Document:

Exhibit 10.2

 

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

 

THIS
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”), dated as of October 26,
2010 (the “Agreement Date”), is entered into by and between Douglas R. Lebda (“Employee”)
and Tree.com, Inc. (the “Company”). All capitalized terms used herein
without definition shall have the meaning assigned to them in the Prior
Agreement (as defined below).

 

WHEREAS,
Employee is currently serving as Chairman and Chief Executive Officer of the
Company;

 

WHEREAS,
the Company was formed in connection with the spin-off by IAC/InterActiveCorp (“IAC”)
of its LendingTree and Real Estate financial reporting segments into a separate
publicly-traded company.  For purposes of
this Agreement, “IAC LendingTree” shall mean IAC’s LendingTree and Real Estate
financial reporting segments;

 

WHEREAS,
Employee and the Company are parties to an Employment Agreement, dated January 7,
2008 which has been subsequently amended to reflect the Spin-Off as well as to
make certain other changes (the “Current Agreement”);

 

WHEREAS,
Employee, IAC and IAC LendingTree were parties to an Employment Agreement
(the “Prior Agreement”), dated as of December 14, 2005, which generally
became effective as of the effective date (as that term is defined in the Prior
Agreement), and which has been superseded by the Current Agreement;

 

WHEREAS,
Employee and the Company now wish to amend and restate the Current Agreement to
incorporate all amendments thereto, to make certain conforming changes to
reflect the Spin-Off and to make certain additional changes; and

 

WHEREAS,
in order to effect the foregoing, the Company and Employee wish to enter into
an amended and restated employment agreement on the terms and conditions set
forth below.

 

NOW,
THEREFORE, in consideration of the mutual agreements hereinafter set forth,
Employee and the Company have agreed and do hereby agree as follows:

 

1A.          EMPLOYMENT.
The Company agrees to employ Employee as Chairman and Chief Executive Officer
as of January 7, 2008 (the “Effective Date”) and Employee accepts and
agrees to such employment.  During
Employee’s employment with the Company, Employee shall perform all services and
acts necessary or advisable to fulfill the duties and responsibilities as are
commensurate and consistent with Employee’s position and shall render such
services on the terms set forth herein. During Employee’s employment with the
Company, Employee shall report to the Board of Directors of the Company.  Employee agrees to devote all of Employee’s
working time, attention and efforts to the Company and to perform the duties of
Employee’s position in accordance with the Company’s policies as in effect from
time to time.

 

 

Notwithstanding
anything to the contrary above, Employee may serve as a corporate board member
for Eastman Kodak Company and Recyclebank, Inc. (collectively, the “Current
Boards”) and such other organizations (not to exceed four (4) in the
aggregate) as are approved in advance by the Company, provided said service
does not (a) interfere with Employee’s ability to perform his duties for
the Company as contemplated hereunder, and (b) compete with, or present an
actual or apparent conflict of interest for, the Company, which shall be
determined by the Board of Directors the Company, in its sole, good faith
judgment.  The Company acknowledges that
as of the Effective Date, Employee is serving as a corporate board member on
the Current Boards.

 

2A.          TERM
OF AGREEMENT. The term (“Term”) of this Agreement shall commence on the
Effective Date and shall continue through the fifth anniversary of the
Effective Date, unless sooner terminated in accordance with the provisions of Section 1
of the Standard Terms and Conditions attached hereto; provided that certain
terms and conditions herein may specify a greater period of effectiveness.
Employee and the Company will enter into good faith negotiations to extend the
Term no later than six months prior to the end of the Term, provided, that
Employee has provided written notice to the Company between eight and six months
prior to the end of the Term which sets forth his interest in entering into
such negotiations.

 

3A.          COMPENSATION.

 

(a)           BASE SALARY. During the Term, the Company shall pay
Employee an annual base salary of $550,000 (the “Base Salary”) payable in equal biweekly installments or in such
other installments as may be in accordance with the Company’s standard payroll
practices as in effect from time to time. The Base Salary shall be reviewed by
the Company as the Company determines to be appropriate or, if requested by
Employee in writing, no less frequently than annually in a manner consistent
with similarly situated executives of the Company and may be increased but not
decreased. For all purposes under this Agreement, the term “Base Salary” shall
refer to the Base Salary as in effect from time to time.

 

(b)           DISCRETIONARY BONUS. During the Term, Employee
shall be eligible to receive discretionary annual bonuses in a manner
consistent with similarly situated executives of the Company. The Board of
Directors, in consultation with Employee, shall establish performance-based
metrics for determining the amount of the bonus paid to Employee, which metrics
shall be consistent with those established for similarly situated executives of
the Company.

 

(c)           EQUITY COMPENSATION.

 

(i)            Grant of Company Equity Incentives. At the time of the
Spin-Off (or, in the case of the Restricted Preferred Stock (as defined in
subsection (i)(B) below), two days prior to the Spin-Off), Employee was
granted the following equity awards, with the vesting of each of the awards
dependent on the continued service of Employee to the Company through the
vesting term:

 

(A)          An award of stock options (the “Company Options”), giving
Employee the right to acquire 589,850 shares of Company common stock, 

 

2

 

with a per share exercise
price of $8.48.  The Company Options will
be governed by the Second Amended and Restated Tree.com, Inc. 2008 Stock
and Annual Incentive Plan (the “Stock Plan”) and related stock option agreement
and shall vest in full on the fifth anniversary of the Effective Date. In the
event of any conflict or ambiguity between this Agreement and the Stock Plan or
stock option agreement, this Agreement shall control.

 

(B)          In consideration for Employee’s past and future services to
the Company (and its predecessor businesses) and its subsidiaries, restricted
shares of Series A Preferred Stock (the “Restricted Preferred Stock”) of
LendingTree Holdings Corp. (“LT Holdings”), such shares having an aggregate
liquidation preference of $5,000,000 or $1,000 per share (the “Liquidation
Preference”). Employee vested in two-thirds of the shares of Restricted
Preferred Stock on the second anniversary of the Spin-Off and exchanged
2,902.33 of such shares (plus cash related to accrued and unpaid dividends) for
534,900 shares of the Company’s common stock. 
The remaining one-third of the shares of Restricted Preferred Stock will
(1) vest on the third anniversary of the Spin-Off and as otherwise set
forth in the Restated Restricted Share Grant and Shareholders’ Agreement, dated
August 15, 2008 by and among IAC, LT Holdings and Employee, as amended
(the “Restricted Stock Agreement”); (2) be mandatorily redeemable by the
issuer on the fifth anniversary of the date of issuance; (3) accrue
dividends at a rate of 12% of the Liquidation Preference per share per year and
unpaid dividends compound at a rate per annum equal to the dividend rate; and (4) have
such other terms as shall be set forth in the Certificate of Incorporation for
LT Holdings.  In the event of any
conflict or ambiguity between this Agreement and the Restricted Stock
Agreement, this Agreement shall control.

 

(ii)           2009 Equity Awards.  Employee was granted the following equity
awards in 2009:

 

(A)          Effective March 26, 2009, Employee was granted one
hundred seventy-five thousand (175,000) shares of Company restricted common
stock, vesting in four equal installments on the first, second, third, and
fourth anniversary of February 17, 2009.

 

(B)          In addition, on or about April 28, 2009 and Employee’s
employment on such date, Employee was granted one hundred seventy-five thousand
(175,000) shares of Company restricted common stock, vesting in four equal
installments on the first, second, third, and fourth anniversary of February 17,
2009.

 

(C)          Such grants shall be governed by and subject to the terms
of the Stock Plan.

 

3

 

(D)          For purposes of the vesting provisions set forth in Section 1(d) of
the Standard Terms and Conditions, the restricted stock granted under this Section 3A(c)(ii) shall
be considered “Company Restricted Stock.”

 

(iii)          2010 Equity Award.  Employee was granted one hundred fifty
thousand (150,000) shares of Company restricted common stock pursuant to the
Restricted Stock Award Agreement, granted on March 31, 2010, between the
Company and Employee (the “2010 Restricted Stock Award”).  For purposes of the vesting provisions set
forth in Section 1(d) of the Standard Terms and Conditions, the
restricted stock granted pursuant to the 2010 Restricted Stock Award shall be
considered “Company Restricted Stock.”

 

(iv)          Notwithstanding the foregoing and anything to the contrary
in this Agreement or any other agreement pursuant to which Employee has
received, or shall receive in the future, awards of equity from the Company, to
the extent not vested in such equity awards, Employee shall become immediately
100% vested in such equity awards upon the occurrence of a “Change in Control”
(as such term is defined by Section 1(g) of the Standard Terms and
Conditions) and in the case of restricted stock awards, such underlying shares
shall become immediately nonforfeitable and transferable.

