Exhibit 10.1

 

STOCK PURCHASE AGREEMENT

 

by and between

 

MRV COMMUNICATIONS, INC., as Seller

 

and

 

CES HOLDING SA, as Purchaser

 

represented for the purpose of this Agreement by

 

VINCI CAPITAL SWITZERLAND SA

 

Dated as of December 2, 2011

 

--------------------------------------------------------------------------------

 

Table of Contents

 

 

Page

ARTICLE I Purchase and Sale; Closing

1

1.1.

Purchase and Sale

1

1.2.

Consideration

1

1.3.

Payment at Closing

2

1.4.

Closing

2

ARTICLE II Representations and Warranties

2

2.1.

Representations and Warranties Regarding Seller

2

2.2.

Representations and Warranties Regarding the Company and its Subsidiaries

3

2.3.

Representations and Warranties of Purchaser

12

ARTICLE III Covenants

14

3.1.

Interim Operations

14

3.2.

Access

15

3.3.

Publicity

15

3.4.

Expenses

15

3.5.

Breakup Fee

15

3.6.

Filings; Other Actions

15

3.7.

MRV Loan

16

3.8.

Resignations

16

3.9.

Intercompany Agreements

16

3.10.

Confidentiality

16

3.11.

Books and Records

16

3.12.

Access to Information after Closing

17

3.13.

Fulfill Closing Conditions

17

3.14.

Disclosure Letters

18

ARTICLE IV Conditions

18

4.1.

Conditions to Each Party’s Obligation to Effect the Transaction

18

4.2.

Conditions to Obligations of Purchaser

19

4.3.

Conditions to Obligations of Seller

20

ARTICLE V Indemnification

21

5.1.

Indemnification by Purchaser

21

5.2.

Indemnification by Seller

21

5.3.

Survival of Representations and Warranties and Indemnities

22

5.4.

Indemnification Procedures

22

5.5.

Limitations on Indemnification

24

5.6.

Indemnity Payments

25

5.7.

Mitigation

25

5.8.

Exclusive Remedy

25

ARTICLE VI Tax Matters

26

6.1.

Seller’s Liability for Taxes

26

6.2.

Purchaser Liability for Taxes

26

6.3.

Proration of Taxes

26

 

i

--------------------------------------------------------------------------------

 

6.4.

Tax Returns

26

ARTICLE VII

26

7.1.

Non-Competition

26

7.2.

Use of Name

27

ARTICLE VIII Termination

27

8.1.

Termination by Mutual Consent

27

8.2.

Termination by Either Purchaser or Seller

27

8.3.

Termination by Seller

27

8.4.

Termination by Purchaser

27

8.5.

Effect of Termination and Abandonment

28

ARTICLE IX Miscellaneous and General

28

9.1.

Amendment; Waivers; Etc.

28

9.2.

Counterparts

28

9.3.

Governing Law

28

9.4.

Consent to Jurisdiction

28

9.5.

Notices

29

9.6.

Entire Agreement

30

9.7.

No Third Party Beneficiaries

30

9.8.

Severability

30

9.9.

Interpretation

30

9.10.

Successors and Assigns

31

9.11.

Further Assurances

31

 

Annex A

 

Definitions

A-1

Annex B-1

 

Form of Escrow Agreement

Annex B-2

 

Form of Escrow Agreement

Annex C

 

Funds Flow Chart

Annex D

 

Financial Statements (Annual Financial Statements and Interim Financial
Statements as of October 31, 2011)

 

Schedules

 

2.2

 

Seller Disclosure Schedule

2.3

 

Purchaser Disclosure Schedule

4.2(d)

 

Remaining Purchaser Due Diligence

 

ii

--------------------------------------------------------------------------------

 

STOCK PURCHASE AGREEMENT

 

STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of December 2, 2011, by
and between MRV COMMUNICATIONS, INC., a Delaware corporation (“Seller”), and CES
HOLDING SA, a Swiss corporation (“Purchaser”), represented for the purpose of
this Agreement by VINCI CAPITAL SWITZERLAND SA.  Capitalized terms used herein
have the meanings set forth in Annex A hereto.

 

RECITALS

 

WHEREAS, Seller owns 1,002 registered shares, par value of CHF1,000 each,
(collectively, the “Shares”), which represent all of the outstanding share
capital of CES Creative Electronic Systems SA (“Company”), a joint stock company
organized under the laws of Switzerland;

 

WHEREAS, the Company owns 100% of Creative Electronic Systems GB Ltd., Creative
Electronic Systems Deutschland GMBH, Creative Electronic Systems Spain, S.L.,
and Creative Electronic Systems CAL, Inc.;

 

WHEREAS, Purchaser has been incorporated by RENAISSANCE PME, fondation suisse
d’investissement, Capital Transmission SA and LFPE S.C.A. SICAR on November 28,
2011 as a special purpose vehicle for the acquisition of the Shares from Seller;

 

WHEREAS, Seller desires to sell the Shares to Purchaser; and

 

WHEREAS, Purchaser desires to purchase the Shares from Seller upon the terms and
subject to the conditions set forth herein.

 

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

 

ARTICLE I

 

Purchase and Sale; Closing

 

1.1.         Purchase and Sale.  Upon the terms and subject to the conditions
set forth in this Agreement, Seller sells and, at the Closing (as defined
below), Seller will convey, assign, transfer and deliver to Purchaser, free and
clear of all Liens, and Purchaser purchases and, at the Closing (as defined
below), will acquire and accept from Seller, all of Seller’s right, title and
interest in and to the Shares (the “Transaction”).

 

1.2.         Consideration.  The aggregate consideration to be paid by Purchaser
at Closing for the Shares shall be CHF 25.8 million (the “Purchase Price”).

 

1

--------------------------------------------------------------------------------

 

1.3.         Payment at Closing.  Upon the terms and subject to the conditions
set forth in this Agreement, upon Closing, Purchaser shall pay to Seller in CHF,
by wire transfer of immediately available funds to an account designated by
Seller the Purchase Price minus the amounts to be paid to the escrow accounts as
specified in Section 4.1(c) and Purchaser shall pay to such escrow accounts a
portion of the Purchase Price as set out in Section 4.1(c).

 

1.4.         Closing.

 

(a)             The closing of the Transaction (the “Closing”) shall take place
at the offices of Schellenberg Wittmer in Geneva, Switzerland, (i) on the
twenty-first day following the satisfaction or waiver of the conditions set
forth in Article IV (other than those conditions that by their terms are to be
satisfied at Closing, but subject to the satisfaction or waiver of such
conditions) or, if such day is not a Business Day, then the next succeeding
Business Day, or (ii) at such other time and place as the parties may agree in
writing.  The “Closing Date” shall be the date upon which the Closing occurs.

 

(b)             At the Closing:

 

(i)            Seller shall deliver to Purchaser (A) certificates for the
Shares, duly endorsed by Seller in favor of Purchaser, (B) a resolution passed
by the Company’s Board of Directors approving the transfer of the Shares in
accordance with the Company’s Organizational Documents, and (C) the share ledger
of the Company, duly updated to record Purchaser as the registered holder of the
Shares;

 

(ii)           Purchaser shall make the payment to Seller in accordance with
Section 1.3; and

 

(iii)          the certificates and other documents to be delivered pursuant to
Sections 4.1, 4.2 and 4.3 hereof shall be delivered.

 

ARTICLE II

 

Representations and Warranties

 

2.1.         Representations and Warranties Regarding Seller.  Except as set
forth in the disclosure letter delivered to Purchaser on or prior to entering
into this Agreement (the “Seller Disclosure Schedule”) (it being agreed that
disclosure of any item in any part of the Seller Disclosure Schedule shall be
deemed disclosure with respect to any other part to which the relevance of such
item is reasonably apparent), Seller hereby represents and warrants to Purchaser
that as of the date of this Agreement and as of Closing:

 

(a)             Organization and Good Standing.  Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware.

 

(b)             Authorization.  Seller has all requisite power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and to

 

2

--------------------------------------------------------------------------------

 

consummate the Transaction.  The execution and delivery by Seller of this
Agreement, the performance of its obligations hereunder and the consummation by
Seller of the Transaction have been duly authorized by all necessary corporate
action, other than the consent of stockholders contemplated in Section 4.3(d),
and this Agreement has been duly executed and delivered by Seller and, assuming
the due authorization, execution and delivery of this Agreement by Purchaser,
constitutes the legal, valid and binding obligation of Seller, enforceable
against Seller in accordance with its terms.

 

(c)             No Violations.  The execution and delivery of this Agreement by
Seller, the performance of its obligations hereunder and the consummation of the
Transaction, will not constitute or result in (A) a breach or violation of, or a
default under, the Organizational Documents of Seller; (B) a breach or violation
of, or a default under, or the acceleration of any obligations or the creation
of a Lien on the assets of Seller or any of its Subsidiaries (with or without
notice, lapse of time or both) pursuant to, any agreement, lease, license,
contract, note, mortgage, indenture, arrangement or other obligation binding
upon Seller or any of its Subsidiaries (the “Seller Contracts”) or (C) conflict
with, breach or violate any Law applicable to Seller or any of its Subsidiaries
or by which Seller or any of its Subsidiaries is bound or affected.

 

(d)             Ownership of Shares.  Seller is the sole direct record and
beneficial owner of all the outstanding shares of capital stock of the Company,
and will transfer and deliver to Purchaser at the Closing valid title to the
Shares free and clear of any Liens.

 

(e)             Brokers and Finders.  There is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of Seller who might be entitled to any fee or commission in connection
with the Transaction, except that Seller has employed Headwaters MB LLC as its
financial advisor, which may be entitled to collect a fee in connection with the
Transaction entirely at the expense of Seller.

 

2.2.    Representations and Warranties Regarding the Company and its
Subsidiaries.  Except as set forth in the Seller Disclosure Schedule (provided
that disclosure of any item in any part of the Seller Disclosure Schedule shall
be deemed disclosure with respect to any other part to which the relevance of
such item is reasonably apparent and provided further that, for purposes of
these representations and warranties as of the Closing Date, other than for
purposes of Section 4.2(a), the Seller Disclosure Schedule shall mean the Seller
Disclosure Schedule as most recently amended prior to the Closing by Seller
pursuant to Section 3.14), Seller hereby represents and warrants to Purchaser
that the following representations and warranties are true and accurate in all
material respects (that is, any item covered by the representation and
warranties which directly or indirectly has a financial impact of more than CHF
50’000) as of the date of this Agreement and as of the Closing Date.

 

(a)             Organization, Good Standing and Qualification of the Company. 
The Company is a joint stock company organized under the laws of Switzerland and
has all requisite power and authority to own and operate its properties and
assets and to carry on its business as presently conducted and is qualified to
do business and is in good standing in each jurisdiction where such concept is
applicable and where the ownership or operation of its assets or properties or
conduct of its business requires such qualification.

 

3

--------------------------------------------------------------------------------

 

(b)             Capitalization of the Company.  The issued and outstanding share
capital of the Company consists solely of 1,002 registered shares, each with a
par value of CHF1’000.  All outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable.  Other than the Shares, there are no outstanding (i) shares of
capital stock or voting securities of the Company, (ii) securities of the
Company convertible into or exchangeable for shares of capital stock or voting
securities of the Company, or (iii) options or other rights to acquire from the
Company or Seller, or other obligation of the Company to issue, any capital
stock, voting securities or securities convertible into or exchangeable for
capital stock or voting securities of the Company.  There are no outstanding
obligations of the Company to repurchase, redeem or otherwise acquire any
securities described in the foregoing clauses (i), (ii) and (iii).  No shares of
any security of the Company are entitled to preemptive rights or registration
rights.

 

(c)             Subsidiaries/Branches.  Except as set forth in Section 2.2(c) of
the Seller Disclosure Schedule, the Company does not have any Subsidiaries or
branches.

