Exhibit 10.3

EXECUTION VERSION

 

 

ASSET PURCHASE AGREEMENT

between:

II-VI INCORPORATED,

a Pennsylvania corporation, and

OCLARO TECHNOLOGY LIMITED,

a company incorporated under the laws of England and Wales

 

 

Dated as of October 10, 2013

 

 

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1.      SALE OF TRANSFERRED ASSETS; RELATED TRANSACTIONS

     1   

1.1

  Sale of Transferred Assets      1   

1.2

  Delivery of Tangible Transferred Assets      3   

1.3

  Purchase Price      3   

1.4

  Assumption of Liabilities      4   

1.5

  Inventory Adjustment      5   

1.6

  Transfer Taxes      7   

1.7

  Allocation      7   

1.8

  Closing      7   

1.9

  Third Party Consents      7   

1.10

  Shenzhen Equipment      8   

2.      REPRESENTATIONS AND WARRANTIES OF THE SELLER

     8   

2.1

  Due Organization, Etc.      8   

2.2

  Inventory      8   

2.3

  Equipment      9   

2.4

  Financial Statements; Absence of Changes      9   

2.5

  Title to Tangible Assets      9   

2.6

  Intellectual Property; Information Technology      10   

2.7

  Proceedings; Orders      12   

2.8

  Compliance with Laws; Governmental Authorizations      12   

2.9

  Environmental Matters      12   

2.10

  Employee and Labor Matters      13   

2.11

  Employee Benefit Matters      14   

2.12

  Tax Matters      15   

2.13

  Real Property      15   

2.14

  Authority; Binding Nature of Agreements      16   

2.15

  Non-Contravention; Consents      17   

2.16

  Sufficiency of Assets      17   

2.17

  Customers and Suppliers      18   

2.18

  Trade Compliance Matters      18   

2.19

  Related Party Matters      19   

2.20

  Absence of Certain Events      19   

2.21

  Insurance      20   

 

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2.22

  Books and Records      21   

2.23

  Disclaimer of the Seller      21   

2.24

  Brokers      21   

2.25

  Contracts      21   

2.26

  Warranties      21   

3.      REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

     22   

3.1

  Due Organization      22   

3.2

  Authority; Binding Nature of Agreements      22   

3.3

  Non-Contravention; Consents      22   

3.4

  Funding      23   

3.5

  Proceedings; Orders      23   

3.6

  Independent Investigation; Seller’s Representations      23   

3.7

  Brokers      23   

4.      COVENANTS

     23   

4.1

  Bulk Sales Laws      23   

4.2

  Non-Competition      24   

4.3

  Patent Files      25   

4.4

  Records      25   

4.5

  Audited Financial Statements      25   

4.6

  Non-Solicitation      25   

4.7

  Non-Disclosure Agreements      25   

4.8

  Shenzhen Equipment      26   

4.9

  Returned Assets      26   

4.10

  Registration with AIC      26   

4.11

  Operation of the Business      26   

5.      SELLER’S CLOSING DELIVERABLES

     27   

6.      PURCHASER’S CLOSING DELIVERABLES

     28   

7.      CLOSING CONDITIONS; TERMINATION

     29   

7.1

  Closing Conditions      29   

7.2

  Termination Events      29   

7.3

  Termination Procedures      29   

7.4

  Effect of Termination      30   

8.      INDEMNIFICATION, ETC.

     30   

 

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8.1

  Survival of Representations and Warranties      30   

8.2

  Indemnification by the Seller      30   

8.3

  Indemnification by the Purchaser      31   

8.4

  Limitations on Indemnification      31   

8.5

  Exclusive Remedy      32   

8.6

  Holdback      32   

8.7

  Defense of Third Party Claims      32   

9.      EMPLOYEE MATTERS

     33   

9.1

  Offers of Employment      33   

9.2

  Termination of Employment      33   

9.3

  Pre-Closing Compensation      33   

9.4

  Pre-Closing Liabilities      33   

9.5

  Credit for Prior Service      34   

9.6

  Waiver of Pre-Existing Conditions      34   

9.7

  Special Jurisdiction Transferred Employees      34   

9.8

  Employee Notices      34   

9.9

  No Third-Party Rights      34   

10.    MISCELLANEOUS PROVISIONS

     35   

10.1

  Tax Returns; Taxes; Cooperation      35   

10.2

  Further Actions      35   

10.3

  Continuing Access to Information      36   

10.4

  Publicity      36   

10.5

  Fees and Expenses      37   

10.6

  Notices      37   

10.7

  Headings      38   

10.8

  Counterparts and Exchanges by Electronic Transmission or Facsimile      38   

10.9

  Governing Law; Venue      38   

10.10

  Successors and Assigns; Parties in Interest      39   

10.11

  Remedies Cumulative; Specific Performance      39   

10.12

  Waiver      40   

10.13

  Amendments      40   

10.14

  Severability      40   

10.15

  Entire Agreement      40   

10.16

  Disclosure Letter      40   

10.17

  Appointment of Process Agent      40   

10.18

  Construction      41   

 

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LIST OF ANNEXES

 

Annex A    —      Certain Definitions Annex A-I    —      List of Knowledge
Group Annex A-II    —      Definition of “Business”

 

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CONFIDENTIAL

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT is entered into as of October 10, 2013, by and
between II-VI Incorporated, a Pennsylvania corporation (the “Purchaser”) and
OCLARO TECHNOLOGY LIMITED, a company incorporated under the laws of England and
Wales with company number 2298887, having its principal office at Caswell
Office, Towcester, Northamptonshire, NN12 8EQ, England (“Seller”). Certain
capitalized terms used in this Agreement are defined in Annex A.

RECITALS

The Seller and the Purchaser have entered into an Option Agreement, dated as of
September 12, 2013 (the “Option Agreement,” and such date, the “Option Date”),
whereby the Seller has granted to the Purchaser an exclusive option, exercisable
upon the terms and conditions set forth therein, to acquire from Seller and
Seller’s Affiliates the Business;

The Seller and the Purchaser wish to provide for the sale of the Transferred
Assets (as defined in Section 1.1) to, and the assumption of the Assumed
Liabilities (as defined in Section 1.4) by, the Purchaser or an Affiliate of the
Purchaser on the terms set forth in this Agreement; and

Pursuant to the Option Agreement, the Purchaser made a payment of $5,000,000 to
the Seller, which payment was non-refundable but creditable against the purchase
of such Transferred Assets.

AGREEMENT

The parties to this Agreement, intending to be legally bound, agree as follows:

 

1. SALE OF TRANSFERRED ASSETS; RELATED TRANSACTIONS.

1.1 Sale of Transferred Assets. The Seller shall sell and transfer and Seller
shall cause its Affiliates to sell to the Purchaser or an Affiliate of
Purchaser, at the Closing, all of the right, title and interest of Seller or any
Affiliate of Seller in the following tangible and intangible assets to the
extent located in the United Kingdom or otherwise owned by Seller (the “UK
Transferred Assets”), free and clear of all Encumbrances, on the terms and
subject to the conditions set forth in this Agreement, in consideration for
payment of the Purchase Price:

(a) Patents and Patent Applications: All of the patents, patent applications and
patent rights to inventions that are either (i) used exclusively in the
Business, or (ii) identified on Part 1.1(a) of the Disclosure Letter (the
Patents, Patent Applications and patent rights to inventions referred to in this
Section 1.1(a), together with the Patents, Patent Applications and patent rights
and inventions sold, transferred and conveyed pursuant to the Non-UK Transfer
Documents being referred to in this Agreement as the “Transferred Patents”),
subject to any rights granted in the Intellectual Property License Agreement.

(b) Other Proprietary Assets: All of the Trade Secrets, Technology and
Intellectual Property Rights (other than patent rights, which are addressed in
Section 1.1(a)) that are either (i) used exclusively in the Business, or
(ii) described on Part 1.1(b) of the Disclosure Letter (the Trade Secrets,
Technology and Intellectual Property Rights referred to in this Section 1.2(b),
together with the Trade Secrets, Technology and Intellectual Property Rights
sold, transferred and conveyed pursuant to the Non-UK Transfer Documents, being
referred to in this Agreement as the “Transferred IP”).

 

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CONFIDENTIAL

 

(c) Inventory: All of the Inventory owned by the Seller or any Affiliate of the
Seller that (i) relates exclusively to the Business regardless of location,
(ii) is listed on Part 1.1(c) of the Disclosure Letter, except to the extent
such inventory has been sold in the ordinary course of business prior to the
Closing, (iii) is vendor managed inventory owned by Seller or an Affiliate of
Seller relating exclusively to the Business and located at the site of a
customer or any other Person, or (iv) is located at the Seller’s or its
Affiliates’ facilities in Shanghai, People’s Republic of China (the “Shanghai
Facility”), or Horseheads, New York (the “Horseheads Facility”) (the Inventory
referred to in this Section 1.1(c), together with the Inventory sold,
transferred and conveyed pursuant to the Non-UK Transfer Documents, being
referred to in this Agreement as the “Transferred Inventory”).

(d) Equipment: All of the Equipment that is (i) owned by the Seller or any
Affiliate of the Seller and used exclusively in the Business, (ii) listed on
Part 1.1(d) of the Disclosure Letter, or (iii) located at the Shanghai Facility
or the Horseheads Facility, other than (A) personal items, (B) information
technology equipment assigned to persons that are not Transferred Employees, or
items of a similar nature, and (C) any customer-owned or vendor-owned equipment
(the Equipment referred to in this Section 1.1(d), together with the Equipment
sold, transferred and conveyed pursuant to the Non-UK Transfer Documents, being
referred to in this Agreement as the “Transferred Equipment”) (it being
understood that Equipment owned by a third party and leased to the Seller or an
Affiliate of the Seller is not “Transferred Equipment”).

(e) Contracts: The benefit (subject to the burden) of the Seller or any
Affiliate of the Seller under the Contracts (a) identified on Part 1.1(e) of the
Disclosure Letter, (b) that are customer purchase orders to the extent
exclusively related to the Business and received and accepted in the ordinary
course of business of the Business consistent with past practices, and (c) the
portions of the Contracts listed on Part 1.1(e)(i) of the Disclosure Letter that
are exclusively related to the Business (the Contracts referred to in this
Section 1.1(e), together with the Contracts conveyed pursuant to the Non-UK
Transfer Documents, being referring to in this Agreement as the “Transferred
Contracts”).

(f) Records: All Records exclusively or primarily related to the Business (the
Records referred to in this Section 1.1(f), together with the Records conveyed
pursuant to the Non-UK Transfer Documents, being referring to in this Agreement
as the “Transferred Books”); provided, however, that Seller and its Affiliates
shall be entitled to retain one or more copies of any Transferred Books, which
Transferred Books are confidential information subject to the terms of the NDA
provided that the terms of non-disclosure under the NDA shall continue
indefinitely.

(g) Governmental Authorizations: All of the Governmental Authorizations that are
capable of being transferred and that are held by the Seller or any Affiliate of
the Seller and used or held for use exclusively in the Business, including
without limitation those identified on Part 1.1(g) of the Disclosure Letter (the
Governmental Authorizations referred to in this Section 1.1(g), together with
the Governmental Authorizations conveyed pursuant to the Non-UK Transfer
Documents, being referring to in this Agreement as the “Transferred Governmental
Authorizations”).

(h) Prepayments: Prepayments made pursuant to any Transferred Contracts;

(i) Claims: All claims, guarantees, warranties, rights of indemnity and other
rights of recovery and other Proceedings against third parties solely with
respect to the Transferred Assets or the Assumed Liabilities, whether arising by
way of counterclaim or otherwise;

 

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(j) Models and Prototypes: All models (whether tangible or digital), prototypes
and test devices exclusively embodying any of the products exclusive to the
Business; and

(k) Goodwill: The goodwill of the Business, other than the goodwill associated
with the other businesses of the Seller or any Affiliate of the Seller, or the
name or Trademarks of the Seller or any of the Affiliates of the Seller that are
not Transferred Assets, including any Trademarks that include any form of
“Oclaro”.

Part 1.1(x) of the Disclosure Letter indicates, as to each UK Transferred Asset,
which of Purchaser or Purchaser’s Affiliates is receiving title hereunder.

The Seller shall cause the Parent and, as applicable, any of Parent’s Affiliates
to sell, transfer and convey to the Purchaser or an Affiliate of Purchaser, at
the Closing, all of the right, title and interest of the Parent or such
Affiliate of Parent in any tangible or intangible assets that would constitute
Transferred Assets but for the fact that such assets are owned by any Affiliate
of Seller or Parent or not located in the United Kingdom (“Non-UK Transferred
Assets,” and together with the UK Transferred Assets, the “Transferred Assets”),
on the terms and subject to the conditions set forth in this Agreement and
pursuant to one or more bills of sale and assignments in form and substance
mutually agreeable to the Purchaser and the Seller (the “Non-UK Transfer
Documents”), in consideration for payment of the Purchase Price.

Notwithstanding anything in Section 1.1 to the contrary, Seller and Purchaser
expressly acknowledge and agree that the Transferred Assets will not include any
assets, rights or properties other than those specifically described above in
this Section 1.1, and any assets, rights or properties specifically identified
on Part 1.1A of the Disclosure Letter are expressly excluded from the
Transferred Assets (such excluded assets being referred to herein collectively
as the “Excluded Assets”).

1.2 Delivery of Tangible Transferred Assets. The Purchaser shall take physical
delivery of the Transferred Inventory, Transferred Equipment and Transferred
Books to the Purchaser (the “Tangible Transferred Assets”) at the location at
which such Tangible Transferred Assets are located on the Closing Date. To the
extent any lab notebooks that constitute Transferred Books are not immediately
available for delivery on the Closing Date, such lab notebooks will be delivered
to Purchaser as soon as practicable following the Closing Date.

1.3 Purchase Price. The aggregate purchase price (the “Purchase Price”) to be
paid by the Purchaser as consideration for the sale, transfer and conveyance of
the Transferred Assets pursuant to this Agreement shall be Eighty Eight Million
Six Hundred Thousand Dollars ($88,600,000), subject to adjustment pursuant to
Section 1.5 below. The Purchase Price shall be paid as follows:

(a) Five Million Dollars ($5,000,000) of such Purchase Price shall be credited
as paid pursuant to the Option Agreement.

(b) At the Closing, the Purchaser shall pay (or cause to be paid) to Seller (or
to one or more Affiliates of Seller), in cash in immediately available funds, a
total of Eighty Three Million Six Hundred Thousand Dollars ($83,600,000), less
the Indemnification Holdback Amount (the “Closing Payment”), subject to
adjustment pursuant to Section 1.5(a) below, by wire transfer to one or more
accounts provided to the Purchaser by Seller prior to the Closing (it being
understood that if Seller desires that any portion of the amount specified in
this Section 1.3 be paid to any Affiliate of Seller, Seller shall provide the
Purchaser with written instructions with respect thereto prior to the Closing).
The Closing Payment shall be made in United States dollars; provided, however,
that the Purchaser may deliver up to $600,000 of the Closing Payment in Chinese
renminbi (at an exchange rate determined as the average of the prevailing
exchange rates published by the Wall Street Journal as of the close of business
on each of the five business days immediately preceding the Closing Date) to one
or more accounts provided to the Purchaser by Seller prior to the Closing, which
amount may be used by Seller or Seller’s Affiliate to satisfy potential
severance obligations in respect of Transferred Employees of Avanex
Communications Technologies Co. (“Avanex”) at the Shanghai Facility.

 

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CONFIDENTIAL

 

(c) At the Closing, the Purchaser shall assume the Assumed Liabilities by
delivery to Seller of an Assignment and Assumption Agreement in form and
substance mutually agreeable to the Purchaser and the Seller (the “Assumption
Agreement”).

(d) At the Closing, the Purchaser shall withhold the Indemnification Holdback
Amount from the Purchase Price to provide funds against which a Purchaser
Indemnitee may assert claims of indemnification under this Agreement. The
Indemnification Holdback Fund will be held, administered and distributed by
Purchaser in accordance with the terms of Article 8 of this Agreement.

1.4 Assumption of Liabilities.

(a) Simultaneously with the Closing, the Purchaser or an Affiliate of Purchaser
shall assume and be liable for, and shall pay, perform and discharge, when due,
and no other Liabilities: (i) all Liabilities arising after the Closing under
the Transferred Contracts but only to the extent that such Liabilities
thereunder do not relate to any failure to perform, improper performance, or
other breach, default or violation of any such Transferred Contract by Seller or
any Affiliate of Seller prior to the Closing; (ii) all Liabilities arising from
the conduct of the Business or the ownership of the Transferred Assets by
Purchaser or any Affiliate of Purchaser following the Closing, including without
limitation the design, manufacture, import, sale or offer for sale of any
products by the Purchaser or any Affiliate of Purchaser irrespective of when
such products were designed, manufactured, imported or offered for sale; and
(iii) all Liabilities of the Purchaser incurred in accordance with this
Agreement, including, without limitation, those set forth on Part 1.4(a) of the
Disclosure Letter (the Liabilities described in clauses “(i)”, “(ii)”, and
“(iii)” of this sentence being collectively referred to as the “Assumed
Liabilities”).

(b) Notwithstanding Section 1.4(a), the Purchaser shall not assume and shall not
be responsible to pay, perform or discharge any Liabilities of Seller or any of
its Affiliates of any kind or nature whatsoever other than the Assumed
Liabilities (the “Excluded Liabilities”). Without limiting the generality of the
foregoing, the Excluded Liabilities shall include, but not be limited to, the
following:

(i) any and all Liabilities to the extent arising from, or incurred in
connection with, the Excluded Assets;

(ii) any and all Liabilities of Seller or any of its Affiliates for Seller
Transaction Expenses (as defined in Section 10.5(b) below);

(iii) any and all Liabilities of Seller or any of its Affiliates listed on Part
1.4(b) of the Disclosure Letter;

(iv) all Liabilities arising from the conduct of the Business or the ownership
of the Transferred Assets on and prior to the Closing Date including, without
limitation, all Liabilities associated with administering and honoring all
repair and replacement warranties, returns and similar obligations related to
the products and services of the Business sold on or prior to the Closing Date
or such services provided on or prior to the Closing Date; provided that, with
respect to products sold or services performed prior to the Closing, Purchaser
will administer and honor all such warranties, returns and similar obligations
on behalf of Seller and any Affiliate of Seller;

 

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(v) any Liability for (x) Taxes of Seller or any Affiliate of Seller or relating
to the Transferred Assets or the Assumed Liabilities for any Pre-Closing Period,
(y) Taxes that arise out of the consummation of the transactions contemplated
hereby or that are the responsibility of Seller pursuant to Section 1.6 or
(z) other Taxes of Seller or any Affiliate of Seller of any kind or description
(including any Liability for Taxes of Seller or any Affiliate of Seller that
becomes a Liability of Purchaser or any Affiliate of Purchaser under any common
Legal Requirement doctrine of de facto merger or transferee or successor
liability or otherwise by operation of contract or Legal Requirement, except
current real estate and personal property taxes with respect to the Business or
the Transferred Assets to the extent such Taxes relate to a Post-Closing
Period);

(vi) subject to Part 1.4(a) of the Disclosure Letter, any Liabilities of Seller
or any Affiliate of the Seller for any Pre-Closing Period relating to present or
former employees, officers, directors, retirees, independent contractors or
consultants of Seller or any Affiliate of Seller, including, without limitation,
any Liabilities associated with any claims for wages or other benefits, bonuses,
accrued vacation, workers’ compensation, severance, retention, termination or
other payments;

(vii) any Liabilities to indemnify, reimburse or advance amounts to any present
or former officer, director, employee or agent of Seller or any Affiliate of
Seller, including, with respect to any breach of fiduciary obligations;

(viii) any Liabilities associated with debt, loan or credit facilities of the
Seller and/or any Affiliate of Seller; and

(ix) any Liabilities arising out of, in respect of or in connection with the
failure by Seller or any of its Affiliates to comply with any Legal Requirement
or Order.

