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                                                                    EXHIBIT 10.3


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                            SHARE PURCHASE AGREEMENT

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                                 BY AND BETWEEN


                            DAVID MEDVED AND OTHERS


                                      AND


                            MRV COMMUNICATIONS INC.



                             RELATING TO THE SHARES



                                       OF


                                   JOLT LTD.




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                             DATED 14TH APRIL 2000

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                                TABLE OF CONTENTS

ARTICLE

<TABLE>
<S>   <C>                                                                    <C>
I.    SALE AND PURCHASE OF THE SHARES

      1.1   Sale and Purchase of the Shares....................................

      1.2   Closing............................................................

      1.3   Purchase Price.....................................................

      1.4   Certain Definitions................................................


II.   CONDITION PRECEDENT TO OBLIGATION OF BUYERS TERMINATION

      2.1

      2.2   Deliveries and Proceedings at Closing .............................

      2.3   Termination Prior to Closing ......................................

      2.4   Fulfillment of Conditions and Agreements Prior to Closing..........


III.  REPRESENTATIONS AND WARRANTIES OF THE SELLER

      3.1   Corporate Organization.............................................

      3.2   Capitalization: Title to Shares....................................

      3.3   Subsidiaries.......................................................

      3.4   Authorization and Validity of Agreement............................

      3.5   No Conflict or Violation...........................................

      3.6   Accounts and Related Matters.......................................

      3.7   Governmental Approvals.............................................

      3.8   Actions and Proceedings............................................

      3.9   Taxes..............................................................

      3.10  Real and Personal Property.........................................

      3.11  Intellectual Property..............................................
</TABLE>



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<TABLE>
<S>                                                                          <C>
      3.12  Outstanding Commitments............................................

      3.13  Compliance with Law................................................

      3.14  Environmental Compliance...........................................

      3.15  Employment Matters.................................................

      3.16  Insurance..........................................................

      3.17  Bank Accounts......................................................

      3.18  Disclosure.........................................................


IV.   REPRESENTATIONS AND WARRANTIES OF THE BUYER

      4.1   Corporate Organization.............................................

      4.2   Authorization and Validity of Agreement............................

      4.3   No Conflict or Violation...........................................

      4.4   Governmental Approvals.............................................


V.    COVENANTS OF THE SELLER

      5.1   Ordinary Course of Business........................................

      5.2   Access and Information.............................................


VI.   ADDITIONAL AGREEMENTS

      6.1   Approval by the Anti Trust Commissioner............................

      6.2   Other Approvals....................................................


VII.  REPAYMENT AND INDEMNIFICATION OBLIGATIONS

      7.1   Repayment Obligations of the Seller................................

      7.2   Survival or Representations........................................

      7.3   Indemnification by Seller..........................................

      7.4   Indemnification by Buyer...........................................
</TABLE>



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<TABLE>
<S>                                                                      <C>
      7.5   Notice of Claims...............................................

      7.6   Third Party Claims.............................................

      7.7   Company Liability..............................................

      7.9   Time for Claims................................................


VIII. MISCELLANEOUS

      8.1   Publicity......................................................

      8.2   Further Assurances ............................................

      8.3   Offset Assignment..............................................

      8.4   Schedules......................................................

      8.5   Amendment and Waiver: Cumulative Effect........................

      8.6   Severability ..................................................

      8.7   Financial Advisors, Brokers and Finders........................

      8.8   Cost and Expenses..............................................  15

      8.9   Notices........................................................

      8.10  Entire Agreements..............................................

      8.11  No Third Party Rights Assignment...............................

      8.12  Transfer Taxes.................................................

      8.13  Governing Law..................................................
</TABLE>



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                            SHARE PURCHASE AGREEMENT

THIS SHARE PURCHASE AGREEMENT, dated as of April 14, 2000 (as the same may be
amended, supplemented or otherwise modified from time to time in accordance with
its terms, this "Agreement"), Between:

             1)  MEDVED - AMISHAV YAEL Israeli I.D. No.011816816
             2)  MEDVED, BENYAMIN
             3)  MEDVED, DAVID Israeli I.D. No.000148825
             4)  MEDVED, JONATHAN Israeli I.D. No.011180346
             5)  MEDVED, HARRY
             6)  MEDVED, MICHAEL
             c/o Yigal Slonim, Advocate
             2 Kaufman St.
             Tel Aviv
             jointly and severally (the "Seller" or "the "Sellers")
                                                               OF THE FIRST PART
             AND

             JOLT LTD
             a company registered under the laws of Israel
             Registration Number 51-157359 having its registered office
             At 8 Hamarpeh st. Har Hotzvim, Jerusalem Israel (the "Company")
                                                              OF THE SECOND PART
             AND

             MRV COMMUNICATIONS INC.
             20415 Nordhoff Chatsworth
             Ca, 91311 U.S.A.
             (the "Buyer" or "MRV")
                                                               OF THE THIRD PART

WHEREAS        the Sellers are the owners of 5,546,200 issued regular shares
               nominal value 0.01 each of the capital stock (the "Shares") of
               the Company (as per the list enclosed to this Agreement and
               marked A), having a share capital of 240,000 New Israeli Shekel.
               The List of all Shareholders holding shares and/or options and/or
               Warrants of the Company is enclosed to this Agreement and marked
               "A1": and

WHEREAS        subject to the terms and conditions hereinafter set forth, the
               Seller desires to sell, the Shares to the Buyer and cause all the
               other shareholders of the Company to sell to the Buyer all the
               Shares of the Company held by them and the Buyer desires to
               Purchase the Shares and also to purchase all the Shares held by
               all the other shareholders of the Company: and

WHEREAS        the Company agrees to register the Shares in the name of the
               Buyer as well as to register any additional Shares Purchased by
               Buyer in his name immediately after the Closing as hereinafter
               defined:

           NOW, THEREFORE, THE PARTIES HERETO HEREBY AGREE AS FOLLOWS:



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                                    ARTICLE I

                         SALE AND PURCHASE OF THE SHARES


       1.1    SALE AND PURCHASE OF THE SHARES.

              Upon the terms and subject to the conditions set forth in this
              Agreement, at the Closing (as such term is defined in Section 1.2
              below):

              a)     The Sellers shall sell to the Buyer the Shares and shall
                     cause other shareholders of the Company (the "Other Selling
                     Shareholders") to sell to the Buyer an aggregate amount of
                     Shares that together with the Shares will total not less
                     then 80% (eighty percent) of the issued Shares of the
                     Company (the Shares together with the balance of the shares
                     of the Company totaling 80% of the issued shares of the
                     Company, to be sold to the Buyer at the closing-the "Sold
                     Shares"). The Sold Shares will be sold to the Buyer and the
                     Buyer shall purchase from the Seller and the Other Selling
                     Shareholders, the Sold Shares free and clear of all liens
                     as defined in Section 1.4(c) below and together with all
                     rights now and hereafter attaching thereto;

                     This sale and purchase transaction is subject to the
                     conditions set forth in Article II.


       1.2    CLOSING.

              a)     The closing of the sale and purchase of the Shares and the
                     Sold Shares (the "Closing") shall be held at the offices of
                     Eckhaus, Talmor, Shilo, Dichno, Attorneys At Law, 3 Daniel
                     Frisch St. Tel-Aviv or at such other location as shall be
                     mutually agreed by the parties, at 11:00 A.M. on April
                     27th, 2000, or such other time and date as the Buyer may
                     designate in writing at his sole discretion, but not later
                     than May 27st. 2000. The date on which the Closing occurs
                     is hereinafter referred to as the "Closing Date".

              b)     At the Closing:

                     (i)    the parties shall exchange the documents referred to
                            in this Agreement including the documents referred
                            to in Articles ii and vi.

                     (ii)   the Sellers and the Other Selling Shareholders shall
                            deliver to the Buyer duly executed Share
                            Certificates and Share Transfer Deeds for all of the
                            Sold Shares, sufficient to convey to the Buyer good
                            title to the Sold Shares free and clear of all liens
                            and the Buyer shall pay the Share Purchase Price (as
                            defined in Section 1.3 below) to the Seller and to
                            the Other Selling Shareholders by handing over to
                            the Seller and to the Other Selling Shareholders,
                            Share Certificates to the "MRV Shares" as
                            hereinafter defined.