 

(d)           BENEFITS. During the Term, Employee shall be
eligible to participate in any welfare, health, life insurance, pension benefit
and incentive plans, programs, policies and practices as may be adopted from
time to time by the Company on the same basis as that provided to similarly
situated employees of the Company generally. Without limiting the generality of
the foregoing, Employee shall be eligible for the following benefits:

 

(i)            Reimbursement for Business
Expenses. During the Term, the Company shall reimburse Employee for
all reasonable and necessary expenses incurred by Employee in performing
Employee’s duties for the Company, on the same basis as similarly situated
employees of the Company generally and in accordance with the Company’s
policies as in effect from time to time.

 

(ii)           Vacation.
During the Term, Employee shall be eligible for paid vacation in accordance
with the plans, policies, programs and practices of the Company applicable to
similarly situated employees of the Company generally. Any accrued vacation
under IAC’s plans, policies, programs and practices shall be rolled over and
continue to be available to Employee upon his becoming subject to the Company’s
plans, policies, programs and practices regarding vacation.

 

4A.          NOTICES.
All notices and other communications under this Agreement shall be in writing
and shall be given by first-class mail, certified or registered with return
receipt requested or hand delivery acknowledged in writing by the recipient
personally, and shall be deemed to have been duly given three days after
mailing or immediately upon duly acknowledged hand delivery, as applicable, to
the respective persons named below:

 

	
  If
  to the Company:

  	
  Tree.com, Inc.

  11115 Rushmore Drive 

  

 

4

 

	
   

  	
  Charlotte,
  NC 28277

  
	
   

  	
   

  
	
   

  	
  Attention:
  Senior Vice President of Human Resources

  
	
   

  	
   

  
	
  If
  to the Employee:

  	
  At
  the most recent address on file at the Company.

  

 

Either
party may change such party’s address for notices by notice duly given pursuant
hereto.

 

5A.          GOVERNING
LAW, JURISDICTION. This Agreement and the legal relations thus created
between the parties hereto shall be governed by and construed under and in
accordance with the laws of the State of Delaware without reference to the
principles of conflicts of laws. Any and all disputes between the parties which
may arise pursuant to this Agreement will be heard and determined solely before
an appropriate federal court in the State of New York, or, if not maintainable
therein, then in an appropriate New York state court. The parties acknowledge
that such courts have jurisdiction to interpret and enforce the provisions of
this Agreement, and the parties consent to, and waive any and all objections
that they may have as to, personal jurisdiction and/or venue in such courts.

 

6A.          COUNTERPARTS.
This Agreement may be executed in several counterparts, each of which shall be
deemed to be an original but all of which together will constitute one and the
same instrument. Employee expressly understands and acknowledges that the
Standard Terms and Conditions attached hereto are incorporated herein by
reference, deemed a part of this Agreement and are binding and enforceable
provisions of this Agreement. References to “this Agreement” or the use of the
term “hereof’ shall refer to this Agreement and the Standard Terms and
Conditions attached hereto, taken as a whole.

 

7A.          EFFECT ON CURRENT AGREEMENT.  This Agreement constitutes the entire
agreement between the parties, and as of the Agreement Date, restates and
supersedes the Current Agreement.

 

IN
WITNESS WHEREOF, the Company has caused this Agreement to be executed and
delivered by its duly authorized officer and Employee has executed and
delivered this Agreement as of the date set forth above.

 

	
   

  	
  TREE.COM, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Evva Claudette Hampton

  
	
   

  	
  Name:   Evva Claudette Hampton

  
	
   

  	
  Title:  Senior Vice President, Human Resources

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EMPLOYEE

  

 

5

 

	
   

  	
  By:

  	
  /s/
  Douglas R. Lebda

  
	
   

  	
  Name:   Douglas R. Lebda

  
	
   

  	
  Title:   Chairman & Chief Executive
  Officer

  

 

6

 

STANDARD TERMS AND CONDITIONS

 

1.             TERMINATION OF EMPLOYEE’S EMPLOYMENT.

 

(a)           DEATH. Upon termination of Employee’s employment
prior to the expiration of the Term by reason of Employee’s death, the Company
shall pay Employee’s designated beneficiary or beneficiaries, within 30 days of
Employee’s death in a lump sum in cash, (i) Employee’s Base Salary from
the date of Employee’s death through the end of the month in which Employee’s
death occurs and (ii) any Accrued Obligations (as defined in Section 1(f) below).

 

(b)           DISABILITY. Upon termination of Employee’s
employment prior to expiration of the Term by reason of Employee’s Disability,
the Company shall pay Employee, within 30 days of such termination in a lump
sum in cash, (i) Employee’s Base Salary from the date of Employee’s
termination of employment due to Disability through the end of the month in
which such termination occurs, offset by any amounts payable to Employee under
any disability insurance plan or policy provided by the Company and (ii) any
Accrued Obligations (as defined in Section 1(f) below). “Disability”
shall mean a condition, resulting from bodily injury or disease, that renders,
and for a six consecutive month period has rendered, Employee unable to perform
substantially the duties pertaining to his employment with the Company. A
return to work of less than 14 consecutive days will not be considered an
interruption in Employee’s six consecutive months of disability. Disability
will be determined by the Company on the basis of medical evidence satisfactory
to the Company.

 

(c)           TERMINATION FOR CAUSE: RESIGNATION BY EMPLOYEE WITHOUT
GOOD REASON. The Company may terminate Employee’s employment under this
Agreement with or without Cause at any time. Upon termination of Employee’s
employment prior to expiration of the Term by the Company for Cause or upon
Employee’s resignation without Good Reason, this Agreement shall terminate
without further obligation by the Company, except for the payment of any
Accrued Obligations (as defined in Section 1(f) below). As used
herein, “Cause” shall mean: (i) the plea of guilty or nolo  contendere
to, or conviction for, a felony offense; provided  however, that
after indictment, the Company may suspend Employee from the rendition of
services, but without limiting or modifying in any other way the Company’s
obligations to Employee under this Agreement; provided, further
that Employee’s employment shall be immediately reinstated if the indictment is
dismissed or otherwise dropped and there is not otherwise grounds to terminate
Employee’s employment for Cause; (ii) a material breach by Employee of a
fiduciary duty owed to the Company; (iii) a material breach by Employee of
any of the covenants made by Employee in Section 2 hereof; or (iv) the
willful or gross neglect by Employee of the material duties required by this
Agreement. Before a cessation of Employee’s employment shall be deemed to be a
termination of Employee’s employment for Cause, (A) the Company shall
provide written notice to Employee that identifies the conduct described in
clauses (ii), (iii) or (iv) above, as applicable, and (B) in the
event that the event or condition is curable, Employee shall have failed to
remedy such event or condition within 30 days after Employee shall have
received the written notice from the Company described above.  As used herein, “Good Reason” shall mean the
occurrence of any of the following without Employee’s written consent, (i) a
material adverse change in Employee’s, title, duties, operational authorities
or reporting responsibilities as they relate to Employee’s position as 

 

7

 

Chairman and Chief Executive Officer of the Company
from those in effect immediately following the Effective Date, excluding for
this purpose any such change that is an isolated and inadvertent action not
taken in bad faith and that is remedied by the Company promptly after receipt
of notice thereof given by the Employee, (ii) a material reduction in
Employee’s annual base salary, (iii) a relocation of Employee’s principal
place of business more than 25 miles from the Charlotte, North Carolina
metropolitan area, or (iv) a material breach by the Company of this
Agreement, excluding for this purpose any such action that is an isolated and
inadvertent action not taken in bad faith and that is remedied by the Company
promptly after receipt of notice thereof given by the Employee.

 

(d)           TERMINATION BY THE COMPANY OTHER THAN FOR DEATH,
DISABILITY OR CAUSE; RESIGNATION BY EMPLOYEE FOR GOOD REASON.  Upon termination of Employee’s employment
with the Company prior to expiration of the Term (i) by the Company
without Cause (other than for death or Disability) or (ii) upon Employee’s
resignation for Good Reason (either such termination, a “Qualifying Termination”),
the Company shall pay Employee the amounts described in clauses (A) and (B) on
the 60th day following Employee’s termination (the “Qualifying Termination
Payment Date”) and take the actions described in clauses (C) and (D);
provided that, payment of the amount described in clause (A) and the
actions described in clauses (C) and (D) shall be conditioned on
Employee’s execution and non-revocation before the Qualifying Termination
Payment Date of a general release of the Company and its affiliates
substantially in the form attached hereto as Exhibit A, and Employee’s
compliance with Sections 2(a) through 2(e):

 

(A) an amount (the “Severance Amount”) equal to
the greater of:

 

(i) the amount of Base Salary (calculated using
Employee’s then-current Base Salary) that Employee would have received had his
employment continued over the period commencing on the date of Employee’s
Qualifying Termination and ending on the earlier of (x) the last day of
the Term or (y) the third anniversary of the date of the Qualifying
Termination, or

 

(ii) one times Employee’s then-current Base
Salary plus Employee’s target annual bonus for the bonus program in effect for
Employee for the year in which Employee’s employment terminates.