1.5 Inventory Adjustment.

(a) At least one business day prior to the Closing, Seller shall deliver to
Purchaser its good faith estimate of the net book value of the Transferred
Inventory as of the Closing Date (the “Estimated Inventory Value”). Part 1.5(a)
of the Disclosure Letter contains an example calculation of Estimated Inventory
Value as of October 5, 2013. The Closing Payment will be adjusted upwards or
downwards as follows: (i) if Estimated Inventory Value exceeds $9,000,000 (the
“Inventory Value Target”), then the Closing Payment will be increased by such
excess, and (ii) if the Estimated Inventory Value is less than the Inventory
Value Target, then the Closing Payment will be reduced by the amount by which
Estimated Inventory Value is less than the Inventory Value Target.

(b) Any amount by which the net book value of the Transferred Inventory as of
the Closing Date (the “Closing Date Inventory Value”) is less than the Inventory
Value Target will reduce the Purchase Price, and any amount by which the Closing
Date Inventory Value is greater than the Inventory Value Target will increase
the Purchase Price.

(c) Within 70 calendar days of the Closing Date, the Seller shall prepare and
deliver to the Purchaser a statement setting forth the calculation of the
Closing Date Inventory Value, including the components thereof.

 

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(d) The Purchaser will notify the Seller in writing of any objections to the
Seller’s computation of Closing Date Inventory Value within 15 calendar days
after the Purchaser receives the statement thereof. If the Purchaser does not
notify the Seller of any such objections by the end of that 15-day period, then
the Closing Date Inventory Value will be considered final at the end of the last
day of that 15-day period. If the Purchaser does notify the Seller of any such
objections by the end of that 15-day period and the Purchaser and the Seller are
unable to resolve their differences within 15 calendar days thereafter, then the
Purchaser and the Seller will instruct their respective accountants to use
commercially reasonable efforts to resolve such disputed items to their mutual
satisfaction and to deliver a final calculation of Closing Date Inventory Value
to the Purchaser and the Seller as soon as reasonably possible. If the
Purchaser’s accountants and the Seller’s accountants are unable to resolve any
such disputed items within 15 calendar days after receiving such instructions,
then the remaining disputed items and the value attributable to them by each of
the Purchaser and the Seller will be submitted to a nationally recognized
accounting firm mutually agreed by the Purchaser and the Seller (the “Accounting
Arbiter”) for resolution, and the Accounting Arbiter will be instructed to
determine the final Closing Date Inventory Value and deliver the same to the
Purchaser and the Seller as soon as possible. The Accounting Arbiter will
consider only those items and amounts in the Purchaser’s and the Seller’s
respective calculations of the Closing Date Inventory Value that are identified
as being items and amounts to which the Purchaser and the Seller have been
unable to agree. In resolving any disputed item, the Accounting Arbiter may not
assign a value to any item greater than the greatest value for such item claimed
by either party or less than the smallest value for such item claimed by either
party. The Accounting Arbiter’s determination of the Closing Date Inventory
Value will be based solely on the financial records of the Business consistent
with the past practices of the Business (i.e., not on independent review) and on
the definition of Closing Date Inventory Value included herein. The
determination of the Accounting Arbiter will be final, conclusive and binding
upon the parties hereto. Neither the Purchaser nor the Seller will have any
right to, and will not, institute any Proceeding challenging such determination
or with respect to the matters that are the subject of this Section 1.5, except
that the foregoing will not preclude a Proceeding to enforce such determination.
If the Accounting Arbiter’s determination of Closing Date Inventory Value is
closer to the value initially asserted by the Purchaser to the Accounting
Arbiter, then the Seller will pay the costs of the Accounting Arbiter. If the
Accounting Arbiter’s determination of Closing Date Inventory Value is closer to
the value initially asserted by the Seller to the Accounting Arbiter, then the
Purchaser will pay the costs of the Accounting Arbiter. Each of the Seller and
the Purchaser and their respective Affiliates will cooperate with and assist the
Accounting Arbiter to determine the final Closing Date Inventory Value,
including by making available and granting reasonable access to records and
employees. The terms of engagement of the Accounting Arbiter for the purposes of
this Section 1.5(c) shall be such reasonable commercial terms as shall be agreed
between the Seller and the Purchaser consistently with the provisions of this
Section 1.5. If the Seller and the Purchaser fail to agree on terms of
engagement for the Accounting Arbiter within 5 calendar days, the Seller and the
Purchaser agree that each of them will execute the standard form of the
Accounting Arbiter’s terms of engagement as proposed by the Accounting Arbiter
for its appointment.

(e) Within five (5) business days after the final determination of the Closing
Date Inventory Value in accordance with this Section 1.5:

(i) if the Closing Date Inventory Value is greater than the Estimated Inventory
Value, the Purchaser will cause the amount by which the Closing Date Inventory
Value exceeds the Estimated Inventory Value to be paid to the Seller by wire
transfer of immediately available funds to an account designated by the Seller;
and

 

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(ii) if the Closing Date Inventory Value is less than the Estimated Inventory
Value, the Seller shall cause the amount by which the Closing Date Inventory
Value is less than the Estimated Inventory Value to be paid to the Purchaser by
wire transfer of immediately available funds to an account designated by the
Purchaser.

1.6 Transfer Taxes. To the extent any sales (including bulk sales), value added,
use, transfer, ad valorem, privilege, gross receipts, registration, conveyance,
excise, license, goods and services, stamp or similar Taxes and documentary
charges, recording fees or other charges or fees that arise out of, in
connection with or are attributable to the sale of the Transferred Assets to the
Purchaser or any of the other Transactions (collectively, the “Transfer Taxes”)
are imposed, such Transfer Taxes shall be the responsibility of, and timely paid
by, both the Purchaser and the Seller in equal proportions. Seller shall, at its
own expense, timely file any Tax Return or other document with respect to such
Taxes or fees for the Business operations prior to or in connection with the
Closing (and Purchaser shall cooperate with respect thereto as necessary). The
Purchaser and the Seller shall use commercially reasonable efforts to minimize
Transfer Taxes, if any, arising out of or relating to the Transactions,
including by Purchaser accepting delivery of software assets located in the
State of California by electronic transmission from Seller’s or Seller’s
Affiliates’ place of business to Purchaser’s computers in accordance with
California Sales and Use Tax Regulation 1502(f)(1)(D), with Seller and its
Affiliates having no obligation to deliver any tangible assets in connection
with the delivery of such software.

1.7 Allocation. The Seller and the Purchaser shall cooperate in good faith to
reach an agreement as to the allocation of the Purchase Price attributable to
the Transferred Assets for U.S. federal income tax purposes in accordance with
Section 1060 of the Code and for tax purposes and Legal Requirements of other
applicable jurisdictions. If such agreement is achieved by the Seller, on the
one hand and the Purchaser, on the other hand, then the Seller and the Purchaser
shall, to the extent applicable, prepare and file Internal Revenue Service Form
8594 on a basis consistent with such agreement and shall take no contrary
position except to the extent required by applicable Legal Requirements. If such
agreement is not achieved by the Seller, on the one hand and the Purchaser, on
the other hand, then the Seller and the Purchaser shall allocate the Purchase
Price attributable to the applicable Transferred Assets in accordance with their
separate determinations.

1.8 Closing. Subject to the satisfaction or waiver of the conditions set forth
in Section 7.1, the closing of the sale of the Transferred Assets and the
assumption of the Assumed Liabilities pursuant to this Agreement (the “Closing”)
shall take place at the offices of Sherrard, German & Kelly, P.C. in Pittsburgh,
Pennsylvania, at a time to be agreed upon by the Purchaser and the Seller, on
the later of: (i) November 1, 2013, or (ii) the date that is the second business
day after the satisfaction or waiver of the conditions set forth in Section 7.1,
or such other time and date mutually agreed by the Purchaser and the Seller. For
purposes of this Agreement, “Closing Date” shall mean the date on which the
Closing actually takes place. The Closing shall be effective as of 12:01 am on
the Closing Date.

1.9 Third Party Consents. To the extent that rights of Seller or any Affiliate
of Seller under any Contract or Governmental Authorization constituting a
Transferred Asset, may not be assigned to Purchaser without the consent of
another Person which has not been obtained, this Agreement shall not constitute
an agreement to assign the same if an attempted assignment would constitute a
breach thereof or be unlawful, and Seller or its Affiliate shall use
commercially reasonable efforts to obtain any such required consent(s) as
promptly as possible. The expenses incurred by Seller and its Affiliate(s) to
obtain any such consent(s) shall be borne by Seller. If any such consent shall
not be obtained or if any attempted assignment would be ineffective or would
impair Purchaser or its Affiliates’ rights under the Transferred Asset in
question so that Purchaser or an Affiliate of Purchaser would not in effect
acquire the benefit of all such rights, Seller shall (or cause its Affiliate
to), to the maximum extent permitted by Legal Requirement and the Transferred
Asset, (i) act after the Closing as Purchaser’s agent in order to obtain for it
the benefits thereunder; and (ii) cooperate with the Purchaser in any other
reasonable arrangement designed to provide such benefits to Purchaser or its
Affiliate; provided, that to the extent such benefits are provided to Purchaser
or any Affiliate of Purchaser, Purchaser shall be responsible for all
corresponding Liabilities arising after the Closing but only to the extent that
such Liabilities do not relate to any failure to perform, improper performance,
warranty or other breach, default or violation by Seller or an Affiliate of
Seller on or prior to the Closing.

 

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1.10 Shenzhen Equipment. All of the Shenzhen Equipment, including record title
thereto, free and clear of any Encumbrance, will be transferred after the
Closing Date as provided in the Bills of Sale with respect to the Shenzhen
Equipment (which shall be in form and substance mutually agreeable to the
Purchaser and the Seller). “Shenzhen Equipment” shall mean the Transferred
Equipment located in Shenzhen, People’s Republic of China. Notwithstanding the
foregoing, the Parties acknowledge that the purchase price allocated to the
Shenzhen Equipment is being paid in full by the Purchaser on the Closing Date
and the Seller and its Affiliates have conveyed equitable title pursuant to this
Agreement.

 

2. REPRESENTATIONS AND WARRANTIES OF THE SELLER.

Seller represents and warrants as of the date of this Agreement, subject to such
exceptions as are disclosed in the Disclosure Letter prepared in accordance with
Section 10.16, to and for the benefit of the Purchaser and any Affiliate of
Purchaser, as follows:

2.1 Due Organization, Etc.

(a) Organization. The Seller and each Affiliate of the Seller that owns any
Transferred Assets is a corporation or other entity duly organized, validly
existing and in good standing (in jurisdictions that recognize the concept of
good standing) under the Legal Requirements of the jurisdiction of its
organization and has full power and unrestricted authority to own and operate
the Transferred Assets, and, where applicable, to carry on the Business as
currently conducted. Part 2.1(a) of the Disclosure Letter accurately sets forth
the jurisdiction of organization for the Parent, Seller and each Affiliate of
the Seller that owns any Transferred Asset.

(b) Qualification. The Seller and each Affiliate of the Seller that owns
Transferred Assets is qualified to do business as a foreign entity under the
Legal Requirements of all jurisdictions in which the ownership of the
Transferred Assets or the operation of the Business as currently conducted
requires such qualification, except where the failure to be so qualified would
not have a Material Adverse Effect. Part 2.1(b) of the Disclosure Letter
accurately sets forth the jurisdictions where Parent, Seller and each Affiliate
of the Seller that owns any Transferred Asset is qualified to do business as a
foreign entity.

2.2 Inventory. All of the Transferred Inventory is (and will as of the Closing
be) of such quality and quantity as to be usable and saleable in the ordinary
course of business of the Business, except for any such Transferred Inventory
included in reserves for unusable or unsaleable inventory as set forth on Part
2.2(b) of the Disclosure Letter. As of the Closing Date, all Transferred
Inventory will be owned by Seller or an Affiliate of Seller free and clear of
all Encumbrances. No Transferred Inventory is held on a consignment basis. Part
2.2(a) of the Disclosure Letter accurately sets forth the location of all
Transferred Inventory and accurately identifies the owner of all Transferred
Inventory.

 

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2.3 Equipment.

(a) Part 2.3(a) of the Disclosure Letter accurately identifies as of the date of
this Agreement all material items of Transferred Equipment, and the location of
such material items of Equipment.

(b) Part 2.3(b) of the Disclosure Letter accurately identifies as of the date of
this Agreement all material items of Equipment that are used in the Business and
are (i) owned by a customer of the Business and (ii) physically located in one
of Seller’s manufacturing facilities or a manufacturing facility of a contract
manufacturer for the Business.

(c) All of the Transferred Equipment and other Equipment owned by the Seller or
any Affiliate of the Seller in connection with the Business: (i) are
structurally sound and in good operating condition and repair (ordinary wear and
tear excepted) and are suitable for use in the ordinary course of business; and
(ii) are adequate for the uses to which they are being put in the ordinary
operation of the Business.

(d) The Shenzhen Equipment is owned by the Shenzhen Company.

2.4 Financial Statements; Absence of Changes.

(a) The Seller has delivered to the Purchaser the unaudited pro forma statement
of income for the Business for the twelve months ended June 29, 2013 (the
“Financial Statement Date,” and such statement of income, the “Business
Financial Statements”). The Business Financial Statements are correct and
complete in all material respects and present fairly in all material respects
the results of operations of the Business for the period covered thereby, all in
accordance with GAAP subject to (i) pro forma estimates, assumptions and
adjustments, including the exclusion of stock compensation charges, insurance
payments from the Thailand floods, restructuring costs associated with
production transfers and related activities, foreign currency gain/loss on
intercompany balances, income or expense from non-cash “in period” changes in
inventory absorption and valuation and tax provision and (ii) no statements of
cash flows, shareholders equity, or comprehensive income have been included and
no footnotes have been included. The Business Financial Statements have been
prepared from and are consistent with the accounting books and records of the
Seller and its Affiliates.

(b) Between the Financial Statement Date and the date of this Agreement, there
has not occurred any Material Adverse Effect, the Business has not incurred any
material Liabilities other than in the ordinary course of business, and the
operations of the Business has been conducted in the ordinary course of
business.

(c) The books and Records of the Seller and each Affiliate of Seller that owns
Transferred Assets are complete are correct in all material respects, reflect
all transactions affecting the Business and the Transferred Assets, and have
consistently been maintained in accordance with sound business practices.

2.5 Title to Tangible Assets. The Seller or the applicable Affiliate of the
Seller currently owns and has good and valid title to, all of the Transferred
Inventory and Transferred Equipment. As of the Closing Date, the Seller or the
applicable Affiliate of the Seller will own, and have good and valid title to,
all of the Transferred Inventory and Transferred Equipment, free and clear of
any Encumbrances.

 

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2.6 Intellectual Property; Information Technology.

(a) The Transferred Patents constitute all U.S. and foreign Issued Patents and
Patent Applications owned by the Seller or any Affiliate of Seller, and which
are exclusively used in the operation of the Business.

(b) Part 2.6(b) of the Disclosure Letter accurately lists all of the registered
and material unregistered Trademarks and applications for registration of
Trademarks owned by the Seller or any Affiliate of Seller and which are
exclusively used in the operation of the Business, setting forth in each case,
the name of the owners of the Trademarks and the jurisdictions in which the
Trademarks have been registered and trademark applications for registration have
been filed.

(c) Part 2.6(c) of the Disclosure Letter accurately lists all of the registered
Copyrights that are owned by the Seller or any Affiliate of Seller and which are
exclusively used or exclusively held for use in the operation of the Business,
setting forth in each case, the name of the owners of the Copyrights and the
jurisdictions in which Copyrights have been registered and applications for
copyright registration have been filed.

(d) The Transferred IP constitutes all Intellectual Property Rights (other than
Patents) that are owned by the Seller or any Affiliate of Seller and which are
exclusively used or exclusively held for use in the operation of the Business.

(e) Except as set forth on Part 2.6(e) of the Disclosure Letter, all Registered
IP is valid, subsisting and enforceable. All required filings and fees related
to the Registered IP due to be filed or paid before the date of Closing have
been timely filed with and paid to the relevant Governmental Bodies and
authorized registrars.

(f) Part 2.6(f) of the Disclosure Letter contains a complete and accurate list
of (i) all Contracts pursuant to which Seller or any of its Affiliates has
licensed or is obligated to license any Seller IP to a third party, excluding
any non-exclusive licenses to Seller IP granted by Seller or any of its
Affiliates in the ordinary course of business incident to a sale of any products
of the Business to an end-customer using Seller’s standard form of agreement
(the “Out-Licenses”), or (ii) other than Open Source Software licenses, all
Contracts pursuant to which a third party has licensed any Intellectual Property
Rights to Seller or any of Seller’s Affiliates that is (A) incorporated into the
Seller IP (other than Shrink-Wrap Code), or (B) is otherwise material to the
Business or the Transferred Assets (the “In-Licenses”); excluding, for the
purpose of (i) and (ii), employee agreements, agreements with consultants and
independent contractors and non-disclosure agreements entered into in the
ordinary course of business (the Out-Licenses, together with the In-Licenses,
the “License Agreements”). Seller, or the Affiliate of Seller, as applicable,
has performed all material obligations required to be performed by it to date
under the License Agreements, and it is not (with or without the lapse of time
or the giving of notice, or both) in material breach or material default
thereunder and, to the Knowledge of Seller, no other party to any License
Agreement is (with or without the lapse of time or the giving of notice, or
both) in material breach or material default thereunder. Seller or Affiliate, as
applicable, has not received any written notice of the intention of any party to
terminate any License Agreement.

(g) Excluding (i) any in-licensed third-party Intellectual Property Rights
embedded or included in the Seller IP as set forth in Part 2.6(g) of the
Disclosure Letter or pursuant to any Material Contract, and (ii) any Open Source
Software embedded or included in the Seller IP, the Seller, or an Affiliate of
the Seller has good, marketable, and, to the Knowledge of the Seller, valid
title to the Seller IP, and will have as of the Closing Date, free and clear of
all Encumbrances, good, marketable, and, to the Knowledge of the Seller, valid
title to the Seller IP. To the Knowledge of the Seller, except as set forth on
Part 2.6(g)-2 of the Disclosure Letter and subject to any rights granted or
restrictions contained in the License Agreements, the respective Seller or
Affiliate of Seller has a valid right to make, use, sell, offer for sale,
license and otherwise exploit all Seller IP.

 

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(h) Except as set forth on Part 2.6(h) of the Disclosure Letter and subject to
any rights granted or restrictions contained in the License Agreements:

(i) Neither the Seller, nor an Affiliate of Seller jointly owns, licenses or
claims any Seller IP with any other Person that is exclusively used in the
operation of the Business.

(ii) In the five (5) years prior to closing, no Person has asserted or
threatened a claim which would have a material adverse effect on the Seller’s or
any Affiliate’s ownership rights to, or rights under, any Seller IP, or
restricts in any material respect the making, use, selling, offering for sale,
transfer, delivery or licensing of any product of the Business, or which may
affect the validity, use or enforceability of any Seller IP.

(iii) Neither the Seller, nor any Affiliate of Seller is subject to any
Proceeding or Order restricting in any manner the use, transfer or licensing of
any Seller IP, or the use, transfer or licensing of any product of the Business,
or which may affect the validity, use or enforceability of any Seller IP.

