EXHIBIT 10.1

 

MEMORANDUM OF UNDERSTANDING

 

This Memorandum of Understanding (“MOU”) contains the principal terms of a settlement (“Settlement”) between Plaintiffs Warren Rubin IRA, Donald Gautreaux and Jing Ke (“Plaintiffs”), Defendants Noam Lotan, Shlomo Margalit, Shay Gonen, Guy Avidan, Guenter Jaensch, Igal Shidlovsky, Daniel Tsui, Harold W. Furchtgott-Roth and Baruch Fischer (the “Individual Defendants”), and nominal defendant MRV Communications, Inc. (“MRV,” or the “Company”) of the claims in In re MRV Communications, Inc. Derivative Litig., Master File No.: 1:08-cv-03800-GAF(MANx) (C.D. Cal.) (“Federal Derivative Action”) and Ke v. Margalit, et al., No. BC393856 (Cal. Supr. Los Angeles) (“State Derivative Action,” and together with the Federal Derivative Action, “Derivative Actions”).

 

1.                                      As a result of the prosecution, pendency and settlement of the Derivative Actions, $2.5 million in cash from the directors’ and officers’ liability insurers shall be paid to MRV. The $2.5 million cash payment shall be made to MRV within five (5) business days after entry of the Final Judgment in the Federal Derivative Action.  Within five (5) business days after receipt of the $2.5 million payment from the directors’ and officers’ liability insurers, MRV shall provide counsel for Plaintiffs with proof of such payment.  If the $2.5 million cash payment is not paid as set forth in the Stipulation of Settlement, any party may cancel the Stipulation of Settlement.

 

2.                                      Within 120 days following the later of the issuance of an order approving the Settlement by the United States District Court for the Central District of California or the end of the period available for appeal to the United States Court of Appeals for the Ninth Circuit, the Board of Directors of MRV shall adopt resolutions and amend committee charters for the implementation of the Corporate Governance Reforms set forth in Exhibit A that have not already been implemented during the course of the Derivative Actions.

 

3.                                      Within 10 days following the later of the issuance of an order approving the Settlement by the United States District Court for the Central District of California or the end of the period available for appeal to the United States Court of Appeals for the Ninth Circuit, the Company shall cancel all unexercised, outstanding options that are currently held by the Individual Defendants and at issue in this litigation, including those options the Federal Derivative Plaintiffs identified as allegedly backdated in their interrogatory responses.

 

4.                                      The Individual Defendants shall make no financial contribution in connection with this Settlement.

 

5.                                      MRV and the Special Litigation Committee (“SLC”) acknowledge that the filing, prosecution and settlement of the claims asserted in the Derivative Actions and the litigation efforts of Plaintiffs and their counsel were a material and substantial cause of the monetary recovery and Corporate Governance Reforms agreed to in No. 2 above.  MRV and the SLC agree that the Settlement provides substantial benefits to MRV and its shareholders.

 

6.                                      The parties shall in good faith agree upon and execute the appropriate Stipulation of Settlement embodying the parties’ agreement to settle the Derivative Actions upon the terms outlined in this MOU, such other terms agreed to in writing, and documentation as may be required to obtain court approval of the Settlement and dismissal of the Derivative Actions with prejudice on the terms set forth in this MOU.

 











 

7.                                      The final terms of the settlement contemplated herein shall be set forth in the definitive Stipulation of Settlement, including:

 

(a)                                 For dismissal with prejudice of all Released Claims.  “Released Claims” shall mean and include any and all claims for relief (including Unknown Claims), rights, demands, causes of action, liabilities, debts, obligations, matters, issues and suits of any kind whatsoever, whether known or unknown, contingent or absolute, matured or unmatured, discoverable or undiscoverable, whether or not concealed or hidden, that have been asserted, might have been or could have been asserted, by the Releasing Parties (“Releasing Parties” shall mean and include (i) Plaintiffs; (ii) any of the Individual Defendants; (iii) MRV; and (iv) any MRV shareholder derivatively on behalf of MRV) against any Released Persons (“Released Persons” shall mean and include (i) Plaintiffs or their beneficiaries; (ii) any of the Individual Defendants or their beneficiaries; (iii) MRV; and (iv) any MRV shareholder, derivatively on behalf of MRV), that are based upon or related to (i) the facts, transactions, events, occurrences, acts, disclosures, statements, omissions or failures to act which were alleged or could have been alleged in the Derivative Actions; and/or (ii) the settlement of the Actions, including the payments provided for in this MOU, and the reasonable attorneys’ fees, costs, and expenses incurred in defense thereof.   The Released Persons shall covenant not to sue any Released Person with respect to all such Released Claims, and shall be permanently barred and enjoined from instituting, commencing, or prosecuting the Released Claims against the Released Persons except to enforce the releases and other terms and conditions contained in the Stipulation and/or the Judgment entered pursuant thereto.

