**Exhibit 10.13**

 

[O’Melveny & Myers LLP Letterhead]

 

September 22, 2003

 

**VIA EMAIL JOHN@IMTMEMS.COMs**

 

Innovative Micro Technology75 Robin Hill RoadGoleta, CA 93117Attn: Dr. John S. Foster

 

Re:                               Professional Notes Executed by InnovativeMicro Technology(formerly Applied Magnetics Corporation, “IMT”)

 

Gentlemen:

 

Reference is made to (i) that certain SecuredPromissory Note, dated as of November 16, 2001, in the original principalamount of $1,383,777.00 (the “Houlihan Note”), executed by IMT for the benefitHoulihan Lokey Howard & Zukin (“Houlihan”); (ii) that certain SecuredPromissory Note, dated as of November 16, 2001, in the original principalamount of $850,000.00 (the “O’Melveny Note”), executed by IMT for the benefit O’Melveny& Myers, LLP, (“O’Melveny”); (iii) that certain Secured Promissory Note,dated as of November 16, 2001, in the original principal amount of$699,580.77 (the “Sheppard Note “), executed by IMT for the benefit SheppardMullin Richter & Hampton LLP (“Sheppard”); and (iv) that certain SecuredPromissory Note, dated as of November 16, 2001, in the original principalamount of $1,203,560.76 (the “Stutman Note,” and together with the HoulihanNote, the O’Melveny Note and the Sheppard Note, the “Notes”), executed for thebenefit Stutman, Treister & Glatt Professional Corporation (“Stutman,” andtogether with Houlihan, O’Melveny and Sheppard, the “Firms”). The Notes aresecured by, among other things, that certain Deed of Trust, Assignment of Rentsand Fixture Filing (Robin Hill Road), dated as November 16, 2001, andrecorded on March 18, 2002, as document number 2002-0025765 in theOfficial Records of the County of Santa Barbara, California (the “Deed of Trust”)encumbering the real property commonly known as75 Robin Hill Road, Goleta, California.

 

IMT’s liability for the amounts to be paid under theNotes arose and is to be repaid pursuant to that certain “Debtor’s ThirdAmended Plan of Reorganization Under Chapter 11 of the Bankruptcy Code Dated asof September 24, 2001, as Modified” in Case No. ND 00-10066- RR, asconfirmed pursuant to an order dated November 5, 2001, (the “Plan”). Noreference herein to the Plan and no provision of the Notes, this letteragreement or the Plan shall alter or impair the obligations of IMT under theNotes, which are absolute and unconditional, unless and until all obligationsof this letter agreement are irrevocably and unconditionally satisfied in fullby IMT.

 

IMT acknowledges andagrees that notwithstanding the terms of the Notes, as of the date hereof noamounts due under any of the Notes have been paid to any of the Firms. IMTagrees that on or before September 30, 2003, IMT shall deliver to O’Melveny,as Agent under and as defined in that certain Intercreditor Agreement, dated asof November 16, 2001, among the Firms (the “IC Agreement”) (i) an amountin immediately available good funds equal to $2,388,372.41 (the

 

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“Cash”); (ii) originalstock certificates for 276,287 shares of unrestricted New Common Stock (asdefined in the Plan) (the “Stock”); (iii) original stock certificatescontaining a restrictive le gend in the form of Exhibit C attached to thisletter agreement for 91,826 of restricted New Common Stock (the “RestrictedStock”); and (iv) IMT’s original signature to the Warrant Agreement in the formof Exhibit A to this letter agreement (the “Warrant Agreement”).

 

Each of the Firms acknowledges, agrees and consents tothe following:

 

1. The distribution of the Cash by O’Melveny, asAgent, as follows: (a) $860,536 to Houlihan, (b) $528,594 to O’Melveny, (c)$435,052 to Sheppard; and (d) $564,190.41 to Stutman.

 

2. The distribution of the Stock by O’Melveny, asAgent, as follows: (a) 104,943 shares to Houlihan, (b) 64,463 shares to O’Melveny,(c) 53,055 shares to Sheppard; and (d) 53,826 shares to Stutman.

 

3. The distribution of the Restricted Stock by O’Melveny,as Agent, to Stutman.

 

4. The delivery of IMT’s original signature to theWarrant Agreement by O’Melveny, as Agent, to Stutman.

 

5. Upon completion of the actions described inparagraphs 1, 2 and 3, above, the cancellation by O’Melveny, as Agent, of eachof the Notes and delivery of the original of each such canceled note to IMTwith a copy to the applicable Firm.

 

6. Upon completion of the actions described inparagraphs 1, 2 and 3, above, the execution by O’Melveny, as Agent, of therequest for full reconveyance of the Deed of Trust in the form of Exhibit B tothis letter agreement (“Reconveyance”) and the full and final release of theDeed of Trust by the recordation such Reconveyance in the Official Records ofthe County of Santa Barbara, California.

 

7. Upon completion of the actions described inparagraphs 1, 2 and 3, above, the execution and filing by O’Melveny, as Agent,of a UCC-3 terminating the UCC Financing Statement filed with the DelawareDepartment of State on March 19, 2002 as Filing Number 2070075.