 

The Severance Amount shall be paid in substantially
equal payments in accordance with the Company’s normal payroll practices in
effect at the time of Employee’s termination of employment (except as otherwise
required pursuant to Section 10) and shall be payable over the period
commencing on the Qualifying Termination Payment Date and ending on the earlier
of (x) the last day of the Term or (y) three (3) years from the
date of the Qualifying Termination;

 

(B) a lump sum cash payment equal to any
Accrued Obligations;

 

(C) the vesting of all IAC restricted stock
units held by Employee on the Effective Date shall be accelerated in full; and

 

8

 

(D) to the extent previously granted, the
Employee shall be fully vested in the Company Restricted Stock and the Company
Options (as such terms are defined in Section 3A(c) of the Agreement)
that he holds on the termination date and the Company Options shall remain
exercisable for a period of twelve months from the date of such termination.

 

Notwithstanding
the foregoing, in no event shall Employee’s resignation be for Good Reason
unless (x) an event or circumstance set forth in any of clauses (i) through
(iv) of the definition thereof shall have occurred and Employee provides
the Company with written notice thereof within forty-five (45) days after
Employee has knowledge of the occurrence or existence of such event or
circumstance, which notice specifically identifies the event or circumstance
that Employee believes constitutes Good Reason, (y) the Company fails to
correct the circumstance or event so identified within thirty (30) days after
the receipt of such notice, and (z) Employee resigns within ninety (90)
days after the date of delivery of the notice referred to in clause (x) above.

 

(e)           MITIGATION; OFFSET. In the event of a termination
of Employee’s employment prior to the end of the Term, in no event shall
Employee be obligated to seek other employment or take any other action by way
of mitigation of severance benefits or other compensation or benefits. If
Employee obtains other employment during the Term, the amount of any severance
payments to be made to Employee under Section 1(d) hereof after the
date such employment is secured shall be offset by the amount of compensation
earned by Employee from such employment through the end of the Term. For
purposes of this Section 1(e), Employee shall have an obligation to inform
the Company promptly regarding Employee’s employment status following
termination and during the period encompassing the Term.

 

(f)            ACCRUED OBLIGATIONS. As used in this Agreement, “Accrued
Obligations” shall mean the sum of (i) any portion of Employee’s accrued
but unpaid Base Salary through the date of death or termination of employment
for any reason, as the case may be; (ii) any compensation previously
earned but deferred by Employee (together with any interest or earnings
thereon) that has not yet been paid, (iii) any reasonable and necessary
business expenses incurred by Employee prior to the date of termination of
employment but not yet reimbursed and (iv) any benefits earned by Employee
but unpaid or unused at the date of termination of employment provided that the
payout of these benefits is consistent with the plans, policies, programs and
practices of the Company at the date of termination of employment.

 

(g)           QUALIFYING TERMINATION WITHIN ONE YEAR FOLLOWING CHANGE
IN CONTROL.  If Employee experiences
a Qualifying Termination within the one-year period following a Change in
Control (as defined below), the Company shall pay Employee the amounts
described in clauses (A) and (B) on the 60th day following Employee’s
termination (the “Change in Control Payment Date”) and take the actions
described in clauses (C) and (D); provided that, payment of the amount
described in clause (A) and the actions described in clauses (C) and (D) shall
be conditioned on Employee’s execution and non-revocation before the Change in
Control Payment Date of a general release of the Company and its affiliates
substantially in the form attached hereto as Exhibit A, and Employee’s
compliance with Sections 2(a) through 2(e):

 

9

 

(A) an amount equal to three (3) times
Employee’s then-current Base Salary payable over the period commencing on the
Change in Control Payment Date and ending on the earlier of (i) the last
day of the Term or (ii) three (3) years from the date of the
Qualifying Termination, and paid in substantially equal payments in accordance
with the Company’s normal payroll practices in effect at the time of Employee’s
termination of employment (except as otherwise required pursuant to Section 10);

 

(B) a lump sum cash payment equal to any
Accrued Obligations;

 

(C) the vesting of all IAC restricted stock
units held by Employee on the Effective Date shall be accelerated in full; and

 

(D) to the extent previously granted, the
Employee shall be fully vested in the Company Restricted Stock and the Company
Options (as such terms are defined in Section 3A(c) of the Agreement)
that he holds on the termination date and the Company Options shall remain
exercisable for a period of twelve months from the date of such termination.

 

Notwithstanding
the foregoing, in no event shall Employee’s resignation be for Good Reason
unless the requirements of Section 1(d)(x) through Section 1(d)(z) are
met with respect to such resignation.

 

For
purposes of this Section 1(g), the term “Change in Control” has the
meaning set forth in the Stock Plan.

 

Further,
no amounts payable to Employee pursuant to this Section 1(g) shall be
subject to the mitigation or offset provisions described in Section 1(e) of
these Standard Terms and Conditions.

 

2.             CONFIDENTIAL INFORMATION; NON-COMPETE;
NON-SOLICITATION; AND PROPRIETARY RIGHTS.

 

(a)           CONFIDENTIALITY. Employee acknowledges that while
employed by the Company, Employee will occupy a position of trust and
confidence. Employee shall not, except as may be required to perform Employee’s
duties hereunder or as required by applicable law, disclose to others or use,
whether directly or indirectly, any Confidential Information. “Confidential
Information” shall mean information about the Company or any of its
subsidiaries or affiliates, and their clients and customers that is not
disclosed by the Company or any of its subsidiaries or affiliates for financial
reporting purposes and that was learned by Employee in the course of employment
with the Company or any of its subsidiaries or affiliates, including without
limitation any proprietary knowledge, trade secrets, data, formulae,
information and client and customer lists and all papers, resumes, and records
(including computer records) of the documents containing such Confidential
Information. Employee acknowledges that such Confidential Information is
specialized, unique in nature and of great value to the Company and its
subsidiaries or affiliates, and that such information gives the Company and its
subsidiaries or affiliates a competitive advantage. Employee agrees to deliver
or return to the Company, at the Company’s request at any time or upon
termination or expiration of Employee’s employment or as soon thereafter as
possible, all documents, computer tapes and disks, records, lists, data,
drawings, prints, notes and written information (and all copies thereof)
furnished by the

 

10

 

Company and its subsidiaries or affiliates or
prepared by Employee in the course of Employee’s employment by the Company and
its subsidiaries or affiliates. As used in this Agreement, “affiliates” shall
mean any company controlled by, controlling or under common control with the
Company.

 

(b)           NON-COMPETITION. During the Term and for a period
of 24 months beyond Employee’s date of termination of employment for any reason
following the date hereof (the “Restricted Period”), Employee shall not,
without the prior written consent of the Company, directly or indirectly,
engage in or become associated with a Competitive Activity. For purposes of
this Section 2(b): (i) a “Competitive Activity” means any business or
other endeavor, in any state of the United States or a comparable jurisdiction
in Canada or any other country, involving products or services that are the
same or similar to the type of products or services that the Company is engaged
in providing both (x) as of the date hereof or at any time during the Term
and (y) at any time during the twelve (12) month period preceding Employee’s
termination of employment, and (ii) Employee shall be considered to have
become “associated with a Competitive Activity” if Employee becomes directly or
indirectly involved as an owner, principal, employee, officer, director,
independent contractor, representative, stockholder, financial backer, agent,
partner, member, advisor, lender, or in any other individual or representative
capacity with any individual, partnership, corporation or other organization
that is engaged in a Competitive Activity. Notwithstanding the foregoing, (i) Employee
may make and retain investments during the Restricted Period, for investment
purposes only, in less than one percent (1%) of the outstanding capital stock
of any publicly-traded corporation engaged in a Competitive Activity if the
stock of such corporation is either listed on a national stock exchange or on
the NASDAQ National Market System if Employee is not otherwise affiliated with
such corporation and (ii) Employee may become employed by a partnership,
corporation or other organization that is engaged in a Competitive Activity so
long as Employee has no direct or indirect responsibilities or involvement in
the Competitive Activity.  Notwithstanding
the foregoing and exclusively with respect to Employee’s termination of
employment pursuant to Section 1(g), the Restricted Period shall be
reduced from 24 months to 12 months following Employee’s date of termination,
solely to the extent applicable to Competitive Activity unrelated to online
lending.