(iv) To the Knowledge of the Seller, no Person is currently infringing any
Seller IP.

(v) To the Knowledge of the Seller, none of the Seller IP infringes or
misappropriates any Intellectual Property Right or Technology of any other
Person. There is no pending or threatened (in writing) Proceeding alleging that
any of the Seller IP has infringed or misappropriated any Intellectual Property
Right or Technology of any other Person.

(i) Seller has taken commercially reasonable measures to protect and maintain
the confidentiality of all Trade Secrets embodied in the Transferred Assets, the
Licensed Seller Intellectual Property in which it has any right, title or
interest. Without limiting the generality of the foregoing, except as set forth
on Part 2.6(i) of the Disclosure Letter, Seller and its Affiliates have entered
into binding, written agreements with every current and former employee and
independent contractor of such Seller or Affiliate involved in the creation,
invention or discovery of any material Owned IP or Trade Secret, to the extent
either is embodied in any Transferred Asset or Licensed Seller Intellectual
Property, whereby such employees and independent contractors either (i) assign
or are obligated to assign to the Seller or the Affiliate of Seller any
ownership interest and right they may have in the Owned IP or Trade Secret; or
(ii) otherwise acknowledge the Seller’s or its Affiliate’s ownership of all
Owned IP or Trade Secrets as work made for hire or otherwise. Seller has
delivered to Purchaser true and complete copies of all such agreements.

(j) Except as set forth on Part 2.6(j) of the Disclosure Letter:

(i) To the Knowledge of Seller, all Patents listed on Part 2.6(a) of the
Disclosure Letter and all Patents included as part of the Licensed Seller
Intellectual Property: (A) have been prosecuted in good faith and are in good
standing, (B) have no inventorship challenges, and (C) no interference has been
declared or provoked relating to any such Patents.

 

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(ii) To the Knowledge of the Seller, there is no material fact with respect to
any Patent Application in which Seller or any Affiliate of Seller has any right,
title or interest and which are used or held for use in the operation of the
Business that would (A) preclude the issuance of an Issued Patent from such
Patent Application (with valid claims no less broad in scope than the claims as
currently pending in such Patent Application), (B) render any Issued Patent
issuing from such Patent Application invalid or unenforceable, or (C) cause the
claims included in such Patent Application to be narrowed.

2.7 Proceedings; Orders. There is no pending Proceeding against or involving the
Seller, or any Affiliate of the Seller that owns Transferred Assets and, to the
Knowledge of the Seller, no Person has threatened to commence any Proceeding
against or involving the Seller or any Affiliate of the Seller that owns
Transferred Assets, in each case, that relates to, or affects, the Business or
the Transferred Assets. There is no Order applicable to the Seller or any
Affiliate of the Seller that relates to, or affects, the Business or the
Transferred Assets.

2.8 Compliance with Laws; Governmental Authorizations.

(a) The Seller and each Affiliate of the Seller that owns Transferred Assets
have complied, and are complying, in all material respects, with all Legal
Requirements applicable to the conduct and operation of the Business and the
ownership and use of the Transferred Assets. No Proceeding has been commenced
against the Seller or Affiliate of the Seller that owns Transferred Assets with
respect to any alleged violation of any Legal Requirement and none of them has
received any written notice alleging any such violation, nor, to the Knowledge
of Seller, is there any inquiry, investigation or proceedings relating to
alleged violations of respective Legal Requirements with respect to the conduct
and operation of the Business and the ownership and use of the Transferred
Assets.

(b) All material Government Authorizations currently required for Seller and its
Affiliates to conduct the Business as currently conducted or for the ownership,
use and operation of the Transferred Assets have been obtained by Seller and its
Affiliates and are valid and in full force and effect. All fees and charges with
respect to such Governmental Authorizations as of the date hereof have been paid
in full. Part 2.8(b) of the Disclosure Letter lists all material Governmental
Authorizations currently issued to the Seller or an Affiliate of the Seller
which are currently required for the conduct of the Business as currently
conducted or the ownership and use of the Transferred Assets, including the
names of such Governmental Authorizations and their respective dates of issuance
and expiration. To the Knowledge of the Seller, no event has occurred that, with
or without notice or lapse of time or both, would reasonably be expected to
result in the revocation, suspension, lapse or limitation of any Government
Authorization set forth in Part 2.8(b) of the Disclosure Letter. To the
Knowledge of the Seller, no Governmental Authorizations currently required to
operate the Business are or will be terminated or otherwise affected by the
transactions contemplated under or in connection with this Agreement.

2.9 Environmental Matters. Except as identified on Part 2.9 of the Disclosure
Letter:

(a) The operations of Seller and the Affiliates of Seller with respect to the
Business and the Transferred Assets are currently in compliance in all material
respects with all Environmental Laws. Seller has not received from any Person,
with respect to the Business or the Transferred Assets, any: (i) Environmental
Notice or Environmental Claim; or (ii) written request for information pursuant
to Environmental Law, which, in each case, either remains pending or unresolved,
or is the source of ongoing Liability, Proceeding, Order, obligation or
requirement as of the Closing Date.

 

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(b) Seller has obtained and is in compliance in all material respects with all
Environmental Permits necessary for the conduct of the Business as currently
conducted and the ownership or use of the Transferred Assets and all such
Environmental Permits are in full force and effect.

(c) None of the Leased Real Property is listed on, or has been proposed for
listing on, the National Priorities List (or CERCLIS) under CERCLA or any
similar state or foreign list that could give rise to liability of the Seller.

(d) To the Knowledge of the Seller, there has been no Release of Hazardous
Materials in contravention of Environmental Law with respect to the Leased Real
Property. Seller has not received an Environmental Notice that the Leased Real
Property (including soils, groundwater, surface water, buildings and other
structure located thereon) has been contaminated with any Hazardous Material
which, in each case, could reasonably be expected to result in an Environmental
Claim against, or a violation of Environmental Law or term of any Environmental
Permit by, Seller or any Affiliate of Seller.

(e) Part 2.9(e) of the Disclosure Letter contains a complete and accurate list
of all active or abandoned underground storage tanks owned or operated by Seller
or any Affiliate of Seller at the Leased Real Property.

(f) Seller has Made Available any and all environmental reports, studies,
audits, records, sampling data, site assessments, risk assessments, and other
similar documents with respect to the Leased Real Property, which are in the
possession of Seller related to Environmental Claims or an Environmental Notice
or the Release of Hazardous Materials.

2.10 Employee and Labor Matters.

(a) With respect to each Eligible Employee (as each such term is defined in
Section 9.1), to the extent not prohibited by applicable Legal Requirements, the
Seller has provided the Purchaser with the following information: (i) the name;
(ii) date of hire; (iii) aggregate amounts of the compensation (including wages,
salary, commissions, deferred compensation, housing or car allowances, bonuses,
profit-sharing payments and other payments) received by such employee from the
Seller or any Affiliate of the Seller with respect to services performed in the
year ended December 31, 2012; (iv) such employee’s annualized base salary and
bonus opportunity as of the date of this Agreement; (v) the location of such
employee’s principal place of business; (vi) exempt/non-exempt status;
(iv) union membership or work council coverage; (viii) execution status of
Intellectual Property Right assignments to the Seller or its Affiliates
(including description thereof); and (ix) any accrued holiday and/or overtime
entitlement.

(b) Except as set forth in Part 2.10(b) of the Disclosure Letter: (i) neither
the Seller nor any Affiliate of the Seller, is bound by, or a party to, or has a
duty to bargain or consult with, any works council, labor union, association or
other employee group, employee representative committee or similar body
representing any Eligible Employees, and (ii) no labor union or employee
organization has been certified or recognized as the collective bargaining
representative of any Eligible Employees.

(c) During the past three (3) years there have not been any and, to the
Knowledge of the Seller, there are, with respect to the Seller and its
Affiliates, no threatened, strikes, work stoppages, slowdowns, lockouts, union
organizing campaigns, demands for recognition, or representation proceedings
regarding or affecting any Eligible Employees. No mass layoffs (as defined by
the Worker Readjustment and Notification Act (29 U.S.C. § 2101)) have been
announced since January 1, 2013 or are being planned.

 

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(d) The Seller and the Affiliates of Seller are, and for the past three
(3) years have been, in compliance in all material respects with all applicable
Legal Requirements respecting the employment of the Eligible Employees,
including, but not limited to Legal Requirements relating to equal employment
opportunity, discrimination and/or harassment on the basis of race, national
origin, religion, gender, disability, age, workers’ compensation, or any other
protected classification, affirmative action, hiring practices, immigration,
workers’ compensation, unemployment compensation, the withholding and payment of
payroll taxes and union dues, the payment of social security contributions,
employment of minors, health and safety, labor relations, collective bargaining
agreements, payment of wages, hours worked, pay equity, employee classification,
leaves of absence, plant closings, and mass layoffs.

(e) The Seller and any Affiliate of Seller are, and for the past three (3) years
have been, in compliance in all material respects with all applicable collective
bargaining agreements and other agreements respecting the Eligible Employees.

(f) Except as set forth on Part 2.10(f) of the Disclosure Letter, all of the
Eligible Employees employed in the United States are employed at will.

(g) Except as set forth on Part 2.10(g) of the Disclosure Letter, during the
past three (3) years, there have not been any material claims, demands, or
proceedings asserted against the Seller or any Affiliate of Seller by or on
behalf of any Eligible Employee, including, but not limited to, grievances,
arbitration proceedings, unfair labor practice charges, discrimination charges,
wage and hour complaints, and safety complaints.

(h) Except as set forth in this Agreement, no proposal, assurance or commitment
has been communicated to any Eligible Employee regarding any material change to
his or her terms of employment agreement or working conditions or regarding the
continuance, introduction, increase or improvement of any benefits or any
discretionary arrangement or practice.

2.11 Employee Benefit Matters.

(a) Part 2.11 of the Disclosure Letter lists each material employee benefit
plan, with respect to Transferred Employees (including each “employee benefit
plan” as defined in Section 3(3) of ERISA), maintained or contributed to (or
required to be contributed to) by Seller or the Seller’s Affiliates for the
benefit of Eligible Employees, or under which the Seller or any Affiliate
thereof has any Liability, including any retention, severance, equity-based,
change in control, retirement, welfare, fringe benefit, incentive or deferred
compensation plan, program or arrangement (each of the foregoing, a “Seller
Benefit Plan”). The Seller has provided to the Purchaser true and complete
copies of each of such Seller Benefit Plans. Any Seller Benefit Plan which is
intended to meet the requirements for tax-qualification under Sections 401(a)
and 401(k) of the Code has been determined by the IRS to be so qualified (by IRS
determination letter to the plan’s sponsor, or by IRS opinion letter to the
prototype plan’s sponsor) and no event has occurred and no condition exists with
respect to the form or operation of such Seller Benefit Plan that would
reasonably be expected to cause the loss of such qualification or exemption.

(b) Each Seller Benefit Plan has been established, administered and maintained
in material compliance with its terms and in material compliance with all
applicable Legal Requirements (including ERISA and the Code). All contributions
required to have been made to all Seller Benefit Plans as of the Closing will
have been made as of the Closing. There are no Proceeding or claims pending or,
to the Knowledge of the Seller, threatened (in writing) with respect to the
Seller Benefit Plans (other than routine claims for benefits).

 

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(c) Neither Seller nor any of its ERISA Affiliates has (i) incurred or
reasonably expects to incur, either directly or indirectly, any material
Liability under Title IV of ERISA or related provisions of the Code or foreign
Legal Requirement relating to any Seller Benefit Plan; (ii) failed to timely pay
premiums to the Pension Benefit Guaranty Corporation; or (iii) engaged in any
transaction which would give rise to liability under Section 4069 or
Section 4212(c) of ERISA.

(d) With respect to each Seller Benefit Plan, (i) no such plan is a “multiple
employer plan” within the meaning of Section 413(c) of the Code or a “multiple
employer welfare arrangement” (as defined in Section 3(40) of ERISA); and
(ii) no Action has been initiated by the Pension Benefit Guaranty Corporation to
terminate any such plan or to appoint a trustee for any such plan.

(e) Other than as required under Section 601 et. seq. of ERISA or other
applicable Legal Requirement, no Seller Benefit Plan or other arrangement
provides post-termination or retiree welfare benefits to any individual for any
reason.

(f) The term “Foreign Plan” shall mean any Seller Benefit Plan that is
maintained outside of the United States. Each Foreign Plan complies with all
applicable Legal Requirement in all material respects. The Records of the
Business accurately reflect the Foreign Plan liabilities and accruals for
contributions required to be paid to the Foreign Plans, in accordance with
applicable generally accepted accounting principles consistently applied. All
contributions required to have been made to all Foreign Plans as of the Closing
will have been made as of the Closing. There are no Proceedings or claims
pending or, to the Knowledge of the Seller, threatened (in writing) with respect
to the Foreign Plans (other than routine claims for benefits).

2.12 Tax Matters.

(a) There are no liens for Taxes upon any of the Transferred Assets other than
for current Taxes not yet due and payable.

(b) Except as set forth on Part 2.12 of the Disclosure Letter, (1) all material
Tax Returns required to be filed on or before the Closing Date, insofar as
related to the Transferred Assets, the Seller, or any Affiliate of Seller owning
Transferred Assets, have been or will be timely filed (including pursuant to any
applicable extension); (2) all material Tax Returns, insofar as related to the
Transferred Assets, the Seller, or any Affiliate of Seller owning Transferred
Assets are true and correct and complete in all material respects; (3) all Taxes
shown to be due and payable on such Tax Returns have been paid or adequate
reserves have been established for the payment of such Taxes; (4) no other
material Taxes are payable, insofar as related to the Transferred Assets, the
Seller, or any Affiliate of Seller owning Transferred Assets with respect to
items or periods covered by such Tax Returns; (5) no audit or examination or
refund litigation with respect to any such Tax Return is pending or has been
threatened in writing; and (6) no waivers of statute of limitations have been
given by or requested with respect to any Taxes of the Seller, or any Affiliate
of Seller owning Transferred Assets.

2.13 Real Property.

(a) Seller does not own any real property used in the Business.

 

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(b) Part 2.13(b) of the Disclosure Letter sets forth each parcel of real
property leased by the Seller or any Affiliate of the Seller that is used
primarily in the conduct of the Business as currently conducted (together with
all rights, title and interest of Seller or such Affiliate in and to leasehold
improvements relating thereto, including, but not limited to, security deposits,
reserves or prepaid rents paid in connection therewith, collectively, the
“Leased Real Property”), and a true and complete list of all leases, subleases,
licenses, concessions and other agreements (whether written or oral), including
all amendments, extensions renewals, guaranties and other agreements with
respect thereto (collectively, the “Leases”). Seller has Made Available to
Purchaser a true and complete copy of each Lease. With respect to each Lease:

(i) Except as disclosed on Part 2.13(b)(i) of the Disclosure Letter, Seller or
the Affiliate of Seller that is a party to the Lease has not subleased, assigned
or otherwise granted to any Person the right to use or occupy such Leased Real
Property or any portion thereof; and

(ii) Seller or such Affiliate of the Seller has not pledged, mortgaged or
otherwise granted an Encumbrance on its leasehold interest in any Leased Real
Property.

(c) Neither Seller nor any Affiliate of the Seller has received any written
notice of (i) material violations of building codes and/or zoning ordinances or
other Legal Requirements affecting the Leased Real Property, (ii) existing,
pending or threatened condemnation proceedings affecting the Leased Real
Property, or (iii) existing, pending or threatened zoning, building code or
other moratorium proceedings, or similar matters which could reasonably be
expected to adversely affect in any material respect the ability to operate the
Leased Real Property as currently operated. Neither the whole nor any portion of
any Leased Real Property has been materially damaged or destroyed by fire or
other casualty since April 28, 2010. All improvements on the Leased Real
Property, including all leasehold improvements, that were made after April 28,
2010, are in compliance with all applicable Legal Requirements and Orders.

2.14 Authority; Binding Nature of Agreements. The Seller and each of the
Seller’s Affiliates has the right, power and authority to enter into, deliver
and to perform its respective obligations under each of the Transactional
Agreements to which it is or may become a party (including all right, power,
capacity and authority to sell, transfer, convey and surrender the Transferred
Assets as provided by this Agreement); and the execution, delivery and
performance by the Seller and each of the Seller’s Affiliates of the
Transactional Agreements to which it is or may become a party have been duly
authorized by all necessary action on the part of the Seller (or such Affiliate)
and their respective board of directors as required by any Legal Requirement,
including any applicable Constituent Document. This Agreement constitutes the
legal, valid and binding obligation of the Seller, enforceable against the
Seller in accordance with its terms, subject to: (a) Legal Requirements of
general application relating to bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other Legal Requirements from time to time
in effect relating to creditors’ rights; and (b) remedies generally and general
principles of equity. Upon the execution by the Seller or any Affiliate of the
Seller of each other Transactional Agreement to which the Seller or any
Affiliate of the Seller is a party, such Transactional Agreement will constitute
the legal, valid and binding obligation of the Seller or such Affiliate of the
Seller, as the case may be, and will be enforceable against the Seller or such
Affiliate of the Seller, as the case may be, in accordance with its terms,
subject to: (a) Legal Requirements of general application relating to
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other Legal Requirements from time to time in effect relating to creditors’
rights; and (b) remedies generally and general principles of equity.

 

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2.15 Non-Contravention; Consents. Neither the execution and delivery by the
Seller or any Affiliate of the Seller of any of the Transactional Agreements,
nor the consummation or performance by the Seller or any Affiliate of the Seller
of any of the Transactions, will (with or without notice or lapse of time):

(a) result in a violation of: (i) any of the provisions of the Organizing
Documents of the Seller or any Affiliate of the Seller that owns Transferred
Assets; or (ii) any resolution adopted by the stockholders, board of directors
or any committee of the board of directors of the Seller or any Affiliate of the
Seller that owns Transferred Assets;

(b) result in a violation of any Legal Requirement or any Order to which the
Seller or any Affiliate of the Seller, or any of the Transferred Assets, is
subject;

(c) result in a material breach of any provision of, or material default under,
or give any Person the right to declare a default or accelerate the maturity or
performance of, or payment under, or to cancel, terminate or modify, any
Material Contract;

(d) contravene, conflict with or result in a violation or breach of any of the
terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any material Governmental
Authorization; or

(e) result in the creation or imposition of an Encumbrance on the Transferred
Assets.

Except as set forth on Part 2.15 of the Disclosure Letter, and except for the
filing with the United States Securities and Exchange Commission of such reports
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as
may be required in connection with this Agreement, the other Transactional
Agreements and the Transactions, neither the Seller nor any Affiliate of the
Seller is required to make any filing with or give any notice to, or to obtain
any Consent from, any Governmental Body or other Person in connection with the
execution and delivery by the Seller or any Affiliate of the Seller of any of
the Transactional Agreements or the consummation or performance by the Seller or
any Affiliate of the Seller of any of the Transactions.

2.16 Sufficiency of Assets. The Transferred Assets, together with the services
to be provided by the Seller or any of its Affiliates under the Transition
Services Agreement and the Manufacturing Services and Supply Agreement and the
Technology and Intellectual Property Rights to be licensed to the Purchaser or
an Affiliate of the Purchaser under the Intellectual Property License Agreement,
will collectively constitute, as of the Closing Date, all of the material
properties, rights, interests and other tangible and intangible assets necessary
to enable the Purchaser to conduct the Business in all material respects in the
manner in which the Business is currently being conducted by the Seller and the
Affiliates of the Seller; provided, however, that the foregoing shall not
constitute a representation or warranty of non-infringement of Intellectual
Property Rights or any other matter covered by Section 2.6 of this Agreement.

 

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2.17 Customers and Suppliers.