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                     (iii)  all matters at the Closing will be considered to
                            take place simultaneously, and no delivery of any
                            document will be deemed complete until all
                            transactions and deliveries of documents required by
                            this Agreement are completed.


       1.3    PURCHASE PRICE.
              The aggregate consideration to be paid to all the Shareholders of
              the Company for all the issued Shares of the Company provided all
              of the issued Shares of the Company are sold to the Buyer shall be
              U.S. $ 42,500,000 (fourty two million and five hundred thousand
              U.S. Dollars) (the "Share Purchase Price"). The Share Purchase
              Price will decrease pro rata in the event that less than a 100% of
              the issued Shares of the Company will be sold to the Buyer. The
              Share Purchase Price shall be payable as follows:

              a)     The pro rata Share of the Purchase Price to be paid to each
                     one of the Sellers will be paid solely by the issuance by
                     MRV to each one of the Sellers at the closing of an amount
                     of Shares of the Common Stock of MRV (the "MRV Shares")
                     totaling in value U.S. $ 4.2146 (four U.S. Dollars and
                     twenty one point forty six cents) for each share of the
                     Company transferred to MRV with the number of such MRV
                     Shares (the "PP Shares") to be computed on the basis of the
                     average Closing Price of the MRV Shares reported on Nasdaq
                     for the five (5) business days immediately preceding the
                     execution of this Agreement.

              b)     The amount of U.S. $ 4.2146 (four U.S. Dollars and twenty
                     one point forty six cents) per share of the Company
                     transferred in accordance with this Agreement in MRV Shares
                     will be paid to the Sellers and the other Shareholders of
                     the Company that will transfer to the Buyer their shares
                     pro-rata with the amount of Shares of the Company
                     transferred by each Shareholder to MRV.

              c)     In the event that the Closing Price of the MRV Shares on
                     the date of registration of the PP Shares with the
                     Securities and Exchange Commission (as such date is defined
                     in this Agreement) when multiplied by the number of the PP
                     Shares will equal less than U.S. $ 4.2146 (four U.S.
                     Dollars and twenty one point forty six cents) but more than
                     U.S $ 3.2388 (three U.S. $ Dollars and twenty three eighty
                     eight cents) the Buyer will issue to the Shareholders that
                     have transferred their shares to the Buyer an additional
                     amount of MRV Shares (the "AD Shares") that together with
                     the PP Shares will equal in value (based on the Closing
                     Price of the MRV Shares on the date of registration) as
                     close an amount as possible to U.S. $ 4.2146 (four U.S.
                     Dollars and twenty one point forty six cents) per share of
                     the Company transferred to the Buyer without having to
                     issue any fractional interests in shares.

              d)     In the event that the Closing Price of the MRV Shares on
                     the date of Registration of the PP Shares with the
                     Securities and Exchange Commission when multiplied by the
                     number of the PP Shares will equal less than U.S. $ 3.2388
                     (three U.S. $ and twenty three eighty eight cents) per
                     Share of the



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                     Company, MRV will not issue any additional MRV Shares other
                     than the AD Shares described in Section 1.3 (c) and the
                     issuance of the PP Shares and the AD Shares to the
                     Shareholders that have transferred their shares in the
                     Company to the Buyer will be considered payment of the full
                     Purchase Price to the Sellers and to the other Shareholders
                     that have transferred their shares to the Buyer.

              e)     Seller hereby acknowledges, represents, warrants, and
                     covenants as follows:

                     (i)    The MRV shares to be issued to the Seller and to any
                            other selling Shareholders, have not been registered
                            under the United States Securities Act of 1933, as
                            amended (the "Act"), and are not freely tradable.
                            The MRV Shares must be held, unless either a
                            registration statement with respect to the MRV
                            Shares is filed and declared effective under the
                            Act, or an exemption from the registration
                            requirement of the Act is available.

                     (ii)   MRV Shares are being acquired for investment for
                            receipients own account and not with a view to sale
                            or resale, to distribute (as that term is defined in
                            the Act) transfer, or to offers in connection
                            therewith. When the MRV Shares have been purchased
                            and issued to a person pursuant to this Agreement no
                            other person will have a beneficial interest in the
                            Shares.

                     (iii)  MRV will affix a legend in substantially the
                            following form to the certificates evidencing the
                            MRV Shares:

                            "The securities represented by this certificate have
                            not been registered under the Securities Act of
                            1933, as amended, and may not be sold, pledged,
                            hypothecated, donated, or otherwise transferred,
                            whether or not for consideration, unless either the
                            shares have been registered under said Act or an
                            exemption from such registration requirement is
                            available. If the shares are to be sold or
                            transferred pursuant to an exemption from the
                            registration requirement, the Company may require a
                            written opinion of counsel, satisfactory to counsel
                            for Company, to the effect that registration is not
                            required and that such transfer will not violate
                            said Act or applicable state securities law".

              f)     Shortly after the closing date, MRV shall file, and shall
                     use its best efforts to cause to become effective, under
                     the Act, a Registration Statement (the "Registration
                     Statement"), which shall provide for the resale to the
                     public of any and all of the Registered Shares by each one
                     of the Selling Shareholders in such manner as the Sellers
                     shall specify to MRV in writing. At all times beginning
                     upon the effectiveness of the Registration Statement and
                     ending at such time as the Sellers shall have sold or
                     otherwise disposed of all of the Registered Shares, MRV
                     shall use its best efforts to maintain the Registration
                     Statement in effect and shall use its best efforts to cause
                     the prospectus contained therein (the "Prospectus") to be
                     and remain current. So that (i) such Prospectus shall at no
                     time contain an untrue statement of a material fact or omit
                     to state a material fact required so as not to be



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                     misleading and (ii) the Sellers may, in accordance with
                     applicable law, make public offers, sales and other
                     distributions of all of the Registered Shares by means of
                     the Prospectus.

              g)     The Sellers and all other Shareholders receiving shares of
                     MRV shall indemnify and hold MRV harmless (and every person
                     which shall be deemed to control MRV) from and against any
                     loss, cost, damage or expense of any nature whatsoever
                     which such indemnified party may suffer or incur in the
                     event that the Registration Statement (including the
                     Prospectus) shall at any time contain an untrue Statement
                     of a material fact or omit to state a material fact
                     required to be stated therein not or necessary to make the
                     Statement therein not misleading to the extent, but only to
                     the extent, that such untrue statement or alleged untrue
                     statement or omission or alleged omission was made in
                     reliance upon and in conformity with written information
                     relating to the Sellers and the Other Shareholders selling
                     their shares to the Buyer or their plan of distribution
                     furnished to MRV for use in the preparation thereof.


       1.4    CERTAIN DEFINITIONS.
              As used in this Agreement, the following terms have the meanings
              given to them below:

              a)     "Accounting Principles" means generally accepted accounting
                     principles in the U.S.A.

              b)     "Affiliate" when used with respect to another person or
                     entity shall mean any person or entity controlling,
                     controlled by, or under common control with such person or
                     entity:

              c)     "Liens" means all liens, mortgages, charges, security
                     interests, burdens, encumbrances or other restrictions or
                     limitations of any nature whatsoever:

              d)     The Phrase "best knowledge of the Seller", or words to that
                     effect, shall mean the knowledge of the members of the
                     Board of Directors of the Seller and the executive
                     management employees of the Seller after reasonable inquiry
                     of the executive management of the Companies:

              e)     Unless the context would require otherwise, the term
                     "Material Adverse Effect" shall be measured with respect to
                     the entire business of the Company taken as a whole, as
                     such business is being conducted on the Closing Date. The
                     Seller may, however, at its option, include in the Schedule
                     hereto items which would not have a Material Adverse Effect
                     within the meaning of the immediately preceding sentence in
                     order to avoid any misunderstanding, and such inclusion
                     shall not be deemed to be an acknowledgment by the Seller
                     that such items would have a Material Adverse Effect or to
                     further define the meaning of such term for purposes of
                     this Agreement.