 

(c)           NON-SOLICITATION OF EMPLOYEES. During the
Restricted Period, Employee shall not, without the prior written consent of the
Company, directly or indirectly, hire or recruit or solicit the employment or
services of (whether as an employee, officer, director, agent, consultant or
independent contractor), any employee, officer, director, agent, consultant or
independent contractor of the Company or any of its subsidiaries or affiliates
(except for such employment or hiring by the Company or any of its subsidiaries
or affiliates); provided, however that this Section 2(c) shall not
apply to any hiring which results solely from a general solicitation of
employment that was not directed to employees of the Company or any of its
subsidiaries or affiliates. Notwithstanding the foregoing and exclusively with
respect to Employee’s termination of employment pursuant to Section 1(g),
the Restricted Period shall be reduced from 24 months to 12 months following
Employee’s date of termination, solely to the extent applicable to Competitive
Activity unrelated to online lending.

 

(d)           NON-SOLICITATION OF BUSINESS PARTNERS. During the
Restricted Period, Employee shall not, without the prior written consent of the
Company, directly 

 

11

 

or indirectly, solicit, attempt to do business with,
or do business with any business partners or business affiliates of the Company
or any of its subsidiaries or those affiliates of the Company that are engaged
in a Competitive Activity, or encourage (regardless of who initiates the
contact) any such business partners or business affiliates to use the services
of any competitor of the Company, its subsidiaries or affiliates. Notwithstanding
the foregoing and exclusively with respect to Employee’s termination of
employment pursuant to Section 1(g), the Restricted Period shall be
reduced from 24 months to 12 months following Employee’s date of termination,
solely to the extent applicable to Competitive Activity unrelated to online
lending.

 

(e)           PROPRIETARY RIGHTS; ASSIGNMENT. All Employee
Developments shall be made for hire by Employee for the Company or any of its
subsidiaries or affiliates. “Employee Developments” means any idea, discovery, invention,
design, method, technique, improvement, enhancement, development, computer
program, machine, algorithm or other work or authorship that (i) relates
to the business or operations of the Company or any of its subsidiaries or
affiliates, or (ii) results from or is suggested by any undertaking
assigned to the Employee or work performed by the Employee for or on behalf of
the Company or any of its subsidiaries or affiliates, whether created alone or
with others, during or after working hours. All Confidential Information and
all Employee Developments shall remain the sole property of the Company or any
of its subsidiaries or affiliates. The Employee shall acquire no proprietary
interest in any Confidential Information or Employee Developments developed or
acquired during the Term. To the extent the Employee may, by operation of law
or otherwise, acquire any right, title or interest in or to any Confidential
Information or Employee Development, the Employee hereby assigns to the Company
all such proprietary rights. The Employee shall, both during and after the
Term, upon the Company’s request, promptly execute and deliver to the Company
all such assignments, certificates and instruments, and shall promptly perform
such other acts, as the Company may from time to time in its discretion deem
necessary or desirable to evidence, establish, maintain, perfect, enforce or
defend the Company’s rights in Confidential Information and Employee
Developments.

 

(f)            COMPLIANCE WITH POLICIES AND PROCEDURES. During
the Term, Employee shall adhere to the policies and standards of
professionalism set forth in the Company’s policies and procedures as they may
exist from time to time.

 

(g)           REMEDIES FOR BREACH. Employee expressly agrees and
understands that Employee will notify the Company in writing of any alleged
breach of this Agreement by the Company, and the Company will have 30 days from
receipt of Employee’s notice to cure any such breach.

 

Employee
expressly agrees and understands that the remedy at law for any breach by Employee
of this Section 2 will be inadequate and that damages flowing from such
breach are not usually susceptible to being measured in monetary terms.
Accordingly, it is acknowledged that upon Employee’s violation of any provision
of this Section 2, in addition to any remedy that the Company may have at
law, the Company shall be entitled to obtain from any court of competent
jurisdiction immediate injunctive relief and obtain a temporary order
restraining any threatened or further breach as well as an equitable accounting
of all profits or benefits arising out of such violation. Nothing in this Section 2
shall be deemed to limit the Company’s remedies 

 

12

 

at
law or in equity for any breach by Employee of any of the provisions of this Section 2,
which may be pursued by or available to the Company.

 

(h)           SURVIVAL OF PROVISIONS. The obligations contained
in this Section 2 shall, to the extent provided in this Section 2,
survive the termination or expiration of Employee’s employment with the Company
and, as applicable, shall be fully enforceable thereafter in accordance with
the terms of this Agreement. If it is determined by a court of competent
jurisdiction in any state that any restriction in this Section 2 is excessive
in duration or scope or is unreasonable or unenforceable under the laws of that
state, it is the intention of the parties that such restriction may be modified
or amended by the court to render it enforceable to the maximum extent
permitted by the law of that state. If any of the covenants of this Section 2
are determined to be wholly or partially unenforceable in any jurisdiction,
such determination shall not be a bar to or in any way diminish the rights of
the Company or its affiliates, as applicable, to enforce any such covenant in
any other jurisdiction.

 

3.             WAIVER OF PRIOR AGREEMENTS. This Agreement
constitutes the entire agreement between the parties, and Employee acknowledges
that he has waived, effective as of the Effective Date, any and all rights
under prior agreements and understandings (whether written or oral) between
Employee and IAC LendingTree or IAC with respect to the subject matter of this
Agreement, other than the Shares Agreement, as modified by the Prior Agreement,
and the provisions of the Prior Agreement referred to in Section 3A(c)(i).
In addition, Employee acknowledges that notwithstanding the foregoing, Employee
shall continue to be subject to those terms of the Prior Agreement which
survive the termination of such agreement, and those restrictive covenants in
the Prior Agreement that begin to run from Employee’s date of termination,
shall run from the Effective Date concurrently with any similar covenants
contained herein. Employee acknowledges and agrees that neither the Company nor
anyone acting on its behalf has made, and is not making, and in executing this
Agreement, the Employee has not relied upon, any representations, promises or
inducements except to the extent the same is expressly set forth in this
Agreement.

 

4.             ASSIGNMENT; SUCCESSORS. This Agreement is
personal in its nature and none of the parties hereto shall, without the
consent of the others, assign or transfer this Agreement or any rights or
obligations hereunder; provided that, in the event of a merger, consolidation,
transfer, reorganization, or sale of all, substantially all or a substantial
portion of the assets of the Company with or to any other individual or entity,
this Agreement shall, subject to the provisions hereof, be binding upon and
inure to the benefit of such successor and such successor (including the
Company upon assignment of this Agreement) shall discharge and perform all the
promises, covenants, duties, and obligations of the Company hereunder, and all
references herein to the “Company” shall refer to such successor.

 

5.             WITHHOLDING. The Company shall make such
deductions and withhold such amounts from each payment and benefit made or
provided to Employee hereunder, as may be required from time to time by
applicable law, governmental regulation or order.

 

6.             HEADING REFERENCES. Section headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose. References to “this
Agreement” or the use of the term “hereof’ shall refer to these 

 

13

 

Standard Terms and Conditions and the Employment
Agreement attached hereto, taken as a whole.

 

7.             WAIVER; MODIFICATION. Failure to insist upon
strict compliance with any of the terms, covenants, or conditions hereof shall
not be deemed a waiver of such term, covenant, or condition, nor shall any
waiver or relinquishment of, or failure to insist upon strict compliance with,
any right or power hereunder at any one or more times be deemed a waiver or
relinquishment of such right or power at any other time or times. This
Agreement shall not be modified in any respect except by a writing executed by
each party hereto.

 

8.             SEVERABILITY. In the event that a court of
competent jurisdiction determines that any portion of this Agreement is in
violation of any law or public policy, only the portions of this Agreement that
violate such law or public policy shall be stricken. All portions of this
Agreement that do not violate any statute or public policy shall continue in
full force and effect. Further, any court order striking any portion of this
Agreement shall modify the stricken terms as narrowly as possible to give as
much effect as possible to the intentions of the parties under this Agreement.

 

9.             INDEMNIFICATION. The Company shall indemnify and
hold Employee harmless for acts and omissions in Employee’s capacity as an
officer, director or employee of the Company to the maximum extent permitted
under applicable law; provided, however that neither the Company,
nor any of its subsidiaries or affiliates shall indemnify Employee for any
losses incurred by Employee as a result of acts that would constitute Cause
under Section 1(c) of this Agreement. This Section 9 shall
survive the termination or expiration of Employee’s employment with the Company
and, as applicable, shall be fully enforceable thereafter in accordance with
the terms of this Agreement.