 

(d)             Organization, Good Standing and Qualification of the
Subsidiaries.  Each of the Subsidiaries is duly formed and validly existing in
the jurisdiction in which it has been formed and has all requisite power and
authority to own and operate its properties and assets and to carry on its
business as presently conducted and is qualified to do business and is in good
standing in each jurisdiction where such concept is applicable and where the
ownership or operation of its assets or properties or conduct of its business
requires such qualification.

 

(e)             Capitalization of the Subsidiaries.  The issued and outstanding
share capital of each of the Subsidiaries has been duly authorized, validly
issued, is fully paid and non-assessable and is as described in Section 2.2(e)
of the Seller Disclosure Schedule.  The Company directly owns all of the issued
and outstanding share capital of its Subsidiaries.  The issued and outstanding
share capital of each of the Subsidiaries is free and clear of any Lien, option
or claim of any third-party.

 

(f)              Governmental Filings; Certain Contracts.

 

(i)            Except as set forth in Section 2.2(f)(i) of the Seller Disclosure
Schedule, no notices, reports, filings or other approvals are required to be
made or effected by Seller or the Company or any of its Subsidiaries with, nor
are any consents, registrations, approvals, permits or authorizations required
to be obtained by Seller or the Company or any of its Subsidiaries from, any
governmental or regulatory authority, agency, commission, body or other
governmental entity, including without limitation the Committee on Foreign
Investment in the United States (CFIUS) (“Governmental Entity”) in connection
with the execution and delivery of this Agreement by Seller or the performance
of its obligations hereunder, other than, as of the time of signing of this
Agreement, filings required to be made in connection with the Stockholder
Approval.

 

(ii)           Assuming receipt of the stockholder approval contemplated by
Section 4.3(d), the execution and delivery of this Agreement by Seller, the
performance of its obligations

 

4

--------------------------------------------------------------------------------

 

hereunder and the consummation of the Transaction will not constitute or result
in (A) a breach or violation of the Organizational Documents of the Company or
its Subsidiaries; (B) except with respect to change of control provisions, if
any, in contracts listed in Section 2.2(t) of the Seller Disclosure Schedule, a
breach or violation of, or a default under, or the acceleration of any
obligations or the creation of a Lien on the assets of the Company or any of its
Subsidiaries (with or without notice, lapse of time or both) pursuant to, any
agreement, lease, license, contract, note, mortgage, indenture, arrangement or
other obligation of the Company or any of its Subsidiaries (collectively, the
“Company Contracts”) or (C) conflict with, breach or violate any Law applicable
to the Company or any of its Subsidiaries or by which their respective
properties are bound or affected.

 

(g)             Financial Statements; Undisclosed Liabilities.

 

(i)            Purchaser has been provided with complete and correct copies of
the Company’s consolidated audited statutory financial statements for the fiscal
years ended December 31, 2007, 2008, 2009 and 2010, copies of which are attached
in Annex D (the “Annual Financial Statements”).  The Annual Financial Statements
(A) have been prepared, in all material respects, in accordance with Swiss GAAP
applied on a consistent basis during the periods involved; and (B) present
fairly, in all material respects, the consolidated financial position of the
Company as of the dates thereof and the consolidated results of operations and
cash flows of the Company for the periods then ended.

 

(ii)           Purchaser has been provided with complete and correct copies of
the Company’s consolidated unaudited balance sheet as of October 31, 2011 and
the related unaudited statement of income and cash flows for the period then
ended (the “Interim Financial Statements” and collectively with the Annual
Financial Statements, the “Financial Statements”).  The Interim Financial
Statements (A) have been prepared, in all material respects, in accordance with
U.S. GAAP applied on a consistent basis during the periods involved (except that
the Interim Financial Statements are subject to normal year-end adjustments and
do not contain all footnote disclosure required by U.S. GAAP); and (B) present
fairly, in all material respects, the consolidated financial position of the
Company as at the dates thereof and the consolidated results of operations and
cash flows of the Company for the periods then ended.

 

(iii)          The Company and its Subsidiaries do not have any liabilities
except for (A) liabilities reflected or reserved against on the balance sheet
included in the Interim Financial Statements and not heretofore paid or
discharged; (B) liabilities that have arisen in the ordinary course of business
; and (C) liabilities that are executory obligations under Company Contracts.

 

(iv)          The Closing Balance Sheet will be prepared consistently with the
Company’s historical practice, will be true and correct in all material respects
as of the Closing Date and will be substantially consistent with the forecasts
previously provided to Purchaser.

 

(h)             Absence of Certain Changes.  Except as contemplated by this
Agreement, from December 31, 2010 to the date hereof, (i) the Company and its
Subsidiaries have conducted their business in the ordinary course and (ii) the
Company and its Subsidiaries have not taken any of the actions described in
clauses (b) through (j) of Section 3.1 hereof.

 

5

--------------------------------------------------------------------------------

 

(i)              Litigation.  There are no actions, suits or proceedings pending
or, to Seller’s Knowledge, threatened against the Company and/or any of its
Subsidiaries.  There has not been in the past five (5) years any litigation,
administrative, mediation or arbitration proceedings or any investigation,
inquiry or enforcement proceedings or any other proceedings or hearings against
or involving the Company and/or its Subsidiaries or any of their Directors
before any statutory or governmental body, department, board or agency. 
Further, neither the Company nor any of its Subsidiaries have received any
notice or other written communication threatening any actions, suits or
proceedings against the Company and/or any of the Subsidiaries. To the Knowledge
of Seller, there are no circumstances that are reasonably likely to give rise to
any such proceedings.

 

(j)              Employee Benefits.

 

(i)            All Benefit Plans, other than Benefit Plans that are mandatory
under applicable Law are listed in Section 2.2(j) of the Seller Disclosure
Schedule.  Prior to the date hereof, true and complete copies of all Benefit
Plans listed in Section 2.2(j) of the Seller Disclosure Schedule, and all
amendments thereto, have been made available to Purchaser.

 

(ii)           Each Benefit Plan has been maintained and administered in
substantial compliance with its respective terms and with applicable Law.  All
contributions, insurance premiums, tax and expenses due that are required to be
made under the terms of any Benefit Plan have been timely made when due or are
appropriately reflected in the Financial Statements.

 

(iii)          To the Knowledge of Seller, no event has occurred and no
condition exists that would reasonably be likely to subject the Company or its
Subsidiaries to any material Tax, fine, Lien, penalty, or other material
liability imposed under applicable Law.

 

(iv)          Except as required by applicable Law, the Company and its
Subsidiaries are not obligated to provide any retiree health or life insurance
benefits to any Group Employee.

 

(v)           There is no action, suit, audit, claim, proceeding or, to the
Knowledge of Seller, investigation pending against or involving or, to the
Knowledge of Seller, threatened against or involving any Benefit Plan before any
court or arbitrator or any Governmental Entity, or federal, state or local
official that would reasonably be likely to subject the Company or its
Subsidiaries to a material liability and (B) to the Knowledge of Seller, there
are no facts or circumstances existing that would reasonably be likely to give
rise to such actions, suits, audits, claims or proceedings.

 

(vi)          Neither the execution of this Agreement, nor the consummation of
the Transaction, will (whether alone or in connection with any other event(s))
(A) entitle any Employee of the Company or any of its Subsidiaries to material
severance pay or any increase in severance pay upon any termination of
employment; or (B) accelerate the time of payment or vesting or result in any
payment or funding (through a grantor trust or otherwise) of any compensation or
benefits under, or increase the amount payable under, any of the Benefit Plans,
except for the Retention Agreements in favor of the Group Employees listed in
Section 2.2(j)(vii) of the Seller Disclosure Schedule.

 

6

--------------------------------------------------------------------------------

 

(vii)         The Group Employees identified in Section 2.2(j)(vii) of the
Seller Disclosure Schedule are the only employees with whom the Company and its
Subsidiaries have entered into any kind of retention agreement, other than their
currently existing employment agreements (the “Retention Agreements”).  Upon
Closing, the Company and its Subsidiaries will have no further liability under
the Retention Agreements.

 

(viii)        With the exception of the Group Employees listed in Section
2.2(j)(viii) of the Seller Disclosure Schedule, no Group Employee has a
termination notice period exceeding two months.

 

(k)             MRV Stock Option Plans.  The Group Employees listed in Section
2.2(k) of the Seller Disclosure Schedule are the only Group Employees who hold
outstanding options under the MRV Stock Option Plans.  The MRV Stock Option
Plans are the only stock option plans under which any of the Group Employees
listed in Section 2.2(k) of the Seller Disclosure Schedule has been granted
stock options.  After Closing, the Company and its Subsidiaries will have no
costs or liabilities arising from the MRV Stock Option Plans or the options
issued and outstanding thereunder.

 

(l)              Indemnification of Officers and Directors.  After Closing, the
Company and its Subsidiaries will have no indemnification liability to current
or former directors or officers of the Company or any of its Subsidiaries.

 

(m)            Compliance with Laws; Permits.  The Company and its Subsidiaries
are in compliance with all laws, statutes, ordinances, rules, regulations,
judgments, orders, injunctions, decrees, licenses and permits of any
Governmental Entity (collectively, “Laws”) applicable to the Company or its
Subsidiaries or by which any of their respective properties are bound or
affected, including without limitation the Federal Acquisition Regulation (FAR),
with respect to all material contract obligations and proposal submission
obligations where the United States Government is the end user under an open or
proposed prime contract or subcontract, and the International Traffic in Arms
Regulations (ITAR).  The Company and its Subsidiaries have all permits,
licenses, orders and other governmental authorizations, consents and approvals
necessary to conduct their businesses as presently conducted.

 

(n)             Environmental Matters.  (i) The property currently operated by
the Company and its Subsidiaries is in compliance with all applicable
Environmental Laws and the Company and its Subsidiaries possess all permits,
licenses, registrations, authorizations and approvals required under applicable
Environmental Laws for the operation of their businesses as presently conducted.

 

(ii)           The property currently operated by the Company and its
Subsidiaries (A) is not the subject of any written notice from any Governmental
Entity or any other Person alleging the violation of any applicable
Environmental Laws; and (B) is not the subject to any court order, injunction,
administrative order or decree arising under any Environmental Law.

 

(o)             Taxes.  (i) All material Tax Returns that are required to be
filed on or before the Closing Date by or with respect to the Company and its
Subsidiaries have

 

7

--------------------------------------------------------------------------------

 

been or will be timely filed on or before the Closing Date, and all such Tax
Returns are or will be true and complete in all material respects.

 

(ii)           All due Taxes have been duly and timely paid or are duly
reflected as payable in the Annual Financial Statements and/or the Interim
Financial Statements.

 

(iii)          No issues that have been raised by the relevant taxing authority
in connection with the examination of any of the Tax Returns referred to in
clause (i) are currently pending.

 

(iv)          There is no Lien for Taxes upon any of the assets of the Company
or its Subsidiaries nor is any taxing authority in the process of imposing any
Lien for Taxes on any such assets, other than Liens for Taxes that are not yet
due and payable or for Taxes the validity or amount of which is being contested
by the Company or its Subsidiaries in good faith by appropriate action.

 

(v)           No withholding tax remains due by the Company or its Subsidiaries
for any dividend paid by the Company or its Subsidiaries at or prior to Closing.

 

(p)             Labor Matters.  None of the Company or any of its Subsidiaries
is the subject of any material proceeding asserting that the Company or any of
its Subsidiaries have committed an unfair labor practice or seeking to compel it
to bargain with any labor union or labor organization nor is there pending or,
to the Knowledge of Seller, threatened, nor has there been since December 31,
2006, any labor strike, walk-out, work stoppage, slow-down or lockout involving
the Company or any of its Subsidiaries. The Company and its Subsidiaries are in
compliance with all applicable Laws respecting employment and employment
practices, terms and conditions of employment, wages, hours of work and
occupational safety and health, except where the failure to comply therewith,
individually or in the aggregate, has not had and would not reasonably be
expected to adversely interfere in any material respect with the conduct of
their businesses.  Since December 31, 2009 there has been no material labor or
employment dispute, except as described in Section 2.2(p) of the Seller
Disclosure Schedule.