(a) Part 2.17(a) of the Disclosure Letter sets forth with respect to the
Business (i) each customer who has paid aggregate consideration to Seller or any
Affiliate of Seller for goods or services rendered in an amount greater than or
equal to $5,000,000 in either of the two most recent fiscal years; and (ii) the
amount of consideration paid by each such customer during such periods. Neither
Seller nor any Affiliate of Seller has received written notice or has Knowledge
that any customer who has paid aggregate consideration to Seller or any
Affiliate of Seller for goods or services rendered in an amount greater than or
equal to $2,500,000 in either of the two most recent fiscal years (each,
“Material Customer”) has ceased, or that any such Material Customers intends to
cease after the Closing, to purchase the goods or services of the Business or to
otherwise terminate or materially reduce its relationship with the Business.

(b) Part 2.17(b) of the Disclosure Letter sets forth with respect to the
Business (i) each supplier to whom the Seller and all Affiliates of Seller, in
the aggregate, have paid consideration for goods or services rendered in an
amount greater than or equal to $1,000,000 for the most recent fiscal year
(collectively, the “Material Suppliers”); and (ii) the amount of purchases from
each Material Supplier during such period. Neither Seller nor any Affiliate of
Seller has received any written notice or has Knowledge that any of the Material
Suppliers has ceased, or that any of such Material Suppliers intends to cease,
to supply goods or services to the Business or to otherwise terminate or
materially reduce its relationship with the Business.

(c) Neither Seller nor any Affiliate of Seller has received any advance payments
or deposits from any customer in consideration to Seller or such Affiliate for
the provision of goods or services of the Business after the Closing Date.

2.18 Trade Compliance Matters.

(a) To the Knowledge of the Seller, neither Seller nor any Affiliate of Seller,
nor any director, officer, agent, employee or other Person acting on behalf of
any or all of them, has with respect to the Business, in the course of its
actions for, or on behalf of, the Business: (i) used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity of for any illegal payments or undeserved benefits to the
benefit of a Person, (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds,
(iii) violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended, or (iv) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.

(b) To the Knowledge of the Seller, the operations of the Seller and its
Affiliates with respect to the Business are and have been conducted at all times
in material compliance with applicable financial recordkeeping and reporting
requirements of the Currency and Foreign Transactions Reporting Act of 1970, as
amended, the money laundering statutes of all jurisdictions, the rules and
regulations thereunder and any related or similar rules, regulations or
guidelines, issued administered or enforced by any Governmental Body
(collectively, the “Money Laundering Laws”) and no action, suit or proceeding by
or before any court or Governmental Body or any arbitrator involving the
Business with respect to the Money Laundering Laws is pending or, to the
Knowledge of Seller, threatened.

(c) To the Knowledge of the Seller, Seller and its Affiliates’ operation of the
Business is in compliance, in all material respects, with applicable
requirements, if any, of the Trading with the Enemy Act, as amended, and each of
the foreign assets control regulations of the United States Treasury Department
(31 CFR, Subtitle B, Chapter V, as amended) and any other enabling legislation
or executive order relating thereto.

 

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(d) To the Knowledge of the Seller:

(i) the Seller and its Affiliates, with respect to the Business, conduct, and
have at all times since January 1, 2009 conducted, its export and re-export
transactions in all material respects in accordance with all applicable U.S.
export and re-export controls, including the United States Export Administration
Act and Export Administration Regulations, the Arms Export Control Act and
International Traffic in Arms Regulations and all regulations promulgated and
administered by the Treasury Department’s Office of Foreign Assets Control
(collectively “U.S. Export Controls”), respectively and related or similar Legal
Requirements issued, administered or enforced in other jurisdictions applicable
to the Business;

(ii) since January 1, 2009, the Seller and its Affiliates have not received any
written notification or communication from any Governmental Body asserting that
the Seller or any Affiliate is not, with respect to the Business, in compliance,
in any material respect, with any U.S. Export Controls, nor has Seller or any
Affiliate of Seller submitted any voluntary self-disclosure to any Governmental
Body regarding any actual or potential violation of any U.S. Export Controls, or
any similar Legal Requirements or guidelines issued, administered or enforced in
the jurisdictions concerned by the Business;

(iii) the Seller and its Affiliates possess or have applied for all Permits from
Governmental Bodies which are required under U.S. Export Controls (or similar
Legal Requirements or guidelines issued, administered or enforced in the
jurisdictions concerned by the Business) in order for the Seller and the
Affiliates to conduct the Business as presently conducted. To the Knowledge of
Seller, (i) all such issued Permits are valid and in full force and effect and
(ii) there is no formal proceeding pending of a, nor has the Seller or any
Affiliate of the Seller received a written notice from any, Governmental Body
seeking or threatening to, modify, suspend, revoke, withdraw, terminate or
otherwise limit any such Permit; and

(iv) neither the Seller nor any Affiliate of Seller that owns Transferred Assets
(i) is a Person whose property or interest in property is blocked or subject to
blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001
Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten
to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (ii) engages in any
dealings or transactions prohibited by Section 2 of such executive order, or is
otherwise associated with any such Person in any manner violative of Section 2
of such executive order or (iii) is a Person on the list of Specially Designated
Nationals and Blocked Persons.

2.19 Related Party Matters. Except as set forth in Part 2.19 of the Disclosure
Letter, or pursuant to any Intercompany Contract, to the Knowledge of the
Seller, neither the Seller nor any Related Party (as defined below) is, or has
been since January 1, 2009, (i) a competitor, creditor, debtor, customer,
distributor, supplier or vendor of the Business or party to any Contract with,
Seller or any Affiliate of Seller, with respect to the Business or (ii) an
officer, director, employee, member, partner, family member, investor,
shareholder or owner of any such Person referred to in clause (i). As used
herein “Related Party” means (X) any Affiliate of Seller, (Y) any officer or
director of the Seller or Affiliate of Seller or (Z) or any Affiliate of any
Person referred to in clause (Y) above. All matters set forth on Part 2.19 of
the Disclosure Letter shall be referred to as the “Related Party Arrangements”.

2.20 Absence of Certain Events. Since the Financial Statements Date, and other
than in the ordinary course of business consistent with past practice, there has
not been any:

(a) event, occurrence or development that has had, or could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect;

 

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(b) material change in any method of accounting or accounting practice for the
Business, except as required by GAAP;

(c) material change in inventory control procedures, prepayment of expenses,
payment of trade accounts payable (except that the Seller and its Affiliates
have delayed payments of certain accounts payable in order to conserve cash),
accrual of other expenses, and acceptance of customer deposits, cash management
practices and policies, practices and procedures with respect to collection of
Accounts Receivable, establishment of reserves for uncollectible Accounts
Receivable, accrual of Accounts Receivable, in each case, with respect to the
Business;

(d) relocation, transfer, assignment, sale or other disposition of any of the
Transferred Assets, except for the sale of Transferred Inventory in the ordinary
course of business;

(e) transfer, assignment or grant of any license or sublicense of any rights
under or with respect to any Intellectual Property Rights or Technology;

(f) material damage, destruction or loss, or any material interruption in use,
of any Transferred Asset, whether or not covered by insurance;

(g) purchase, lease or other acquisition of the right to own, use or lease any
property or assets in connection with the Business for an amount in excess of
$500,000, individually (in the case of a lease, per annum) or $1,000,000 in the
aggregate (in the case of a lease, for the entire term of the lease, not
including any option term), except for purchases of Transferred Inventory in the
ordinary course of business consistent with past practice;

(h) grant of any bonuses, whether monetary or otherwise, or increase in any
wages, salary, severance, pension or other compensation or benefits in respect
of any employees, officers, directors, independent contractors or consultants of
the Business, other than as required in any existing written agreements or
required by applicable Legal Requirements, (ii) change in the terms of
employment for any employee of the Business or any termination of any employees
for which the aggregate costs and expenses exceed $50,000, or (iii) action to
accelerate the vesting or payment of any compensation or benefit for any
employee, officer, director, consultant or independent contractor of the
Business;

(i) adoption, modification or termination of any: (i) severance or retention
agreement with any current or former employee, officer, director, independent
contractor or consultant of the Business, (ii) Seller Benefit Plan, or
(iii) collective bargaining or other agreement with a labor union or works
council, in each case whether written or oral; or

(j) entry into any commitment or Contract to do any of the foregoing.

2.21 Insurance. Part 2.21 of the Disclosure Letter lists all insurance policies
(including the name of each carrier, coverage types and limits, policy numbers
and expiration dates) to which the Seller or any Affiliate of Seller is a party
and which relate to the Business or the Transferred Assets. All insurance
policies listed on Part 2.21 of the Disclosure Letter are valid and in effect as
of the Closing Date. Neither Seller nor any Affiliate of Seller is in default
with respect to any provisions of any liability or other forms of insurance held
by it and listed on Part 2.21 of the Disclosure Letter or has failed to give any
material notice or present any material claim thereunder in a due and timely
fashion. During the past twelve (12) months, and with respect to the Business
and the Transferred Assets, neither the Seller nor any Affiliate of the Seller
has been denied any application for insurance or had any insurance policy
terminated nor have any of them been notified of any pending termination. There
is no claim in an amount exceeding USD $500,000 outstanding under any of the
insurance policies (or under any policies previously held by the Seller or its
Affiliates with respect to the Business.

 

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2.22 Books and Records. The books of account and other financial Records of the
Business (including electronically kept records), all of which have been Made
Available to Purchaser, are complete and correct and represent actual, bona fide
transactions and have been maintained in accordance with sound business
practices and the requirements of Section 13(b)(2) of the Exchange Act
(regardless of whether the Seller is subject to that Section or not), including
the maintenance of an adequate system of internal controls.

2.23 Disclaimer of the Seller. The Transferred Assets are being sold on an “as
is” basis as of the Closing and in their condition as of the Closing “with all
faults” and, except as set forth in this Section 2, none of the Seller, any
Affiliate of the Seller or any of their respective Representatives makes or has
made any other representations or warranties, express or implied, at law or in
equity, in respect of the Business, any Transferred Assets or any Assumed
Liabilities, including with respect to: (a) merchantability or fitness for any
particular purposes; (b) the operation of the Business by the Purchaser or any
Affiliate of the Purchaser; or (c) the probable success or profitability of the
Business after the Closing.

2.24 Brokers. Except as set forth in Part 2.24 of the Disclosure Letter, no
broker, finder or investment banker is entitled to any brokerage, finder’s or
other fee or commission in connection with the transactions contemplated by this
Agreement or any other Transactional Agreement based upon arrangements made by
or on behalf of Seller.

2.25 Contracts.

(a) Part 2.25(a) of the Disclosure Letter identifies any Contract that is a
Material Contract.

(b) With respect to each Transferred Contract: (i) each such Transferred
Contract is a valid and enforceable agreement of the Company, the Seller or an
Affiliate of the Seller and is in full force and effect in all material respects
and subject in each case to: (A) laws of general application relating to
bankruptcy, insolvency and the relief of debtors; and (B) general principles of
equity; and (ii) no event or circumstance has occurred that, with notice or
lapse of time or both, would constitute an event of default under any
Transferred Contract or result in a termination thereof or would cause or permit
the acceleration of any material right or obligation or the loss of any material
benefit thereunder. Complete and correct copies of each Transferred Contract
(including all modifications, amendments and supplements thereto and waivers
thereunder) have been Made Available to Purchaser. No Person has threatened in
writing to terminate or commence any Proceeding with respect to any dispute
involving any Transferred Contract.

2.26 Warranties. There are no product warranty obligations with respect to the
products of the Business manufactured, sold or delivered by Seller or any of its
Affiliates, other than as set forth in the Transferred Contracts or in any
purchase orders with respect to such products.

 

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3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.

The Purchaser represents and warrants, to and for the benefit of the Seller, as
follows:

3.1 Due Organization. The Purchaser and each Affiliate of the Purchaser that is
involved in any of the Transactions is a corporation duly organized, validly
existing and in good standing under the Legal Requirements of the jurisdiction
of its organization.

3.2 Authority; Binding Nature of Agreements. The Purchaser and each of its
Affiliates has right, power and authority to enter into, deliver and to perform
its obligations under each of the Transactional Agreements to which it is or may
become a party; and the execution, delivery and performance by the Purchaser and
each of its Affiliates of the Transactional Agreements to which it is or may
become a party have been duly authorized by all necessary action on the part of
the Purchaser (or such Affiliate) and its board of directors. Neither the
Purchaser nor any Affiliate of the Purchaser is required to obtain the approval
of its stockholders in connection with the execution, delivery and performance
of any of the Transactional Agreements. This Agreement constitutes the legal,
valid and binding obligation of the Purchaser, enforceable against the Purchaser
in accordance with its terms, subject to: subject to: (a) Legal Requirements of
general application relating to bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other Legal Requirements from time to time
in effect relating to creditors’ rights; and (b) remedies generally and general
principles of equity. Upon the execution by the Purchaser or any Affiliate of
the Purchaser of each other Transactional Agreement to which the Purchaser or
any Affiliate of the Purchaser is a party, such Transactional Agreement will
constitute the legal, valid and binding obligation of the Purchaser (or such
Affiliate), and will be enforceable against the Purchaser (or such Affiliate) in
accordance with its terms, subject to: (i) Legal Requirements of general
application relating to bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other Legal Requirements from time to time in effect
relating to creditors’ rights; and (ii) remedies generally and general
principles of equity.

3.3 Non-Contravention; Consents. Neither the execution and delivery by the
Purchaser or any Affiliate of the Purchaser of any of the Transactional
Agreements, nor the consummation or performance by the Purchaser or any
Affiliate of the Purchaser of any of the Transactions, will (with or without
notice or lapse of time):

(a) result in a violation of: (i) any of the provisions of the Organizing
Documents of the Purchaser or any Affiliate of the Purchaser; or (ii) any
resolution adopted by the stockholders, board of directors or any committee of
the board of directors of the Purchaser or any Affiliate of the Purchaser;

(b) result in a violation of any Legal Requirement or any Order to which the
Purchaser or any Affiliate of the Purchaser is subject; or

(c) result in a material breach of any provision of or material default under,
or result in a default under, any provision of any Contract to which the
Purchaser or any Affiliate of the Purchaser is a party or by which the Purchaser
or any Affiliate of the Purchaser is bound.

Except as disclosed on Part 3.3 of the Disclosure Letter, neither the Purchaser
nor any Affiliate of the Purchaser is required to make any filing with or give
any notice to, or to obtain any Consent from, any Governmental Body in
connection with the execution and delivery by the Purchaser or any Affiliate of
the Purchaser of any of the Transactional Agreements or the consummation or
performance by the Purchaser or any Affiliate of the Purchaser of any of the
Transactions.

 

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3.4 Funding. The Purchaser currently has available, and at the Closing will
continue to have available, sufficient cash to enable it to pay the Purchase
Price and all other amounts payable pursuant to this Agreement and the other
Transactional Agreements or otherwise necessary to consummate the Transactions.
Upon the consummation of the Transactions: (a) the Purchaser will not be
insolvent; (b) the Purchaser will not be left with unreasonably small capital;
(c) the Purchaser will not have incurred debts beyond its ability to pay such
debts as they mature; and (d) the capital of the Purchaser will not be impaired.

3.5 Proceedings; Orders. There is no pending Proceeding against or involving the
Purchaser or any Affiliate of the Purchaser, and, to the Knowledge of the
Purchaser, no Person has threatened (in writing) to commence any Proceeding
against or involving the Purchaser or any Affiliate of the Purchaser that
challenges, or that may have the effect of preventing, materially delaying,
making illegal or otherwise materially interfering with, any of the
Transactions. To the Knowledge of the Purchaser, there is no Order that would
reasonably be expected to have: (a) an adverse effect on the ability of the
Purchaser or any Affiliate of the Purchaser to comply with or perform any
material covenant or obligation under any of the Transactional Agreements; or
(b) the effect of preventing, materially delaying, making illegal or otherwise
materially interfering with any of the Transactions.

3.6 Independent Investigation; Seller’s Representations. The Purchaser has
conducted its own independent investigation, review and analysis of the
business, operations, assets, liabilities, results of operations, financial
condition, software, technology and prospects of the Business, which
investigation, review and analysis was done by the Purchaser and its Affiliates
and Representatives. In entering into this Agreement, the Purchaser acknowledges
that it has relied solely upon the aforementioned investigation, review and
analysis and not on any factual representations or opinions of the Seller, its
Affiliates, or their respective Representatives (except the specific
representations and warranties of the Seller set forth in Section 2 as qualified
by the Disclosure Letter). The Purchaser hereby agrees and acknowledges that:
other than the representations and warranties made in Section 2 (as qualified by
the Disclosure Letter), none of the Seller, the Seller’s Affiliates or any of
their respective Representatives make or have made any representation or
warranty, express or implied, at law or in equity, with respect to the
Transferred Assets, the Assumed Liabilities or the Business including as to:
(i) merchantability or fitness for any particular use or purpose; (ii) the
operation of the Business by the Purchaser or any Affiliate of the Purchaser; or
(iii) the probable success or profitability of the Business after the Closing.

3.7 Brokers. Except as set forth on Part 3.7 of the Disclosure Letter, no
broker, finder or investment banker is entitled to any brokerage, finder’s or
other fee or commission in connection with the transactions contemplated by this
Agreement or any other Transactional Agreement based upon arrangements made by
or on behalf of Purchaser.

 

4. COVENANTS.

4.1 Bulk Sales Laws. The parties hereby waive compliance with the provisions of
any bulk sales, bulk transfer or similar Legal Requirements of any jurisdiction
that may otherwise be applicable with respect to the sale of any or all of the
Transferred Assets to the Purchaser.

 

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4.2 Non-Competition.

(a) For all purposes of and under this Agreement, the following capitalized
terms shall have the following respective meanings:

(i) “Competing Business” shall mean the business of designing, developing,
manufacturing, selling, licensing, marketing, distributing, maintaining and
supporting products of the Business as of the date of this Agreement.

(ii) “Competing Territory” shall mean anywhere in the world where products or
services of the Business are designed, manufactured, purchased, assembled,
distributed or sold, including without limitation the United States of America,
the United Kingdom, and the People’s Republic of China.

(b) Seller acknowledges and agrees that Purchaser would be irreparably damaged
if Seller, or any of its Affiliates, were to participate in a Competing Business
and that any such competition by Seller (or its Affiliates) would result in a
significant loss of goodwill by the Purchaser. Seller further acknowledges and
agrees that the covenants and agreements set forth in this Section 4.2 were a
material inducement to Purchaser to enter into this Agreement and to perform its
obligations hereunder, and that Purchaser would not obtain the full benefit of
the bargain set forth in this Agreement as specifically negotiated by the
Parties hereto if Seller breached the provisions of this Section 4.2. Therefore,
Seller agrees, in further consideration of the amounts to be paid hereunder for
the Transferred Assets, except with the prior written consent of the Purchaser,
at all times from and after the Closing Date until the date that is 60 months
following the Closing Date, Seller shall not, and shall cause its Affiliates not
to, directly or indirectly, engage in, conduct, manage, operate, own, control or
participate in the management of a Competing Business in the Competing Territory
or any portion thereof. Seller acknowledges that the Business has been conducted
or is presently proposed to be conducted throughout the Competing Territory and
that the time and geographic restrictions set forth above are reasonable and
necessary to protect the goodwill of the Business being sold by Seller pursuant
to this Agreement.