 

Effective immediately upon completion of the actionsdescribed in paragraphs 1, 2, 3 and 4, above, each of the Firms on behalf ofitself and anyone claiming by, through or under such Firm (collectively, “Releasors“), fully and irrevocably releases each of the other Firms from any and allclaims that Releasors may now have or hereafter acquire against such otherFirms for any action, cause of action, claim, cost, damage, demand, expense(including, without limitation, attorneys’ fees and expenses), fine, judgment,liability, lien, loss, or penalty, whether foreseen or unforeseen or direct orindirect, arising from or related to the IC Agreement. Each Firm furtheracknowledges and agrees that this release shall be given full force and effectaccording to each of its expressed terms and provisions, including, but notlimited to, those relating to unknown and suspected claims, damages and causesof action.

 

Each of the Firms hereby consents and agrees to O’Melveny,as Agent, withholding from such Firm’s distribution of Cash an amount equal tosuch Firm’s Pro Rata Share of the costs, fees

 

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and expenses incurred by O’Melveny, as Agent, onbehalf of the Firms related to the preparation of this letter agreement and thecompletion of the actions described in paragraphs 5 and 6, above (the “Agent’sCosts”). The Firms obligation to reimburse the Agent’s Costs is pursuant to Section 1(j)of the IC Agreement. The Agent’s Costs are $14,000.

 

Please indicate your agreement to the terms of thisletter agreement by countersigningbelow and then return an executed original ofthis letter agreement to my attention.

 
|                                                | Cordially,                                                 |                            |
|-----------------------------------------------------|------------------------------------------------------------|---------------------------------|
|                                                |                                                       |                            |
|                                                | Lynn Anne Shapiro                                          |                            |
|                                                | for O’Melveny & Myers LLP                         |                            |
|                                                |                                                       |                            |
| cc:                                                 | The Parties on the attached Distribution List (via  email) |                            |
|                                                | Evan M. Jones, Esq.                                        |                            |
|                                                |                                                       |                            |
| Acknowledged and Agreed                             |                                                       |                            |
|                                                |                                                       |                            |
| Innovative Micro Technology, a Delaware corporation |                                                       |                            |
|                                                |                                                       |                            |
| By:                                                 | /s/ John S. Foster                                         |                            |   |   |
|                                                | Dr.  John S. Foster, Chief Executive Officer               | Dated: September 22,  2003 |   |
|                                                |                                                       |                            |
|                                                     |                                                            |                                 |  |  |  |

 

***Countersignature blocks continue on following page***

 

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| Acknowledged and Agreed and Consent Granted             |                                             |
|---------------------------------------------------------|--------------------------------------------------|
|                                                    |                                             |   |
| Houlihan Lokey Howard & Zukin                       |                                             |   |
|                                                    |                                             |   |
| By:                                                     | /s/                                              | Andrew Miller |   |   |   |
|                                                    |                                             | Andrew Miller |   |   |
|                                                    |                                             | Title: | Dated: September 22, 2003 |   |
|                                                    |                                             |   |
| O’Melveny & Myers LLP                          |                                             |   |
|                                                    |                                             |   |
| By:                                                     | /s/                                              | Evan M. Jones |   |   |   |
|                                                    |                                             | Evan M. Jones, Partner | Dated: September 22, 2003 |   |
|                                                    |                                             |   |
| Sheppard Mullin Richter & Hamilton LLP              |                                             |   |
|                                                    |                                             |   |
| By:                                                     | Prentice O’Leary, Professional Corporation, |   |
|                                                    | Partner                                          |   |   |
|                                                    |                                             |   |
| By:                                                     | /s/Prentice O’Leary                         |   |   |   |
|                                                    | Prentice O’Leary, President                 | Dated: September 22, 2003 |   |
|                                                    |                                             |   |
| Stutman, Treister & Glatt Professional  Corporation |                                             |
|                                                    |                                             |   |
| By:                                                     |                                             |   |   |   |
|                                                    |                                             |   |
| Name:                                                   |                                             |   |   |   |
|                                                    |                                             |   |
| Title:                                                  |                                             |   | Dated: September 22, 2003 |   |
|                                                         |                                                  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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**Distribution List**

 
| Houlihan Lokey Howard & Zukin                                                                                                                   |              |             |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|-------------------|------------------|
| 1930 Century Park West                                                                                                                              |              |             |
| |Los Angeles, CA 90067-6802                                                                                                                         |              |             |
| Facsimile:(310) 553-4024                                                                                                                            |              |             |
| Attention:                                                                                                                                          | Mr. Andrew Miller | amiller@hlhz.com |   |   |
|                                                                                                                                                | Mr. Andrew Morrow | amorrow@hlhz.com |   |   |
|                                                                                                                                                |              |             |
| Sheppard Mullin Richter & Hamilton LLP                                                                                                          |              |             |
| 333 South Hope Street, 48th Floor                                                                                                                   |              |             |
| Los Angeles, CA 90071                                                                                                                               |              |             |
| Facsimile:(213) 620-1398                                                                                                                            |              |             |
| Attention: Prentice L. O’Leary, Esq. po’leary@sheppardmullin.com                                                                          |              |             |
|                                                                                                                                                |              |             |
| Stutman, Treister & Glatt Professional  Corporation                                                                                             |              |             |
| 1901 Avenue of the Stars, 12th Floor                                                                                                                |              |             |
| Los Angeles, CA 90067                                                                                                                               |              |             |
| Facsimile:(310) 228-5788                                                                                                                            |              |             |
| Attention: Theodore B. Stolman,  Esq.               tstolman@stutman.com |              |             |

 

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Exhibit A

 

Form of Warrant Agreement

 

[omitted]

 

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