 

(q)             Sensitive Payments.  No Group Employee has made any payment to
any government official that could be deemed an acte de corruption within the
meaning of Title 19 (Corruption) of the Swiss Criminal Code.

 

(r)              Property.  Neither the Company nor any of its Subsidiaries owns
any real property.  Any real property or tangible personal property held under
lease by the Company or any of its Subsidiaries that is material to their
businesses is held by the Company or its Subsidiaries, as applicable, under a
valid, subsisting and enforceable lease with such exceptions as are not material
and do not interfere with the current use of such property by the Company or its
Subsidiaries.

 

8

--------------------------------------------------------------------------------

 

(s)             Intellectual Property.

 

(i)            Other than the items listed in Section 2.2(s) of the Seller
Disclosure Schedule, neither the Company nor any of its Subsidiaries have any
registered patents, trademarks, internet domain names, copyrights or
applications therefor.

 

(ii)           The Company and its Subsidiaries own, or are licensed or
otherwise possess the right to use, the technology, know-how and trade secrets
used in the businesses of the Company and its Subsidiaries as currently
conducted (the “Owned Intellectual Property”).  The Company and its Subsidiaries
have not granted any security interests in any of the Owned Intellectual
Property.

 

(iii)          At all times, the Company and its Subsidiaries have taken
reasonable measures to protect the Owned Intellectual Property related to their
respective businesses against unauthorized disclosure to third parties, either
by way of confidentiality undertakings or by way of appropriate references in
their business correspondence.

 

(iv)          There are no claims pending or, to the Knowledge of Seller,
threatened (A) that the business of the Company and its Subsidiaries as
currently conducted infringes the Intellectual Property rights of any third
party; (B) challenging the ownership, validity or enforceability of any of the
Owned Intellectual Property; or (C) challenging the Company or its Subsidiaries
rights to use any third party Intellectual Property.

 

(v)           To the Knowledge of Seller, the businesses of the Company and its
Subsidiaries do not infringe Intellectual Property rights of any third party.

 

(vi)          To the Knowledge of Seller, there is no material unauthorized use,
infringement or misappropriation of any of the Owned Intellectual Property by
any third party, including any Group Employee.

 

(vii)         The Company and its Subsidiaries have taken reasonable measures
designed to protect the secrecy of its trade secrets.

 

(t)              Contracts.  Schedule 2.2(t) of the Seller Disclosure Schedule
lists all Material Contracts.  The term “Material Contracts” means all of the
following types of Company Contracts and Subsidiaries Contracts (other than
Organizational Documents of the Company and its Subsidiaries and agreements
related to employee benefits and labor matters):

 

(i)            all Company Contracts and Subsidiaries Contracts evidencing
Indebtedness in excess of CHF 100’000;

 

(ii)           joint venture and limited partnership agreements;

 

(iii)          each material supply, inventory, purchase and customer Company
Contracts and its Subsidiaries Contracts that is reasonably likely to involve
consideration of more than CHF 1’000’000 in the aggregate over the term of such
Company Contracts and Subsidiaries Contracts;

 

9

--------------------------------------------------------------------------------

 

(iv)          stock purchase agreements, asset purchase agreements and other
contracts relating to the acquisition, lease or disposition by the Company and
its Subsidiaries of material assets and properties or shares of capital stock of
the Company and its Subsidiaries, in each case under which the Company and its
Subsidiaries have any material indemnification obligations or any other material
ongoing obligations;

 

(v)           Company Contracts and its Subsidiaries Contracts with consultants
that are likely to involve consideration of more than CHF 100’000 in the
aggregate over the term of such Company Contracts and Subsidiaries Contracts;

 

(vi)          Company Contracts and Subsidiaries Contracts involving the payment
of royalties or other amounts calculated based upon the revenues or income of
the Company Contracts and Subsidiaries and that are likely to involve
consideration of more than CHF 300’000 per year in the aggregate over the term
of such Company Contracts and Subsidiaries Contracts;

 

(vii)         all Company Contracts and Subsidiaries Contracts with Governmental
Entities; and

 

(viii)        Company Contracts and Subsidiaries Contracts that limit, or
purport to limit, the ability of the Company or its Subsidiaries before or after
the Closing to compete in any line of business or with any Person or to operate
in any geographic area or during any period of time.

 

Seller has made available to Purchaser copies of all Material Contracts.  To the
Knowledge of Seller, each Material Contract is in full force and effect and is
valid, binding and enforceable against the other parties thereto in accordance
with its terms.  Neither the Company, nor its Subsidiaries nor, to the Knowledge
of Seller, any other Person is in material breach or violation of, or default
under, any Material Contract. To the Knowledge of Seller, no event has occurred
which would result in a breach of or default under, require any consent or other
action by any Person under, or give rise to any penalty or right of termination,
cancellation or acceleration of any right or obligation of the Company or its
Subsidiaries or to a loss of any benefit to which the Company or its
Subsidiaries are entitled under (in each case, with or without notice or lapse
of time, or both) any Material Contract, other than with respect to change of
control provisions in the contracts listed in Section 2.2(t) of the Seller
Disclosure Schedule.

 

(u)             Inventory.  The Company’s inventory, in all material respects: 
(i) is carried on the Financial Statements and is valued and reported in a
manner consistent with the Company’s past practices, and in accordance with
Swiss GAAP with respect to its Annual Financial Statements and U.S. GAAP with
respect to its Interim Financial Statements, consistently applied; and (ii) is
of a quantity that is consistent with the Company’s past practice.

 

(v)             Affiliate Transactions.  Section 2.2(v) of the Seller Disclosure
Schedule sets forth a complete and correct list of all written Intercompany
Agreements.

 

(w)            Insurance.  The Company and its Subsidiaries have maintained in
full force and effect insurance policies, which, with respect to their amount
and coverage,

 

10

--------------------------------------------------------------------------------

 

provide sufficient and reasonable coverage against losses and liabilities
normally insured against by a Person carrying on the same type of business as
the Company and its Subsidiaries.  The Company and its Subsidiaries carry
insurance that complies with the requirements of the Company Contracts and
Subsidiaries Contracts identified in Section 2.2(t)(iii) of the Seller
Disclosure Schedule.  In addition (i) neither the Company nor any of its
Subsidiaries is in material default under any insurance policy maintained by the
Company and its Subsidiaries the effect of which would reasonably be expected to
jeopardize coverage thereunder; (ii) all premiums due have been paid on
insurance policies maintained by the Company and its Subsidiaries in all
material respects, and the Company and its Subsidiaries have not received any
written notice of cancellation of any insurance policy maintained by the Company
and its Subsidiaries material to them or written notice with respect to any
refusal of coverage thereunder the resolution of which is still pending or
unresolved; (iii) there is no past or current material claim under any existing
insurance policy maintained by the Company and its Subsidiaries for which the
insurance company is denying coverage or defending under a reservation of rights
or similar clause; and (iv) there are no outstanding unpaid claims under any
insurance policy maintained by the Company and its Subsidiaries that are
material, individually or in the aggregate.

 

(x)              Accounts Receivable.  As of the date hereof, to Seller’s
Knowledge, all of the accounts receivable owing to the Company or any of its
Subsidiaries constitute, in all material respects, valid and enforceable claims
arising from bona fide transactions in the ordinary course of business, and
there are no known or asserted claims, refusals to pay or other rights of
set-off against any thereof other than such as have arisen or will arise in the
ordinary course of business and for which adequate reserves have been
established in the Financial Statements (to the extent required by Swiss GAAP
with respect to its Annual Financial Statements and U.S. GAAP with respect to
its Interim Financial Statements).

 

(y)             Books and Records.  The Company and its Subsidiaries’ books,
accounts, data, files, information and records are true, correct and complete in
all material respects, and are maintained in the Company’s usual, regular and
ordinary manner in accordance with applicable Law.

 

(z)              Scolari Acquisition.  The Company’s proposed acquisition of
certain items of manufacturing equipment, the hiring of former employees of
Dominique Scolari Electronique (DSE), and lease of the Scolari building (the
“Scolari Acquisition”) have been authorized by the Seller and the Company.  The
consummation of the Scolari Acquisition will be in compliance in all material
respects with applicable laws and will not materially disrupt the on-going
business operations of the Company and will not result in any violation of any
obligation under any Company Contracts.  With respect to the Scolari
Acquisition, the Company will not be subject to any claim related to DSE past
activities or any claim related to the application of the Swiss Merger Act.

 

(aa)           CES West.  The Company’s exclusive agent, CES West LLC, is a Utah
limited liability company wholly-owned by Mr. and Mrs. Keith Folkerson.  The
Company’s dealings with CES West are on an arm’s-length basis.  To the Knowledge
of

11

--------------------------------------------------------------------------------

 

Seller, except as described in Section 2.2(aa) of the Seller Disclosure
Schedule, CES West is in compliance in all material respects with applicable
laws.  The Company will not be subject to any claim as a result of the
disclosure in Section 2.2(aa) of the Seller Disclosure Schedule or for any claim
related to payment of US tax as a result of its relationship with CES West prior
to Closing.

 

(bb)           Employee Pension Plans. All employee pension plans that are
mandatory under applicable laws have been duly and timely funded in accordance
with said laws.

 

(cc)           Full and Fair Disclosure and Information.  To Seller’s Knowledge,
there are no facts pertaining to the Company and/or its Subsidiaries that might
materially affect Purchaser’s evaluation of the Shares and/or have a material
impact on the Transaction that have not been disclosed to Purchaser.  To
Seller’s Knowledge, the information provided by Seller and the Company to
Purchaser during its due diligence process is complete, accurate and not
misleading.

 

2.3.    Representations and Warranties of Purchaser.

 

Except as set forth in the disclosure letter delivered to the Company by
Purchaser on or prior to entering into this Agreement (the “Purchaser Disclosure
Schedule”), Purchaser hereby represents and warrants to the Company that:

 

(a)             Organization and Good Standing.  Purchaser is a joint stock
company duly organized, validly existing and in good standing under the laws of
Switzerland and has all requisite power and authority to own and operate its
properties and assets and to carry on its business as presently conducted.

 

(b)             Authorization.  Purchaser has all requisite power and authority
to execute and deliver this Agreement, to perform its obligations hereunder and
to consummate the Transaction.  The execution and delivery by Purchaser of this
Agreement, the performance of its obligations hereunder and the consummation by
Purchaser of the Transaction have been duly authorized by all necessary action
of Purchaser, and this Agreement has been duly executed and delivered by
Purchaser and, assuming the due authorization, execution and delivery of this
Agreement by Seller, constitutes the legal, valid and binding obligation of
Purchaser, enforceable against Purchaser in accordance with its terms, except as
limited by applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws affecting the enforcement of
creditors’ rights generally or, as to enforceability, by general equitable
principles.

 

(c)             Governmental Filings; No Violations.

 

(i)            No notices, reports, filings or other approvals are required to
be made by Purchaser with, nor are any consents, registrations, approvals,
permits or authorizations required to be obtained by Purchaser from, any Swiss
Governmental Entity, in connection with the execution and delivery of this
Agreement by Purchaser and the consummation by Purchaser of the Transaction,
including without limitation and based on Purchaser’s own independent analysis,
the Committee on Foreign Investment in the United States (CFIUS).

 

12

--------------------------------------------------------------------------------

 

(ii)           The execution and delivery of this Agreement by Purchaser, the
performance of its obligations hereunder and the consummation of the
Transaction, will not constitute or result in (A) a breach or violation of, or a
default under, the Organizational Documents of Purchaser; (B) a breach or
violation of, or a default under, or the acceleration of any obligations or the
creation of a Lien on the assets of Purchaser (with or without notice, lapse of
time or both) pursuant to, any agreement, lease, license, contract, note,
mortgage, indenture, arrangement or other obligation binding upon Purchaser (the
“Purchaser Contracts”) or (C) conflict with, breach or violate any Law
applicable to Purchaser or any of its Subsidiaries or by which Purchaser or any
of its Subsidiaries is bound or affected; except, in the case of clauses (B) or
(C) above, for any breach, violation, default, acceleration, creation or change
that would not, individually or in the aggregate, reasonably be likely to
prevent, materially delay or materially impair the ability of Purchaser to
consummate the Transaction.

