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 O