(c) Notwithstanding anything to the contrary in this Section 4.2, Seller and its
Affiliates may:

(i) acquire and continue to operate any Person that conducts a Competing
Business if in the calendar year prior to the acquisition, the consolidated
revenues of that Person (“Target”) from its Competing Business do not constitute
more than 20% of the total consolidated revenues of Target;

(ii) purchase products or services from third parties that are engaged in a
Competing Business; or

(iii) hold and make passive indirect investments, through a publicly traded
mutual fund or similar investment, in publicly traded securities or other equity
interests not to exceed a five percent (5%) ownership interest in such Person;
provided that Seller and its Affiliates do not actively participate in or
control, directly or indirectly, any investment or other decisions with respect
to such investment.

(d) Notwithstanding anything to the contrary in this Section 4.2, if any Person
acquires control of Seller or any of its Affiliates, whether by stock purchase,
merger, consolidation or other business combination, and such Person or an
Affiliate of such Person is engaged in a Competing Business at the time of such
acquisition, the provisions of this Section 4.2 shall terminate effective upon
the consummation of such acquisition by such Person, and the provisions of this
Section 4.2 shall not have any further force or effect.

 

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(e) The Parties acknowledge that nothing in this Section 4.2 shall limit or
restrict (i) the ability of the Parties to perform any of their obligations
under any of the Transactional Agreements or (ii) to perform or receive the
obligations or benefits under any non-assignable Transferred Assets pursuant to
Section 1.9 of this Agreement.

4.3 Patent Files. Within 30 calendar days of the Closing Date, Seller shall
deliver a letter of instruction, in form and substance reasonably acceptable to
Purchaser, to each legal counsel of Seller or any Affiliate of Seller that has
in its possession Patent prosecution files that related to any Transferred
Patents, instructing such counsel to release such files upon Purchaser’s request
(and at Purchaser’s sole expense).

4.4 Records. Within 60 calendar days of the Closing Date, Seller shall deliver
to Purchaser copies of all Records related to the Business but which are not
Transferred Books.

4.5 Audited Financial Statements. After the Closing, the Seller will cause to be
prepared the consolidated balance sheet of the Business as of June 29, 2013 and
the related consolidated statements of income and cash flows of the Business for
the period ending on June 29, 2013, prepared in accordance with GAAP on a basis
consistent with the basis in which the Seller and its Affiliates have applied
GAAP historically, and shall deliver such statements to Grant Thornton, LLP
promptly to enable the preparation of an audit of such statements for delivery
to the Purchaser within sixty (60) days following the Closing Date (as audited,
the “Audited Financial Statements”). Seller and Purchaser shall share equally
the cost of the Audited Financial Statements. Purchaser shall cooperate and
assist the Seller and its Representatives, at Purchaser’s cost, with respect to
the preparation of the Audited Financial Statements and shall ensure that the
Seller and its Representatives, upon reasonable notice, are provided with access
to the Representatives, personnel and assets of the Business to the extent
necessary for the Representatives to timely prepare the Audited Financial
Statements, including all existing books, Records, Tax Returns, work papers and
other documents and information relating to the Business.

4.6 Non-Solicitation. Following the Closing Date for a period of two (2) years:

(a) Purchaser shall not, and shall cause its Affiliates not to, solicit to
employ, or solicit to provide services to Purchaser or any of its Affiliates,
any employee of Seller or its Affiliates who is then-employed by Seller or its
Affiliates; and

(b) Seller shall not, and shall cause its Affiliates not to, solicit to employ,
or solicit to provide services to Seller or any of its Affiliates, any employee
of Purchaser or its Affiliates who is then-employed by Purchaser or its
Affiliates.

For purposes of this Section 4.6, the term “solicit” shall not be deemed to
include generalized searches for employees through media advertisements or
employment firms.

4.7 Non-Disclosure Agreements. Promptly following the Closing, Seller shall and
shall cause its Affiliates to use commercially reasonable efforts to cause all
counterparties to nondisclosure agreements pertaining to an acquisition of the
Business to return or destroy all confidential information of the Business
provided by Seller or any Affiliate of Seller thereunder. In the event either
Purchaser or Seller (or any of their respective Affiliates) become aware of
noncompliance by any such counterparty, then the Party learning of such
non-compliance shall notify the other Party and thereafter, upon written request
from Purchaser, Seller or such Affiliate shall assign to Purchaser or an
Affiliate of Purchaser all rights to enforce such nondisclosure agreements, or
if such rights are not assignable, shall enforce such rights on behalf of
Purchaser or Purchaser’s Affiliate (at the expense of Purchaser or such
Affiliate).

 

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4.8 Shenzhen Equipment. Seller agrees that neither Seller, Parent or an
Affiliate of Seller or Parent will (A) sell, transfer, lease, exchange, assign
or otherwise dispose of, or grant any option, warrant or other right with
respect to, any of the Shenzhen Equipment other than as required under
Section 1.10; or (B) create, incur or suffer to exist any Encumbrance with
respect to any Shenzhen Equipment, except for the Liens in favor of Purchaser.

4.9 Returned Assets. After the Closing Date, Seller shall use commercially
reasonable efforts to, and shall cause Parent to, (a) exercise their respective
rights under the Venture Contract Manufacturing Agreement to cause the
counterparty thereto to return and reconvey title to the equipment previously
transferred by Seller or Parent or acquired at Seller’s or Parent’s direction
thereunder as identified in Part 4.9 of the Disclosure Letter (the “Repurchased
Transferred Equipment”) or (b) acquire equipment substantially similar to such
Repurchased Transferred Equipment (“Replacement Equipment”), and Seller and
Parent shall promptly upon acquisition thereof convey title to such Repurchased
Transferred Equipment or Replacement Equipment to Purchaser or Purchaser’s
designee. Purchaser will take delivery of any Repurchased Transferred Equipment
or Replacement Equipment at the location the Repurchased Transferred Equipment
is in on the date of this Agreement.

4.10 Registration with AIC. Within three (3) months after the Closing Date,
Seller shall use commercially reasonable efforts to cause the registered address
of Avanex to be corrected with the Administration of Industry and Commerce (AIC)
in China so that Purchaser’s Affiliate may register at such address. 

4.11 Operation of the Business. Unless the Seller shall receive the prior
written consent of the Purchaser, which consent may not be unreasonably withheld
or delayed, and except as required by any Legal Requirement, the Seller shall
use its commercially reasonable efforts to ensure that, during the Pre-Closing
Period, the following covenants are complied with, but only as they relate
exclusively to the Business and the Transferred Assets:

(a) the Seller and its Affiliates shall conduct the operations of the Business
in the ordinary course of business (except that the Seller and its Affiliates
may delay the payment of certain payables to conserve cash);

(b) the Seller and its Affiliates shall use commercially reasonable efforts to
keep available the services of the employees currently providing services
primarily to the Business;

(c) the Seller and its Affiliates shall not change any of the methods of
accounting or accounting practices in any material respect, other than in a
manner consistent with changes in GAAP or to conform to changes in applicable
Legal Requirements;

(d) the Seller and its Affiliates shall not make any Tax election with respect
to the Business or that affects the Transferred Assets, other than Tax elections
that are the same as or consistent with Tax elections previously made by the
respective party or to conform to changes in applicable Legal Requirements;

 

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(e) the Seller and its Affiliates shall not (i) sell, transfer, lease, license
or otherwise dispose of any of the Transferred Assets, other than sales of
Transferred Inventory in the ordinary course of business, or (ii) subject any of
the Transferred Assets to any claim, lien, pledge, option, charge, easement,
security interest, deed of trust, mortgage, conditional sales agreement,
Encumbrance, preemptive right, right of first refusal, restriction or other
right of third parties, whether voluntarily incurred or arising by operation of
law, other than as may exist on the Effective Date;

(f) the Seller and its Affiliates shall not: (i) other than in the ordinary
course of business, declare or pay any bonus or declare or make any cash
incentive payment, retention payment or similar payment to, or increase the
amount of the wages, salary, commissions, benefits or other compensation
(including equity and equity-based compensation) or remuneration payable to, or
accelerate any benefits available to, any of the Eligible Employees; or
(ii) other than in the ordinary course of business, hire any new employee for
the Business; and

(g) the Seller and its Affiliates shall not commit to take any of the actions
described in clauses “(c)” through “(f)” of this Section 4.11.

 

5. SELLER’S CLOSING DELIVERABLES.

At Closing, Seller shall deliver the following to Purchaser (the terms of which
shall be negotiated by the Parties in good faith and any of which may be waived
by the Purchaser, in whole or in part, in writing), each of which shall be in
full force and effect:

5.1 a Transition Services Agreement in substantially the form and substance
contemplated by the Purchaser and the Seller on the date of this Agreement (the
“Transition Services Agreement”), duly executed by the parties thereto (other
than the Purchaser or any Affiliate of Purchaser);

5.2 a Manufacturing Services and Supply Agreement (Amplifier) in substantially
the form and substance contemplated by the Purchaser and the Seller on the date
of this Agreement (the “Manufacturing Services and Supply Agreement”), duly
executed by the parties thereto (other than the Purchaser or any Affiliate of
Purchaser);

5.3 an Intellectual Property License Agreement in substantially the form and
substance contemplated by the Purchaser and the Seller on the date of this
Agreement (the “Intellectual Property License Agreement”), duly executed by the
parties thereto (other than the Purchaser);

5.4 bills of sale with respect to the Transferred IP, Transferred Inventory,
Transferred Equipment, Transferred Books and Transferred Governmental
Authorizations, in substantially the form and substance contemplated by the
Purchaser and the Seller on the date of this Agreement (the “Bills of Sale”),
duly executed by the Seller or the Affiliate of the Seller that owns the
respective Transferred Asset;

5.5 assignment agreements with respect to the Transferred Patents and
Transferred Contracts in substantially the form and substance contemplated by
the Purchaser and the Seller on the date of this Agreement (the “Assignment
Agreements”), duly executed by the Seller or the Affiliate of the Seller that
owns the Transferred Patent or is a party to the Transferred Contract;

5.6 a certificate signed by the Secretary of each of Seller and each Affiliate
of the Seller that owns Transferred Assets certifying as true and correct as of
the Closing Date: (i) the Constituent Documents of the respective entities
signing the certificate; (ii) the incumbency of the officers of such entities
that are signing any of the Transactional Agreements; and (iii) the resolutions
of the boards of directors (or equivalent managing bodies) of such entities
approving the Transactional Agreements to which they are a party and the
transactions contemplated therein;

 

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5.7 a spreadsheet accurately and completely setting forth the payment
instructions for any payments required to be made at Closing, duly executed by
the Seller;

5.8 the Non-UK Transfer Documents, duly executed by the owner of the respective
Transferred Assets;

5.9 evidence of the termination or release, in each case in a manner reasonably
satisfactory to Purchaser, of all Encumbrances on the Transferred Assets;

5.10 a Deed of Release in favor of the Purchaser in substantially the form and
substance contemplated by the Purchaser and the Seller on the date of this
Agreement (the “Deed of Release”);

5.11 a Non-Compete Agreement in substantially the form and substance
contemplated by the Purchaser and the Seller on the date of this Agreement (the
“Non-Compete Agreement”);

5.12 a Sublicense Agreement (Amplifier Business), in relation to the
Intellectual Property License Agreement between Alcatel and Oclaro (North
America), Inc. (formerly known as Avanex Corporation), dated July 31, 2003, in
substantially the form and substance contemplated by the Purchaser and the
Seller on the date of this Agreement;

5.13 the Furukawa Side Letter in substantially the form and substance
contemplated by the Purchaser and the Seller on the date of this Agreement; and

5.14 such other documents as the Purchaser may request in good faith for the
purpose of facilitating the consummation or performance of any of the
Transactions.

 

6. PURCHASER’S CLOSING DELIVERABLES.

At Closing, Purchaser shall deliver the following to Seller (the terms of which
shall be negotiated by the Parties in good faith and any of which may be waived
by the Purchaser, in whole or in part, in writing), each of which shall be in
full force and effect:

6.1 the Transition Services Agreement, duly executed by the Purchaser or an
Affiliate of the Purchaser;

6.2 the Manufacturing Services and Supply Agreement, duly executed by the
Purchaser or an Affiliate of the Purchaser;

6.3 the Assumption Agreement, duly executed by the Purchaser or an Affiliate of
the Purchaser;

6.4 the Intellectual Property License Agreement, duly executed by the Purchaser
or an Affiliate of the Purchaser;

 

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6.5 a certificate signed by the Chief Executive Officer of the Purchaser and
each Affiliate of the Purchaser that is purchasing Transferred Assets certifying
as true and correct as of the Closing Date: (i) the Constituent Documents of the
respective entities signing the certificate; (ii) the incumbency of the officers
of such entities that are executing the Transactional Agreements; (iii) the
resolutions of the such entities approving the Transactional Agreements to which
they are a party and the transactions contemplated therein; and (iv) the
incumbency of each officer for each entity that is purchasing any Transferred
Assets, duly executed by the respective parties;

6.6 such assignments, assumption agreements and other documents as the Seller
may, acting reasonably and in good faith, determine to be necessary or
appropriate to effect the assumption of the Assumed Liabilities; and

6.7 such other documents as the Seller may request in good faith for the purpose
of facilitating the consummation or performance of any of the Transactions.

 

7. CLOSING CONDITIONS; TERMINATION.

7.1 Closing Conditions. The Purchaser’s obligation to purchase, and the Seller’s
obligation to sell and transfer the Transferred Assets, and to take the other
actions required to be taken by the Purchaser and the Seller, respectively, at
the Closing is subject to the satisfaction, at or prior to the Closing, of the
following conditions:

(a) confirmation from the German Cartel Office (Bundeskartellamt) pursuant to
Chapter VII of the German Act against Restrictions of Competition of 1958
(Gesetz gegen Wettbewerbsbeschränkungen) that no action will be taken by the
German Cartel Office with respect to the transactions contemplated by this
Agreement (the “Anti-Trust Approval”); and

(b) no temporary restraining order, preliminary or permanent injunction or other
Order preventing the consummation of any of the Transactions shall have been
issued by any court of competent jurisdiction and remain in effect, and there
shall not be any Legal Requirement enacted or deemed applicable to any of the
Transactions that makes consummation of the Transactions illegal.

7.2 Termination Events. This Agreement may be terminated prior to the Closing:

(a) by the mutual written consent of the Purchaser and the Seller;

(b) by the Purchaser if the Closing has not taken place on or before December 1,
2013 (other than as a result of any failure on the part of the Purchaser to
comply with or perform its covenants and obligations under this Agreement); or

(c) by the Seller if the Closing has not taken place on or before December 1,
2013 (other than as a result of any failure on the part of the Seller to comply
with or perform any covenant or obligation set forth in this Agreement).

7.3 Termination Procedures. If the Purchaser wishes to terminate this Agreement
pursuant to Section 7.2(b), the Purchaser shall deliver to the Seller a written
notice stating that the Purchaser is terminating this Agreement. If the Seller
wishes to terminate this Agreement pursuant to Section 7.2(c), the Seller shall
deliver to the Purchaser a written notice stating that the Seller is terminating
this Agreement.

 

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7.4 Effect of Termination. If this Agreement is terminated pursuant to
Section 7.2, all further obligations of the parties under this Agreement shall
terminate; provided, however, that: (a) no party shall be relieved of any
obligation or other Liability arising from any intentional breach by such party
of any representation or warranty contained in this Agreement or material breach
by such party of any covenant contained in this Agreement; and (b) the parties
shall, in all events, remain bound by and continue to be subject to the
provisions set forth in Section 10.4, 10.5, 10.6, 10.7, 10.8, 10.9, 10.10,
10.11, 10.12, 10.13, 10.14, 10.15, 10.16 and 10.17.

 

8. INDEMNIFICATION, ETC.

8.1 Survival of Representations and Warranties.

(a) All agreements and covenants in this Agreement shall survive the Closing
indefinitely or otherwise in accordance with their terms.

(b) The representations and warranties made by the Seller in Sections 2.5 and
2.6(g) of this Agreement shall survive the Closing indefinitely (each, a
“Fundamental Rep”), and the representations and warranties made by the Seller in
Sections 2.9 and 2.12 of this Agreement (each, an “SOL Rep”) shall survive the
Closing until one month after the applicable statute of limitations (the “SOL
Representation Termination Date”). All representations and warranties made by
the Seller in this Agreement other than the Fundamental Reps and SOL Reps shall
expire at 5:00 p.m., United States Pacific Standard Time, on December 31, 2014
(the “General Representation Termination Date”), and the representations and
warranties made by the Purchaser in this Agreement shall expire on the General
Representation Termination Date; provided, however, that if a Claim Notice (as
defined below) relating to any representation or warranty of the Seller in this
Agreement is given to the Seller on or prior to the General Representation
Termination Date or the SOL Representation Expiration Date, as applicable, or if
a Claim Notice relating to any representation or warranty of the Purchaser in
this Agreement is given to the Purchaser on or prior to the General
Representation Termination Date, then the claim(s) asserted in such Claim Notice
shall survive the General Representation Termination Date or the SOL
Representation Expiration Date, as applicable, until such time as such claim is
(or claims are) fully and finally resolved.

(c) The limitations set forth in Section 8.1(b) shall not apply in the case of
fraud.

(d) For purposes of this Agreement, a “Claim Notice” relating to a particular
representation or warranty shall be deemed to have been given if any Indemnitee,
acting in good faith, delivers to the Seller or the Purchaser, as applicable, a
written notice stating that such Indemnitee believes that there is or has been a
breach of such representation or warranty, asserting a claim for recovery under
Section 8.2 in the case of a breach by the Seller or under Section 8.3 in the
case of a breach by the Purchaser, and setting forth in reasonable detail:
(i) the basis for, and a reasonable description of the circumstances supporting,
such Indemnitee’s belief that there is or has been such a breach; and (ii) a
non-binding, preliminary estimate of the aggregate dollar amount of the actual
and potential Damages that have arisen and may arise as a result of such breach.

8.2 Indemnification by the Seller. From and after the Closing Date (but subject
to the limitations set forth in this Section 8), the Seller shall indemnify each
of the Purchaser Indemnitees on a pound for pound basis against all Damages that
are incurred by any of the Purchaser Indemnitees and that arise from:

(a) any inaccuracy in or breach of any of the representations or warranties made
by the Seller in this Agreement;

 

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(b) any breach of any covenant or obligation of the Seller contained in this
Agreement; or

(c) any Excluded Liabilities.

8.3 Indemnification by the Purchaser. From and after the Closing Date (but
subject to the limitations set forth in this Section 8), the Purchaser shall
indemnify each of the Seller Indemnitees on a pound for pound basis against all
Damages that are incurred by any of the Seller Indemnitees and that arise from:

(a) any inaccuracy in or breach of any of the representations or warranties made
by the Purchaser in this Agreement;

(b) any breach of any covenant or obligation of the Purchaser contained in this
Agreement; or

(c) the Transferred Assets and the Assumed Liabilities.

8.4 Limitations on Indemnification.

(a) Subject to Section 8.4(d), the Seller shall not be required to make any
indemnification payment pursuant to Section 8.2(a) until such time as the total
amount of all Damages that have been incurred by any one or more of the
Purchaser Indemnitees and with respect to which any indemnification payment
would otherwise be available to the Purchaser Indemnitees pursuant to such
section, exceeds an aggregate of $440,000 (the “Deductible Amount”). If the
total amount of such Damages exceeds the Deductible Amount, the Purchaser
Indemnitees shall be entitled to be indemnified only against the amount of such
Damages exceeding the Deductible Amount. Subject to Section 8.4(e), the
Purchaser shall not be required to make any indemnification payment pursuant to
Section 8.3(a) until such time as the total amount of all Damages that have been
incurred by any one or more of the Seller Indemnitees and with respect to which
any indemnification payment would otherwise be available to the Seller
Indemnitees pursuant to such section exceeds the Deductible Amount. If the total
amount of such Damages exceeds the Deductible Amount, the Seller Indemnitees
shall be entitled to be indemnified only against the amount of such Damages
exceeding the Deductible Amount.