 

(d)             Brokers and Finders.  Neither Purchaser nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finder’s fees in connection
with the Transaction.

 

(e)             Available Funds.  Assuming satisfaction of the conditions set
forth in Section 4.2, Purchaser will have the funds necessary to satisfy all of
its obligations hereunder.

 

(f)              Securities Matters.  The Shares are being acquired by Purchaser
for its own account and without a view to the public distribution or sale of the
Shares or any interest in such Shares.  Purchaser has sufficient knowledge and
experience in financial and business matters so as to be capable of evaluating
the merits and risks of its investment in the Shares, and Purchaser is capable
of bearing the economic risks of such investment, including a complete loss of
its investment in the Shares.  Purchaser understands and agrees that it may not
sell, transfer, assign, pledge or otherwise dispose of the Shares other than
pursuant to applicable securities Laws and in accordance with the Company’s
Organizational Documents.

 

(g)             Investigation.  Purchaser acknowledges and agrees that it
(i) has made its own inquiry and investigation into, and, based thereon, has
formed an independent judgment concerning, the Company; and (ii) has been
furnished with or given adequate access to such information about the Company as
it has requested.  Purchaser further acknowledges and agrees that (A) the only
representations, warranties, covenants and agreements made by Seller are the
representations, warranties, covenants, and agreements made in this Agreement
and the Seller Disclosure Schedule; and (B) except as set forth in Sections 2.1
and 2.2 of this Agreement (as qualified by the Seller Disclosure Schedule),
Seller does not make any other representation or warranty with respect to
Seller, its Affiliates, the Company or any of its Subsidiaries, this Agreement
or the Transaction.

 

13

--------------------------------------------------------------------------------

 

ARTICLE III

 

Covenants

 

3.1.    Interim Operations.  Between signing of this Agreement and Closing,
Seller shall cause each of the Company and its Subsidiaries (unless Purchaser
shall otherwise approve in writing, which approval shall not be unreasonably
withheld or delayed, and except as otherwise expressly contemplated hereby or
set forth in the Seller Disclosure Schedule) to:

 

(a)           other than consummation of the Scolari Acquisition, conduct its
business in the ordinary and usual course and, to the extent consistent
therewith, use all reasonable efforts to preserve its business organization
intact and maintain its existing relations and goodwill with customers,
suppliers and employees;

 

(b)           not amend its Organizational Documents;

 

(c)           not (i) issue, sell, pledge, dispose of or encumber any shares of
the Company or its Subsidiaries capital stock, or securities convertible into or
exchangeable or exercisable for, or options, warrants, calls, commitments or
rights of any kind to acquire, any shares of the Company or its Subsidiaries
capital stock of any class; (ii) transfer, sell, dispose of or encumber any
material portion of its assets, other than sales of inventory in the ordinary
course of business and other than amounts in cash equal to the Pre-Closing
Distributions, provided that, CHF 1’000’000 of the Pre-Closing Distributions
will not be distributed by the Company or its Subsidiaries until Closing and
will be available for funding of the Reserve Amount at Closing; or (iii) other
than in the ordinary course of business, incur any Indebtedness or issue any
debt securities or guarantee or endorse the obligations of any Person;

 

(d)           other than as may be required by applicable Law, not (i) increase
the compensation payable or to become payable to Group Employees; (ii) grant any
rights to severance or termination pay to, or enter into any employment or
severance agreement with any Group Employee (other than in connection with the
Scolari Acquisition); or (iii) establish, adopt, enter into or amend, any
collective bargaining agreement or Benefit Plan;

 

(e)           except in the ordinary course of business, not (i) enter into,
amend or terminate any contract or agreement that would be material to the
Company and its Subsidiaries taken as a whole (other than in connection with the
Scolari Acquisition); or (ii) exclusively license to any third party any
material Owned Intellectual Property;

 

(f)            other than consummation of the Scolari Acquisition, not acquire
by merger, consolidation, acquisition of assets or equity interests or any
similar transaction any corporation, partnership, limited liability company or
other business organization or all or substantially all of the assets of any
such entity;

 

(g)           except in the ordinary course of business, not settle or
compromise any material claims or litigation;

 

(h)           not make any material change, other than as required by Swiss GAAP
or U.S. GAAP, to its accounting principles or procedures;

 

14

--------------------------------------------------------------------------------

 

(i)            except as described in the funds flow chart attached as Annex C,
not make any payment or distribution to Seller or its Affiliates; and

 

(j)            not authorize or enter into an agreement to do any of the
foregoing.

 

3.2.    Access.  Upon reasonable notice, and except as may otherwise be required
by applicable Law, Seller shall cause the Company to afford Purchaser’s
officers, employees, counsel, accountants and other authorized representatives
reasonable access, during normal business hours throughout the period prior to
the Closing, to its properties, books, contracts and records and, during such
period, Seller shall cause the Company to furnish promptly to the Purchaser all
information concerning its business, properties and personnel as may reasonably
be requested; provided, that the foregoing shall not require Seller or the
Company to permit any inspection, or to disclose any information, that in the
reasonable judgment of Seller would result in the disclosure of any trade
secrets of third parties or violate any of its obligations with respect to
confidentiality if Seller shall have used reasonable best efforts to obtain the
consent of such third party to such inspection or disclosure.

 

3.3.    Publicity.  Seller and Purchaser shall consult with each other prior to
issuing any press releases or otherwise making public announcements with respect
to the Transaction and prior to making any filings with any third party and/or
any Governmental Entity with respect thereto, except as may be required by Law.

 

3.4.    Expenses.  Except as otherwise expressly provided in this Agreement, all
costs and expenses incurred in connection with this Agreement and the
Transaction shall be paid by the party incurring such cost or expense.

 

3.5.    Breakup Fee.  If Purchaser or Seller exercises its right to terminate
this Agreement based on the failure of the condition set forth in
Section 4.3(d) (Stockholder Approval), Seller will cause the Company promptly to
pay Purchaser a fee of CHF 200’000.

 

3.6.    Filings; Other Actions.

 

(a)             Purchaser and Seller shall cooperate with each other and use
reasonable best efforts to take or cause to be taken all actions, and do or
cause to be done all things, necessary, proper or advisable on its part under
this Agreement and applicable Law to consummate the Transaction as soon as
practicable, including preparing and submitting as promptly as practicable all
documentation to effect all necessary notices, reports, submissions and other
filings and to obtain as promptly as practicable all consents, registrations,
approvals, permits or authorizations necessary or advisable to be obtained from
any third party or any Governmental Entity in order to consummate the
Transaction.

 

(b)             In furtherance and not in limitation of the foregoing, each of
Purchaser and Seller shall (i) reasonably cooperate with each other in
determining whether any action by or in respect of, or filing with, any
Governmental Entity is required, (ii) execute and deliver, or cause to be
executed and delivered, such documents and other instruments and take, or cause
to be taken, such further actions as may be reasonably required to carry out the
provisions of this Agreement and give effect to the Transaction,

 

15

--------------------------------------------------------------------------------

 

and (iii) refrain from taking any actions that could reasonably be expected to
impair, delay or impede the Closing.

 

3.7.    MRV Loan. Seller shall cause all principal and accrued interest in
respect of the MRV Loan to be paid to the Company and the proceeds thereof to be
distributed to Seller, and any tax withholding with respect thereto to be paid,
at or prior to Closing, it being understood and agreed between the parties that
the Purchase Price has been agreed upon based on the MRV Loan being fully
discharged and the related withholding tax fully paid by the Company.

 

3.8.    Resignations.  Except as set forth in Section 3.8 of the Seller
Disclosure Schedule, Seller shall cause each member of the Board of Directors of
the Company to resign as a director, effective as of the Closing, with
confirmation that they have no claims whatsoever against the Company or any of
its Subsidiaries.

 

3.9.    Intercompany Agreements.  Except as otherwise agreed in writing by
Purchaser and Seller, Seller shall cause all Intercompany Agreements to be
terminated at or prior to Closing.

 

3.10.       Confidentiality.  From the date hereof until the third anniversary
of this Agreement, Seller and Purchaser will hold, and will cause their
respective Representatives to hold, in strict confidence, unless disclosure to a
Governmental Entity is necessary or appropriate in connection with any necessary
regulatory approval or unless compelled to disclose by judicial or
administrative process or, in the written opinion of its counsel, by other
requirement of Law or the applicable requirements of any Governmental Entity,
all nonpublic records, books, contracts, instruments, computer data and other
data and information (collectively, “Information”) concerning the other parties
hereto furnished to them by such other parties or their Representatives pursuant
to this Agreement (except to the extent that such information can be shown to
have been (i) previously known by such party on a non-confidential basis,
(ii) in the public domain through no fault of such party, (iii) independently
developed by such party or its Representatives without reliance on Information
or (iv) later lawfully acquired from other sources by the party to which it was
furnished), and neither Seller nor Purchaser shall release or disclose such
Information to any other Person, except its respective auditors, attorneys,
financial advisors, other consultants and advisors and, to the extent permitted
above, to Governmental Entities.

 

3.11.          Books and Records

 

(a)     Seller and its Affiliates shall have the right to retain copies of all
books and records of the Company and its Subsidiaries relating to periods ending
on or prior to the Closing subject to compliance with applicable Law.  Seller
shall keep such documents confidential in accordance with Section 3.10  
Purchaser agrees that, from and after the Closing, with respect to all original
books and records of the Company and its Subsidiaries, Purchaser will (and will
cause the Company and its Subsidiaries to) (i) comply in all material respects
with applicable Law relating to the preservation and retention of records and
(ii) apply preservation and retention policies that are no less stringent than
those generally applied by Purchaser.

 

16

--------------------------------------------------------------------------------

 

(b)     In connection with any reasonable business purpose, including (i) in
response to the request or at the direction of a Governmental Entity, (ii) the
preparation of Tax returns, (iii) the determination of any matter relating to
the rights or obligations of Seller under this Agreement and (iv) compliance
with any Laws applicable to Seller (including any applicable securities Laws),
subject to any applicable Law and subject to any applicable privileges
(including the attorney-client privilege and any confidentiality obligations
towards third parties), upon reasonable prior written notice, Purchaser shall
use reasonable commercial efforts to cause the Company and its Subsidiaries to:
(A) provide Seller and its Representatives information with respect to the
Company for periods prior to Closing, (B) afford Seller and its Representatives
reasonable access, during normal business hours, to the offices, properties,
books, data, files, information and records of the Company and its Subsidiaries,
and (C) make available to Seller and its Representatives the Group Employees
whose assistance, expertise, testimony, notes and recollections or presence is
absolutely necessary at their workplace to assist Seller or its Affiliates in
connection with any of the purposes referred to above; provided, however, that
such access shall not unreasonably interfere with the business or operations of
the Company and its Subsidiaries and that Seller and its Representatives keep
such information confidential in accordance with Section 3.10.

 

3.12.          Access to Information after Closing.  Purchaser shall use its
best efforts to provide access to the Seller or its representatives to the
books, documents, data and information of the Company during normal business
hours, insofar as such information is required or relevant to protect the
legitimate interests of the Seller, particularly in connection with Swiss or
United States taxation matters, any requests for or obligations to provide
information to the United States Securities Exchange Commission, or in
connection with the requirements of applicable law, legal disputes with third
parties, or for evaluation of and in response to possible claims under this
Agreement.  If the Seller makes use of this right of access, then Seller shall
(a) reimburse the Company for all reasonable expenses occurred in connection
with such access and inspection of documents and (b) keep such information
confidential in accordance with Section 3.10 and except as required in
connection with any legal disputes with third parties or claims under this
Agreement.  In addition, Purchaser shall use its best effort to deliver to the
Seller, no later than the earlier of 21 days after Closing or 10 days after the
end of the fiscal quarter in which the Closing takes place, a reporting package
using the regular monthly reporting package used by the Company to report its
financial results to Seller, except that the balance sheet data will be as of
the Closing Date and the statement of operations data will be for the period
then ended.