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                                   ARTICLE II

            CONDITION PRECEDENT TO OBLIGATION OF BUYERS` TERMINATION


       2.1    The obligations of Buyer to proceed with the Closing is subject to
              the fulfillment prior to or at Closing of the conditions set forth
              in this Section. Any one or more of these conditions may be waived
              in whole, or in part, by Buyer at Buyer's sole option:

              a)     Sellers shall have caused all but not less then 80% of the
                     Shareholders of the Company to sign this Agreement and to
                     transfer to Buyer at least 80% of the issued shares of the
                     Company free and clear of any liens or encumbrances.

              b)     Sellers shall have tendered to Buyer at Closing a document
                     signed by each one of the shareholders of the Company
                     waiving his right of first refusal to purchase shares of
                     the Company from any shareholder of the Company (if there
                     is any)and a declaration signed by the Company's attorney
                     that all rights of first refusal under the Company's
                     articles of incorporation have been waived.

              c)     Seller shall have notified in writing all the shareholders
                     of the Company of the execution of this Agreement by Seller
                     and the Company and shall have offered all the shareholders
                     of the Company to sell their shares to the Buyer and to
                     execute this Agreement.

              d)     The Company shall have paid a payment on account to "Bank
                     Le Pituah Hatasia Ltd." (the "Bank") and shall have
                     received a written confirmation from the Bank that all the
                     debts of the Company to the Bank - Long Term together with
                     Short Term, are not higher than 2,700,000 N.I.S.

              e)     Seller and the Company have obtained the approval of the
                     Anti Trust Commissioner to the sale of shares and to the
                     other Contemplated Transactions under this Agreement.

              f)     Seller and the Company have obtained the approval of the
                     Chief Scientist ("Madan Rashi") to the sale of shares and
                     to the other Contemplated Transactions under this
                     Agreement.


              g)     Seller and the Company have settled to the full
                     satisfaction of the Buyer all law suits now pending against
                     the Company.

              h)     Seller and the Company have received all Governmental or
                     other approvals necessary for the transfer of shares and to
                     the other Contemplated Transactions under this Agreement.



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              i)     Each one of the Sellers, the Additional Sellers and the
                     Company shall have performed all of the agreements complied
                     with all of the provisions required by this Agreement to be
                     performed or complied with by such party at or before
                     Closing Date.

              j)     No legal requirements shall be in effect that prohibits or
                     threatens to prohibit the Contemplated Transactions or that
                     would limit or adversely affect Buyer's ownership of the
                     Shares or control of the Company or the business. No Legal
                     Proceeding shall be pending, threatened or challenging the
                     lawfulness of the Contemplated Transactions, seeking to
                     prevent or delay any of the Contemplated Transactions or
                     seeking relief by reason of the Contemplated Transactions.
                     Neither Seller, the Company or Buyer shall have received
                     any claim by any person (written or oral) asserting that
                     the person other than Seller and/or the Shareholders listed
                     in Schedule "A1" is the holder or beneficial owner of, or
                     has the right to acquire or obtain beneficial ownership of,
                     the Shares or any equity interest or right in the Company,
                     (ii) has any Encumbrance on or Security Rights in the
                     Shares, or (iii) is entitled to all or any portion of the
                     Purchase Price.

              k)     Between the date of this Agreement and the Closing Date,
                     there shall have been no material adverse change,
                     regardless of insurance coverage, in the business or any of
                     the assets, results of operations, liabilities, prospects
                     or condition, financial or otherwise, of the Company.

              l)     Seller shall have delivered a certificate, dated as of the
                     Closing Date, in a form satisfactory to Buyer certifying to
                     the fulfillment of the conditions set forth in Section 2.2.
                     The contents of the certificate shall constitute a
                     representation and warranty of Seller and the Company as of
                     the Closing Date and shall be deemed relied upon by Buyer
                     and fully incorporated in this Agreement.

              m)     The Company and each party to this Agreement shall have
                     received all Required Authorizations under any applicable
                     Legal Requirements necessary to consummate the Contemplated
                     Transactions. The Company shall also have received all
                     Required Authorizations.

              n)     Buyer shall have completed to its satisfaction its business
                     and legal due diligence investigation of the Company, its
                     property and Business.

              o)     Buyer shall also have received the other documents referred
                     to in Section 3. All certificates, opinions and other
                     documents delivered by Seller or the Company to Buyer under
                     this Agreement shall be satisfactory to Buyers in form and
                     substance.

              p)     David Medved shall have entered into a Non-Competition and
                     Non-Solicitation Agreement for a period of 3 years with
                     Buyer.

              q)     Seller and Additional Sellers shall have entered into a
                     stock restriction agreement with Buyer.



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<PAGE>   12

              r)     Buyer's Board of Directors shall have authorized Buyer to
                     enter into, and shall have approved this Agreement and the
                     Contemplated Transactions.

              s)     The representations and warranties of Seller and the
                     Company contained in this Agreement shall be accurate and
                     complete, individually and collectively, in all material
                     respects (i) as of the date of this Agreement and (ii) as
                     of the Closing Date as if made on the Closing Date.


       2.2    DELIVERIES AND PROCEEDINGS AT CLOSING

              a)     Seller and other Selling Shareholders shall deliver to
                     Buyer at the Closing:

                     (i)    Certificates representing the Shares, free of all
                            Encumbrances, duly endorsed in negotiable form or
                            accompanied by stock powers duly executed in blank,
                            and signed share transfer Deeds with signatures
                            witnessed by an Attorney, a Notary, or a witness.

                     (ii)   Certificates signed by the Company's Attorney dated
                            not more than 2 days prior to Closing Date to the
                            effect that the Company is a validly existing
                            corporation.

                     (iii)  Certificate of the Attorney of the Company (A)
                            setting forth all resolutions of the Board of
                            Directors of the Company authorizing the execution
                            and delivery of this Agreement and the performance
                            by the Company of the Contemplated Transactions, and
                            (B) stating that the Governing Documents of the
                            Company were in effect on the date of adoption of
                            those resolutions, the date of execution of this
                            Agreement and the Closing Date.

                     (iv)   General releases by Seller, and all directors and
                            officers of the Company of all Liability of the
                            Company to them and of any claim that they, or any
                            of them, may have against the Company.

                     (v)    The minute books, stock certificate book and
                            transfer ledgers certified to correct by the
                            Company's Attorney and corporate seal of the
                            Company.

                     (vi)   Resignations of the officers and directors of the
                            Company and resignations of all authorized
                            signatories to all of the bank and other depository
                            and investment accounts of the Company, effective as
                            of the Closing Date.

                     (vii)  Such other agreements and documents specified in
                            this Agreement and as Buyer may reasonably request.

              b)     Buyer shall deliver or cause to be delivered to Seller, at
                     the Closing:



                                       11
<PAGE>   13

                     (i)    A stock certificate for the unvested shares due to
                            Sellers and to the other Selling Shareholders in
                            accordance with Section 1.3 registered in the name
                            of the Seller or according to his order, shall be
                            delivered to Yigal Slonim, Advocate, as escrow
                            agent, pursuant to the terms of this Agreement.

       2.3    TERMINATION PRIOR TO CLOSING

              a)     EVENTS OF TERMINATION. This Agreement may be terminated in
                     writing at any time prior to the Closing by: (i) the mutual
                     consent of Buyer, Seller and the Company; (ii) Buyer, if
                     any of the conditions specified in Section 2.1 and 2.2
                     shall not have been fulfilled (or if satisfaction becomes
                     impossible) on or before the Closing Date and shall not
                     have been waived by Buyer; (iii) by Buyer, if a material
                     breach of any provision of this Agreement has been
                     committed by Seller or the Company and such breach has not
                     been cured or waived by Buyer; (iv) by Seller, if a
                     material breach of any provision of this Agreement has been
                     committed by Buyer and such breach has not been cured or
                     waived by Seller.

              b)     CONSEQUENCES OF TERMINATION. If this Agreement is
                     terminated by mutual consent of the parties, no party shall
                     have any obligation to any other party as a result of that
                     termination. If any party terminates this Agreement for any
                     reason other than as described in Section 2.3 (a) Buyer, on
                     the one hand, and Seller and the Company, on the other
                     hand, shall be liable to the other for any breach of this
                     Agreement by such party which breach led to such
                     termination. Each party shall also be entitled to any other
                     remedy to which it may be entitled at law or in equity,
                     including injunctive relief and specific performance. All
                     rights and obligation of the parties set forth in Section
                     8.1 shall survive termination of this Agreement.
                     Notwhithstanding the above, Seller can not terminate this
                     Agreement even if the Closing date will be postponed by
                     Buyer at Buyer's sole discretion provided such postponement
                     will not exceed 30 days..