(b) Subject to Section 8.4(e), the maximum amount of indemnifiable Damages which
may be recovered by the Purchaser Indemnitees from the Seller with respect to
(i) the matters described in Section 8.2(a), Section 8.2(b) and Section 8.2(c)
shall be an aggregate amount equal to the Indemnification Holdback Amount.

(c) Subject to Section 8.4(e), the maximum amount of indemnifiable Damages which
may be recovered by the Seller Indemnitees from the Purchaser with respect to
the matters described in Section 8.3(a) and 8.3(b) shall be an aggregate amount
equal to $4,000,000.

(d) The amount of Damages recoverable by any Indemnitees hereunder shall be
reduced by the amount of any insurance proceeds actually paid to the Indemnitee,
and the Tax benefits to which any of the Purchaser Indemnitees is entitled,
relating to such Damages, after deducting all attorneys fees, expenses and other
costs of recovery and any deductible associated therewith to the extent paid.

 

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(e) The limitations on the indemnification obligations of the Seller and the
Purchaser set forth in Sections 8.4(a),8.4(b), and 8.4(c) shall not apply to any
Damages arising from any inaccuracy in or breach of any Fundamental
Representation or in the case of fraud.

8.5 Exclusive Remedy. Subject to any injunction or other equitable remedies that
may be available to the Indemnitees, from and after the Closing Date, the
Indemnitors shall not be liable or responsible in any manner whatsoever (whether
for indemnification or otherwise) to the Indemnitees for a breach of this
Agreement, the Bills of Sale, the Assumption Agreements, and the Non-UK Transfer
Document, except as expressly provided in this Section 8, and, subject to the
foregoing, this Section 8 provides the exclusive remedy and cause of action of
Indemnitees against any Indemnitor with respect to any matter arising out of or
in connection with a breach of this Agreement; provided, however, that no claim
against an Indemnitor for fraud by such Indemnitor shall be subject to the
limitations of this Section 8.5.

8.6 Holdback. A Purchaser Indemnitee shall be paid from the Indemnification
Holdback Fund the amount of any Damage for which it has been finally determined
in accordance with Part 10.9(d) of the Disclosure Letter that such Purchaser
Indemnitee is entitled to indemnification pursuant to this Section 8, promptly
after such final determination. So long as any of the Indemnification Holdback
Amount remains in the Indemnification Holdback Fund, the Indemnification
Holdback Fund shall be the sole source of recovery for any Damage incurred by a
Purchaser Indemnitee under Section 8.2 of this Agreement. The period during
which claims for indemnification from the Indemnification Holdback Fund may be
initiated shall commence on the Closing Date and terminate at 5:00 p.m., Pacific
Time, on December 31, 2014 (the “Indemnification Holdback Claim Period”).
Notwithstanding anything to the contrary in this Agreement, on the date of
expiration of the Indemnification Holdback Claim Period, such portion of the
Indemnification Holdback Fund as may be necessary, in the reasonable judgment of
Purchaser, to satisfy any then unresolved or unsatisfied claims for Damages (to
the extent specified in any Claims Notice delivered to the Seller pursuant to
Section 8.2 prior to the expiration of the Indemnification Holdback Claim
Period) shall remain in the Indemnification Holdback Fund until such claims for
Damages have been resolved or satisfied in accordance with this Article 8.
Within three business days after the date of expiration of the Indemnification
Holdback Claim Period, the Indemnification Holdback Fund, less any amount
determined pursuant to the previous sentence, shall be paid by the Purchaser to
the Seller.

8.7 Defense of Third Party Claims. In the event of the assertion or commencement
by any Person of any Proceeding with respect to which any Indemnitee may be
entitled to indemnification pursuant to this Section 8, the Indemnitor shall
have the right, at its election, to proceed with the defense (including
settlement or compromise) of such Proceeding on its own with counsel reasonably
satisfactory to the Indemnitee; provided, however, that the Indemnitor may not
settle or compromise any such Proceeding without the prior written consent of
the Indemnitee. The Indemnitee shall give the Indemnitor prompt notice after it
becomes aware of the commencement of any such Proceeding against the Indemnitee;
provided, however, any failure on the part of the Indemnitee to so notify the
Indemnitor shall not limit any of the obligations of the Indemnitor, or any of
the rights of the Indemnitee, under this Section 8 (except to the extent such
failure prejudices the defense of such Proceeding). If the Indemnitor elects to
assume and control the defense of any such Proceeding: (a) at the request of the
Indemnitor, the Indemnitee shall make available to the Indemnitor any material
documents and materials in the possession of the Indemnitee that may be
necessary to the defense of such Proceeding; (b) the Indemnitor shall keep the
Indemnitee reasonably informed of all material developments relating to such
Proceeding; and (c) the Indemnitee shall have the right to participate in the
defense of such Proceeding at its own expense. If the Indemnitor does not elect
to proceed with the defense of any such Proceeding, the Indemnitee may proceed
with the defense of such Proceeding with counsel of its own choice.

 

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9. EMPLOYEE MATTERS.

9.1 Offers of Employment. The Purchaser shall extend (or shall cause an
Affiliate of the Purchaser to extend) an offer of employment to those employees
of the Seller or an Affiliate of the Seller set forth on Part 9.1 of the
Disclosure Letter and to any other employee of the Seller or any Affiliate of
the Seller that the Seller and the Purchaser agree prior to the Closing will be
offered employment by the Purchaser or an Affiliate of the Purchaser (each, an
“Eligible Employee”). Without limiting the foregoing, Eligible Employees shall
be deemed to include all employees of the Shanghai Facility and all or
substantially all of the employees of the Horseheads Facility, and other
employees critical to the operation of the Business, it being understood that
the aggregate number of Eligible Employees is expected to equal approximately
148 persons. Effective immediately following the Closing, but subject to the
provisions of the Transition Services Agreement, the Purchaser shall (or shall
cause an Affiliate of the Purchaser to) hire each Eligible Employee who timely
accepts the offer of employment extended to such individual as contemplated by
this Section 9.1, as well as each Special Jurisdiction Transferred Employee, as
defined in Section 9.7 below (each such employee referred to in this sentence, a
“Transferred Employee”).

9.2 Termination of Employment. Effective as of the Closing Date, but subject to
the provisions of the Transition Services Agreement, (i) Seller shall terminate
the employment of all Transferred Employees (other than any Special Jurisdiction
Transferred Employee) and eliminate (A) any contractual provisions or other
restrictions that would otherwise prevent any Transferred Employee from becoming
an employee of the Purchaser or an Affiliate of the Purchaser and (B) any
confidentiality restrictions that would prevent any Transferred Employee from
using or transferring to the Purchaser any information relating to or useful for
the Business and (ii) except as otherwise precluded by applicable Legal
Requirements, the Transferred Employees shall cease accruing any benefits under
any Seller Benefit Plan, and Seller shall take, or cause to be taken, all such
actions as may be necessary to effect such cessation of such participation.
Seller shall bear any and all obligations and liability under the WARN Act
resulting from employment losses pursuant to this Section 9; provided, that
Purchaser and its applicable Affiliates comply with all of their obligations
under Section 9.1. In the event that Purchaser or one of its applicable
Affiliates does not comply with its obligations under this Section 9.2, the
Purchaser shall bear any and all obligations and liability under the WARN Act
resulting from employment losses.

9.3 Pre-Closing Compensation. Subject to Part 1.4(a) of the Disclosure Letter,
Seller shall be solely responsible, and the Purchaser shall have no obligations
whatsoever for, any compensation or other amounts payable to any Transferred
Employee relating to service with Seller or any of its Affiliates at any time on
or prior to the Closing Date, including, without limitation, any hourly pay,
commission, bonus, salary, accrued vacation, fringe, pension or profit sharing
benefits or severance pay for any period relating to the service with Seller or
any of its Affiliates, and Seller shall pay all such amounts to all entitled
persons on or prior to the Closing Date.

9.4 Pre-Closing Liabilities. Seller shall remain solely responsible for the
satisfaction of all claims for life insurance, sickness, accident or disability
benefits brought by or in respect of any Transferred Employee (or a spouse or
dependent thereof) to the extent such claims relate to events occurring on or
prior to the Closing Date, and Seller shall remain solely responsible for the
satisfaction of all health care claims brought by or in respect of any
Transferred Employee (or a spouse or dependent thereof) to the extent such
claims relate to treatment or services provided on or prior to the Closing Date.

 

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9.5 Credit for Prior Service. To the extent not otherwise required by or
resulting from operation of any Legal Requirement, the Purchaser shall, or shall
cause its Affiliates to, recognize each Transferred Employee’s period of
employment with the Seller (and any Affiliate of Seller or predecessor of Seller
or such Affiliate) for purposes of vesting, eligibility and level of benefits
under the Purchaser’s and its Affiliates’ employee benefit plans, programs and
arrangements in which any Transferred Employee will be eligible to participate
following Closing, including but not limited to, the Seller’s and its
Affiliates’ applicable welfare benefit plans, employee pension plans, vacation,
disability, sick leave, paid time off and severance benefit plans, programs and
arrangements; provided, however, that the foregoing shall not apply to any
employee benefit plan, program or arrangement, including severance benefit
plans, solely required under any Legal Requirement.

9.6 Waiver of Pre-Existing Conditions. With respect to any plan that provides
medical, disability, dental, vision or similar benefits maintained by Purchaser
or any Affiliate of Purchaser, Purchaser shall (and Purchaser shall cause its
Affiliates to) cause any and all pre-existing condition (or actively-at-work or
similar) limitations, waiting periods and evidence of insurability requirements
to be waived with respect to all Transferred Employees and their eligible
dependents.

9.7 Special Jurisdiction Transferred Employees. Notwithstanding any other
provision of this Agreement, effective as of the Closing, the Purchaser shall
employ (or shall cause an Affiliate of the Purchaser to employ) all of the
Eligible Employees who are employed by the Seller or an Affiliate of the Seller
as of the Closing and whose transfer of employment to the Purchaser or an
Affiliate in connection with the Transactions is required pursuant to applicable
Legal Requirements (each, a “Special Jurisdiction Transferred Employee”). The
Purchaser shall (and shall cause each of its applicable Affiliates to) comply
with all applicable provisions of the EC Council Directive No. 2001/23 as
implemented by applicable local regulations, or other country-specific legal
standards or applicable Legal Requirements, in connection with the transfer of
the employment of the Special Jurisdiction Transferred Employees to the
Purchaser or to an Affiliate of the Purchaser.

9.8 Employee Notices. To the extent any notification, information or
consultation requirements are imposed by applicable Legal Requirements in
connection with the Transactions with regard to any Eligible Employees, the
Purchaser and the Seller agree to cooperate to ensure that such notification,
information and consultation requirements are completed.

9.9 No Third-Party Rights. No provision in this Section 9 shall (i) create any
third-party beneficiary or other rights in any employee or former employee
(including any beneficiary or dependent thereof) of Seller or any of its
Affiliates or any other Person other than the parties hereto and their
respective successors and permitted assigns, (ii) constitute or create an
employment agreement or (iii) constitute or be deemed to constitute an amendment
to any employee benefit plan (including any Seller Benefit Plan) sponsored or
maintained by the Purchaser or the Seller or any of their respective Affiliates.

 

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10. MISCELLANEOUS PROVISIONS.

10.1 Tax Returns; Taxes; Cooperation.

(a) The Seller shall file or cause to be filed all Tax Returns with respect to
the Business and the Transferred Assets for all taxable periods ending on or
prior to the Closing Date, and the Purchaser shall file or cause to be filed all
Tax Returns with respect to the Business and the Transferred Assets for all
taxable periods beginning after the Closing Date. The Tax Returns with respect
to the Business and the Transferred Assets for any taxable period that includes
but does not end on the Closing Date (“Straddle Period” and each such Tax
Return, a “Straddle Period Return”) shall be prepared by Purchaser, or at its
direction, consistent with the prior Tax Returns of the Business and the
Transferred Assets. Purchaser shall provide a copy of each Straddle Period
Return to Seller for its comment and approval at least 30 days prior to filing
and shall make such revisions to each Straddle Period Return as are consistent
with the prior Tax Returns with respect to the Business and the Transferred
Assets and are reasonably requested by Seller.

(b) Any Tax refunds that are determined to be due to Purchaser that relate to
Tax periods or portions thereof ending on or before the Closing Date shall be
for the account of Seller, and Purchaser shall pay over to Seller any such
refund within five days after receipt or determination of entitlement thereto.

(c) Purchaser shall not file any amended Tax Return with respect to the Business
or the Transferred Assets for any taxable period ending on or prior to the
Closing Date or to file any amended Straddle Period Return, or to make any Tax
election that affects any Tax Return with respect to the Business or the
Transferred Assets for any taxable period ending on or prior to the Closing Date
or any Straddle Period Return, in each case without the prior written consent of
the Seller.

(d) The Seller and the Purchaser shall reasonably cooperate, and shall cause
their respective Affiliates and Representatives to reasonably cooperate, in all
matters relating to Taxes, including by providing any information and
documentation that may be necessary to enable the other to comply with any
filing requirements relating to any such Taxes.

10.2 Further Actions.

(a) From and after the Closing, each party hereto shall cooperate with the other
parties, and shall cause to be executed and delivered such documents as the
other parties may reasonably request, for the purpose of evidencing the
Transactions.

(b) After the Closing, if the Seller or any Affiliate of the Seller receives any
payment, refund or other amount that is a Transferred Asset or is otherwise
properly due and owing to the Purchaser or any Affiliate of the Purchaser in
connection with the Transactions, the Seller shall promptly remit or shall cause
to be remitted such amount to the Purchaser or to such Affiliate of the
Purchaser. After the Closing, if the Purchaser or any Affiliate of the Purchaser
receives any payment, refund or other amount that is properly due and owing to
the Seller or any Affiliate of the Seller in connection with the Transactions,
the Purchaser shall promptly remit or shall cause to be remitted such amount to
the Seller or such Affiliate of the Seller.

(c) After the Closing, if Purchaser identifies any Intellectual Property Rights
of Seller or any Affiliate of Seller that Purchaser reasonably determines should
have been included in the Seller IP transferred to Purchaser because such
Intellectual Property Rights are used exclusively in the Business or licensed to
Purchaser because such Intellectual Property Rights are necessary to conduct the
Business (“Excluded IP”), the Seller agrees to undertake a good faith effort
with the Purchaser to review the Excluded IP consistent with the Parties’ review
of the Seller IP prior to Closing and if the Parties agree that any such item of
Excluded IP should have been included in Seller IP transferred or licensed to
Purchaser, then such item of Excluded IP shall be transferred or licensed, as
the case may be, to Purchaser on the same terms and conditions as the Seller IP
was transferred or licensed to Purchaser under this Agreement. If the Parties
are unable to agree, the Parties agree to resolve the issue pursuant to the
Dispute Resolution Procedures referred to in Section 10.9(d).

 

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10.3 Continuing Access to Information. After the Closing, Purchaser shall give
(and shall cause its Affiliates to give) Seller and its Representatives
reasonable access during normal business hours to (and shall, and shall cause
its Affiliates to, allow Seller and its Representatives to make copies of) any
books and records and information relating to the Business or the Transferred
Assets for any reasonable purpose, including as may be necessary for:
(a) preparation of Tax returns and financial statements which are the
responsibility of Seller; (b) management and handling of any Tax audits and Tax
disputes; or (c) complying with any audit request, subpoena or other
investigative demand by any Governmental Body or for any civil litigation. For a
period of six years following the Closing, or such longer period as may be
required by applicable Legal Requirements or necessitated by applicable statutes
of limitations, Purchaser shall maintain all books and records related to the
Transferred Assets in the jurisdiction in which such books and records were
located prior to the Closing and shall not destroy or dispose of any of such
books and records.

10.4 Publicity.

(a) The Purchaser shall ensure that, on and at all times after the date of this
Agreement: (i) no press release or other publicity concerning any of the
Transactions is issued or otherwise disseminated (and no other disclosure
regarding any of the Transactions is made) by or on behalf of the Purchaser or
any Affiliate of the Purchaser without the Seller’s prior written consent; and
(ii) the Purchaser (and each of its Affiliates) continues to keep the terms of
this Agreement and the other Transactional Agreements strictly confidential;
provided, however, that, without the consent of the Seller: (A) the existence
and terms of the Transactions, this Agreement and the other Transactional
Agreements may be disclosed to the extent the Purchaser reasonably believes that
such disclosure is required by any Legal Requirement (including rules and
regulations issued by a national securities exchange that are applicable to the
Purchaser); (B) the Purchaser and the Affiliates of the Purchaser may disclose
the existence and terms of the Transactions, this Agreement and the other
Transactional Agreements to their Representatives to the extent that the
Purchaser in good faith believes that such Persons have a reasonable need to
know such information; and (C) the Purchaser and the Affiliates of the Purchaser
may make disclosures that are consistent with (but not more expansive in any
material respect than) disclosures approved by the Seller or made pursuant to
clause “(A)” or “(B)” of this sentence.

(b) The Seller shall ensure that, on and at all times after the date of this
Agreement: (i) no press release or other publicity concerning any of the
Transactions is issued or otherwise disseminated by or on behalf of the Seller
or any Affiliate of the Seller without the Purchaser’s prior written consent;
and (ii) the Seller (and each of Affiliate of the Seller) continues to keep the
terms of this Agreement and the other Transactional Agreements strictly
confidential; provided, however, that, without the consent of the Purchaser:
(A) the existence and terms of the Transactions, this Agreement and the other
Transactional Agreements may be disclosed to the extent the Seller reasonably
believes that such disclosure is required by any Legal Requirement (including
rules and regulations issued by a national securities exchange that are
applicable to the Seller or any Affiliate thereof); (B) the Seller and the
Affiliates of the Seller may disclose the existence and terms of the
Transactions, this Agreement and the other Transactional Agreements to their
employees, customers, suppliers and other Persons with relationships with the
Business, in each case to the extent that the Seller in good faith believes that
such Persons have a reasonable need to know such information; and (C) the Seller
and the Affiliates of the Seller may make disclosures that are consistent with
(but not more expansive in any material respect than) disclosures approved by
the Purchaser or made pursuant to clause “(A)” or “(B)” of this sentence.

 

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10.5 Fees and Expenses.

(a) Except as otherwise specifically set forth in this Agreement, the Seller
shall bear and pay all fees, costs and expenses that have been incurred or that
are in the future incurred by, on behalf of or for the benefit of the Seller or
any Affiliate of the Seller in connection with: (i) the negotiation, preparation
and review of this Agreement (including the Disclosure Letter) and the other
Transactional Agreements; (ii) the preparation and submission of any filing or
notice required to be made or given by the Seller or any Affiliate of the Seller
in connection with any of the Transactions, and the obtaining of any Consent
required to be obtained by the Seller or any Affiliate of the Seller in
connection with any of the Transactions; and (iii) the consummation and
performance of the Transactions (collectively, the “Seller Transaction
Expenses”).

(b) The Purchaser shall bear and pay all fees, costs and expenses that have been
incurred or that are in the future incurred by, or on behalf or for the benefit
of the Purchaser in connection with: (i) the negotiation, preparation and review
of this Agreement and the other Transactional Agreements; (ii) the preparation
and submission of any filing or notice required to be made or given by the
Purchaser or any Affiliate of the Purchaser in connection with any of the
Transactions, and the obtaining of any Consent required to be obtained by the
Purchaser or any Affiliate of the Purchaser in connection with any of the
Transactions; and (iii) the consummation and performance of the Transactions.