 

3.13.          Fulfill Closing Conditions.  Each of Seller and Purchaser shall
cooperate with each other and shall each exercise their reasonable best efforts
to fulfill the conditions to Closing set forth in Article IV, including the
obtaining of necessary approvals, the obtaining of senior debt financing and the
completion of Purchaser due diligence. Without limiting the foregoing, Purchaser
shall use its reasonable best efforts (A) to prepare, negotiate and enter into
definitive agreements with respect to the debt financing contemplated by
Section 4.2(b), (B) to satisfy on a timely basis all conditions to funding in
such definitive agreements and to consummate such financing at or prior to the
Closing, including using its reasonable best efforts to cause the applicable
lenders to fund such financing at the Closing, (C) to enforce its rights under
any such definitive agreements and (D) to comply with its

 

17

--------------------------------------------------------------------------------

 

obligations under such definitive agreements. Purchaser shall (i) keep Seller
informed on a current basis and in reasonable detail of the status of its
efforts to arrange such debt financing, (ii) use its reasonable best efforts to,
by December 15, 2011, provide Seller evidence of a commitment to such debt
financing and (iii) promptly when available provide to Seller with a written
confirmation from the Bank confirming the definitive agreements for such
financing.  Without limiting the generality of the foregoing, Purchaser shall
give Seller prompt notice of any breach or default by any party to any such
definitive agreements. Seller will use its reasonable best efforts to satisfy
the condition set forth in Section 4.3(d)(Stockholder Approval) and will keep
Purchaser informed of its actions taken in connection therewith.  Purchaser will
cooperate with Seller to provide timely information concerning the securing of
debt financing and the fulfillment of other closing conditions, which may be
helpful to Seller’s preparation of its proxy statement and its proxy
solicitation.  Seller will advise Purchaser of the progress of its proxy
solicitation.

 

3.14.                  Disclosure Letters.  Seller and Purchaser shall promptly
notify each other of any developments between the date of this Agreement and the
Closing that would cause the Seller Disclosure Schedule or the Purchaser
Disclosure Schedule, respectively, to be materially untrue and will mutually
agree to amend such schedules so that they will be true and correct in all
material respects as of the Closing Date.

 

ARTICLE IV

 

Conditions

 

4.1.          Conditions to Each Party’s Obligation to Effect the Transaction. 
The respective obligations of each party to effect the Transaction are subject
to the satisfaction or waiver at or prior to the Closing of each of the
following conditions:

 

(a)       Governmental Approvals.  All authorizations, consents, Orders (as
defined below) or approvals of, or declarations or filings with, or expirations
of waiting periods imposed by, any Governmental Entities necessary for the
consummation of the Transaction, shall have been obtained or made.

 

(b)       Litigation.  No Governmental Entity of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any law, statute,
ordinance, rule, regulation, judgment, injunction, decree or other order
(whether temporary, preliminary or permanent) (collectively, an “Order”) that is
in effect and restrains, enjoins or otherwise prohibits consummation of the
Transaction.

 

(c)       Escrow Accounts.  The parties shall have established the following
escrow accounts at Poncet Buhler Lacin & Vallery, Notaires, 5, rue Pedro Meylan,
Case postale 434, 1211 Genève 17 (the “Escrow Holder”):

 

(i)            An escrow account for the amount of the Restricted Cash
identified on the Closing Balance Sheet and subject to the terms and conditions
of the escrow agreement set forth in Annex B-1 attached to this Agreement.  The
amount of the Restricted Cash will be released from the escrow and distributed
to Seller on the first Business Day following the date of

 

18

--------------------------------------------------------------------------------

 

termination of the Advance Payment Guarantee; or, to the extent the Advance
Payment Guarantee is drawn by its beneficiary, the amount of any such draw will
be released from the escrow and distributed to the Company; provided that if the
Advance Payment Guarantee is released prior to Closing, this escrow will be
unnecessary and the amount of the Restricted Cash will be paid to Seller at
Closing; and

 

(ii)           An escrow account for 10% of the Purchase Price, to be funded at
the Closing and subject to the terms and conditions of the escrow agreement set
forth in Annex B-2 attached to this Agreement, which provides, among other
things that, save as in case of drawing by Purchaser, the escrow will terminate
and the full amount then held in the escrow will be distributed to Seller on
April 1, 2013.

 

4.2.          Conditions to Obligations of Purchaser.  The obligations of
Purchaser to effect the Transaction are also subject to the satisfaction, or
waiver by Purchaser, at or prior to the Closing of the following conditions:

 

(a)             Representations and Warranties.  The representations and
warranties of Seller regarding itself, the Company and the Subsidiaries set
forth in this Agreement shall be true and correct as of the Closing Date as
though made on and as of the Closing Date (except to the extent any such
representation or warranty expressly speaks as of an earlier date, in which case
such representation and warranty shall be deemed made only as of such date).

 

(b)             Closing Balance Sheet.  Three days prior to the Closing Date,
Seller shall have caused the Company to deliver to Purchaser the Closing Balance
Sheet.

 

(c)             Senior Debt Financing.  Purchaser shall have obtained senior
debt financing of a minimum amount of CHF 10’000’000.

 

(d)             Due Diligence.  Purchaser shall have finalized to its
satisfaction its due diligence process, which due diligence process as of the
date of this Agreement consists only of the items listed on Schedule 4.2(d).

 

(e)             Consents; Notices.  The Company shall submit to Purchaser, prior
to sending, the drafts of written consents and of notices of change of control
to be sent pursuant to the Company Contracts and Subsidiaries Contracts listed
in Section 2.2(t)(iii) of the Seller Disclosure Schedule.  Prior to Closing, the
Company shall have obtained where required, written consents from or, where
required, provided notices of change of control to the counterparties under said
contracts.  Copies of the written consents and notices of change of control will
be provided to the Purchaser prior to Closing.

 

(f)              Ten days prior to the Closing Date, Seller shall have presented
to Purchaser’s satisfaction the original share certificates and/or share ledgers
for the four Subsidiaries: Creative Electronic Systems GB Ltd., Creative
Electronic Systems Deutschland GMBH, Creative Electronic Systems Spain, S.L.,
and Creative Electronic Systems CAL, Inc.

 

19

--------------------------------------------------------------------------------

 

(g)             Key Employees.  None of the Group Employees listed in
Section 2.2(j)(vii) of the Seller Disclosure Schedule shall have terminated or
given written notice of termination of his employment with the Company or its
Subsidiaries.

 

(h)             Performance of Seller’s Obligations.  Seller shall have
performed in all material respects all obligations required to be performed by
Seller under this Agreement at or prior to the Closing.

 

(i)              Seller’s Certificate.  Seller shall have delivered to Purchaser
a certificate, signed by an officer of Seller and dated as of the Closing Date,
to the effect of the foregoing clauses (a) and (h) of this Section 4.2.

 

(j)              Resignations.  Each member of the Board of Director of the
Company shall have executed and delivered a letter of resignation confirming
that at and after Closing he or she has no claim against the Company.

 

(k)             Retention Agreements.  Any Group Employee who has a Retention
Agreement that provides for post-closing severance liability shall have executed
an amended Retention Agreement with the Company eliminating post-closing
severance liability or shall have provided a release of such liability to the
Company.

 

(l)              No Material Adverse Effect.  Since the date of this Agreement,
no circumstance, change or event shall have occurred or shall exist that would,
individually or in the aggregate, reasonably be likely to result in a Material
Adverse Effect.

 

4.3.          Conditions to Obligations of Seller.  The obligations of Seller to
effect the Transaction are also subject to the satisfaction, or waiver by
Seller, at or prior to the Closing of the following conditions:

 

(a)             Representations and Warranties.  The representations and
warranties of Purchaser set forth in this Agreement shall be true and correct as
of the Closing Date as though made on and as of the Closing Date (except to the
extent any such representation and warranty expressly speaks as of an earlier
date, in which case such representation and warranty shall be deemed made only
as of such date); provided, however, that notwithstanding anything herein to the
contrary, this subsection shall be deemed to have been satisfied even if such
representations or warranties are not so true and correct unless the failure of
such representations or warranties to be so true and correct, individually or in
the aggregate, would reasonably be likely to prevent, materially delay or
materially impair the ability of Purchaser to consummate the Transaction.

 

(b)             Performance of Obligations of Purchaser.  Purchaser shall have
performed all obligations required to be performed by it under this Agreement at
or prior to the Closing.

 

(c)             Purchaser’s Certificate.  Purchaser shall have delivered to
Seller a certificate, signed by an officer of Purchaser and dated as of the
Closing Date, to the effect of the foregoing clauses (a) and (b) of this
Section 4.3.

 

20

--------------------------------------------------------------------------------

 

(d)             Stockholder Approval.  The Transaction shall have been approved
by the requisite vote of the Seller’s stockholders (the “Stockholder Approval”).

 

ARTICLE V

 

Indemnification

 

5.1.          Indemnification by Purchaser.

 

(a)             From and after the Closing Date, Purchaser shall indemnify and
save and hold harmless Seller and each of Seller’s successors, assigns,
Representatives, officers, directors and Affiliates (collectively, the “Seller
Indemnitees”) from and against all demands, claims, actions or causes of action,
assessments, losses, damages, liabilities, costs and expenses, including,
without limitation, interest, penalties and reasonable attorneys’ fees and
expenses (“Damages”) suffered by any such Seller Indemnitees resulting from or
arising out of:  (i) any breach by Purchaser of any representation or warranty
contained in Section 2.3; and (ii) any nonfulfillment or breach of any covenant
or agreement made by Purchaser in this Agreement, in each case existing as of
the Closing Date.

 

(b)             The Seller Indemnitees shall not be entitled to assert any
indemnification pursuant to clause (i) of Section 5.1(a) after the expiration of
the applicable survival period referenced in Section 5.3; provided, that if on
or prior to such expiration of the applicable survival period a notice of claim
shall have been given to Purchaser pursuant to Section 5.4, the Seller
Indemnitees shall continue to have the right to be indemnified with respect to
the matter or matters to which such claim relates until such claim for
indemnification has been satisfied or otherwise resolved.

 

5.2.          Indemnification by Seller.

 

(a)             From and after the Closing Date, Seller shall indemnify and save
and hold harmless Purchaser and each of Purchaser’s successors, assigns,
Representatives, officers, directors and Affiliates, including the Company and
its Subsidiaries (collectively, the “Purchaser Indemnitees”) from and against
any Damages resulting from, arising out of, or incurred in connection with:
(i) any breach by Seller of any representation or warranty contained in Sections
2.1 or 2.2; and (ii) any nonfulfillment or breach of any covenant or agreement
made by Seller in this Agreement, in each case existing as of the Closing Date.

 

(b)             The Purchaser Indemnitees shall not be entitled to assert any
indemnification pursuant to clause (i) of Section 5.2(a) after the expiration of
the applicable survival period; provided that if on or prior to such expiration
of the applicable survival period a notice of claim shall have been given to
Seller pursuant to Section 5.4 hereof for such indemnification, the Purchaser
Indemnities shall continue to have the right to be indemnified with respect to
the matter or matters to which such claim relates until such claim for
indemnification has been satisfied or otherwise resolved.

 

21

--------------------------------------------------------------------------------

 

5.3.          Survival of Representations and Warranties and Indemnities

 

The representations and warranties set forth in Section 2.2 and the related
indemnification obligations of Seller set forth in Section 5.2 (and, in the case
of clause (b) below, the covenant contained in Section 6.1 and the related
indemnification obligation of Seller set forth in Section 5.2) shall survive the
Closing and be valid and remain in effect:

 

(a)             until the fifth anniversary of the Closing with respect to the
representations contained in Section 2.1(b) (Seller authorization),
Section 2.1(d) (Ownership of the Company shares), Section 2.2(b) (Capitalization
of the Company), Section 2.2(e) (Capitalization of the Subsidiaries), and
2.2(m) (only for claims of the US Government for pre-Closing non-compliance, if
any, with FAR).