       2.4    FULFILLMENT OF CONDITIONS AND AGREEMENTS PRIOR TO CLOSING
              Each party shall satisfy all of those conditions to the
              obligations of the other under this Article II, on or prior to the
              Closing Date. Each party shall cooperate with the other and take,
              or cause to be taken, all action and do, or cause to be done, all
              things necessary, proper or advisable, including making or
              obtaining any and all Required Authorization, to consummate and
              make effective the Contemplated Transactions.



                                       12
<PAGE>   14

                                   ARTICLE III

                  REPRESENTATIONS AND WARRANTIES OF THE SELLER


The Seller hereby represents and warrants to and for the benefit of the Buyer as
follows:

       3.1    CORPORATE ORGANIZATION.
              The Company is a company duly incorporated and validly existing
              under the laws of Israel, and has all requisite corporate power
              and authority to own its respective properties and assets and to
              conduct its respective businesses as now being conducted. True and
              complete copies of the Organizational Documents of the Company, as
              amended to the date hereof, are attached hereto as Schedule 3.1.

       3.2    CAPITALIZATION: TITLE TO SHARES.

              a)     The capital of the Company consists of 24,000,000 shares,
                     nominal value N.I.S 0.01 per share, out of which 10,083,900
                     are validly issued and fully-paid after all vested Options
                     and Warrants are exercised.. The Shares are the only
                     outstanding interests in the capital of the Company, and
                     there are no outstanding subscriptions, options, conversion
                     rights, warrants, preemptive rights or other agreements
                     providing for the purchase, issuance or sale of any
                     interests in the capital of the Company, other than as
                     contemplated by this Agreement.

              b)     Each one of Sellers is the lawful owner of the Shares
                     listed next to his name in Annex A, free and clear of all
                     Liens. Each one of the Sellers has, or will have at
                     Closing, full legal right, power and authority to sell,
                     assign, transfer and convey the Shares in accordance with
                     the terms and subject to the conditions of this Agreement.


       3.3    SUBSIDIARIES.
              Except Air Optics Inc. which is registered in the State of
              Dellawere U.S.A. the Company does not own, either directly or
              indirectly, any shares or equity interests in any other legal
              entity.


       3.4    AUTHORIZATION AND VALIDITY OF AGREEMENT.
              The execution and delivery of this Agreement and the performance
              of the Seller's obligations hereunder have been duly authorized by
              and on behalf of the Seller if such authorization is necessary
              under any law and no other corporate proceeding on the part of the
              Sellers which are incorporated is or will be necessary to
              authorize such execution, delivery and performance, This Agreement
              has been duly executed and delivered by the Seller and, assuming
              due authorization, execution and delivery by the Buyer,
              constitutes the valid and binding obligation of the Seller
              enforceable against the Seller in accordance with its terms and
              the Seller has entered into no other agreement with another third
              party providing for the sale of the Shares.



                                       13
<PAGE>   15

       3.5    NO CONFLICT OR VIOLATION.
              Neither the execution and delivery of this Agreement, nor the
              performance by the Seller of its obligations hereunder, nor the
              consummation of the transactions provided for hereby, does or
              will:

              (i)    conflict with or violate any provision of the articles of
                     incorporation or similar governing documents
                     ("Organizational Documents") of any of the Sellers or the
                     Company:

              (ii)   results in the cancellation, modification, revocation, or
                     suspension of any permits, authorizations, approvals,
                     registrations and licenses granted by or obtained from any
                     governmental, administrative or regulatory authority
                     ("Permits") issued or granted to the Company:

              (iii)  result in the creation of any Liens upon any of the
                     respective properties or assets of the Company: or

              (iv)   constitute a violation by the Seller or the Company of any
                     applicable laws, rules or regulations of any governmental,
                     administrative or regulatory authority ("Laws") applicable
                     to it or any judgments, orders, decrees, rulings or awards
                     of any court, arbitrator or other judicial authority or any
                     governmental, administrative or regulatory authority
                     ("Judgments") applicable to it.


       3.6    ACCOUNTS AND RELATED MATTERS.

              a)     Schedule 3.6(a) sets forth true and complete copies of the
                     balance sheets and statements of income of the Company for
                     the period ending June 30 1999, together with the related
                     schedules and notes as certified by Someh Hiekin CPA (the
                     "June 1999 Accounts") and the un-audited balance sheets for
                     the fiscal year ending December 31 1999 (December 1999
                     Accounts"). Except as indicated therein, the June 1999
                     Accounts and the December 1999 accounts were prepared in
                     accordance with the Accounting Principles consistently
                     applied, and present fairly in all material respects the
                     financial condition of the Company as of December 31 1999.
                     The Seller undertake to cause the Company to hand over to
                     MRV not later than June 30 2000 a complete copy of the
                     audited balance sheets and statements of income of the
                     Company for the fiscal year ending December 31, 1999
                     ("December 31, 1999 audited accounts").

                     The Seller and the Company hereby represent to Buyer that
                     the December 31, 1999 audited accounts will not be
                     different in all material respects from the December 1999
                     accounts.

              b)     Since December 31 1999 through the date hereof, (I) the
                     Company has conducted its business only in the ordinary
                     course in substantially the same manner as therefore
                     conducted, and has not taken any of the actions described
                     in subparagraphs (I) through (vii) of Section 5.1 of this



                                       14
<PAGE>   16

                     Agreement that would have required the consent of the Buyer
                     if such action were to be taken between the date hereof and
                     the Closing Date.

              c)     Except as set forth on Schedule 3.6 (c), since December 31
                     1999, the Company has not (I) declared or paid any
                     dividends, or (ii) paid or accrued any management or
                     similar fees to or in favor of any Persons, other than
                     severance payments to Geptah Lorch.


       3.7    GOVERNMENTAL APPROVALS.
              No consent, waiver. approval, authorization, exemption,
              registration, license or declaration of or by, or filing with, any
              governmental, administrative or regulatory authority
              ("Governmental Approval") other than described in this Agreement
              is required to be made or obtained by the Seller or the Company,
              in connection with the execution and delivery of this Agreement by
              the Seller and the Company or the performance by the Seller of its
              obligations hereunder. Other then the authorization described in
              this Agreement which the Seller and the Company undertake to apply
              for immediately after the execution of this Agreement.


       3.8    ACTIONS AND PROCEEDINGS.
              As of the date hereof, there is no action, suit, claim or legal,
              administrative, arbitration or other alternative dispute
              resolution proceeding or investigation (each, a "Proceeding" and
              collectively, "Proceedings") pending or, to the best knowledge of
              the Seller, threatened in writing against the Company or, with
              respect to the transactions contemplated herein, against Seller,
              other then the proceedings described in Schedule 3.8. the Company
              is not subject to any Judgment that has a Material Adverse Effect
              or would interfere with the transactions contemplated by this
              Agreement.


       3.9    TAXES.
              As of the date hereof: (I) the Seller and the Company have filed
              on a timely basis all returns and reports in respect of taxes for
              which the Company may be liable: (ii) all taxes required to be
              paid by the Company that were due and payable prior to the date
              hereof have been paid: (iii) there are no pending audits or
              investigations or pending or, to the best knowledge of the Seller,
              threatened claims relating to taxes for which the Company may
              become liable: and (iv) no deficiencies for any taxes have been
              assessed against the Company which remain unpaid. As used in this
              Agreement, "tax or taxes" shall mean all taxes, assessments and
              governmental charges of any kind, whether payable directly or by
              withholding, including without limitation, income, property,
              sales, customs, value added, employment and social security taxes
              and charges, together with any interest, penalties or additions to
              tax with respect thereto, imposed by any governmental authority.