 

(b)                                 For the release by the Individual Defendants and MRV and its counsel of Plaintiffs and their counsel, by Plaintiffs and MRV and its counsel of the Individual Defendants and their counsel, and by the Individual Defendants and Plaintiffs and their counsel of MRV and its counsel, from all claims arising out of, relating to, or in connection with the institution, prosecution, settlement or resolution of the Derivative Actions or the Released Claims.  Notwithstanding the foregoing, the releases shall not in any way relieve MRV of its obligations to the Individual Defendants, including payment of reasonable attorneys’ fees incurred in defense of the Derivative Actions.

 

(c)                                  That neither the Settlement nor any provision in the Stipulation of Settlement shall be construed or deemed an admission by any of the Individual Defendants of liability, which the Individual Defendants expressly deny, or of any issue or fact, with respect to any of the claims raised or that might have been raised in the Derivative Actions.

 

(d)                                 The releases shall not in any way impair or restrict the rights of the parties to enforce the terms of the Settlement.

 

(e)                                  With respect to Released Claims, the Stipulation of Settlement shall contain a waiver of the provisions of California Civil Code § 1542 and any similar provision of law.

 

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8.                                      Notice of the proposed Settlement shall be made by (i) the filing of a Form 8-K with the SEC, attaching a copy of the Stipulation of Settlement; (ii) posting of the Stipulation of Settlement on MRV’s website; and (iii) a one-time publication of the Notice of Settlement in the nationally distributed business journal, Investors’ Business Daily.  MRV or its insurers shall be solely responsible for the cost of notice as set forth herein and/or any other notice as may be required by the Federal Court.

 

9.                                      Within thirty (30) days after the Settlement becomes final as defined in the Stipulation of Settlement filed in the United States District Court for the Central District of California, plaintiff in the State Derivative Action shall voluntarily dismiss that action with prejudice.

 

10.                               After negotiating the principal terms of the Settlement, counsel for Plaintiffs and MRV, acting by and through the SLC, separately negotiated at arm’s length the amount of attorneys’ fees to be paid to Plaintiffs’ counsel.  The negotiated amount of fees that the parties have agreed upon is $500,000 in cash and 250,000 freely tradable warrants for MRV’s common stock, with a strike price equal to the closing price of MRV’s common stock on the date on which an order of the federal court finally approving the settlement becomes final.  The warrants shall be of a five (5) year duration, exercisable only by means of a cashless exercise, and shall be registered or exempt from registration provided by section 3(a)(10) of the Securities Act of 1933.  Shares issued under the warrants shall be fully-paid, freely tradable, and non-assessable.  Furthermore, the warrants shall be pursuant to a form of agreement to be entered on the Effective Date of the Stipulation of Settlement, which shall provide for the above terms as well as proportionate adjustment of the warrants in the event of a stock split or other reorganization.  MRV shall take all necessary and appropriate actions to perfect the exemption of the warrants from registration under the Federal Securities laws by reason of section 3(a)(10) of the Securities Act of 1933.  The delivery date of the warrants shall be within three business days after the date on which an order of the federal court finally approving the settlement becomes final and the period to appeal the order of the federal court has expired (assuming no appeal is taken), provided that plaintiffs’ counsel delivers instructions to MRV for receipt of the warrants.  Terms in this paragraph with respect to the pricing, delivery, exercise, and perfection of the warrants, as well as the tradable nature of shares issued under the warrants (e.g., whether or not it is necessary to register shares issued under the warrants) are without prejudice to Plaintiffs and MRV agreeing to modify those terms, by no later than the date of the Stipulation of Settlement.

 

11.                               The SLC, in its business judgment, has approved the Settlement and each of its terms, as being in the best interest of MRV and its shareholders, and its members will submit declarations attesting to the benefits of the settlement’s terms and in support of preliminary and final approval of the settlement.

 

12.                               Except as otherwise provided herein, this MOU shall be binding upon and shall inure to the benefit of the parties and their respective agents, successors, executors, heirs and assigns.  The Stipulation of Settlement and agreed form of Final Judgment shall not have terms inconsistent with the terms of this MOU unless the parties agree in writing to those terms.

 

13.                               This MOU will be executed by counsel for the parties, each of who represents and warrants that they have the authority from their client(s) to enter into this MOU and bind their clients thereto. This MOU may be executed in counterparts by any of the signatories hereto, including by telecopier and/or e-signature, and as so executed shall constitute one agreement.

 

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14.                               This MOU may be modified or amended only by a writing signed by all of the signatories hereto.