 

10.          SECTION 409A OF THE CODE. The benefits provided
under this Agreement shall comply with Section 409A of the Code and the
regulations thereunder. To the extent so required in order to comply with Section 409A
of the Code, (i) amounts and benefits to be paid or provided under this
Agreement shall be paid or provided to Employee, in a single lump sum on the
first business day after the date that is six months following the date of
termination of Employee’s employment or shall begin six months and one day
following the date of termination, and (ii) the Company and Employee agree
to amend or modify this Agreement and any agreements relating hereto (including
any award agreement with respect to equity compensation described in Section 3A(c))
as may be necessary to comply with Section 409A of the Code. For purposes
of this Agreement, the terms “termination” and “termination of employment” (and
variations thereof) shall mean Employee’s “separation from service” within the
meaning of Section 1.409A-1(h) of the Treasury Regulations
promulgated under Section 409A of the Code, applying the default terms thereof.

 

14

 

ACKNOWLEDGED
AND AGREED:

 

Date:     October 26,
2010

 

	
   

  	
  TREE.COM, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Evva Claudette Hampton

  
	
   

  	
  Name:
  Evva Claudette Hampton

  
	
   

  	
  Title:
  Senior Vice President, Human Resources

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EMPLOYEE

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Douglas R. Lebda

  
	
   

  	
  Name:
  Douglas R. Lebda

  
	
   

  	
  Title:
  Chairman & Chief Executive Officer

  

 

15

 

EXHIBIT A

 

FORM OF RELEASE AGREEMENT

 

This
Release Agreement (“Release”) is entered into as of this
             day of
                  ,
hereinafter “Execution Date”, by and between [Employee Full Name] (hereinafter “Employee”),
and Tree.com, Inc. (hereinafter, the “Company”). The Employee and the
Company are sometimes collectively referred to as the “Parties”.

 

1.                                      The Employee’s
employment with the Company is terminated effective [Month, Day, Year]
(hereinafter “Termination Date”). The Parties have agreed to avoid and resolve
any alleged existing or potential disagreements between them arising out of or
connected with the Employee’s employment with the Company including the
termination thereof. The Company expressly disclaims any wrongdoing or any
liability to the Employee.

 

2.                                      The Company
agrees to provide the Employee the severance benefits provided for in Section [1(d)][1(g)]
of his/her Employment Agreement (the “Severance Benefits”) with the Company,
dated as of [ ], after he/she executes this Release [FOR 40+ and does not
revoke it as permitted in Section 8 below, the expiration of such revocation
period being the “Effective Date”)].

 

3.                                      Employee
represents that he/she has not filed, and will not file, any complaints,
lawsuits, administrative complaints or charges relating to her employment with,
or resignation from, the Company, excluding any action to enforce the
Employment Agreement as it relates to the provision of the Severance Benefits
or to Sections 3A(d) or 9[; provided, however, that nothing
contained in this Section 3 shall prohibit you from bringing a claim to
challenge the validity of the ADEA Release in Section 8 herein]. Employee
agrees to release the Company, its subsidiaries, affiliates, and their
respective parents, direct or indirect subsidiaries, divisions, affiliates and
related companies or entities, regardless of its or their form of business
organization, any predecessors, successors, joint ventures, and parents of any
such entity, and any and all of their respective past or present shareholders,
partners, directors, officers, employees, consultants, independent contractors,
trustees, administrators, insurers, agents, attorneys, representatives and
fiduciaries, including without limitation all persons acting by, through, under
or in concert with any of them (collectively, the “Released Parties”), from any
and all claims, charges, complaints, causes of action or demands of whatever
kind or nature that Employee now has or has ever had against the Released
Parties, whether known or unknown, arising from or relating to Employee’s
employment with or discharge from the Company, including but not limited to:
wrongful or tortious termination; constructive discharge; implied or express
employment contracts and/or estoppel; discrimination and/or retaliation under
any federal, state or local statute or regulation, specifically including any
claims Employee may have under the Fair Labor Standards Act, the Americans with
Disabilities Act, Title VII of the Civil Rights Act of 1964 as amended, and the
Family and Medical Leave Act; the discrimination or other employment laws of
the State of [          ](1); any claims
brought under any federal or state statute or regulation for 

 

(1)  Insert state of employment.

 

16

 

non-payment
of wages or other compensation, including grants of stock options or any other
equity compensation; and libel, slander, or breach of contract other than the
breach of this Release. This Release specifically excludes claims, charges,
complaints, causes of action or demand that post-date the Termination Date [or
the Effective Date, whichever is later].

 

4.                                      Employee agrees
to keep the fact that this Release exists and the terms of this Release in
strict confidence except to his/her immediate family and his/her financial and
legal advisors on a need-to-know basis.

 

5.                                      Employee warrants
that no promise or inducement has been offered for this Release other than as
set forth herein and that this Release is executed without reliance upon any
other promises or representations, oral or written. Any modification of this
Release must be made in writing and be signed by Employee and the Company.

 

6.                                      Employee will
direct all employment verification inquiries to [HR Rep]. In response to
inquiries regarding Employee’s employment with the Company, the Company by and
through its speaking agent(s) agrees to provide only the following
information: Employee’s date of hire, the date her employment ended and rates
of pay.

 

7.                                      If any
provision of this Release or compliance by Employee or the Company with any
provision of the Release constitutes a violation of any law, or is or becomes
unenforceable or void, then such provision, to the extent only that it is in
violation of law, unenforceable or void, will be deemed modified to the extent
necessary so that it is no longer in violation of law, unenforceable or void,
and such provision will be enforced to the fullest extent permitted by law. If
such modification is not possible, such provision, to the extent that it is in
violation of law, unenforceable or void, will be deemed severable from the
remaining provisions of this Release, which provisions will remain binding on
both Employee and the Company. This Release is governed by, and construed and
interpreted in accordance with the laws of the State of [   ], without regard to principles of conflicts
of law. Employee consents to venue and personal jurisdiction in the State of [  ] for disputes arising under this Release.
This Release represents the entire understanding with the Parties with respect
to subject matter herein, no oral representations have been made or relied upon
by the Parties.

 

8.                                      [FOR EMPLOYEES
OVER 40 ONLY — In further recognition of the above, Employee hereby releases
and discharges the Released Parties from any and all claims, actions and causes
of action that he/she may have against the Released Parties, as of the date of
the execution of this Release, arising under the Age Discrimination in
Employment Act of 1967, as amended (“ADEA”), and the applicable rules and
regulations promulgated thereunder. The Employee acknowledges and understands
that ADEA is a federal statute that prohibits discrimination on the basis of
age in employment, benefits and benefit plans. Employee specifically agrees and
acknowledges that: (A) the release in this Section 8 was granted in
exchange for the receipt of consideration that exceeds the amount to which
he/she would otherwise be entitled to receive upon termination of his/her
employment; (B) his/her waiver of rights under this Release is knowing and
voluntary as required under the Older Workers Benefit Protection Act; (B) that
he/she has 

 

17

 

read
and understands the terms of this Release; (C) he/she has hereby been
advised in writing by the Company to consult with an attorney prior to
executing this Release; (D) the Company has given him/her a period of up
to twenty-one (21) days within which to consider this Release, which period
shall be waived by the Employee’s voluntary execution prior to the expiration
of the twenty-one day period; and (E) following his/her execution of this
Release he/she has seven (7) days in which to revoke his/her release as
set forth in this Section 8 only and that, if he/she chooses not to so
revoke, the Release in this Section 8 shall then become effective and
enforceable and the payment listed above shall then be made to his/her in
accordance with the terms of this Release. To cancel this Release, Employee
understands that he/she must give a written revocation to the General Counsel
of the Company at [  ](2),either by hand
delivery or certified mail within the seven-day period. If he/she rescinds the
Release, it will not become effective or enforceable and he/she will not be
entitled to any benefits from the Company.]

 

9.                                      EMPLOYEE
ACKNOWLEDGES AND AGREES THAT HE/SHE HAS CAREFULLY READ AND VOLUNTARILY SIGNED
THIS RELEASE, THAT HE/SHE HAS HAD AN OPPORTUNITY TO CONSULT WITH AN ATTORNEY OF
HIS/HER CHOICE, AND THAT HE/SHE SIGNS THIS RELEASE WITH THE INTENT OF RELEASING
THE COMPANY, ITS AFFILIATES, SUBSIDIARIES AND THEIR RESPECTIVE
SHAREHOLDERS, DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS FROM ANY AND ALL
CLAIMS.

 

	
  ACCEPTED
  AND AGREED TO:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [Company
  Name]

  	
   

  	
  [Employee
  Full Name]

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
  Dated:

  	
   

  
						

 

(2) 
Insert address.

 

18Exhibit 10.1

 

 

 

 

STOCK PURCHASE AGREEMENT

 

by and among

 

 

MAGNOLIA SOURCE B.V.,

 

SOURCE PHOTONICS, INC.,

 

SOURCE PHOTONICS SANTA CLARA, INC.