                                       15
<PAGE>   17

              All Taxes imposed by Law on the Seller or the Company in
              connection with the transactions under this Agreement including
              (but not limited to) V.A.T. on the Purchase Price (if due) income
              tax on the Purchase Price etc. will be paid by the Seller and or
              any other Selling Shareholder.


       3.10   REAL AND PERSONAL PROPERTY.

              a)     The Company does not own Real Property.

              b)     Schedule 3.10 (b) sets forth an accurate and complete list
                     of all real property leased by the Company. Except as set
                     forth on Schedule 3.10 (b

              c)     Schedule 3.10 (c) sets forth a true and complete copy of
                     the assets of the Company as of March 31, 2000, listing all
                     material items of machinery, equipment and other tangible
                     personal property (collectively "Machinery and Equipment")
                     owned by the Company as of such date.


       3.11   INTELLECTUAL PROPERTY.
              Schedule 3.11 sets forth a true and complete list of all
              intellectual property patents, copyrights, trademarks, service
              marks and trade names owned by or registered in the name of the
              Company.


       3.12   OUTSTANDING COMMITMENTS.
              Schedule 3.12 sets forth an accurate and complete list of all of
              the following written Contracts (other than any such Contracts
              reflected in other Schedules to this Agreement) to which the
              Company is a party and has any express obligations continuing as
              of the date hereof:

              (i)    loan agreements, guarantee agreements, mortgages, security
                     agreements and other documents or written arrangements
                     relating to the borrowing of money or for lines of credit
                     (other than intercompany loans and indebtedness):

              (ii)   working capital maintenance, comfort letters or other forms
                     of guaranty agreements in respect of a third party
                     obligation:

              (iii)  contracts or commitments limiting or restricting the
                     Company from engaging in or competing in any line of
                     business or with any person, firm or company:

              (iv)   partnership or joint venture agreements:

              (v)    agreements with related parties ("Baalei Inian" and "Nosei
                     Misra") as such term is defined under the Israeli Company
                     Act 1999 and the Israeli Securities Law 1968.

              (vi)   agreements relating to third party technology, know-how or
                     processes which the Company is licensed or authorized to
                     use: and



                                       16
<PAGE>   18

              (vii)  any other contract or agreement made in the ordinary course
                     of business pursuant to which annual payments in excess of
                     U.S. $ 50,000 may reasonably be expected to be made.

              (viii) any other contract or agreement made other than in the
                     ordinary course of business pursuant to which annual
                     payments in excess of $ 10,000 may reasonably be expected
                     to be made: (the foregoing Contracts being referred to
                     collectively as the "Outstanding Commitments" and
                     individually as an "Outstanding Commitment"). As of the
                     date hereof, there have been no claims made, or to the best
                     knowledge of the Seller, threatened relating to the
                     validity or enforceability of any of the Outstanding
                     Commitments. As of the date hereof, neither the Seller nor
                     the Company has received written notice that any party to
                     any of the Outstanding Commitments intends to cancel or
                     terminate any Outstanding Commitment.


       3.13   COMPLIANCE WITH LAW.
              To the best knowledge of the Seller, the operations of the Company
              has been conducted in all material respects in accordance with all
              applicable Laws and Judgments, Neither the Seller nor the Company
              has received written notice of any violation of any such Law or of
              any default with respect to any Judgment applicable to the Company
              or to any of its respective assets, properties of operations. The
              Companies have all Permits required for the conduct of its
              businesses, except where failure to have such Permit would not
              have a Material Adverse Effect.


       3.14   ENVIRONMENTAL COMPLIANCE.
              To the best knowledge of the Seller, the operations of the Company
              has been conducted in all material respects in accordance with all
              applicable Laws regulating emissions, discharges or wastes in the
              environment (including without limitation ambient air, surface
              water, ground water or land) or otherwise regulating the
              manufacturing, processing, distribution, use, treatments, storage,
              disposal, transport or handling of pollutants, contaminates,
              chemicals or toxic or hazardous substances or wastes or
              environmental protection (collectively referred to as
              "Environmental Laws"). Neither the Seller nor the Company has
              received written notice from any governmental authority of any
              material violation of any Environmental Laws.


       3.15   EMPLOYMENT MATTERS.

              a)     Schedule 3.15 (a) sets forth (I) an accurate and complete
                     list as of the date hereof of all directors of the Company,
                     and (ii) an accurate and complete list of the collective
                     bargaining agreements applicable to the Company employees.



                                       17
<PAGE>   19

              b)     Schedule 3.15 (b) sets forth (I) the number of employees
                     employed by the Company as of March 31st, 2000, and (ii) a
                     complete list of all employees of the Company entitled as
                     of the date hereof to an annual salary or other
                     compensation in excess of New Shekels 50,000 (the "Listed
                     Employees"). All employment and severance contracts,
                     arrangements or policies pertaining to the employees of the
                     Company comply in all material respects with all applicable
                     requirements of Law, and, except to the extent set forth on
                     Schedule 3.15 (b), none of such contracts, arrangements or
                     policies pertaining to the Listed Employees are more
                     favorable than the applicable Collective Agreements
                     (Heskemim Kibutziim), or the applicable requirements of Law
                     in any material respect.

              c)     Since December 31st 1999, the Company did not (I) pay or
                     agree to pay any bonuses or made or agreed to make any
                     increase in the rate of wages, salaries or other
                     remuneration of any of its directors or employees other
                     than in the ordinary course of business and in a manner
                     consistent with past practice or as dictated by applicable
                     Law or the applicable collective Agreements, or (ii)
                     changed its hiring or termination policies or practices in
                     any material respect.

              d)     Except as set forth on Schedule 3.15 (d), to the best
                     knowledge of the Seller, as of the date hereof there are no
                     plans or arrangements providing for "Pizuiei Piturim"
                     insurance coverage, disability benefits, vacation benefits,
                     retirement benefits, deferred compensation, profit sharing,
                     stock options or other form of post retirement benefits
                     covering directors or employees or former directors or
                     employees of the Companies which provide for any individual
                     or collective terms and conditions of employment that are
                     more favorable than the applicable collective Agreements,
                     or the applicable requirements of Law in any material
                     respect.

              e)     To the best knowledge of the Seller, as of the date hereof
                     there are no contracts, agreements, plans or arrangements
                     covering directors or employees or former directors or
                     employees of the Companies which contain any "change of
                     control" or similar provisions.


       3.16   INSURANCE.
              Schedule 3.16 sets forth a complete list of the insurance policies
              currently in effect under which any of the Companies is an insured
              party. To the best knowledge of the Seller, the insurance
              maintained by the Companies is valid and enforceable in accordance
              with its terms, is in full force and effect, and insures against
              such risks and liabilities as are substantially consistent with
              customary practices and standards of companies engaged in similar
              businesses in Israel.


       3.17   BANK ACCOUNTS.
              Schedule 3.17 sets forth a complete list of the names of each bank
              or other financial institution in which the Company has an
              account, and the names of all persons authorized to operate such
              account.



                                       18
<PAGE>   20

       3.18   DISCLOSURE.
              The Seller has not knowingly withheld from the Buyer any fact with
              respect to the Company which the Seller believes would change in
              any material way to meaning of all or part of the declaration set
              forth in this Article II, including without limitation the
              Schedules attached hereto.


                                   ARTICLE IV

                   REPRESENTATIONS AND WARRANTIES OF THE BUYER


The Buyer represents and warrants to and/or the benefit of to the Seller as
follows:


       4.1    CORPORATE ORGANIZATION.
              The Buyer is a company duly organized and validly existing under
              the laws of its country or state of incorporation. The Buyer has
              the corporate power and authority to enter into this Agreement and
              to carry out its obligations hereunder.


       4.2    AUTHORIZATION AND VALIDITY OF AGREEMENT.
              The execution and delivery of this Agreement and the performance
              of the Buyer's obligations are subject to the approval of MRV's
              Board of Directors and no other corporate proceeding other then
              such approval will be necessary to authorize such execution,
              delivery and performance. This Agreement if approved by MRV's
              Board of Directors and assuming due authorization execution and
              delivery by the Seller and the Company, constitutes a legal, valid
              and binding obligation of the Buyer, enforceable against it in
              accordance with its terms.