 

(b)             until three months after expiration of the applicable statute of
limitations (including any extensions thereof) with respect to matters covered
by Section 2.2(o) (Taxes), Section 2.2(z) (Scolari Acquisition, in particular
any claim related to DSE past activities and any claim related to the
application of the Swiss Merger Act), Section 2.2 (aa) (CES West: for any claim
related to payment of US tax and for any claim related to the disclosure made by
Seller in Section 2.2(aa) of Seller Disclosure Schedule)), Section 6.1 (Tax
Indemnity) and Section 2.2(j) (Employee Benefits); and,

 

(c)             in case of all other representations and warranties, until
March 31, 2013;

 

provided, however, that it is agreed and understood that any representation or
warranty or indemnity that would otherwise terminate in accordance with this
Section 5.3 will continue to survive if a notice of breach with respect to such
representation and warranty has been duly and timely provided until the related
claim for misrepresentation or breach of warranty has been satisfied or
resolved.  The parties waive the statute of limitations under Art. 210 CO.

 

The above limitations shall not apply in case of fraud or willful breach of its
obligations by Seller.

 

The covenants and agreements of the parties hereto contained in this Agreement
shall survive until they are fully performed or, if earlier, until the
expiration thereof set forth in the terms of such covenant and agreement.

 

5.4.          Indemnification Procedures.

 

(a)             If a Seller Indemnitee or Purchaser Indemnitee (an “Indemnified
Party”) shall desire to assert any claim for indemnification provided for under
this Article V in respect of, arising out of or involving a claim or demand made
by any Person (other than a party hereto or Affiliate thereof) against the
Indemnified Party (a “Third Party Claim”), such Indemnified Party shall notify
Purchaser or Seller, as the case may be (the “Indemnifying Party”), within 30
days in writing of such Third Party Claim, the amount or the estimated amount of
Damages sought thereunder to the extent then ascertainable (which estimate shall
not be conclusive of the final amount of such Third Party Claim),

 

22

--------------------------------------------------------------------------------

 

any other remedy sought thereunder, any relevant time constraints relating
thereto and, to the extent practicable, any other material details pertaining
thereto (a “Third Party Claim Notice”) promptly after receipt by such
Indemnified Party of written notice of the Third Party Claim; provided, however,
that failure to provide a Third Party Claim Notice shall not affect the
indemnification provided hereunder except to the extent the Indemnifying Party
shall have been actually prejudiced as a result of such failure.  The
Indemnified Party shall deliver to the Indemnifying Party, within 10 days after
the Indemnified Party’s receipt thereof, copies of all notices and documents
(including court papers) received by the Indemnified Party relating to the Third
Party Claim; provided, however, that the failure to deliver such copies shall
not affect the indemnification provided hereunder except to the extent the
Indemnifying Party shall have been actually prejudiced as a result of such
failure.

 

(b)             If a Third Party Claim is made against an Indemnified Party, the
Indemnifying Party will be entitled to participate in the defense thereof and,
if it so chooses and acknowledges without reservation its obligation to
indemnify the Indemnified Party therefore, to assume the defense thereof with
counsel selected by the Indemnifying Party and reasonably satisfactory to the
Indemnified Party.  Should the Indemnifying Party so elect to assume the defense
of a Third Party Claim, the Indemnifying Party will not be liable to the
Indemnified Party for legal expenses subsequently incurred by the Indemnified
Party in connection with the defense thereof, unless the Third Party Claim
involves potential conflicts of interest or substantially different defenses for
the Indemnified Party and the Indemnifying Party.  If the Indemnifying Party
assumes such defense, the Indemnified Party shall have the right to participate
in the defense thereof and to employ counsel, at its own expense (except as
provided in the immediately preceding sentence), separate from the counsel
employed by the Indemnifying Party, it being understood that the Indemnifying
Party shall control such defense.  The Indemnifying Party shall be liable for
the fees and expenses of counsel employed by the Indemnified Party for any
period during which the Indemnifying Party has not assumed the defense thereof
and as otherwise contemplated by the two immediately preceding sentences.  If
the Indemnifying Party chooses to defend any Third Party Claim, all the parties
hereto shall cooperate in the defense or prosecution thereof.  Such cooperation
shall include the retention and (upon the Indemnifying Party’s request) the
provision to the Indemnifying Party of records and information that are
reasonably relevant to such Third Party Claim, and use reasonable efforts to
make employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder.  Whether or not
the Indemnifying Party shall have assumed the defense of a Third Party Claim,
the Indemnified Party shall not admit any liability with respect to, or settle,
compromise or discharge, such Third Party Claim without the Indemnifying Party’s
prior written consent (which consent shall not be unreasonably withheld).  The
Indemnifying Party may pay, settle or compromise a Third Party Claim without the
written consent of the Indemnified Party, so long as such settlement includes
(A) an unconditional release of the Indemnified Party from all liability in
respect of such Third Party Claim; (B) does not subject the Indemnified Party to
any injunctive relief or other equitable remedy; and (C) does not include a
statement or admission of fault, culpability or failure to act by or on behalf
of any Indemnified Party.

 

23

--------------------------------------------------------------------------------

 

(c)             If an Indemnified Party shall desire to assert any claim for
indemnification provided for under this Article V other than a claim in respect
of, arising out of or involving a Third Party Claim (a “Direct Claim”), such
Indemnified Party shall notify the Indemnifying Party warranty in writing within
30 days after having obtained knowledge of a misrepresentation or breach of such
Direct Claim; the notice shall mention the amount or the estimated amount of
damages sought thereunder to the extent then ascertainable (which estimate shall
not be conclusive of the final amount of such Direct Claim), any other remedy
sought thereunder, any relevant time constraints relating thereto and, to the
extent practicable, any other material details pertaining thereto (a “Direct
Claim Notice”); provided that the failure to give such notification shall not
affect the indemnification provided for hereunder except to the extent the
Indemnifying Party shall have been actually prejudiced as a result of such
failure.  The Indemnifying Party shall have a period of 20 days within which to
respond to any Direct Claim Notice or any Third Party Claim Notice.  If the
Indemnifying Party does not respond within such 20-day period, the Indemnifying
Party will be deemed to have accepted such claim.  If the Indemnifying Party
rejects all or any part of such claim, Seller and Purchaser shall attempt in
good faith for 20 days to resolve such claim.  If no such agreement can be
reached through good faith negotiation within 20 days, either Purchaser or
Seller may commence an action in accordance with Section 9.4.  The procedure
provided for in this Section 5.4(c) shall be in lieu of, and to the exclusion
of, Purchaser’s duty to immediately investigate and notify Seller in accordance
with Article 201 CO.

 

5.5.          Limitations on Indemnification.

 

(a)             Seller shall have no liability for any claim for indemnification
pursuant to Section 5.2(a) if the Damages associated with such claim are less
than CHF 50,000 (any such claim being referred to as a “De Minimis Claim”). 
Seller shall have no liability for indemnification pursuant to
Section 5.2(a) with respect to Damages for which indemnification is provided
thereunder unless the aggregate amount of such Damages (including all Damages
associated with De Minimis Claims) exceeds the amount equal to CHF 100,000 (the
“Deductible”), in which case Seller shall be liable for all such Damages
(including all Damages associated with De Minimis Claims) in excess of the
Deductible; provided that, (i) in no event shall the aggregate amount to be paid
by Seller for Damages with respect to all such claims for indemnification
pursuant to Section 5.2(a) exceed an amount equal to the Purchase Price and, in
addition to and without limiting the foregoing, (ii)(A) not including claims
relating to breaches of the representations and warranties contained in Sections
2.1(b), 2.1(d), 2.2(b), 2.2(f)(i), 2.2(m), and 2.2(w), the aggregate amount to
be paid by Seller for Damages with respect to all such claims for
indemnification pursuant to Section 5.2(a)(i) shall not exceed an aggregate
maximum amount equal to 25% of the Purchase Price; (B) the aggregate amount to
be paid by Seller for Damages with respect to claims relating to the breach of
the representations and warranties contained in Sections 2.2(f)(i), 2.2(m), and
2.2(w) shall not exceed an aggregate maximum amount equal to 50% of the Purchase
Price; and (C) the aggregate amount to be paid by Seller for Damages with
respect to claims relating to the breach of the representations and warranties
contained in Sections 2.1(b), 2.1(d), 2.2(b) and 5.2(a)(ii) (but only to the
extent of claims, if any, related to failure of compliance with the

 

24

--------------------------------------------------------------------------------

 

covenants contained in Section 3.1) shall not exceed an aggregate maximum amount
equal to the Purchase Price.

 

(b)             No Indemnified Party shall be entitled to recover from an
Indemnifying Party more than once in respect of the same Damages.

 

(c)             Notwithstanding anything to the contrary in this Article V, in
no event shall an Indemnifying Party have liability to any Indemnified Person
for any consequential or indirect damages, lost profits or similar items.

 

(d)             The above limitations on Indemnification shall not apply in case
of fraud or willful breach of its obligations by Seller.

 

5.6.          Indemnity Payments.

 

(a)             Subject to the escrow instructions for the escrow established
pursuant to Section 4.1(c)(i), claims against Seller may be settled upon
Seller’s instructions from the proceeds of that escrow.

 

(b)             The amount of any Damages payable under this Article V shall be
net of any amounts actually recovered by the Indemnified Party under any
insurance policies or from any other Person alleged to be responsible therefor
(net of any actual costs or expenses incurred in connection with securing or
obtaining such amounts recovered with respect to such Damages).  If the
Indemnified Party actually recovers any amounts under applicable insurance
policies, or from any other Person alleged to be responsible for any Damages,
subsequent to an indemnification payment by the Indemnifying Party, then such
Indemnified Party shall promptly reimburse the Indemnifying Party for the excess
(if any) of (i) the indemnification payment made by the Indemnifying Party with
respect to such Damages plus the amount received under applicable insurance
policies or from any other Person by the Indemnified Party with respect to such
Damages, net of any actual costs or expenses incurred in connection with
securing or obtaining such amounts recovered less (ii) the full amount of such
Damages.

 

(c)             The parties shall treat any indemnification payment made under
this Agreement as an adjustment to the Purchase Price, unless a different
treatment is required by applicable Law.

 

5.7.          Mitigation.  Each party shall take commercially reasonable actions
to mitigate losses, including by taking commercially reasonable actions to
pursue insurance claims and claims against third parties and shall reasonably
consult and cooperate with the other party with a view toward mitigating Damages
upon and after becoming aware of any event or condition which would reasonably
be expected to give rise to any Damages that are indemnifiable hereunder.

 

5.8.          Exclusive Remedy.  Except as set forth in Article VI, this
Article V shall be the exclusive remedy of the parties hereto following the
Closing for any losses arising out of any breach of the representations,
warranties, covenants or agreements of the parties contained in this Agreement,
except for fraud or willful breach by Seller of its obligations.

 

25

--------------------------------------------------------------------------------

 

ARTICLE VI

 

Tax Matters

 

6.1.          Seller’s Liability for Taxes.  Seller shall be solely liable, and
shall indemnify Purchaser, for any Taxes attributable to the Company and its
Subsidiaries with respect to any taxable period or portion thereof ending on or
before the Closing, including any Taxes attributable to the Company for such
portion of a taxable period beginning before and ending after the Closing,
provided, however, that Seller shall not indemnify Purchaser for any Taxes
properly accrued by the Company prior to Closing and reflected on the Closing
Balance Sheet.

 

6.2.          Purchaser Liability for Taxes.  Purchaser shall be solely liable
for any Swiss Taxes attributable to the Company with respect to any taxable
period or portion thereof beginning after the Closing, including any Taxes
attributable to the Company for such portion of a taxable period beginning
before and ending on the Closing Date for which accrual has been made by the
Company.