 

and

 

MRV COMMUNICATIONS, INC.

 

 

Dated
as of October 26, 2010

 

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I. PURCHASE AND SALE

  	
  1

  
	
  1.01

  	
  Purchase Price

  	
  1

  
	
  1.02

  	
  The Closing

  	
  2

  
	
  1.03

  	
  Deliveries by the Buyer at the Closing

  	
  2

  
	
  1.04

  	
  Deliveries by the Seller at the Closing

  	
  2

  
	
  1.05

  	
  Simultaneous Delivery

  	
  3

  
	
  1.06

  	
  Delivery of Balance of Purchase Price

  	
  3

  
	
  1.07

  	
  Aggregate RSU Amount

  	
  4

  
	
  1.08

  	
  Bonus Payments

  	
  4

  
	
  1.09

  	
  Withholding

  	
  4

  
	
   

  	
   

  	
   

  
	
  ARTICLE II. REPRESENTATIONS
  AND WARRANTIES OF SELLER

  	
  4

  
	
  2.01

  	
  Organization and Authority

  	
  4

  
	
  2.02

  	
  Authorization; Valid and Binding Agreement

  	
  5

  
	
  2.03

  	
  Ownership of Capital Stock

  	
  5

  
	
  2.04

  	
  No Breach

  	
  5

  
	
  2.05

  	
  Litigation

  	
  5

  
	
   

  	
   

  	
   

  
	
  ARTICLE III.
  REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY AND ITS SUBSIDIARIES

  	
  5

  
	
  3.01

  	
  Organization and Authority

  	
  6

  
	
  3.02

  	
  Authorization; Valid and Binding Agreement

  	
  6

  
	
  3.03

  	
  Capital Stock

  	
  6

  
	
  3.04

  	
  No Breach

  	
  6

  
	
  3.05

  	
  Subsidiaries

  	
  7

  
	
  3.06

  	
  Financial Statements

  	
  7

  
	
  3.07

  	
  Absence of Certain Developments

  	
  9

  
	
  3.08

  	
  Title to Properties

  	
  11

  
	
  3.09

  	
  Tax Matters

  	
  12

  
	
  3.10

  	
  Contracts and Commitments

  	
  14

  
	
  3.11

  	
  Intellectual Property

  	
  15

  
	
  3.12

  	
  Litigation

  	
  17

  
	
  3.13

  	
  Employee Benefit Matters

  	
  17

  
	
  3.14

  	
  Insurance

  	
  18

  
	
  3.15

  	
  Compliance with Laws

  	
  19

  
	
  3.16

  	
  Environmental Matters

  	
  19

  
	
  3.17

  	
  Affiliated Transactions

  	
  20

  
	
  3.18

  	
  Employees

  	
  20

  
	
  3.19

  	
  Brokerage

  	
  21

  
	
  3.20

  	
  Permits

  	
  21

  
	
  3.21

  	
  Product Warranties

  	
  21

  
	
  3.22

  	
  Bank Accounts

  	
  22

  

 

i

 

	
  3.23

  	
  Accounts Receivable

  	
  22

  
	
  3.24

  	
  Foreign Corrupt Practices

  	
  22

  
	
  3.25

  	
  Customers

  	
  22

  
	
  3.26

  	
  Suppliers

  	
  23

  
	
  3.27

  	
  Sufficiency of Assets

  	
  23

  
	
  3.28

  	
  Complete Copies of Materials

  	
  23

  
	
  3.29

  	
  Grants and Benefits

  	
  23

  
	
  3.30

  	
  Director and Officer Claims

  	
  24

  
	
  3.31

  	
  Termination of Intercompany Obligations, Guarantees and
  Indemnity Obligations

  	
  24

  
	
  3.32

  	
  No Other Representations

  	
  24

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV. REPRESENTATIONS
  AND WARRANTIES OF BUYER

  	
  25

  
	
  4.01

  	
  Organization and Authority

  	
  25

  
	
  4.02

  	
  Authorization; Valid and Binding Agreement

  	
  25

  
	
  4.03

  	
  No Breach

  	
  25

  
	
  4.04

  	
  Litigation

  	
  25

  
	
  4.05

  	
  Brokerage

  	
  25

  
	
  4.06

  	
  Investment Representation

  	
  25

  
	
  4.07

  	
  Limited Guarantee

  	
  26

  
	
  4.08

  	
  No Other Representations

  	
  26

  
	
   

  	
   

  	
   

  
	
  ARTICLE V. COVENANTS OF
  SELLER AND THE COMPANY

  	
  26

  
	
  5.01

  	
  Access to Books and Records

  	
  26

  
	
  5.02

  	
  Confidentiality

  	
  26

  
	
  5.03

  	
  Non-Competition

  	
  27

  
	
  5.04

  	
  Non-Solicitation

  	
  28

  
	
  5.05

  	
  Successors

  	
  28

  
	
  5.06

  	
  Third Party Consents

  	
  28

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI. COVENANTS OF
  BUYER

  	
  29

  
	
  6.01

  	
  Access to Books and Records

  	
  29

  
	
  6.02

  	
  Directors and Officer Liability

  	
  29

  
	
  6.03

  	
  Employees and Employee Benefits

  	
  29

  
	
  6.04

  	
  Insurance; Risk of Loss

  	
  31

  
	
  6.05

  	
  Non-Solicitation

  	
  32

  
	
  6.06

  	
  Restricted Stock Unit Awards

  	
  32

  
	
  6.07

  	
  Lease Guaranty

  	
  32

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII. INDEMNIFICATION

  	
  32

  
	
  7.01

  	
  Survival of Representations, Warranties, Covenants and
  Agreements

  	
  32

  
	
  7.02

  	
  Indemnification by Seller for the Benefit of Buyer

  	
  33

  
	
  7.03

  	
  Indemnification by Buyer for the Benefit of Seller

  	
  35

  
	
  7.04

  	
  Manner of Payment

  	
  35

  
	
  7.05

  	
  Notice and Defense of Third Party Claims

  	
  35

  
	
  7.06

  	
  Determination of Loss Amount

  	
  37

  
	
  7.07

  	
  Termination of Indemnification

  	
  38

  

 

ii

 

	
  7.08

  	
  Limitation on Recourse

  	
  38

  
	
  7.09

  	
  Mediation and Arbitration

  	
  38

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII. ADDITIONAL
  COVENANTS AND AGREEMENTS

  	
  38

  
	
  8.01

  	
  Disclosure Generally

  	
  38

  
	
  8.02

  	
  Acknowledgment by Buyer

  	
  38

  
	
  8.03

  	
  Tax Matters

  	
  39

  
	
  8.04

  	
  Further Assurances

  	
  44

  
	
  8.05

  	
  Release

  	
  45

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX. DEFINITIONS

  	
  45

  
	
  9.01

  	
  Definitions

  	
  45

  
	
  9.02

  	
  Cross-Reference of Other Definitions

  	
  51

  
	
   

  	
   

  	
   

  
	
  ARTICLE X. MISCELLANEOUS

  	
  53

  
	
  10.01

  	
  Press Releases and Communications

  	
  53

  
	
  10.02

  	
  Expenses

  	
  53

  
	
  10.03

  	
  Knowledge Defined

  	
  53

  
	
  10.04

  	
  Notices

  	
  53

  
	
  10.05

  	
  Assignment; Third Party Beneficiaries

  	
  55

  
	
  10.06

  	
  Severability

  	
  55

  
	
  10.07

  	
  References

  	
  55

  
	
  10.08

  	
  No Strict Construction

  	
  56

  
	
  10.09

  	
  Amendment and Waiver

  	
  56

  
	
  10.10

  	
  Complete Agreement

  	
  56

  
	
  10.11

  	
  Counterparts

  	
  56

  
	
  10.12

  	
  Waiver of Jury Trial

  	
  56

  
	
  10.13

  	
  Specific Performance

  	
  57

  
	
  10.14

  	
  Governing Law

  	
  57

  
	
  10.15

  	
  Jurisdiction

  	
  57

  

 

iii

 

STOCK PURCHASE AGREEMENT

 

THIS
STOCK PURCHASE AGREEMENT (this “Agreement”) is made as of October 26,
2010, by and among Magnolia Source B.V., a company organized under the laws of
the Netherlands  (“Buyer”),
Source Photonics, Inc., a Delaware corporation (“SPI”), Source Photonics
Santa Clara, Inc., a Delaware corporation (“SPSC”, and each of SPSC and
SPI, individually, or both of them collectively, the “Company”), and MRV
Communications, Inc., a Delaware corporation (“Seller”).  Capitalized terms used and not otherwise
defined herein have the meanings set forth in Article IX.