 

15.                               The parties shall use their best efforts to execute the Stipulation of Settlement and related settlement documents, and file with the United States District Court for the Central District of California all papers in support of preliminary approval of the settlement, in accordance with the terms and deadlines set forth in the Federal Court’s January 3, 2013 Order (Dkt. No. 277, Federal Derivative Action).

 

16.                               The parties agree to take all reasonable and necessary steps to expeditiously implement the terms of this MOU and to complete the Settlement.  The parties intend that the settlement reflected in the definitive Stipulation of Settlement be a complete and final resolution of all disputes between them with respect to the Actions and Released Claims.

 

17.                               This MOU shall be governed by the laws of the State of California, without regard to California’s conflict of law rules.

 

	
DATED:   January 16, 2013
    	
ROBBINS   GELLER RUDMAN & DOWD LLP
    
	
 
    	
TRAVIS   E. DOWNS III
    
	
 
    	
JAMES   I. JACONETTE
    
	
 
    	
CHRISTOPHER   D. STEWART
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/ James I. Jaconette
    
	
 
    	
JAMES I. JACONETTE
    
	
 
    	
 
    
	
 
    	
655   West Broadway, Suite 1900
    
	
 
    	
San   Diego, CA 92101-3301
    
	
 
    	
Telephone:   619/231-1058
    
	
 
    	
619/231-7423   (fax)
    
	
 
    	
 
    


 

	
DATED:   January 16, 2013
    	
THE   WEISER LAW FIRM, P.C.
    
	
 
    	
ROBERT   B. WEISER
    
	
 
    	
BRETT   D. STECKER
    
	
 
    	
JEFFREY   J. CIARLANTO
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/ Robert B. Weiser
    
	
 
    	
ROBERT B. WEISER
    
	
 
    	
 
    
	
 
    	
22   Cassatt Avenue
    
	
 
    	
Berwyn,   PA 19312
    
	
 
    	
Telephone:   610/225-2677
    
	
 
    	
610/408-8062   (fax)
    
	
 
    	
 
    
	
 
    	
Co-Lead   Counsel for Federal Plaintiffs
    


 

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DATED:   January 16, 2013
    	
KESSLER   TOPAZ MELTZER & CHECK, LLP
    
	
 
    	
ERIC   L. ZAGAR (State Bar No. 250519)
    
	
 
    	
ROBIN   WINCHESTER
    
	
 
    	
JAMES   H. MILLER
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/ Robin Winchester
    
	
 
    	
ROBIN WINCHESTER
    
	
 
    	
 
    
	
 
    	
280   King of Prussia Road
    
	
 
    	
Radnor,   PA 19087
    
	
 
    	
Telephone:   610/667-7706
    
	
 
    	
267/948-2512   (fax)
    
	
 
    	
 
    
	
 
    	
Counsel   for State Plaintiff in Ke v. Margalit, et al.
    


 

	
DATED:   January 15, 2013
    	
LATHAM &   WATKINS
    
	
 
    	
DAVID   J. SCHINDLER (Bar No. 130490)
    
	
 
    	
david.schindler@lw.com
    
	
 
    	
CHARLES   W. COX (Bar No. 162854)
    
	
 
    	
chuck.cox@lw.com
    
	
 
    	
JAMES   H. MOON (Bar No. 268215)
    
	
 
    	
james.moon@lw.com
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/ Charles W. Cox
    
	
 
    	
CHARLES W. COX
    
	
 
    	
 
    
	
 
    	
355   South Grand Avenue
    
	
 
    	
Los   Angeles, CA 90071-1560
    
	
 
    	
Telephone:   213/485-1234
    
	
 
    	
213/891-8763   (fax)
    
	
 
    	
 
    
	
 
    	
Counsel   for Defendant Shlomo Margalit
    


 

	
DATED:   January 15, 2013
    	
BIRD   MARELLA BOXER WOLPERT
    
	
 
    	
NESSIM DROOKS and LINCENBERG
    
	
 
    	
GARY   S. LINCENBERG (Bar No. 123058)
    
	
 
    	
gsl@birdmarella.com
    
	
 
    	
PAUL   S. CHAN (Bar No. 183406)
    
	
 
    	
psc@birdmarella.com
    
	
 
    	
SHARON   BEN-SHAHAR (Bar No. 212862
    
	
 
    	
sbs@birdmarella.com
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/ Sharon Ben-Shahar
    
	
 
    	
SHARON BEN-SHAHAR
    
	
 
    	
 
    
	
 
    	
1875   Century Park East, 23rd Floor
    
	
 
    	
Los   Angeles, CA 90067-2561
    
	
 
    	
Telephone:   310/201-2100
    
	
 
    	
310/201-2110   (fax)
    
	
 
    	
 
    
	
 
    	
Counsel   for Defendant Noam Lotan
    


 