 

6.3.          Proration of Taxes.  To the extent necessary to determine the
liability for Taxes for a portion of a taxable year or period that begins before
and ends after the Closing, the determination of the Taxes for the portion of
the year or period ending on, and the portion of the year or period beginning
after, the Closing shall be determined by assuming that the taxable year or
period ended as of 12:01 A.M., Swiss time, on the Closing Date, except that
those annual property taxes and exemptions, allowances or deductions that are
calculated on an annual basis shall be prorated on a time basis.

 

6.4.          Tax Returns.  Seller shall prepare and timely file all Tax Returns
of the Company and its Subsidiaries required to be filed on or before the
Closing Date.  Purchaser shall prepare and timely file all Tax Returns of the
Company required to be filed after the Closing Date.  Purchaser shall prepare
all Tax Returns for all taxable periods beginning before and ending after the
Closing Date (“Straddle Period Returns”).  Seller may review and comment on all
Straddle Period Returns, such comments not to be unreasonably rejected by
Purchaser.

 

ARTICLE VII

 

Non-Competition and Use of Name

 

7.1.          Non-Competition. To assure to Purchaser full benefit of the
business and goodwill of the Company and its Subsidiaries, Seller hereby
undertakes as a separate and independent undertaking that it shall, either on
its own account or for any other Person, directly or indirectly, not:

 

(a)                                           Within the first 18 months
following the Closing Date (i) solicit, induce or attempt to induce any Group
Employee to leave the employ of any of the Company and its Subsidiaries or to
engage in any business that competes directly with the Company or its
Subsidiaries; or (ii) hire or assist in hiring any Group Employee to become an
employee of a Person that Seller controls (independently of the business in
which any such Group Employee is or will be

 

26

--------------------------------------------------------------------------------

 

active) or to work for any business that competes with any of the Company and
its Subsidiaries; or (iii) interfere with or entice away any Person who is or
has been a customer, supplier or business partner of any of the Company and its
Subsidiaries; or (iv) in any way interfere with the relationships between the
Company and its Subsidiaries and their employees, suppliers, customers, business
partners and/or consultants;

 

(b)                                          Within the first 18 months
following the Closing Date, carry out directly or indirectly any activity or be
engaged, concerned or interested or become a shareholder (except as shareholder
of a listed company with 5% or less interest in such listed company) of, a
Person or other business that is active in the same business field and/or
competes with the Company or its Subsidiaries.

 

7.2.          Use of Name.  Seller covenants and agrees that no rights of
whatever nature related to the use of the names “CES Creative Electronic Systems
SA” or “CES” will be retained by Seller. Seller undertakes as of the Closing
Date not to use, directly or indirectly such names individually or in
conjunction with other names in any manner whatsoever.

 

ARTICLE VIII

 

Termination

 

8.1.          Termination by Mutual Consent.  This Agreement may be terminated
and the Transaction may be abandoned at any time prior to the Closing by mutual
written consent of Purchaser and Seller.

 

8.2.          Termination by Either Purchaser or Seller.  This Agreement may be
terminated and the Transaction may be abandoned at any time prior to the Closing
by either Purchaser or Seller if (a) the Stockholder Approval shall not have
been obtained on or before January 31, 2012; (b) the Transaction shall not have
been consummated by March 31, 2012 (the “Termination Date”); or (c) any Order
permanently restraining, enjoining or otherwise prohibiting consummation of the
Transaction shall become final and non-appealable; provided, that the right to
terminate this Agreement pursuant to clause (b) above shall not be available to
any party that has breached in any material respect its obligations under this
Agreement in any manner that shall have proximately contributed to the
occurrence of the failure of the Transaction to be consummated by the
Termination Date.

 

8.3.          Termination by Seller.  This Agreement may be terminated and the
Transaction may be abandoned at any time prior to the Closing by Seller if there
has been a breach of any representation, warranty, covenant or agreement made by
Purchaser in this Agreement, or any such representation and warranty shall have
become untrue after the date of this Agreement, such that Section 4.3(a) or
4.3(b) would not be satisfied and such breach or condition is not curable or, if
curable, is not cured within 30 days after written notice thereof is given by
Seller to Purchaser.

 

8.4.          Termination by Purchaser.  This Agreement may be terminated and
the Transaction may be abandoned at any time prior to the Closing by Purchaser
if there has been a

 

27

--------------------------------------------------------------------------------

 

breach of any representation, warranty, covenant or agreement made by Seller in
this Agreement, or any such representation and warranty shall have become untrue
after the date of this Agreement, such that Section 4.2(a) or 4.2(h) would not
be satisfied and such breach or condition is not curable or, if curable, is not
cured within 30 days after written notice thereof is given by Purchaser to
Seller.

 

8.5.          Effect of Termination and Abandonment.  In the event of
termination of this Agreement and the abandonment of the Transaction pursuant to
this Article VIII, this Agreement (other than as set forth in Sections 3.5
and 3.10) shall become void and of no effect with no liability on the part of
any party hereto (or of any of its directors, managers, members, stockholders,
officers, employees, agents, legal and financial advisors or other
representatives); provided, however, except as otherwise provided herein, no
such termination shall relieve any party hereto of any liability or damages
resulting from any willful or intentional breach of this Agreement.

 

ARTICLE IX

 

Miscellaneous and General

 

9.1.          Amendment; Waivers; Etc.  No amendment, modification or discharge
of this Agreement, and no waiver hereunder, shall be valid or binding unless set
forth in writing and duly executed by (i) Purchaser where enforcement of the
amendment, modification, discharge or waiver is sought against Purchaser or
(ii) Seller where enforcement of the amendment, modification, discharge or
waiver is sought against Seller.  Any such waiver shall constitute a waiver only
with respect to the specific matter described in such writing and shall in no
way impair the rights of the party granting such waiver in any other respect or
at any other time.  The waiver by Purchaser or Seller of a breach of or a
default under any of the provisions of this Agreement or to exercise any right
or privilege hereunder, shall not be construed as a waiver of any other breach
or default of a similar nature, or as a waiver of any of such provisions, rights
or privileges hereunder. The rights and remedies herein provided are cumulative
and none is exclusive of any other, or of any rights or remedies that any party
may otherwise have at law or in equity.

 

9.2.          Counterparts.  This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.

 

9.3.          Governing Law.  THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND
IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN
ACCORDANCE WITH THE LAW OF SWITZERLAND WITHOUT REGARD TO THE CONFLICT OF LAW
PRINCIPLES THEREOF.

 

9.4.          Consent to Jurisdiction.  Each of the parties hereto hereby
irrevocably and unconditionally submits, for itself and its property, to the
jurisdiction of the ordinary courts of the Canton of Geneva (the “Chosen
Courts”), subject to appeal to the Swiss Federal Court, in any action or
proceeding arising out of or relating to this Agreement or the Transaction or
for

 

28

--------------------------------------------------------------------------------

 

recognition or enforcement of any judgment relating thereto, and each of the
parties hereby irrevocably and unconditionally (i) agrees not to commence any
such action or proceeding except in a Chosen Court; (ii) agrees that any claim
in respect of any such action or proceeding may be heard and determined in any
of the Chosen Courts; (iii) waives, to the fullest extent it may legally and
effectively do so, any objection which it may now or hereafter have to the
laying of venue of any such action or proceeding in any Chosen Court; and
(iv) waives, to the fullest extent permitted by Law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any Chosen
Court.  Each of the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Each party to this Agreement irrevocably consents to service of process in the
manner provided for notices in Section 9.5.  Nothing in this Agreement shall
affect the right of any party to this Agreement to serve process in any other
manner permitted by law.

 

9.5.          Notices.  Any notice, request, instruction or other document to be
given hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, or by
facsimile or email, provided that the facsimile or email is promptly confirmed
by telephone, return facsimile or email confirmation thereof:

 

if to Purchaser:

 

CES Holding SA

c/o Vinci Capital Switzerland SA

PSE

1015 Lausanne, Switzerland

Attention: Xavier Paternot

fax:  +41 21 693 92 30

email: xp@vincicapital.ch

 

with a copy to:

 

Clarence Peter

Python & Peter

Rue François-Bellot 6, 2nd floor

1206 Geneva, Switzerland

fax(es): +41 22 702 15 55, +41 22 702 14 50

email: cpeter@pplex.ch

 

29

--------------------------------------------------------------------------------

 

if to Seller:

 

MRV Communications, Inc.

20415 Nordhoff Street,

Chatsworth, California 91311

Attention:  Jennifer Painter, VP and General Counsel

fax:  +1 (818) 407-5867

email:  jpainter@mrv.com

 

with a copy to:

 

Jean Jacques Ah Choon

Schellenberg Wittmer

15 bis, rue des Alpes

P.O. Box 2088

1211 Geneva, Switzerland

fax:  +41 22 707 8001

email: jean-jaques.ahchoon@swlegal.ch

 

or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.

 

9.6.          Entire Agreement.  This Agreement (including any exhibits hereto),
the Seller Disclosure Schedule and the Purchaser Disclosure Schedule constitute
the entire agreement, and supersede all other prior agreements, understandings,
representations and warranties both written and oral, among the parties, with
respect to the subject matter hereof.

 

9.7.          No Third Party Beneficiaries.  This Agreement is not intended to
confer upon any Person other than the parties hereto any rights or remedies
hereunder.

 

9.8.          Severability.  The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.  If any
provision of this Agreement, or the application thereof to any Person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision; and (b) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.

 

9.9.          Interpretation.  This Agreement shall be construed without regard
to any presumption or rule requiring construction or interpretation against the
party drafting or causing any instrument to be drafted.  The words “hereof”,
“herein” and “hereunder” and words of like import used in this Agreement shall
refer to this Agreement as a whole and not to any particular

 

30

--------------------------------------------------------------------------------

 

provision of this Agreement.  The captions herein are included for convenience
of reference only and shall be ignored in the construction or interpretation
hereof.  References to Articles, Sections, Exhibits and Schedules are to
Articles, Sections, Exhibits and Schedules of this Agreement unless otherwise
specified.  All Exhibits and Schedules annexed hereto or referred to herein are
hereby incorporated in and made a part of this Agreement as if set forth in full
herein.  Any capitalized terms used in any Exhibit or Schedule but not otherwise
defined therein, shall have the meaning as defined in this Agreement.  Any
singular term in this Agreement shall be deemed to include the plural, and any
plural term the singular.  Whenever the words “include”, “includes” or
“including” are used in this Agreement, they shall be deemed to be followed by
the words “without limitation”, whether or not they are in fact followed by
those words or words of like import.  “Writing”, “written” and comparable terms
refer to printing, typing and other means of reproducing words (including
electronic media) in a visible form.  References to any agreement or contract
are to that agreement or contract as amended, modified or supplemented from time
to time in accordance with the terms hereof and thereof.  References to any
Person include the successors and permitted assigns of that Person.  References
from or through any date mean, unless otherwise specified, from and including or
through and including, respectively.  Any reference in this Agreement to a
statute shall be to such statute, as amended from time to time, and to the
rules and regulations promulgated thereunder.

 

9.10.        Successors and Assigns.  The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.  Neither Seller nor Purchaser may assign, delegate or
otherwise transfer any of its rights or obligations under this Agreement without
the prior written consent of the other party; any attempted assignment that does
not comply with this Section 9.10 shall be void.

 

9.11.        Further Assurances.  From time to time, as and when requested by
any party hereto and at such party’s expense, any other party shall execute and
deliver, or cause to be executed and delivered, all such documents and
instruments and shall use commercially reasonable efforts to take, or cause to
be taken, all such further or other actions as the requesting party may
reasonably deem necessary or desirable to evidence and effectuate the
Transaction.

 

[THIS SPACE INTENTIONALLY BLANK]

 

31

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
duly authorized officers of the parties hereto as of the date first written
above.

 

 

 

MRV COMMUNICATIONS, INC.