 

WHEREAS,
Seller owns all of the issued and outstanding capital stock of SPI as of the
date of this Agreement, which consists of 1,000 shares (the “SPI Shares”)
of common stock, par value $0.001 per share (the “SPI Common Stock”)
and all of the issued and outstanding capital stock of SPSC as of the date of
this Agreement, which consists of 1,000 shares (the “SPSC Shares” and
together with the SPI Shares, the “Shares”) of common stock, par value
$0.001 per share (the “SPSC Common Stock” and together with the SPI
Common Stock, the “Common Stock”);

 

WHEREAS,
upon the terms and subject to the conditions set forth herein, Buyer desires to
acquire the Shares from Seller, and Seller desires to sell the Shares to Buyer;

 

WHEREAS,
Seller desires that the aforesaid sale be consummated on the terms and
conditions set forth in this Agreement, and in connection therewith Seller
acknowledges that its non-competition covenant to Buyer, as provided for in Section 5.03,
is an essential element of the aforesaid sale and but for the agreement of
Seller to comply with such covenant Buyer would not have entered into this
Agreement; and

 

WHEREAS,
concurrently with the execution of this Agreement, and as a condition to the
willingness of Seller to enter into this Agreement, Francisco Partners II
(Cayman), L.P. and Francisco Partners Parallel Fund II, L.P. (collectively, the
“Fund”) have delivered to Seller a limited guarantee (the “Limited
Guarantee”), dated as of the date hereof, which guarantees Buyer’s payment
to the Seller of the Initial Funding Amount, the Second Funding Amount and the
Final Funding Amount pursuant to the terms hereof.

 

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

 

ARTICLE I.

 

PURCHASE AND SALE

 

1.01                           Purchase Price.  For purposes hereof, the purchase price for
the Shares and the covenant not to compete contained in Section 5.03
shall be an amount equal to $117,841,039 (the “Purchase Price”).  The Purchase Price shall be paid as
follows:  the Initial Funding Amount
shall be paid pursuant to Section 1.03(a),  the
Second Funding Amount and the Final Funding 

 

1

 

Amount shall be paid pursuant to Section 1.06,
the Aggregate RSU Amount shall be paid pursuant to Section 1.07, and the
amounts required to be paid by MRV or the Company under those agreements set
forth in Schedule 1.08 shall be paid pursuant to Section 1.08.

 

1.02                           The Closing.  The closing of the transactions contemplated
by this Agreement (the “Closing”) shall take place at the offices of
Latham & Watkins LLP located at 355 South Grand Avenue, Los Angeles, CA, on
the date hereof (the “Closing Date”). 
At the Closing, upon the terms set forth in this Agreement, Seller shall
sell, assign, transfer, convey and deliver the Shares to Buyer, and Buyer shall
purchase and acquire the Shares from Seller, free and clear of all Liens.

 

1.03                           Deliveries by
the Buyer at the Closing.  At
the Closing, Buyer shall deliver, or cause to be delivered, to Seller the
following:

 

(a)                                  $40,000,000  of the Purchase Price minus the
Aggregate RSU Amount minus the
amounts required to be paid by MRV or the Company under those agreements set
forth in Schedule 1.08 (the “Initial Funding Amount”) to Seller,
by wire transfer of immediately available funds to the account designated by
Seller (the “Funding Account”); provided, however, that
such wire transfer shall be made promptly following the opening of the fedwire
system the day following the Closing Date;

 

(b)                                 a certificate
of Buyer, in a form reasonably satisfactory to Seller, dated as of the Closing
Date, certifying that the representations and warranties set forth in Article
IV are true and correct (without regard to any qualification as to
materiality) at and as of the date of this Agreement (other than those representations
and warranties that address matters as of particular dates which shall be true
and correct at and as of such particular dates), except where the failure of
such representations and warranties to be so true and correct would not, in the
aggregate, have a material and adverse effect on Buyer’s ability to consummate
the transactions contemplated by this Agreement, and the Buyer has performed
and complied in all material respects with all of the covenants and agreements
required to be performed by them under this Agreement at the Closing; and

 

(c)                                  certified
copies of the resolutions duly adopted by Buyer’s board of directors (or its
equivalent governing body) authorizing the execution, delivery and performance
of this Agreement and the other agreements contemplated hereby to which Buyer
is a party, and the consummation of all transactions contemplated hereby and
thereby.

 

1.04                           Deliveries by
the Seller at the Closing.  At
the Closing, Seller shall deliver, or cause to be delivered, to Buyer the following:

 

(a)                                  the
certificates representing the Shares, duly endorsed in blank for transfer or
accompanied by appropriate transfer documents;

 

(b)                                 a certificate
executed by the Chief Executive Officer or Chief Financial Officer of each of
Seller and the Company in a form reasonably satisfactory to Buyer, dated as of
the Closing Date, certifying that the representations and warranties set forth
in Article II and III are true and correct in all material
respects as of the date of this Agreement (other than those 

 

2

 

representations and warranties that address matters
as of particular dates, which shall have been true and correct in all material
respects at and of such particular dates) and that the Company and Seller have
performed and complied in all material respects with all of the covenants and
agreements required to be performed by them under this Agreement at the
Closing;

 

(c)                                  resignations
effective as of the Closing Date from each of the persons set forth on Schedule
1.04(c) as officers and directors of SPI, SPSC and their respective
Subsidiaries;

 

(d)                                 certified
copies of the resolutions duly adopted by Seller’s board of directors (or its
equivalent governing body) authorizing the execution, delivery and performance
of this Agreement and the other agreements contemplated hereby to which Seller
is a party, and the consummation of all transactions contemplated hereby and
thereby;

 

(e)                                  a receipt for
the Initial Funding Amount;

 

(f)                                    the consents,
authorizations, waivers and approvals of the third parties to the agreements
listed on Schedule 1.04(f);

 

(g)                                 a certificate
executed by the Chief Executive Officer or Chief Financial Officer of each of
Seller and the Company in a form reasonably satisfactory to Buyer, dated as of
the Closing Date (the “Minimum Cash Certificate”), certifying the amount
of Cash on Hand as of the Closing is at least $4,358,998 (the “Minimum Cash
Amount”) and the amount of Cash on Hand as of the Closing located in bank
or brokerage accounts in the United States as of the Closing is at least
$300,000 (the “US Minimum Cash Amount”); and

 

(h)                                 a properly
executed certificate in a form reasonably satisfactory to Buyer in accordance
with the requirements of Treasury Regulation Section 1.1445-2(c)(3).

 

1.05                           Simultaneous
Delivery.  All
deliveries at the Closing as provided for in Section 1.03 shall be
deemed to be made and effected simultaneously with each other and with all
deliveries provided for in Section 1.04, and all such deliveries
shall be deemed to be in escrow until all such deliveries provided for in Section 1.03
and in Section 1.04 have been made and effected.

 

1.06                           Delivery of
Balance of Purchase Price.

 

(a)                                  No later than
twenty-five (25) days after the Closing Date, Buyer shall deliver, or cause to
be delivered, to Seller an amount equal to $60,000,000  (the
“Second Funding Amount”), by wire transfer of immediately available
funds to the Funding Account.

 

(b)                                 No later than
sixty (60) days after the Closing Date, Buyer shall deliver, or cause to be
delivered, to Seller an amount equal to $17,841,039  (the
“Final Funding Amount”), by wire transfer of immediately available funds
to the Funding Account.

 

(c)                                  Notwithstanding
anything to the contrary in this Agreement, Seller shall be entitled to receive
from Buyer all fees and expenses, including attorneys’ fees, incurred by 

 

3

 

Seller in enforcing the payment obligation under Sections
1.03(a), 1.06 and the Limited Guarantee.

 

1.07                           Aggregate RSU
Amount.  At
the Closing, Buyer shall deliver to SPI the Aggregate RSU Amount.

 

1.08                           Bonus Payments.  Within thirty (30) days following the
Closing, Buyer shall, on behalf of Seller and the Company, cause to be paid an
aggregate of $3,806,115 to the individuals set forth on Schedule 1.08,
in the amounts set forth opposite their names, which amounts are required to be
paid to such individuals under those agreements set forth in Schedule 1.08,
in each case, less any applicable Taxes required to be withheld from such payments
in accordance with the provisions of Section 1.09.