       4.3    NO CONFLICT OR VIOLATION.
              Neither the execution and delivery of this Agreement, nor the
              performance by the Buyer of its obligations hereunder, nor the
              consummation of the transactions provided for hereby, does or will
              (I) conflict with or violate any provision of the Organizational
              Documents of the Buyer: (ii) violate, conflict with or result in
              the breach or termination of any Contracts or Permits to which the
              Buyer is a party or by which any of it or its securities,
              properties or assets are bound: (iii) result in the creation of
              any Liens upon any of its securities, properties or assets, or
              (iv) constitute a violation by the Buyer of any Laws or Judgments
              applicable to it: except, in each such case, for such any such
              matters that would not, either individually or in the aggregate,
              adversely effect the ability of the Buyer to perform its
              obligations under this Agreement.



                                       19
<PAGE>   21

       4.4    GOVERNMENTAL APPROVALS.
              No Governmental Approval is required to be made or obtained by the
              Buyer, in connection with the execution and delivery of this
              Agreement by the Buyer or the performance by the Buyer of its
              obligations hereunder, other than the receipt of the approval of
              the Israeli Anti Trust Commissioner.




                                    ARTICLE V

                             COVENANTS OF THE SELLER


       5.1    ORDINARY COURSE OF BUSINESS.
              During the period from the date of this Agreement to the Closing,
              except as specifically contemplated by this Agreement or as
              otherwise consented to in writing by the Buyer: (a) the Seller
              will ensure that the Company carries on its business only in the
              ordinary course in substantially the same manner as heretofore
              conducted: and (b) the Seller will not permit of the Company to:

              (i)    amend its Organizational Documents:

              (ii)   acquire, by merger, consolidation, purchase of stock or
                     assets or otherwise, any corporation, partnership,
                     association or other business organization:

              (iii)  alter its outstanding capital stock or declare, set aside,
                     make or pay and dividend or other distribution in respect
                     of its capital stock (in cash or otherwise), or purchase or
                     redeem any shares of its capital stock:

              (iv)   issue or sell (or agree to issue or sell) any of its
                     capital stock or any options, warrants or other rights to
                     purchase any such shares or any securities convertible into
                     or exchangeable for such shares:

              (v)    grant any general increase in the remuneration and benefits
                     of the Companies' employees or make any other material
                     change in the level or remuneration of such employees or in
                     the Companies' employment polices:

              (vi)   incur, other than in the ordinary course of business
                     consistent with past practice, any material indebtedness
                     for borrowed money (including through the issuance of debt
                     securities) or vary in any material manner the terms of any
                     material existing indebtedness:

              (vii)  make any change in its accounting procedures or practices
                     unless mandated by generally accepted accounting
                     principles: or

              (viii) agree to take any of the actions set forth in the foregoing
                     subsections (I) through (vi).



                                       20
<PAGE>   22

       5.2    ACCESS AND INFORMATION.
              During the period from the date of this Agreement to the Closing
              (or the earlier termination of this Agreement), the Seller shall
              permit the Buyer and its representatives reasonable access during
              normal business hours to the premises and the books and records of
              the Company, provided that such access shall not interfere with
              the normal business and operations of the Company.



                                   ARTICLE VI

                              ADDITIONAL AGREEMENTS


       6.1    APPROVAL BY THE ANTI TRUST COMMISSIONER.
              The Closing of the Sale and purchase of shares is conditioned upon
              the receipt of the approval of the Anti Trust Commissioner or its
              Ruling that such approval is not necessary under Law. The Buyer
              and the Seller will exercise their best efforts to obtain, as soon
              as reasonably practicable, the approval of the Israeli Anti Trust
              Commissioner to the transaction described in this Agreement. The
              failure to receive such approval will not give rise to any claim
              by the Buyer or Seller provided both parties will exercise their
              best efforts to receive such approval.


       6.2    OTHER APPROVALS
              The Seller undertakes to secure at or before closing all other
              approvals and consents necessary for the transfer of shares under
              this Agreement and for all such other Contemplated Transactions
              under this Agreement.


       6.3    The Seller will call or cause to be called shortly after the
              execution of this Agreement a meeting of the, its Board of
              Directors and a General Meeting of the Shareholders of the Company
              and will present to all such organs of the Company the
              transactions contemplated under this Agreement including the
              details of the Option Agreement he intends to sign with the Buyer
              as well as all other details of his interests in the Transactions
              with the Buyer and will hand over to the Buyer the minutes of the
              the Board of Directors and the General Meeting of Shareholders
              certified to be true and correct by the Company's Attorney.
              Receipt of the approval of the Board of Directors of the Company
              described in this section 6.3 is a condition precedent to Closing.


       6.4    Sellers undertake to notify all Shareholders of the Company of the
              Execution of this Agreement and to cause to registered
              Shareholders of the Company holding together at least 80% of the
              issued Share Capital of the Company to execute this Agreement and
              transfer their shares to the Buyer at Closing in accordance with
              the terms of this Agreement. The execution of this Agreement by
              registered Shareholders holding at least 80% of the issued Share
              Capital of the Company is a condition precedent to Closing by
              Buyer that can be waived by Buyer at Buyer's sole discretion.



                                       21
<PAGE>   23

       6.5    The Purchase Price and the form of payment described in Section
              1.3 are the Purchase Price and payment for all the shares of the
              Company subject to the terms and conditions of this Agreement. The
              Buyer will deposit at Closing with Nathan Shilo, Advocate the pro
              rata MRV Shares to be transferred to any Shareholder of the
              Company that will not transfer his shares to the Buyer at the
              Closing (The " Non Transferring Shareholders"). Advocate Nathan
              Shilo will hand over a pro rata share certificate to the MRV
              Shares to each one of the Not Transferring Shareholders that will
              execute this Agreement and transfer his shares in the Company to
              the Buyer after the Closing but not later than 90 days past the
              Closing date. All MRV Shares remaining with Advocate Nathan Shilo
              91 days after the Closing will be returned to Buyer upon Buyer's
              written request and the Buyer will have no further obligations to
              purchase any shares of the Company from the Non Transferring
              Shareholders after 91 days from the day of Closing have past.



                                   ARTICLE VII

                    REPAYMENT AND INDEMNIFICATION OBLIGATIONS


       7.1    REPAYMENT OBLIGATIONS OF THE SELLER.
              From and after the Closing the Seller and all Additional Sellers
              that have transferred their shares in the Company to the Buyer
              undertake to pay to the Buyer as a partial repayment of the
              Purchase Price (i) any amount of money owed by the Company to any
              party which was not described or disclosed to Buyer under this
              Agreement (ii) any amount of money owed by the Company under any
              judgment rendered against the Company before or after the Closing
              which remains unpaid at the date of Closing or after closing
              together with all other related costs any such repayment will be
              first done from the amount deposited referred to in Article 7.8.


       7.2    SURVIVAL OR REPRESENTATIONS
              All representations, warranties, covenants and obligations made by
              any party in this Agreement shall survive the Closing. Any
              limitation or qualification set forth in any one representation
              and warranty shall not limit or qualify any other representation
              and warranty. The right to indemnification under this Section or
              any other remedy based on the breach or inaccuracy of any
              representation or warranty in this Agreement or breach of, or
              noncompliance with, any covenant or obligation in this Agreement
              will not be affected by any investigation conducted with respect
              to, or any knowledge acquired (or capable of being acquired) at
              any time, whether before or after the execution and delivery of
              this Agreement or the Closing Date, with respect to any such
              representation, warranty covenant or obligation. The waiver by any
              party of any condition at Closing or the breach or inaccuracy of
              any representation or warranty, or breach of, or noncompliance
              with, any covenant or obligation, will not affect the right of
              such party to



                                       22
<PAGE>   24

              indemnification, payment of damages or other remedy based on such
              breach, inaccuracy or noncompliance.