 

 

 

 

 

By

/s/ Chris King

 

 

Name:

Chris King

 

 

Title:

Chief Financial Officer

 

 

 

 

 

CES HOLDING SA

 

 

 

 

 

By

/s/ Raffaele Petrone

 

 

Name:

Raffaele Petrone

 

 

 

 

 

By

/s/ Xavier Paternot

 

 

Name:

Xavier Paternot

 

32

--------------------------------------------------------------------------------

 

Annex A

 

DEFINITIONS

 

“Advance Payment Guarantee” shall mean that Advance Payment Guarantee,
No. 40GA-D00658-4CHH, dated 16 August 2011, face amount EUR 989’478, issued by
UBS for which the Company is the account party.

 

“Affiliate” shall mean with respect to any Person, a Person that directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with such Person.

 

“Agreement” shall have the meaning set forth in the Preamble of this Agreement.

 

“Annual Financial Statements” shall have the meaning set forth in
Section 2.2(g)(i) of this Agreement.

 

“Benefit Plans” shall mean all material benefit and compensation plans,
contracts, policies, arrangements or agreements including, but not limited to
employment, consulting, retention, welfare, deferred compensation, retirement or
post-retirement, severance, stock option, stock purchase, stock appreciation,
stock based, incentive, bonus plans or other employee benefits sponsored or
maintained by the Company and its Subsidiaries and in which only Company and/or
Subsidiaries Employees (including their dependents, spouses or beneficiaries)
participate.

 

“Business Day” shall mean any day other than a Saturday, a Sunday, federal
holiday or a day on which banks in Los Angeles, California or Geneva,
Switzerland are authorized or obligated by Law to close.

 

“CHF” shall mean Swiss francs, the lawful currency of Switzerland.

 

“Chosen Courts” shall have the meaning set forth in Section 9.4 of this
Agreement.

 

“Closing” shall have the meaning set forth in Section 1.4(a) of this Agreement.

 

“Closing Balance Sheet” shall mean the balance sheet of the Company as of the
last day of the month immediately preceding the month in which the Closing
occurs, giving pro forma effect to the payment of the MRV Note, the payment of
all cash dividends by the Company to Seller after the date of this Agreement and
at or prior to Closing (for the avoidance of doubt, including those occurring
after the date of the closing balance sheet but prior to the Closing), together
with all withholding taxes and other costs, if any, associated with such
payments.

 

“Closing Date” shall have the meaning set forth in Section 1.4(a) of this
Agreement.

 

“Company” shall have the meaning set forth in the Recitals to this Agreement.

 

“Company Contracts” shall have the meaning set forth in Section 2.2(f)(ii).

 

“Company Employees” shall mean all current or former employees or directors of
the Company.

 

“Damages” shall have the meaning set forth in Section 5.1(a) of this Agreement.

 

“De Minimis Claim” shall have the meaning set forth in Section 5.5(a) of this
Agreement.

 

“Deductible” shall have the meaning set forth in Section 5.5(a) of this
Agreement.

 

A-1

--------------------------------------------------------------------------------

 

“Direct Claim” shall have the meaning set forth in Section 5.4(c) of this
Agreement.

 

“Direct Claim Notice” shall have the meaning set forth in Section 5.4(c) of this
Agreement.

 

“Environmental Law” shall mean any applicable Law relating to (i) the protection
of the environment, (including air, surface water, groundwater soil and natural
resources) or (ii) the use, storage, handling, release or disposal of any
hazardous substance, material or waste, in each case as presently in effect.

 

“Escrow Holder” shall have the meaning set forth in Section 4.1(c) of this
Agreement.

 

“Financial Statements” shall have the meaning set forth in Section 2.2(g)(ii) of
this Agreement.

 

“Governmental Entity” shall have the meaning set forth in Section 2.2(f)(i) of
this Agreement.

 

“Group Employee” shall mean any Company Employee or Subsidiary Employee.

 

“Indebtedness” shall mean the indebtedness for borrowed money of the Company.

 

“Indemnified Party” shall have the meaning set forth in Section 5.4 of this
Agreement.

 

“Indemnifying Party” shall have the meaning set forth in Section 5.4 of this
Agreement.

 

“Information” shall have the meaning set forth in Section 3.10 of this
Agreement.

 

“Intellectual Property” shall mean any or all of the following and all statutory
and/or common law rights throughout the world in, arising out of, or associated
therewith: (i) all patents; (ii) all patents pending; (iii) all inventions
(whether patentable or not), invention disclosures and improvements, all trade
secrets, proprietary information, know how and technology; (iv) all works of
authorship, copyrights, copyright registrations and applications, including
source code and object code; (v) all industrial designs and any registrations
and applications therefore; (vi) all trademarks; (vii) all databases and data
collections (including knowledge databases, customer lists and customer
databases); (viii) all rights in software; (ix) rights to website addresses and
domain names; (x) Copyrights, (xi) Trademarks, (xii) any similar, corresponding
or equivalent rights to any of the foregoing; and (xiii) all goodwill associated
with any of the foregoing.

 

“Intercompany Agreements” shall mean contracts, agreements, notes, leases,
licenses and other instruments between the Company or any of its Subsidiaries,
on the one hand, and Seller or any Affiliate of Seller (other than the Company
or any of its Subsidiaries), on the other hand.

 

--------------------------------------------------------------------------------

 

“Interim Financial Statements” shall have the meaning set forth in
Section 2.2(g)(ii) of this Agreement.

 

“Knowledge of Seller” or “Seller’s Knowledge” shall mean the actual knowledge,
assuming reasonable investigation, of Messrs. Hervé Garchette, Frédéric Gay,
Dilip Singh and Chris King and Ms. Jennifer Painter.

 

“Laws” shall have the meaning set forth in Section 2.2(m) of this Agreement.

 

“Lien” shall mean, with respect to any property or asset, any mortgage, lien
(including statutory liens), claim, pledge, charge, security interest or
encumbrance of any kind in respect of such property or asset.

 

“Material Adverse Effect” shall mean a material adverse effect on the financial
condition, properties, business or results of operations of the Company and its
Subsidiaries, taken as a whole; provided, however, that none of the following,
and no effect arising out of or resulting from any of the following, shall
constitute or be considered when determining if a “Material Adverse Effect” has
occurred: (i) any change in Law, Swiss GAAP or U.S. GAAP applicable to the
Company or any of its Subsidiaries or in the interpretations thereof; (ii) any
change, circumstance or condition affecting the military or aerospace industries
generally; (iii) the public announcement of the Transaction; (iv) any change in
economic, business, regulatory or political conditions generally or in the U.S.,
Swiss or global financial markets, including changes in interest or exchange
rates and changes in currency and credit markets; (v) any action taken, or
failure to take action, by the Company as required by this Agreement; (vi) acts
of war, armed hostilities, sabotage or terrorism, or any escalation or worsening
of any such acts of war, armed hostilities, sabotage or terrorism threatened or
underway as of, or occurring after, the date of this Agreement; or (vii) any
failure by the Company to meet any internal or external projections, guidance,
estimates or forecasts for or during any period ending on or after the date of
this Agreement.

 

“Material Contracts” shall have the meaning set forth in Section 2.2(t) of this
Agreement.

 

“MRV Loan” shall mean intercompany loan owing by Seller to the Company,
identified as such on the Company’s balance sheet and the Interim Financial
Statements.

 

“MRV Stock Option Plans” shall mean Seller’s Non-Director and Non-Executive
Officer Consolidated Long-Term Stock Incentive Plan and the MRV
Communications, Inc. 2007 Omnibus Incentive Plan.

 

“Order” shall have the meaning set forth in Section 4.1(b) of this Agreement.

 

“Organizational Documents” shall mean, with respect to a legal entity, such
entity’s articles or certificate of incorporation and bylaws, or analogous
documents, in each case as amended through the date hereof.

 

“Owned Intellectual Property” shall have the meaning set forth in
Section 2.2(s)(ii) of this Agreement.

 

A-2

--------------------------------------------------------------------------------

 

“Person” shall mean any individual, corporation (including not-for-profit),
general or limited partnership, limited liability company, joint venture,
estate, trust, association, organization, Governmental Entity or other entity of
any kind or nature.

 

“Pre-Closing Distributions” shall mean the distributions to be made by the
Company to the Seller before Closing as detailed in the funds flow chart
attached as Annex C.

 

“Purchase Price” shall have the meaning set forth in Section 1.2 of this
Agreement.

 

“Purchaser” shall have the meaning set forth in the Preamble of this Agreement.

 

“Purchaser Contracts” shall have the meaning set forth in Section 2.3(c)(ii) of
this Agreement.

 

“Purchaser Disclosure Schedule” shall have the meaning set forth in Section 2.3
of this Agreement.

 

“Purchaser Indemnitees” shall have the meaning set forth in Section 5.2(a) of
this Agreement.

 

“Representatives” shall mean, with respect to any Person, such Person’s
Affiliates, directors, officers, employees, agents, advisors, and
Representatives of such Person’s agents and advisors.

 

“Reserve Amount” shall mean the estimated amount of CHF 574,775, subject to
adjustment to give effect to the USD/CHF currency exchange rate as of the
Closing Date.

 

“Restricted Cash” shall mean the cash on the Closing Balance Sheet identified as
“Restricted Cash” in the amount corresponding to the Advance Payment Guarantee
and subject to the escrow agreement attached as 4.1(d).

 

“Retention Agreement” shall have the meaning given in Section 2.2(j)(vii).

 

“Scolari Acquisition” shall have the meaning set forth in Section 2.2(z).

 

“Seller” shall have the meaning set forth in the Preamble of this Agreement.

 

“Seller Contracts” shall have the meaning set forth in Section 2.1(c) of this
Agreement.

 

“Seller Disclosure Schedule” shall have the meaning set forth in Section 2.1 of
this Agreement.

 

“Seller Indemnitees” shall have the meaning set forth in Section 5.1(a) of this
Agreement.

 

A-3

--------------------------------------------------------------------------------

 

“Stockholder Approval” shall have the meaning set forth in Section 4.3(d) of
this Agreement.

 

“Shares” shall have the meaning set forth in Recitals to this Agreement.

 

“Straddle Period Returns” shall have the meaning set forth in Section 6.4 of
this Agreement.

 

“Subsidiary” shall mean, with respect to any Person, any entity, whether
incorporated or unincorporated, of which at least a majority of the securities
or ownership interests having by their terms ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
is directly or indirectly owned or controlled by such Person.

 

“Subsidiary Contracts” shall mean all contracts to which any of the Subsidiaries
is a party.

 

“Subsidiary Employee” shall mean all current or former employees or directors of
any Subsidiary.

 

“Swiss GAAP” shall mean generally accepted accounting principles in Switzerland
as in effect at the time any applicable financial statements were prepared.

 

“Tax” (including, with correlative meaning, the terms “Taxes,” and “Taxable”)
shall mean all federal, state or local income, profits, franchise, gross
receipts, environmental, customs duty, capital stock, severances, stamp,
payroll, sales, employment, unemployment, disability, use, property,
withholding, excise, production, value added, occupancy taxes, duties or
assessment and any other taxes, duties or assessments of any nature whatsoever,
together with all interest, penalties and additions imposed with respect to such
amounts and any interest in respect of such penalties and additions.

 

“Tax Return” shall mean all returns and reports (including elections,
declarations, disclosures, schedules, estimates and information returns)
required to be supplied to a Tax authority relating to Taxes.

 

“Termination Date” shall have the meaning set forth in Section 8.2 of this
Agreement.

 

“Third Party Claim” shall have the meaning set forth in Section 5.4(a) of this
Agreement.

 

“Third Party Claim Notice” shall have the meaning set forth in Section 5.4(a) of
this Agreement.

 

“Transaction” shall have the meaning set forth in Section 1.1 of this Agreement.

 

“U.S. GAAP” shall mean generally accepted accounting principles in the United
States as in effect at the time any applicable financial statements were
prepared.

 

* * * *

 

A-4

--------------------------------------------------------------------------------