; (b) as to the Investors, by persons holding at least a majority of
the Series A-1 Shares and Series A Shares (including any Common Stock
issued or issuable upon conversion thereof) held by the Investors and their
assignees; and (c) as to the Current Stockholders, by persons holding a
majority interest of the Shares held by the Current Stockholders who are then employed
by the Company and by L-3 Communications; provided, that, notwithstanding the
foregoing, no consent of any Current Stockholder shall be necessary for any
amendment and/or restatement the sole purpose of which is merely to include
additional holders of preferred stock of the Company as “Investors” as parties
hereto or other individuals as “Current Stockholders” and parties hereto.  Any Investor or Current Stockholder may waive
any of his/her/its rights hereunder without obtaining the consent of any other
Investor or Current Stockholder, as the case may be.  Any amendment or waiver effected in accordance
with this Section 12(l) shall be binding upon each Investor, its
successors and assigns, the Company and the Current Stockholders in
question.  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 the 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 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.


 


The
next page is the signature page.


 


11





















 


IN WITNESS WHEREOF, the parties hereto have
executed this Right of First Refusal and Co-Sale Agreement as of the date first
above written.


 


Company:


 


	
  INNOVATIVE MICRO
  TECHNOLOGY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ John Foster

  	
   

  
	
   

  	
  John Foster

  
	
   

  	
  President and Chief
  Executive Officer

  



 


12





















 


Current Stockholders


 


	
   

  	
   

  	
  Outstanding

  Shares

  	
   

  	
  Vested

  Restricted

  Shares

  	
   

  	
  Shares Subject

  to Warrants and

  Options (Vested

  and Unvested)

  	
   

  
	
  L-3 COMMUNICATIONS

  CORPORATION 

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ David Reilly

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:
  David Reilly

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:
  VP, Asst. General Counsel & Asst.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Secretary

  	
   

  	
  1,569,500

  	
   

  	
  0

  	
   

  	
  1,133,500

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  /s/ John Foster 

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  John Foster

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  President and Chief Executive Officer

  	
   

  	
  0

  	
   

  	
  126,077

  	
   

  	
  280,085

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  /s/ Peter Altavilla

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Peter Altavilla

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Chief Financial Officer, Secretary and

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Treasurer

  	
   

  	
  0

  	
   

  	
  84,051

  	
   

  	
  187,446

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  /s/ Paul Rubel

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Paul Rubel

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Vice President, Product Development

  	
   

  	
  0

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  /s/ Mike Shillinger

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Mike Shillinger

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Vice President, Operations

  	
   

  	
  0

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  /s/ Monteith Heaton

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Monteith Heaton

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Vice President, Sales and Marketing

  	
   

  	
  0

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  /s/ Douglas Thompson

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Douglas Thompson

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Vice President, Product Engineering and

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quality

  	
   

  	
  0

  	
   

  	
   

  	
   

  	
   

  	
   

  
																



 


13





















 


Investors:


 


	
  INVESTOR GROWTH
  CAPITAL LIMITED

  
	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Lisa Crawford

  	
   

  	
  its
  “A” Director

  
	
   

  	
  Name:
  Lisa Crawford

  	
   

  
	
   

  	
  Title:
  “A” Director

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Robert de Heus

  	
   

  	
  its
  “B” Director

  
	
   

  	
  Name:
  Robert de Heus

  	
   

  
	
   

  	
  Title:
  “B” Director

  	
   

  
	
   

  	
   

  	
   

  
	
  INVESTOR GROUP L.P.

  	
   

  
	
   

  	
   

  	
   

  
	
  By:  Investor
  Group GP LTD., its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Lisa Crawford

  	
   

  	
  its
  “A” Director

  
	
   

  	
  Name:
  Lisa Crawford

  	
   

  
	
   

  	
  Title:
  “A” Director

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Robert de Heus

  	
   

  	
  its
  “B” Director

  
	
   

  	
  Name:
  Robert de Heus

  	
   

  
	
   

  	
  Title:
  “B” Director

  	
   

  
	
   

  	
   

  	
   

  
	
  BAVP VII, LLP

  	
   

  
	
   

  	
   

  	
   

  
	
  by:
  BA Venture Partners VII, LLC, its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Eric M. Sigler

  	
   

  	
   

  
	
   

  	
  Name:
  Eric M. Sigler

  	
   

  
	
   

  	
  Title:
  Member

  	
   

  
	
   

  	
   

  	
   

  
	
  MIRAMAR VENTURE PARTNERS,
  L.P.

  
	
   

  	
   

  	
   

  
	
  By: Miramar Venture
  Associates, LLC, its general partner

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Robert R. Holmen

  	
   

  	
   

  
	
   

  	
  Name:
  Robert R. Holmen

  	
   

  
	
   

  	
  Member

  	
   

  
								



 


14





















 


Schedule I

Investors


 


	
   

  	
   

  	
  Shares, Series A-1

  Convertible

  Preferred Stock

  
	
  Investor Growth Capital Limited

  National Westminster House

  Le Truchot, St. Peter Port

  GY1 4PW, Guernsey

  Channel Islands

  Tel.: +44 1481 732 615

  Facsimile: +44 1481 732 616

  Attention: Wayne Tallowin

  

  With a copy (which shall not

  constitute notice) to:

  Benjamin B. Quinones, Esq.

  Pillsbury Winthrop LLP

  2475 Hanover Street

  Palo Alto, CA 94304-1114

  Facsimile: (650) 233-4545

  	
   

  	
  329,412

  
	
   

  	
   

  	
   

  
	
  Investor Group L.P.

  National Westminster House

  Le Truchot, St. Peter Port

  GY1 4PW, Guernsey

  Channel Islands

  Tel.: +44 1481 732 615

  Facsimile: +44 1481 732 616

  Attention: Wayne Tallowin

  

  With a copy (which shall not

  constitute notice) to:

  Benjamin B. Quinones, Esq.

  (address as above)

  	
   

  	
  141,176

  
	
   

  	
   

  	
   

  
	
  BAVP VII, L.P.

  950 Tower Lane, Suite 700

  Foster City, CA. 94404

  Facsimile:

  	
   

  	
  352,941

  
	
   

  	
   

  	
   

  
	
  Miramar Venture Partners, L.P.

  2101 East Coast Hwy., Ste. 300

  Corona del Mar, CA 92625

  Facsimile: (949) 760-4451

  	
   

  	
  176,471

  
	
   

  	
   

  	
   

  
	
  TOTAL

  	
   

  	
  1,000,000

  



 


I-1