       7.3    INDEMNIFICATION BY SELLER
              Seller, and all Other Selling Shareholders, , shall indemnify,
              defend, save and hold harmless Buyer and its officers, directors,
              employees, agents and Affiliates (including, after the Closing,
              the Company: each, a "BUYER INDEMNITEE") from and against all
              damages directly or indirectly asserted against, imposed upon,
              resulting to, or incurred or required to be paid by any Buyer
              Indemnitee up to the pro rata share of the consideration received
              by each one of the Sellers and Other Selling Shareholders pursuant
              to this Agreement from or in connection with:

              a)     any material breach or inaccuracy of any representation or
                     warranty made by Seller or the Company in this Agreement,
                     in any supplement to the Schedules, in any certificate or
                     document delivered by Seller or the Company in connection
                     with this Agreement or any other agreement to which Seller
                     or the Company, or both, is or is to become a party:

              b)     any material breach or nonperformance of any covenant or
                     obligation made by Seller or the Company in or in
                     connection with this Agreement or any other agreement to
                     which Seller or the Company, or both, is or is to become a
                     party:

              c)     any product shipped or manufactured by, or any services
                     provided by, the Company prior to the Closing Date:

              d)     any Environmental Liabilities of the Company, arising out
                     of or relating to (i) any violation of or noncompliance
                     with any Environmental Law occurring prior to the Closing
                     Date by the Company or any other person for whose conduct
                     the Company is or may be held responsible, (ii) the
                     ownership or operation, or, any condition at, the
                     facilities on or prior to the Closing Date, including any
                     migration of any such condition after the Closing Date,
                     (iii) the presence or release of any regulated material at
                     or with respect to the facilities on or prior to the
                     Closing Date, (iv) any hazardous activity conducted by the
                     Company or any other Person acting as agent for or on
                     behalf of the Company, (v) any release by the Company or
                     any other person acting as agent for or on behalf of the
                     Company on any other property, and (vi) any remedial action
                     required to be taken by the Company: and

              e)     any and all other material Liabilities of the Company
                     existing on the Closing Date or arising out of any
                     transaction entered into, or any state of facts existing,
                     prior to the Closing Date, except for those Liabilities
                     that are expressly quantified and set forth in this
                     Agreement and its Schedules.



                                       23
<PAGE>   25

       7.4    INDEMNIFICATION BY BUYER.
              Buyer shall indemnify, defend, save and hold harmless Seller and
              its officers, directors, employees, Affiliates and agents (each, a
              "Seller Indemnitee") from and against any and all Damages
              (collectively, "Seller Damages") directly or indirectly asserted
              against, imposed upon, resulting to, or incurred or required to be
              paid by any Seller Indemnitee from or in connection with, (i) any
              breach or inaccuracy of any representation or warranty made by
              Buyer in connection with this Agreement (ii) a breach or
              nonperformance of any covenant or agreement made by Buyer in or in
              connection with this Agreement or in any other agreement to which
              Buyer is or is to become a party.


       7.5    NOTICE OF CLAIMS.
              If any Buyer indemnitee or Seller Indemnitee (an "Indemnified
              Party") believes that it has suffered on incurred, or will suffer
              or incur, any Damage for which it is entitled to indemnification
              under this Article VIII, the Indemnified Party shall notify the
              party or parties from whom indemnification is being claimed (the
              "Indemnifying Party"). This notice shall specify the factual basis
              of the claim in reasonable detail in light of the circumstances
              then existing, If any Legal Proceeding is instituted by or against
              a third party with respect to which any Indemnified Party intends
              to claim any Damages, such Indemnified Party shall notify the
              Indemnifying Party of such action or suit.


       7.6    THIRD PARTY CLAIMS
              The Indemnified Party shall have the right to conduct and control,
              through counsel of its choosing, the defense of any third party
              claim, action or suit. The Indemnified Party may compromise or
              settle third party claim, action or suit so long as the
              Indemnified Party gives the Indemnifying Party advance notice of
              any proposed compromise or settlement. The Indemnified Party shall
              permit the Indemnifying Party to participate in the defense of any
              such claim, action or suit (except those involving Taxes,
              Environmental Remedial Actions and any related Legal Proceeding)
              through counsel chosen by the Indemnifying Party, so long as the
              fees and expenses of that counsel are borne by the Indemnifying
              Party. If the Indemnified Party permits the Indemnifying Party to
              undertake, conduct and control the conduct and settlement of such
              claim, action or suit: (i) the Indemnifying Party shall not permit
              any Encumbrance to exist upon any asset of the Indemnified Party:
              (ii) the indemnifying Party shall not consent to any settlement
              that does not include as an unconditional term of the settlement
              the giving of a complete release from Liability with respect to
              such action or suit to the Indemnified Party: (iii) the
              Indemnifying Party shall permit the Indemnified Party to
              participate in such conduct or settlement through counsel chosen
              by the Indemnified Party (without any Order by any Governmental
              Body): and (iv) the Indemnifying Party shall agree promptly to
              reimburse the Indemnified Party for the full amount of any Damages
              including fees and expenses of counsel for the Indemnified Party.



                                       24
<PAGE>   26

       7.7    COMPANY LIABILITY
              After the Closing, the Company shall have no Liability to Seller
              for any breach of any representation or warranty made by Seller or
              the Company to Buyer in this Agreement, in any certificate or
              document furnished in connection with this Agreement by Seller or
              the Company or any Other Agreement to which Seller or the Company,
              or both, is or is to become a party.


       7.8    As collateral for Seller's undertakings to pay to Buyer a partial
              repayments of the Purchase Price the Sellers will deposit with
              Michael Talmor Attorney at Law and Yigal Slonim Attorney at Law as
              joint Trustees (the "Trustee") an amount of shares out of the PP
              Shares equal in value to U.S. $ 10,000,000 (ten million U.S.
              Dollars) to be computed as per the Closing Price of the MRV Shares
              on the day prior to the closing day (the "Deposited Shares"). The
              Trustee is hereby instructed to sell the Deposited Shares
              immediately following the Registration of the PP Shares and
              deposit the proceeds of such sale in a bank account (the "Trust
              Account"). The Trustee will be permitted to sell the Deposited
              Shares at any earlier date upon a written demand of Buyer
              notifying the Trustee of a substantiated claim against the Company
              or any other claim for indemnification made by the Buyer. The
              Trustee is hereby irrevocably instructed to pay out of the Trust
              Account any amount due to the Buyer under this Agreement at Buyers
              first demand. Any amounts due to the Buyer under this Agreement
              which exceed the amounts in the Trust Account or the value of the
              Deposited Shares will be paid from Seller's funds. Any amounts of
              money or shares remaining in the Trust Account after the time for
              claim indicated in Section 8.9 will be refunded by the Trustee to
              the Sellers.

              In the event that no claim for indemnification by Buyer has been
              made within 2 years from date of Closing the Deposited Shares and
              or any amount of cash in the Trust Account will be refunded to the
              Sellers.


       7.9    TIME FOR CLAIMS.
              Any claim for indemnification under this Agreement must be made
              within five (5) years of the Closing Date, except that the right
              to make a claim for a partial repayment of the Purchase Price
              shall survive until the end of the financial year following the
              seventh anniversary of the Closing Date.



                                  ARTICLE VIII

                                  MISCELLANEOUS


       8.1    PUBLICITY.
              From the date hereof through and including the Closing Date, the
              Seller or the Company shall not issue, or cause or permit the
              publication by any of their respective Affiliates or
              representatives, of any press release or other public



                                       25
<PAGE>   27

              announcementwith respect to this Agreement except with the consent
              of the Buyer or as may be required by applicable Law. The
              requirements of this Section 9.1 shall be in Addition to those
              included in any Confidentiality Agreement (as defined in Section
              9.5 below).


       8.2    FURTHER ASSURANCES.
              After Closing, without further consideration, Seller shall take or
              cause to be taken such actions (including the execution,
              acknowledgment and deliver of instruments, documents, transfers,
              conveyances and assurances) as Buyer may request for the better
              conveying, transferring, assigning delivering the Shares to Buyer
              or any of the assets used in the Business to the Company.