10.6 Notices. Any notice or other communication required or permitted to be
delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received: (a) when delivered by hand;
(b) the first business day after sent by registered mail, by overnight courier
or by express delivery service; (c) if sent by facsimile transmission before
2:00 p.m. in California, when transmitted and receipt is confirmed; (d) if sent
by facsimile transmission after 2:00 p.m. in California and receipt is
confirmed, on the following business day, in any case to the address or
facsimile telephone number set forth beneath the name of such party below (or to
such other address or facsimile telephone number as such party shall have
specified in a written notice given to the other parties hereto):

if to the Seller:

Oclaro Technology Limited

c/o Oclaro, Inc.

2560 Junction Ave.

San Jose, CA 95134

Attention: Kate Rundle, General Counsel

Facsimile: +1.408.919.1501

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

Jones Day

1755 Embarcadero Road

Palo Alto, California 94303

Attention: Robert T. Clarkson

Facsimile: +1.650.739.3900

 

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if to the Purchaser:

II-VI Incorporated

375 Saxonburg Boulevard

Saxonburg, Pennsylvania 16056

Attention: Francis J. Kramer, President

Facsimile: +1.724.352.5299

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

Sherrard, German & Kelly, P.C.

28th Floor, Two PNC Plaza

620 Liberty Avenue

Pittsburgh, Pennsylvania 15222

Attention: Robert D. German, Esquire

Facsimile: +1.412.261.6221

10.7 Headings. The bold-faced headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.

10.8 Counterparts and Exchanges by Electronic Transmission or Facsimile. This
Agreement may be executed in several counterparts, each of which shall
constitute an original and all of which, when taken together, shall constitute
one agreement. The exchange of a fully executed Agreement (in counterparts or
otherwise) by electronic transmission or facsimile shall be sufficient to bind
the parties to the terms and conditions of this Agreement.

10.9 Governing Law; Venue.

(a) This Agreement and any claim, dispute or issue arising out of or in
connection with this Agreement or its subject matter, shall be governed in all
respects by the laws of England and Wales (without giving effect to principles
of conflicts of laws).

(b) Except as otherwise expressly provided in this Agreement or in
Section 10.9(d), the courts of England and Wales have exclusive jurisdiction to
settle any Proceeding or dispute arising out of or in connection with this
Agreement or its subject matter. Each party to this Agreement:

 

  (i) expressly and irrevocably consents and submits to the jurisdiction of the
courts of England and Wales in connection with any such Proceeding;

 

  (ii) irrevocably agrees that the courts of England and Wales will have
exclusive jurisdiction in relation to any claim, dispute or difference
concerning this Agreement, any matter arising from it and the negotiations
leading up to it being entered into; and

 

  (iii) irrevocably waives any right that it may have to object to an action
being brought in those Courts, to claim that the action has been brought in an
inconvenient forum or to claim that those Courts do not have jurisdiction.

 

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A judgment, order or decision of the courts of England and Wales in respect of
any such Proceeding or dispute may be recognized or enforced by any courts of
any state which, under the laws and rules applicable in that state, are
competent or able to grant such recognition or enforcement.

(c) Notwithstanding the submission to that exclusive jurisdiction or anything to
the contrary contained in this Agreement any party may bring proceedings in the
courts of any other state which have jurisdiction for reasons other than the
parties’ choice, for the purpose of seeking:

 

  (i) an injunction, order or other non-monetary relief (or its equivalent in
such other state); and/or

 

  (ii) any relief or remedy which, if it (or its equivalent) were granted by the
courts of England and Wales, would not be enforceable in such other state.

(d) Notwithstanding anything to the contrary contained in this Agreement, any
claim for indemnification pursuant to Section 8 shall be brought and resolved
exclusively in accordance with Part 10.9(d) of the Disclosure Letter; provided,
however, that nothing in this Section 10.9(d) shall prevent the Seller or the
Purchaser from seeking preliminary injunctive relief from a court of competent
jurisdiction.

10.10 Successors and Assigns; Parties in Interest.

(a) This Agreement shall be binding upon: the Seller and its successors and
assigns (if any); and the Purchaser and its successors and assigns (if any).
This Agreement shall inure to the benefit of: the Seller, the Purchaser; the
other Indemnitees; and the respective successors and assigns (if any) of the
foregoing.

(b) Neither the Seller nor the Purchaser may assign any of its rights or
delegate any of its obligations under this Agreement without the prior written
consent of the other party hereto, except that: (i) each party may assign any of
its rights to any Affiliate of such party; and (ii) each party may delegate any
of its obligations to any Affiliate of such party as long as such party remains
jointly and severally liable with such Affiliate for such obligations.

(c) Except for the provisions of Section 8 hereof, none of the provisions of
this Agreement is intended to provide any rights or remedies to any Person other
than the parties to this Agreement and their respective successors and assigns
(if any). Without limiting the generality of the foregoing, no creditor of the
Seller or any Affiliate of the Seller shall have any rights under this Agreement
or any of the other Transactional Agreements.

10.11 Remedies Cumulative; Specific Performance. The rights and remedies of the
parties hereto shall be cumulative (and not alternative). Each party agrees
that: (a) in the event of any breach or threatened breach by the other party of
any covenant, obligation or other provision set forth in this Agreement, such
party shall be entitled (in addition to any other remedy that may be available
to it) to: (i) a decree or order of specific performance or mandamus to enforce
the observance and performance of such covenant, obligation or other provision;
and (ii) an injunction restraining such breach or threatened breach; and (b) no
Person shall be required to provide any bond or other security in connection
with any such decree, order or injunction or in connection with any related
Proceeding.

 

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10.12 Waiver. No failure on the part of any Person to exercise any power, right,
privilege or remedy under this Agreement, and no delay on the part of any Person
in exercising any power, right, privilege or remedy under this Agreement, shall
operate as a waiver of such power, right, privilege or remedy; and no single or
partial exercise of any such power, right, privilege or remedy shall preclude
any other or further exercise thereof or of any other power, right, privilege or
remedy. No Person shall be deemed to have waived any claim arising out of this
Agreement, or any power, right, privilege or remedy under this Agreement, unless
the waiver of such claim, power, right, privilege or remedy is expressly set
forth in a written instrument duly executed and delivered on behalf of such
Person; and any such waiver shall not be applicable or have any effect except in
the specific instance in which it is given.

10.13 Amendments. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of the Purchaser and the Seller. Save as provided in
Section 8 or otherwise expressly provided for in this Agreement, the Parties do
not intend that any term of this Agreement is enforceable under the Contracts
(Rights of Third Parties) Act 1999 by a person who is not a party to this
Agreement and the consent of any person who is not a party to this Agreement
shall not be required for the amendment, variation, rescission or termination of
the same, but this does not affect any right or remedy of a third party which
exists or is available apart from that Act.

10.14 Severability. In the event that any provision of this Agreement, or the
application of any such provision to any Person or set of circumstances, shall
be determined to be invalid, unlawful, void or unenforceable to any extent it
shall to that extent be deemed not to form part of this Agreement but, the
remainder of this Agreement, and the application of such provision to Persons or
circumstances other than those as to which it is determined to be invalid,
unlawful, void or unenforceable, shall not be impaired or otherwise affected and
shall continue to be valid and enforceable to the fullest extent permitted by
any Legal Requirements. Without limiting the foregoing, if, at the time of
enforcement of the covenants contained in Section 4.6 (the “Restrictive
Covenants”), a court shall hold that the duration, scope or area restrictions
stated herein are unreasonable under circumstances then existing, the Parties
agree that the maximum duration, scope or area reasonable under such
circumstances shall be substituted for the stated duration, scope or area and
that the court shall be allowed and directed to revise the restrictions
contained herein to cover the maximum period, scope and area permitted by Legal
Requirements.

10.15 Entire Agreement. The Transactional Agreements and the NDA set forth the
entire understanding of the parties relating to the subject matter thereof and
supersede all prior agreements and understandings among or between any of the
parties relating to the subject matter thereof.

10.16 Disclosure Letter. The Disclosure Letter shall be arranged in separate
parts corresponding to the numbered and lettered sections contained herein;
provided, however, that any information disclosed in any numbered or lettered
part shall be deemed to relate to and to qualify any other representation or
warranty or numbered or lettered section where such disclosure would reasonably
be deemed to apply.

10.17 Appointment of Process Agent

(a) The Purchaser shall ensure that there is at all times appointed an agent for
service of process on it in England in relation to any matter arising out of
this Agreement or any of the other Transaction Documents, service upon whom
shall be deemed completed whether or not forwarded to or received by the
Purchaser and the Purchaser shall notify the Seller of the name of such agent
and their contact details.

 

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(b) The Purchaser may from time to time appoint a new process agent acceptable
to the Seller (acting reasonably) to receive service of process in England
pursuant to Section 10.17(a).

(c) The Purchaser shall inform the Seller in writing of any change in the
address of its process agent within 28 calendar days.

(d) If any process agent appointed by the Purchaser pursuant to this
Section 10.17 ceases to have an address in England, the Purchaser irrevocably
agrees to appoint a new process agent acceptable to the Seller (acting
reasonably) and to deliver to the Seller within 14 calendar days a copy of a
written acceptance of appointment by its new process agent.

(e) Pursuant to clause Section 10.17(a), the Purchaser agrees to appoint Gareth
Rowles of II-VI U.K., Limited as its agent for service of process on it in
England in relation to any matter arising out of this Agreement and the other
Transaction Documents.

10.18 Construction.

(a) For purposes of this Agreement, whenever the context requires: the singular
number shall include the plural, and vice versa; the masculine gender shall
include the feminine and neuter genders; the feminine gender shall include the
masculine and neuter genders; and the neuter gender shall include the masculine
and feminine genders.

(b) The parties hereto agree that any rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not be applied
in the construction or interpretation of this Agreement.

(c) As used in this Agreement, the words “include” and “including,” and
variations thereof, shall not be deemed to be terms of limitation, but rather
shall be deemed to be followed by the words “without limitation.”

(d) Any reference to “$”, “USD” or “dollars” means United States dollars. All
amounts required to be paid under or pursuant to this Agreement shall be in
United States Dollars.

(e) Except as otherwise indicated, all references in this Agreement to
“Sections” are intended to refer to Sections of this Agreement.

[The remainder of this page is intentionally left blank.]

 

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The parties to this Agreement have caused this Agreement to be executed and
delivered as of the date first written above.

 

II-VI INCORPORATED

BY:

 

/s/ Vincent D. Mattera, Jr.

Name: Vincent D. Mattera, Jr.

Title: Executive Vice President

 

Signed by Jerry Turin

on behalf of

OCLARO TECHNOLOGY LIMITED

in the presence of a witness:

WITNESS:

 

/s/ Carol Davis

      By:    /s/ Jerry Turin

Name: Carol Davis

      Name: Jerry Turin

Title: Paralegal

      Title: Director

Address: 2560 Junction Ave.

        

               San Jose, CA 95134

        

[Signature Page to Asset Purchase Agreement]

 

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ANNEX A

CERTAIN DEFINITIONS

For purposes of the Agreement (including this Annex A):

Accounts Receivable. “Accounts Receivable” shall mean all accounts and notes
receivable generated from the Business.

Affiliate. “Affiliate” shall mean, with respect to any Person, any other Person
that as of the date of the Agreement or as of any subsequent date, directly or
indirectly, through one or more intermediaries, controls, is controlled by or is
under common control with such specified Person. The foregoing notwithstanding,
for purposes of this Agreement, any Affiliate of Seller that is not a Subsidiary
of the Parent shall be deemed not to be an Affiliate of the Seller.

Agreement. “Agreement” shall mean the Asset Purchase Agreement to which this
Annex A is attached (including the Disclosure Letter), as it may be amended from
time to time.

Business. “Business” shall have the meaning given to it on Annex A-II.

CERCLA. “CERCLA” shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq.

Code. “Code” shall mean the United States Internal Revenue Code of 1986, as
amended.

Consent. “Consent” shall mean any approval, consent, permission or authorization
(including any Governmental Authorization).

Constituent Document. “Constituent Document” shall mean, with respect to any
Person that is not a natural person, such Person’s articles of incorporation,
certificate of incorporation, bylaws, or similar charter documents.

Contract. “Contract” shall mean any written, oral, implied or other agreement,
contract, instrument, deed, purchase order or legally binding undertaking.

Copyrights. “Copyrights” shall mean all copyrights, copyrightable works,
semiconductor topography and mask work rights, and applications for registration
thereof, including all rights of authorship, use, publication, reproduction,
distribution, performance transformation, moral rights and rights of ownership
of copyrightable works and mask works, and all rights to register and obtain
renewals and extensions of registrations, together with all other interests
accruing by reason of international copyright, semiconductor topography and mask
work conventions.

Damages. “Damages” shall mean any loss, damage, judgment, award, fines,
penalties, Proceedings, assessments, fee (including any legal fee, expert fee,
accounting fee or advisory fee) cost or expense, and including without
limitation all special, indirect, incidental or consequential damages.

Disclosure Letter. “Disclosure Letter” shall mean the disclosure letter (dated
as of the date of the Agreement) delivered to the Purchaser on behalf of the
Seller.

 

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Encumbrance. “Encumbrance” shall mean any lien, charge, security interest or
encumbrance, other than: (a) statutory liens for Taxes that are not yet due and
payable or liens for Taxes being contested in good faith by any appropriate
proceedings for which adequate reserves have been established; (b) statutory
liens to secure obligations to landlords, lessors or renters under leases or
rental agreements; (c) deposits or pledges made in connection with, or to secure
payment of, workers’ compensation, unemployment insurance or similar programs
mandated by applicable Legal Requirements; (d) statutory liens in favor of
carriers, warehousemen, mechanics and materialmen, to secure claims for labor,
materials or supplies and other like liens; (e) liens in favor of customs and
revenue authorities arising as a matter of Legal Requirements to secure payments
of customs duties in connection with the importation of goods; (f) encumbrances
that do not materially interfere with the use, operation or transfer of, or any
of the benefits of ownership of, the property subject thereto, (g) any licenses
of Technology or Intellectual Property Rights of Seller or Affiliates of the
Seller that were entered into in the ordinary course of business or were
otherwise Made Available to Purchaser; (h) any licenses or covenants not to sue
granted to customers, resellers or OEMs of Seller or any Affiliates of the
Seller that were entered into in the ordinary course of business or were
otherwise Made Available to Purchaser; and (i) easements, rights of way, zoning
ordinances and other similar encumbrances affecting the Leased Real Property
which do not prohibit or interfere with the current operation of any Leased Real
Property.

Environmental Law. “Environmental Law” shall mean any applicable Legal
Requirement relating to the environment, or to Hazardous Material, including the
emission, discharge, deposit, disposal, leaching, migration or release of any
Hazardous Material into the environment or the generation, treatment, storage,
transportation or disposal of any Hazardous Material.

Environmental Claim. “Environmental Claim” shall mean any Proceeding or Order,
or, as to each, any settlement or judgment arising therefrom, by or from any
Person alleging Liability of whatever kind or nature reasonably (including
Liability or responsibility for the costs of enforcement proceedings,
investigations, cleanup, governmental response, removal or remediation, natural
resources damages, property damages, personal injuries, medical monitoring,
penalties, contribution, indemnification and injunctive relief) arising out of,
based on or resulting from any actual or alleged non-compliance with any
Environmental Law or term or condition of any Environmental Permit.

Environmental Notice. “Environmental Notice” shall mean any written directive,
notice of violation or infraction, or notice respecting any Environmental Claim
relating to actual or alleged non-compliance with any Environmental Law or any
term or condition of any Environmental Permit.

Environmental Permit. “Environmental Permit” shall mean any Governmental
Authorization required under or issued, granted, given, authorized by or made
pursuant to Environmental Law.

Entity. “Entity” shall mean any corporation, general partnership, limited
partnership, limited liability partnership, joint venture or other entity.

Equipment. “Equipment” shall mean all furniture, fixtures, equipment (including
development tools, testing equipment, factory test equipment, IT equipment),
computer hardware, office equipment and apparatuses, tools, machinery and
supplies and other tangible property (other than Inventory).

ERISA. “ERISA” shall mean the Employee Retirement Income Security Act of 1974,
as amended.

ERISA Affiliate. “ERISA Affiliate” shall mean any Person who is treated as a
single employer along with the Seller pursuant to Section 414(b) or (c) of the
Code.

 

A-2

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GAAP. “GAAP” shall mean generally accepted accounting principles in the United
States set forth in the opinions and pronouncements of the Accounting Principles
Board and the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board, that are
applicable to the circumstances of the date of determination, consistently
applied.

Governmental Authorization. “Governmental Authorization” shall mean any permit,
license, registration, qualification or authorization issued by any Governmental
Body.

Governmental Body. “Governmental Body” shall mean any:

(a) nation, state, county, city, town, borough, village, district, or other
jurisdiction;

(b) Federal, state, local, municipal, foreign, multinational, or other
government;

(c) governmental authority of any nature (including any agency, branch,
department, board, commission, court, tribunal, or other entity exercising
governmental powers);

(d) body entitled or purporting to exercise, any administrative, executive,
judicial, legislative, police, regulatory, or taxing authority or power, whether
local, national, or international; or

(e) official of any of the foregoing.

Hazardous Material. “Hazardous Material” shall mean any “hazardous substance,”
“pollutant,” “contaminant,” “hazardous waste,” “regulated substance,” “hazardous
chemical” or “toxic chemical” as designated, listed or defined (whether
expressly or by reference) in any statute, regulation or other Legal
Requirement.

Indemnitees. “Indemnitees” shall mean Purchaser Indemnitees and Seller
Indemnitees.

Indemnitors. “Indemnitors” shall mean the Purchaser and the Seller.

Indemnification Holdback Amount. “Indemnification Holdback Amount” shall mean
$4,000,000.

Indemnification Holdback Fund. “Indemnification Holdback Fund” shall mean the
funds held by Purchaser in accordance with Article 8 of this Agreement,
excluding funds which by the terms of this Agreement should have been disbursed
to Seller and all interest, dividends, gains and other income accrued thereon.

Intellectual Property Rights. “Intellectual Property Rights” shall mean all
rights of the following types, which may exist or be created under the Legal
Requirements of any jurisdiction in the world: (a) rights associated with works
of authorship, including copyrights, moral rights and mask works; (b) trademark
and trade name rights and similar rights; (c) trade secret rights; (d) patent
and industrial property rights; and (e) rights in or relating to registrations,
renewals, extensions, combinations, divisions, and reissues of, and applications
for, any of the rights referred to in clauses “(a)” through “(d)” above.

Intercompany Contract. “Intercompany Contract” means any Contract to which the
sole parties are the Seller and/or any Affiliate of the Seller.

 

A-3

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Inventory. “Inventory” shall mean all inventory (including spare parts, raw
materials, work in process, finished goods, packaging and supplies), including
all such in-transit inventory, but excluding any consumables used in the
manufacture of any products of the Business.

IRS. “IRS” means the United States Internal Revenue Service.

Issued Patents. “Issued Patents” shall mean all issued patents, reissued or
reexamined patents, revivals of patents, utility models, certificates of
invention, registrations of patents and extensions thereof, regardless of
country or formal name, issued by the United States Patent and Trademark Office
and any other Governmental Body.

Knowledge. Information shall be deemed to be known to or to the “Knowledge” of
the Seller if that information is actually known by any Person identified on
Annex A-I after due inquiry. Information shall be deemed to be known to or to
the “Knowledge” of the Purchaser if that information is actually known by any of
the directors or senior executive officers of the Purchaser. As used herein, the
phrase “after due inquiry” shall mean, with respect to any Person, such Person’s
inquiry of the direct report who would reasonably be expected to have actual
knowledge of relevant facts and circumstances.