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DATED:   January 15, 2013
    	
ORRICK   HERRINGTON & SUTCLIFFE LLP
    
	
 
    	
ERIC   A. GRESSLER (Bar No. 186674)
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/ Eric A. Gressler
    
	
 
    	
ERIC A. GRESSLER
    
	
 
    	
 
    
	
 
    	
777   South Figueroa Street, Suite 3200
    
	
 
    	
Los   Angeles, CA 90017-5855
    
	
 
    	
Telephone:   213/629-2020
    
	
 
    	
213/612-2499   (fax)
    
	
 
    	
 
    
	
 
    	
Counsel   for Defendant Guy Avidan
    


 

	
DATED:   January 15, 2013
    	
O’MELVENY &   MYERS LLP
    
	
 
    	
SETH   ARONSON (Bar No. 100153)
    
	
 
    	
saronson@omm.com
    
	
 
    	
J.   JORGE deNEVE (Bar No. 198855)
    
	
 
    	
MIGUEL   BAHAMON (Bar No. 261737)
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/ Seth Aronson
    
	
 
    	
SETH ARONSON
    
	
 
    	
 
    
	
 
    	
400   South Hope Street, 15th Floor
    
	
 
    	
Los   Angeles, CA 90071-2899
    
	
 
    	
Telephone:   213/430-6000
    
	
 
    	
213/430-6407   (fax)
    
	
 
    	
 
    
	
 
    	
Counsel   for Defendant Shay Gonen
    


 

	
DATED:   January 15, 2013
    	
SCHEPER   KIM & HARRIS LLP
    
	
 
    	
DAVID   C. SCHEPER (Bar No. 120174)
    
	
 
    	
dscheper@scheperkim.com
    
	
 
    	
GREGORY   ANDREW ELLIS (Bar No. 204478)
    
	
 
    	
gellis@scheperkim.com
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/ Gregory Andrew Ellis
    
	
 
    	
GREGORY ANDREW ELLIS
    
	
 
    	
 
    
	
 
    	
601   West 5th Street, 12th Floor
    
	
 
    	
Los   Angeles, CA 90071-2025
    
	
 
    	
Telephone:   213/613-4655
    
	
 
    	
213/613-4656   (fax)
    
	
 
    	
 
    
	
 
    	
Counsel   for Defendants Igal Shidlovsky, Guenter Jaensch, Daniel Tsui and Baruch   Fischer
    


 

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DATED:   January 15, 2013
    	
PROSKAUER   ROSE LLP
    
	
 
    	
RONALD   E. WOOD (Bar No. 133854)
    
	
 
    	
rwood@proskauer.com
    
	
 
    	
JENNIFER   LYNN ROCHE (Bar No. 254538)
    
	
 
    	
jroche@proskauer.com
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/ Ronald E. Wood
    
	
 
    	
RONALD E. WOOD
    
	
 
    	
 
    
	
 
    	
2049   Century Park East, 32nd Floor
    
	
 
    	
Los   Angeles, CA 90067
    
	
 
    	
Telephone:   310/284-5635
    
	
 
    	
310/557-2193   (fax)
    
	
 
    	
 
    
	
 
    	
Counsel   for Defendant Harold W. Furchtgott-Roth
    


 

	
DATED:   January 15, 2013
    	
SULLIVAN &   CROMWELL LLP
    
	
 
    	
ROBERT   A. SACKS
    
	
 
    	
sacksr@sullcrom.com
    
	
 
    	
ADAM   S. PARIS
    
	
 
    	
parisa@sullcrom.com
    
	
 
    	
HEIDI   B. BRADLEY
    
	
 
    	
bradleyh@sullcrom.com
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/ Adam S. Paris
    
	
 
    	
ADAM S. PARIS
    
	
 
    	
 
    
	
 
    	
1888   Century Park East, Suite 2100
    
	
 
    	
Los   Angeles, CA 90067
    
	
 
    	
Telephone:   310/712-6600
    
	
 
    	
310/712-8800   (fax)
    
	
 
    	
 
    
	
 
    	
Attorneys   for Nominal Defendant MRV Communications, Inc.
    


 

Approved:

 

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DATED:   January 15, 2013
    	
WILMER   CUTLER PICKERING HALE AND DORR LLP
    
	
 
    	
JEFFREY   B. RUDMAN
    
	
 
    	
jeffrey.rudman@wilmerhale.com
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/ Jeffrey Rudman
    
	
 
    	
JEFFREY B. RUDMAN
    
	
 
    	
 
    
	
 
    	
60   State Street
    
	
 
    	
Boston,   Massachusetts 02109
    
	
 
    	
Telephone:   617/526-6000
    
	
 
    	
617/526-5000   (fax)
    
	
 
    	
 
    
	
 
    	
Attorneys   for Special Litigation Committee of MRV
    


 

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