       8.3    OFFSET ASSIGNMENT.
              Buyer shall be entitled to offset, setoff or recoup from any
              amounts due to Seller from Buyer under this Agreement or under any
              Other Agreement against any obligation of Seller to Buyer under
              this Agreement or under any Other Agreement. This Agreement and
              all the rights and powers granted by this Agreement shall bind and
              inure to the benefit of the parties and their respective
              successors and permitted assigns. This Agreement and the rights,
              interests and obligations under this Agreement may not be assigned
              by any party without the prior written consent of the other
              parties, except that Buyer may make such assignments to any
              Affiliate of Buyer provided that Buyer remains liable under this
              Agreement.


       8.4    SCHEDULES.
              The disclosures in the Schedules to this Agreement, and those in
              any supplement to the Schedules, relate only to the
              representations and warranties in the Section of the Agreement to
              which they expressly refer and not to any other representation or
              warranty in this Agreement. In the event of any inconsistency
              between the statements in this Agreement and those in the
              Schedules, the statements in this Agreement will control.


       8.5    AMENDMENT AND WAIVER: CUMULATIVE EFFECT.
              To be effective, any amendment or waiver under this Agreement must
              be in writing and signed by the party against whom enforcement of
              the same is sought Neither the failure of any party to exercise
              any right, power or remedy provided under this Agreement or to
              insist upon compliance by any other party with its obligations
              under this Agreement, nor any custom or practice of the parties at
              variance with the terms of this Agreement, shall constitute a
              waiver by such party of its right to exercise any such right,
              power or remedy or to demand such compliance. The rights and
              remedies of the parties are cumulative and not exclusive of the
              rights and remedies that they otherwise might have now or
              hereafter at law, in equity, by statute or otherwise.



                                       26
<PAGE>   28

       8.6    SEVERABILITY.
              If any term or other provision of this Agreement is held by a
              court of competent jurisdiction to be invalid, illegal or
              incapable of being enforced under any applicable Legal Requirement
              in any particular respect or under any particular circumstances,
              then, so long as the economic or legal substance of the
              Contemplated Transactions is not affected in any manner materially
              adverse to any party, (i) such term or provision shall
              nevertheless remain in full force and effect in all other respects
              and under all other circumstances, and (ii) all other terms,
              conditions and provisions of this Agreement shall remain in full
              force and effect. Upon such determination that any term or other
              provision is invalid, illegal or incapable of being enforced, the
              parties shall negotiate in good faith to modify this Agreement so
              as to effect the original intent of the parties as closely as
              possible in an acceptable manner so that the Contemplated
              Transactions are fulfilled to the fullest extent possible.


       8.7    FINANCIAL ADVISORS, BROKERS AND FINDERS.

              a)     The Seller represents and warrants to the Buyer that it has
                     not employed the services of an investment banker,
                     financial advisor, broker or finder in connection with this
                     Agreement or any of the transactions contemplated hereby.
                     The Seller indemnifies and agrees to defend and hold the
                     Buyer and each of the Companies harmless against and in
                     respect of all claims, losses, liabilities, fees, costs and
                     expenses which may be asserted against the Buyer (or any
                     Affiliate of the Buyer) by any broker or other person who
                     claims to be entitled to an investment banker's, financial
                     advisor's, broker's, finder's or similar fee or commission
                     in respect of the execution of this Agreement, or the
                     consummation of the transactions contemplated hereby, by
                     reason of his acting at the request of the Seller.

              b)     The Buyer represents and warrants to the Seller that it has
                     not employed the services of an investment banker,
                     financial advisor, broker or finder in connection with this
                     Agreement or any of the transactions contemplated hereby.
                     The Buyer indemnifies and agrees to save and hold the
                     Seller harmless against and in respect of all claims,
                     losses, liabilities, fees, costs and expenses which may be
                     asserted against it by any broker or other person who
                     claims to be entitled to an investment banker's, financial
                     advisor's, broker's, finder's or similar fee or commission
                     in respect of the execution of this Agreement or the
                     consummation of the transactions contemplated hereby, by
                     reason of his acting at the request of the Buyer.


       8.8    COSTS AND EXPENSES.
              Whether or not the transactions contemplated by this Agreement are
              consummated, each of the parties to this Agreement shall bear its
              own expenses incurred in connection with the negotiation,
              preparation, execution and closing of this Agreement and the
              transactions provided for hereby.



                                       27
<PAGE>   29

       8.9    NOTICES.
              All notices or other communications required or permitted by this
              Agreement shall be effective upon receipt and shall be in writing
              and delivered personally or by overnight courier, or sent by
              facsimile, as follows:

            If to Buyer, to: MRV COMMUNICATIONS INC.
                             20415 Nordhoff castsworth
                             Ca, 91311 U.S.A.


            With a copy to:  M. Talmor, Attorney at Law
                             3, Daniel Frisch St., Tel - Aviv
                             Israel


            If to the Seller, to:  Dr. David Medved
                             18 Marcus st., Jerusalem
                             Israel


            With a copy to:  Slonim and Waldinger
                             2 Kaufman st. Tel - Aviv 68012
                             Israel


              or to such other address as hereafter shall be furnished as any of
              the parties hereto to the other parties hereto.


       8.10   ENTIRE AGREEMENT.
              This Agreement (together with its Schedules) represents the entire
              agreement and understanding of the parties with reference to the
              transactions set forth herein and no representations or warranties
              have been made in connection with this Agreement other than those
              expressly set forth herein. This Agreement supersedes the MOU
              executed on March 26 2000 all prior negotiations, discussions,
              correspondence, communications, understandings and agreements
              between the parties relating to the subject matter of this
              Agreement (other than the Confidentiality Agreement dated ________
              (the "Confidentiality Agreement"), which shall remain in full
              effect for all purposes thereof) and all prior drafts of this
              Agreement, all of which are merged into this Agreement, No
              Memorandum of understanding, prior drafts of this Agreement and no
              words or phrases from any such prior drafts shall be admissible
              into evidence in any proceeding or other legal action involving
              this Agreement. All Schedules hereto are part of the present
              Agreement, and any matter disclosed in any Schedule shall be
              deemed disclosed in every other Schedule.



                                       28
<PAGE>   30

       8.11   NO THIRD PARTY RIGHTS ASSIGNMENT.
              This Agreement is intended to be solely for the benefit of the
              parties hereto and is not intended to confer any benefits upon, or
              create any rights in favor of, any person other than the parties
              hereto and shall not be assignable (other then by the Buyer to any
              of its affiliates) without the prior written consent of the other
              party. Notwithstanding the foregoing, the Seller acknowledge and
              agrees that the Buyer may at any time prior to Closing assign its
              rights to purchase the Shares and its other rights under this
              Agreement to one or more subsidiaries of the Buyer, provided that
              no such assignment shall relieve the Buyer of any of its
              obligations hereunder.


       8.12   TRANSFER TAXES.
              Any transfer taxes or similar levies that may become payable in
              Israel or any other Jurisdiction as a result of the execution of
              this Agreement or the transfer of the Shares pursuant thereto, and
              which are by law payable initially as a primary obligation of
              Seller shall be for the sole account of the Seller stamp tax in
              connection with this Agreement shall be paid in equal shares by
              Seller and Buyer.


       8.13   GOVERNING LAW.
              This Agreement shall be governed by and enforced in accordance
              with the laws of Israel and the Courts of Tel - Aviv, Israel will
              have sole Local Jurisdiction in connection with any dispute
              arising in connection with this Agreement and the transactions
              described.


IN WITNESS WHEREOF, THE PARTIES HERETO HAVE EXECUTED THIS AGREEMENT AS OF THE
DATE FIRST ABOVE WRITTEN.


DAVID MEDVED
            ------------------------------
YAEL MEDVED - AMISHAV
                     ---------------------
BENYAMIN MEDVED
               ---------------------------
JONATHAN MEDVED
               ---------------------------
HARRY MEDVED
            ------------------------------
MICHAEL MEDVED
              ----------------------------
JOLT LTD.
         ----------------------------------------
BY: DAVID MEDVED CHAIRMAN OF THE BOARD AND C.T.O.


MRV COMMUNICATIONS INC.
                       ------------------
BY: YAFFA JACOB



                                       29