Legal Requirement. “Legal Requirement” shall mean any law, statute, rule or
regulation issued, enacted or promulgated by any Governmental Body.

Liability. “Liability” shall mean any debt, obligation, duty or liability of any
nature (including any unknown, undisclosed, unmatured, unaccrued, unasserted,
contingent, indirect, conditional, implied, vicarious, derivative, joint,
several or secondary liability), regardless of whether such debt, obligation,
duty or liability would be required to be disclosed on a balance sheet prepared
in accordance with GAAP and regardless of whether such debt, obligation, duty or
liability is immediately due and payable.

Licensed Seller Intellectual Property. “Licensed Seller Intellectual Property”
shall mean the Intellectual Property Rights and Technology licensed by Seller or
an Affiliate of the Seller to Purchaser or an Affiliate of the Purchaser and as
set forth in Schedule 1 of the Intellectual Property License Agreement.

Made Available. “Made Available” means made available to Purchaser and/or its
Representatives prior to the Closing Date through the Seller’s virtual data room
or otherwise.

Material Adverse Effect. “Material Adverse Effect” shall mean any change that
does, or would be reasonably expected to, have a material adverse effect on the
Transferred Assets, taken as a whole; provided, however, that none of the
following shall be deemed either alone or in combination to constitute, and none
of the following shall be taken into account in determining whether there has
been or would be, a Material Adverse Effect: (a) any adverse effect resulting
from or arising out of the announcement or pendency of the Agreement (including
the identity of the Purchaser or the Purchaser’s plans for the Business) or the
Transactions (including any action or inaction by the customers, suppliers,
distributors, employees or competitors of the Parent, Seller or their respective
Affiliates); (b) any adverse effect resulting from or arising out of general
economic conditions, including from conditions in the United States or foreign
economies or banking or securities markets; (c) any adverse effect resulting
from or arising out of general conditions in the industries in which the
Business operates; (d) any adverse effect resulting from changes or developments
in international, national, regional, state or local wholesale or retail markets
for any product that has similar specification as the products of the Business,
including enhancements, modifications, evolutions or combinations of or with
such products, including those due to actions by competitors; (e) any adverse
effect resulting from or arising out of any natural disaster or any acts of
terrorism, sabotage, military action or war or any escalation or worsening
thereof; (f) any adverse effect resulting from or arising out of any changes in
any Legal Requirement or GAAP; (g) any failure by the Seller, the Parent, or the
Business to meet (A) any published analyst estimates or expectations of revenue,
earning or other financial performance or results of operations for any period
or products or (B) any budgets, plans, projections or forecasts of its revenues,
earnings or other financial performance or results of operations for any period
or products, whether or not published; or (h) any adverse effect resulting from
the undertaking, performance or observance of the obligations contemplated by
this Agreement, the failure to take any action as a result of restrictions or
other prohibitions set forth in this Agreement, or any actions taken with the
prior written consent of the Purchaser.

 

A-4

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Material Contract. “Material Contract” shall mean (a) each Transferred Contract;
and (b) each of the Contracts listed in subsections (i)-(vii) below, other than
Intercompany Contracts, that exclusively relate to the Business:

(i) any Contract pursuant to which any material Intellectual Property Rights or
Technology of the Business is or has been licensed, sold, assigned or otherwise
conveyed or provided to the Seller or an Affiliate of the Seller (other than any
Contracts for non-customized software that (i) is licensed solely in executable
or object code form pursuant to a nonexclusive software license and (ii) is
generally available on standard terms);

(ii) any Contract imposing any material restriction on the right or ability of
the Seller or any Affiliate of Seller, or, after the Closing Date, the right or
ability of the Purchaser or an Affiliate of Purchaser (A) to compete in any
Product Line or the Business or with any Person or in any area or which would so
limit the freedom of the Seller or an Affiliate of the Seller or, after the
Closing Date, the Purchaser or an Affiliate of Purchaser (including granting
exclusive rights or rights of first refusal to license, market, sell or deliver
any of the products or services offered by Seller), (B) to acquire any product
or other asset or any services from any other Person, to sell any product or
other asset to or perform any services for any other Person or to transact
business or deal in any other manner with any other Person (including granting
any rights of first refusal), or (C) develop, distribute or license any
Technology or Intellectual Property Rights;

(iii) any Contract for the purchase of materials, supplies, goods, services,
equipment or other assets providing for annual payments by the Seller and the
Affiliates of Seller of $500,000 or more;

(iv) any Contract relating to the acquisition or disposition of any business
(whether by merger, sale of stock, sale of assets or otherwise): (A) entered
into after July 1, 2010, or (B) pursuant to which the Seller or an Affiliate of
the Seller has any current or future rights or obligations;

(v) any Contract relating to indebtedness for borrowed money or the deferred
purchase price of property;

(vi) any partnership, joint venture or any sharing of revenues, profits, losses,
costs or liabilities or any other similar Contracts;

(vii) other than purchase orders received in the ordinary course of business,
any other Contract (1) not made in the ordinary course of business that is
material to the Business; and (2) is not terminable without penalty or Liability
on 60 days prior written notice.

NDA. “NDA” means that certain Confidentiality Agreement dated as of February 19,
2013 between the Parent and Purchaser.

 

A-5

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Open Source Software. “Open Source Software” shall mean any Software that is
subject to any: “open source,” “copyleft,” or other similar types of license
terms (including any GNU General Public License, Library General Public License,
Lesser General Public License, Mozilla license, Berkeley Software Distribution
license, Open Source Initiative license, MIT, Apache, and Public Domain
licenses, and the like), including any licensed approved by the Open Source
Initiative and listed at http://www.opensource.org/licenses.

Order. “Order” shall mean any order, judgment, decree, injunction, ruling,
decision or award issued by any court, administrative agency or other
Governmental Body or any arbitrator or arbitration panel.

Organizing Documents. “Organizing Documents” shall mean the certificate of
incorporation, bylaws, and any other similar organizational or constituent
documents.

Owned IP. “Owned IP” shall mean: (a) all Intellectual Property Rights and
Technology that is used or held for use in or that relates to the Business in
which the Seller or any Affiliate of the Seller has an ownership interest.

Parent. “Parent” means Oclaro, Inc., a Delaware corporation.

Patent Applications. “Patent Applications” shall mean all published or
unpublished nonprovisional and provisional patent applications and reexamination
proceedings.

Patents. “Patents” shall mean the Issued Patents and the Patent Applications.

Permits. “Permits” shall mean all permits, licenses, franchises, approvals,
authorizations, registrations, certificates, variances and similar rights
obtained from Governmental Authorities.

Person. “Person” shall mean any individual, Entity or Governmental Body.

Pre-Closing Period. “Pre-Closing Period” shall mean the period from the date of
the Agreement through the Closing Date.

Post-Closing Period. “Post-Closing Period” shall mean the period from the date
after the Closing Date.

Prepayments. “Prepayments” shall mean any prepaid expenses, credits, advance
payments, security deposits and other deposits, but not including any estimated
Taxes.

Proceeding. “Proceeding” shall mean any action, suit or legal proceeding
commenced, conducted or heard by or before any Governmental Body or any
arbitrator or arbitration panel.

Purchaser Indemnitees. “Purchaser Indemnitees” shall mean the following Persons:
(a) the Purchaser; (b) the Purchaser’s current and future Affiliates; (c) the
respective current and future Representatives of the Persons referred to in
clauses “(a)“and “(b)” of this sentence; and (d) the respective successors and
assigns of the Persons referred to in clauses “(a)”, “(b)” and “(c)” of this
sentence.

 

A-6

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Records. “Records” shall mean, whether or not such information is maintained in
writing, visually, electronically or in machine readable or any other form:
(a) books of account, ledgers and general, financial and accounting records, tax
declarations and tax records, machinery and equipment maintenance files,
customer lists, customer purchasing histories, price lists, distribution lists,
supplier lists, production data, lab notebooks, quality system audit reports,
failure mode analyses, quality control records and procedures, sales material
and records (including pricing history, total sales, terms and conditions of
sale, sales and pricing policies and practices), marketing and promotional
surveys, publicly filed documents relating to any Proceeding currently pending,
internal and external audit reports (including, reports relating to financial,
quality, export control or trade compliance matters), documents relating to any
mergers or acquisitions; and (b) research and development files and intellectual
property files relating to any Intellectual Property Right or Technology and
(c) all historical parametric data and related information including such data
that relates to the historic production of products.

Registered IP. “Registered IP” shall mean all Seller IP that is registered,
filed, or issued under the authority of, with or by any Governmental Body,
including all patents, registered copyrights, registered mask works and
registered trademarks and all applications for any of the foregoing.

Release. “Release” shall mean any actual or threatened release, spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping, abandonment, disposing or allowing to escape or migrate into
or through the environment (including, without limitation, ambient air (indoor
or outdoor), surface water, groundwater, land surface or subsurface strata or
within any building, structure, facility or fixture) in violation of
Environmental Law.

Representatives. “Representatives” shall mean officers, directors, employees,
agents, attorneys, accountants and financial and other advisors.

Seller Contract. “Seller Contract” shall mean any Contract exclusively relating
to the Business to which the Seller or any Affiliate of the Seller is a party.

Seller Indemnitees. “Seller Indemnitees” shall mean the following Persons:
(a) the Seller; (b) the Seller’s current and future Affiliates, including the
Parent; (c) the respective current and future Representatives of the Persons
referred to in clauses “(a)“and “(b)” of this sentence; and (d) the respective
successors and assigns of the Persons referred to in clauses “(a)”, “(b)” and
“(c)” of this sentence.

Seller IP. “Seller IP” shall mean: (a) all Intellectual Property Rights and
Technology that is used in the Business in which the Seller or any Affiliate of
the Seller has an ownership interest or a license or similar right, including
but not limited to the Transferred Patents, the Transferred IP, and the Licensed
Seller Intellectual Property.

Shenzhen Company. “Shenzhen Company” shall mean Oclaro Technology (Shenzhen)
Co., Ltd., a People’s Republic of China company.

Shrink-Wrap Code. “Shrink-Wrap Code” shall mean generally commercially
available, off-the-shelf Software where available for a cost of not more than
$5,000 for a perpetual license for a single user or work station (or $1,000 for
an annual license for a single user or work station).

Software. “Software” shall mean computer software, programs and databases in any
form, including source code, object code, operating systems and specifications,
data, databases, GDS and GDSII files, database management code, firmware,
utilities, graphical user interfaces, menus, images, icons, forms and software
engines, and all related documentation, developer notes, comments and
annotations.

 

A-7

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Subsidiary. “Subsidiary” means, with respect to any Person, any other Person
that is an entity, whether incorporated or unincorporated, at least a majority
of the securities or other interests of which having by their terms ordinary
voting power to elect a majority of the board of directors or others performing
similar functions with respect to such other Person that is an entity is
directly or indirectly owned or controlled by such Person or by any one or more
of its Subsidiaries, or by such Person and one or more of its Subsidiaries, or
of which such Person or any one of its Subsidiaries is the managing member or
general partner.

Tax. “Tax” shall mean any tax (including any income tax, franchise tax, capital
gains tax, estimated tax, gross receipts tax, value-added tax, surtax, excise
tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax,
business tax, occupation tax, inventory tax, occupancy tax, withholding tax or
payroll tax), levy, assessment, tariff, impost, imposition, toll, duty
(including any customs duty), deficiency or fee, and any related charge or
amount (including any fine, penalty or interest), that is imposed, assessed or
collected by or under the authority of any Governmental Body or is payable
pursuant to any tax-sharing agreement.

Tax Return. “Tax Return” shall mean any return, report, statement, declaration,
estimate, schedule, notice, notification, form, election, certificate or other
document or information that is, has been or may in the future be filed with or
submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection or payment of
any Tax or in connection with the administration, implementation or enforcement
of or compliance with any Legal Requirement relating to any Tax.

Technology. “Technology” shall mean algorithms, apparatus, databases, data
collections, diagrams, inventions, know-how, logos, marks, methods and
processes, protocols, software, techniques, works of authorship and other forms
of technology (whether or not embodied in any tangible form and including all
tangible embodiments of the foregoing, such as instruction manuals, laboratory
notebooks, prototypes, samples, studies and summaries).

Trademarks. “Trademarks” shall mean all (i) trademarks, service marks, marks,
logos, insignias, designs, names or other symbols, (ii) applications for
registration of trademarks, service marks, marks, logos, insignias, designs,
names or other symbols, (iii) trademarks, service marks, marks, logos,
insignias, designs, names or other symbols for which registrations has been
obtained.

Trade Secrets. “Trade Secrets” shall mean all product specifications, data,
know-how, formulae, compositions, processes, designs, sketches, photographs,
graphs, drawings, samples, inventions and ideas, research and development,
manufacturing or distribution methods and processes, customer lists, current and
anticipated customer requirements, price lists, market studies, business plans,
computer software and programs (including object code), computer software and
database technologies, systems, structures and architectures (and related
processes, formulae, composition, improvements, devices, know-how, inventions,
discoveries, concepts, ideas, designs, methods and information), and any other
information, however documented, that is a trade secret within the meaning of
the applicable trade-secret protection Legal Requirements.

Transactional Agreements. “Transactional Agreements” shall mean: (a) the
Agreement; (b) the Transition Services Agreement; (c) the Assumption Agreement;
(d) the Intellectual Property License Agreement; (e) Bills of Sale; (f) the
Payoff Instructions; (g) the certificates required under Sections 5.6 and 6.5;
(h) the Non-UK Transfer Documents; (i) the Assignment Agreements; and (j) the
Manufacturing Services and Supply Agreement.

 

A-8

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Transactions. “Transactions” shall mean: (a) the execution and delivery of the
respective Transactional Agreements; and (b) all of the transactions
contemplated by the respective Transactional Agreements, including: (i) the sale
of the Transferred Assets by the Seller to the Purchaser in accordance with the
Agreement; (ii) the assumption of the Assumed Liabilities by the Purchaser in
accordance with the Agreement; and (iii) the performance by the Seller and the
Purchaser or their respective Affiliates of their respective obligations under
the Transactional Agreements, and the exercise by the Seller and the Purchaser
of their respective rights under the Transactional Agreements.

Venture Contract Manufacturing Agreement. “Venture Contract Manufacturing
Agreement” means, collectively (a) certain Manufacturing and Purchase Agreement,
by and between the Seller and Venture Corporation Ltd., effective as of
March 19, 2012, and (b) that certain Equipment and Inventory Purchase Agreement
by and among the Seller, the Shenzhen Company, Venture Electronics (Shenzhen)
Co., Ltd. and Venture Electronics Services (M) Sdn Bhd dated March 19, 2012.

WARN Act. “WARN Act” means the federal Worker Adjustment and Retraining
Notification Act of 1988, and similar state, local and foreign Legal
Requirements related to plant closings, relocations, mass layoffs and employment
losses.

 

A-9

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Each of the following terms is defined in the Section set forth opposite such
terms:

 

Term

  

Section

Anti-Trust Approval

   7.1(a)

Assignment Agreements

   5.5

Assumed Liabilities

   1.4(a)

Assumption Agreement

   1.3(c)

Audited Financial Statements

   4.5

Bills of Sale

   5.4

Business Financial Statements

   2.4(a)

Claim Notice

   8.1(d)

Closing

   1.8

Closing Date

   1.8

Closing Date Inventory Value

   1.5(b)

Closing Payment

   1.3(b)

Competing Business

   4.2(a)(i)

Competing Territory

   4.2(a)(ii)

Deductible Amount

   8.4(a)

Eligible Employee

   9.1

Estimated Inventory Value

   1.5(a)

Exchange Act

   2.15

Excluded Assets

   1.1

Excluded Liabilities

   1.4(b)

Financial Statement Date

   2.4(a)

Foreign Plan

   2.11(f)

Fundamental Rep

   8.1(b)

General Representation Termination Date

   8.1(b)

Horseheads Facility

   1.1(c)

In-Licenses

   2.6(f)

Indemnification Holdback Claim Period

   8.6

Intellectual Property License Agreement

   5.3

Inventory Value Target

   1.5(a)

Leased Real Property

   2.13(b)

Leases

   2.13(b)

License Agreements

   2.6(f)

Manufacturing Services and Supply Agreement

   5.2

Material Customers

   2.17(a)

Material Suppliers

   2.17(b)

Money Laundering Laws

   2.18(b)

Non-UK Transferred Assets

   1.1

Non-UK Transfer Documents

   1.1

Option Agreement

   Recital

Option Date

   Recital

Out-Licenses

   2.6(f)

Purchase Price

   1.3

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Purchaser

   Introduction

Related Party

   2.19

Related Party Arrangements

   2.19

Replacement Equipment

   4.9

Repurchased Transferred Equipment

   4.9

Seller

   Introduction

Seller Benefit Plan

   2.11(a)

Seller Transaction Expenses

   10.5(a)

Shanghai Facility

   1.1(c)

Shenzhen Equipment

   1.10

SOL Rep

   8.1(b)

SOL Representation Termination Date

   8.1(b)

Special Jurisdiction Transferred Employee

   9.7

Straddle Period

   10.1(a)

Straddle Period Return

   10.1(a)

Tangible Transferred Assets

   1.2

Target

   4.2(c)(i)

Transfer Taxes

   1.6

Transferred Assets

   1.1

Transferred Books

   1.1(f)

Transferred Contracts

   1.1(e)

Transferred Employee

   9.1

Transferred Equipment

   1.1(d)

Transferred Governmental Authorization

   1.1(g)

Transferred Inventory

   1.1(c)

Transferred IP

   1.1(b)

Transferred Patents

   1.1(a)

Transition Services Agreement

   5.1

U.S. Export Controls

   2.18(d)(i)

UK Transferred Assets

   1.1

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CONFIDENTIAL

ANNEX A-I

MEMBERS OF KNOWLEDGE GROUP

Greg Dougherty

Jerry Turin

Kate Rundle

Yves LeMaitre

Terry Unter

Jim Haynes

Pete Mangan

Julie Stephenson

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ANNEX A-II

DEFINITION OF “BUSINESS”

“Business” means Seller’s and Seller’s Affiliates’ Amplification Business Unit
comprised of Seller’s and Seller’s Affiliates’ (A) optically pumped fiber
amplifier products, including related sub-systems and line card products serving
telecommunications markets; and (B) micro-optics products, including related
sub-systems and line card products serving telecommunication markets. The
Business also includes the Transferred Assets and related personnel (it being
understood that transferred employees will include a total of approximately 148
employees).

The Amplification Business Unit comprises: the Avanex Communications Technology
(Shanghai) legal entity in Shanghai, Peoples’ Republic of China including the
Transferred assets and related personnel; personnel and research and development
assets located in or assigned to Horseheads, New York, San Jose, California, and
Paignton, UK; manufacturing assets and personnel located in Bangkok, Thailand,
Penang, Malaysia and Shenzhen, China; and manufacturing assets owned by Seller’s
and Seller’s Affiliates’ consigned to the following suppliers: Fabrinet,
Venture, Photop Fuzhou and Browave Zhuhai in the Peoples’ Republic of China.

“Business” does not include: (i) transmission subsystems and line card products
of Seller and/or Sellers’ Affiliates, which may include as component parts
(A) optically pumped fiber amplifiers that Seller or its Affiliates may purchase
after the Closing from vendors other than Affiliates of Seller or (B) micro
optic products that either (x) Seller or its Affiliates may purchase after the
Closing from vendors other than Affiliates of Seller or (y) are not part of the
product and product lines intended to be sold in the Transactions;
(ii) wavelength selective switches; and (iii) related assets and personnel.