 

1.09                           Withholding.  Buyer and the Company shall be entitled to
deduct and withhold from the consideration or other amounts otherwise payable
pursuant to this Agreement to Seller or any RSU Holder and any Person that
receives a bonus payment pursuant to Section 1.08 or otherwise such
amounts as it is required to deduct and withheld with respect to such
consideration or other amounts under any provision of state, local or foreign
tax law; provided, however,  that (a) before making any
such deduction or withholding with respect to payments made to Seller, Buyer or
the Company, as applicable, shall give Seller notice of the intention to make
such deduction or withholding (such notice, which shall include the authority,
basis and method of calculation for the proposed deduction or withholding,
shall be given at least a commercially reasonable period of time before such
deduction or withholding is required, in order for the Seller to obtain
reduction of or relief from such deduction or withholding); (b) Buyer or
the Company, as applicable, shall cooperate with Seller to the extent
reasonable in efforts by Seller to obtain reduction of or relief from such
deduction or withholding; and (c) Buyer or the Company, as applicable
shall timely remit to the appropriate Governmental Authority any and all
amounts so deducted or withheld and timely file all Tax Returns and provide to
the Seller such information statements and other documents required to be filed
or provided under applicable Tax Law.  To
the extent that amounts are so withheld by Buyer or the Company and paid to the
applicable tax authority, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to Seller or such RSU Holder in
respect of which such deduction and withholding was made by Buyer or the
Company, as the case may be.

 

ARTICLE II.

 

REPRESENTATIONS AND

WARRANTIES OF SELLER

 

Except
as disclosed in the disclosure schedules attached hereto (the “Disclosure
Schedules”), which identify items of disclosure by reference to a
particular Section or Subsection of this Agreement, as applicable, Seller
represents and warrants to Buyer as follows:

 

2.01                           Organization
and Authority.  Seller is a
corporation duly organized, validly existing and in good standing under the
Laws of the State of Delaware, with all requisite corporate power and authority
to execute and deliver this Agreement and perform its obligations hereunder.

 

4

 

2.02                           Authorization;
Valid and Binding Agreement.  The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all requisite corporate action on the part of Seller.  This Agreement has been duly and validly
executed and delivered by Seller and, assuming that this Agreement is a legally
valid and binding obligation of Buyer, this Agreement constitutes a valid and
binding obligation of Seller, enforceable against Seller in accordance with its
terms, except as enforceability may be limited by bankruptcy Laws, other
similar Laws affecting creditors’ rights and general principles of equity
affecting the availability of specific performance and other equitable
remedies.

 

2.03                           Ownership of
Capital Stock.  As of the
date of this Agreement, Seller is the record and beneficial owner of the
Shares, free and clear of all Liens, other than applicable federal and state
securities Law restrictions.  Seller has
the power and authority to sell, assign, transfer, convey and deliver such
Shares as provided in this Agreement, and such sale, assignment, transfer,
conveyance and delivery by Seller at Closing will transfer to Buyer good and
marketable title to the Shares, free and clear of any Liens, other than applicable
federal and state securities Law restrictions and Liens being released at the
Closing.  Seller is not a party to any
voting trust or other Contract with respect to the voting, redemption, sale,
transfer or other disposition of the Shares, and has not granted any proxy, in
whole or in part, with respect to the Shares.

 

2.04                           No Breach.  The execution, delivery and performance of
this Agreement by Seller and the consummation of the transactions contemplated
hereby do not result (with or without notice or lapse of time, or both) in any
breach of, constitute a default under, result in a violation of, result in the
creation of any Lien (other than a Permitted Lien) upon any asset of Seller or
any of its Subsidiaries, or require any material permit, authorization, consent
or approval by, filing with or notice or declaration to any Governmental
Authority, under (a) the provisions of Seller’s certificate of
incorporation, bylaws or equivalent organizational documents (including, in
China, equivalent business licenses), (b) any government registration or
Contract to which Seller is a party or by which Seller or its properties or
assets may be bound or affected, or (c) any Law or Order to which Seller
is subject, except, in the case of clauses (b) and (c), where the
failure of any of the foregoing to be true would not have a material and
adverse effect on the ability of Seller to consummate the transactions
contemplated by this Agreement.

 

2.05                           Litigation.  There are no Proceedings pending or, to
Seller’s knowledge, overtly threatened against or affecting Seller before or by
any Governmental Authority, which would have a material and adverse effect on
the ability of Seller to consummate the transactions contemplated by this
Agreement.

 

ARTICLE III.

 

REPRESENTATIONS AND
WARRANTIES RELATING TO

THE COMPANY AND ITS SUBSIDIARIES

 

Except
as disclosed in the Disclosure Schedules, which identifies items of disclosure
by reference to a particular Section or Subsection of this Agreement, as
applicable, Seller represents and warrants to Buyer as follows:

 

5

 

3.01                           Organization
and Authority.

 

(a)                                  Each of SPI and
SPSC is a corporation duly organized, validly existing and in good standing
under the Laws of the State of Delaware, with all requisite corporate power and
authority to own and operate its respective properties and to carry on its
respective businesses as now conducted and to execute and deliver this
Agreement and perform its respective obligations hereunder.

 

(b)                                 Each of SPI and
SPSC is duly qualified to do business and is in good standing in every
jurisdiction in which its respective ownership of property or the conduct of
its respective businesses as now conducted requires it to qualify.  The Company has made available to Buyer
copies of the articles of incorporation and bylaws of each of SPI and SPSC as
currently in effect.

 

3.02                           Authorization;
Valid and Binding Agreement.  The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all requisite corporate action on the part of each of SPI and
SPSC.  This Agreement has been duly and
validly executed and delivered by each of SPI and SPSC and, assuming that this
Agreement is a valid and binding obligation of Buyer, this Agreement
constitutes a legally valid and binding obligation of each of SPI and SPSC,
enforceable against each of SPI and SPSC in accordance with its terms, except
as enforceability may be limited by bankruptcy Laws, other similar Laws
affecting creditors’ rights and general principles of equity affecting the
availability of specific performance and other equitable remedies.

 

3.03                           Capital Stock.  The total authorized capital stock of SPI
consists of 10,000 shares of SPI Common Stock, of which 1,000 shares
of SPI Common Stock are issued and outstanding as of the date hereof.  The total authorized capital stock of SPSC
consists of 1,000 shares of SPSC Common Stock, of which 1,000 shares
of SPSC Common Stock are issued and outstanding as of the date hereof.  All of the issued and outstanding shares of
Common Stock are duly and validly issued and outstanding, and are fully paid
and non-assessable.  On the date hereof,
all of the issued and outstanding shares of Common Stock are held of record by
Seller, free and clear of all Liens. 
Except as set forth on Schedule 3.03, there are no
outstanding subscriptions, options, warrants, commitments, preemptive rights,
agreements, arrangements or commitments of any kind for or relating to the
issuance, sale, registration or voting of, or outstanding securities
convertible into or exchangeable for, any shares of capital stock of any class
or other equity interests of the Company.

 

3.04                           No Breach.  Except as set forth on Schedule 3.04,
the execution, delivery and performance of this Agreement by the Company, the
consummation of the transactions contemplated hereby, and the compliance by the
Company with the provisions of this Agreement, will not conflict with, result
(with or without notice or lapse of time, or both) in any breach or violation
of or default under, result in the creation of any Lien upon any asset of the
Company or any of its Subsidiaries under, give rise to a right of termination
or cancellation under, or require any permit, license, authorization, consent,
Order, or approval by, filing with or notice or declaration to any Person,
under any provision of (a) SPI’s or SPSC’s or any of their Subsidiaries’
certificate of incorporation, bylaws or equivalent organizational documents
(including, in China, equivalent business licenses), (b) any Contract or
Permit, or (c) any Law or 

 

6

 

Order to which the Company or any of its
Subsidiaries is subject, except, in the case of clauses (b) and (c),
where the failure of any of the foregoing to be true would not have a Material
Adverse Effect.

 

3.05                           Subsidiaries.

 

(a)                                  Except as set
forth on Schedule 3.05(a), neither SPI, SPSC nor any of their
Subsidiaries owns any stock, partnership interest, joint venture interest or
other equity ownership interest in any other Person.  Each Subsidiary of SPI and SPSC identified on
Schedule 3.05(a) (i) is duly organized, validly existing and
in good standing under the Laws of the jurisdiction of its incorporation or
formation, (ii) has all requisite corporate power and authority to own and
operate its properties and to carry on its businesses as now conducted and
(iii) is duly qualified to do business and is in good standing in every
jurisdiction in which its ownership of property or the conduct of its
businesses as now conducted requires it to qualify except where the failure to
be so qualified or in good standing would not have a Material Adverse
Effect.  The Company has made available
to Buyer copies of the certificate of incorporation,
bylaws or equivalent organizational documents (including, in China, equivalent
business licenses) of each of its Subsidiaries as currently in effect.

 

(b)                                 All of the
issued and outstanding shares of capital stock or other equity interest of each
Subsidiary of SPI and SPSC are duly and validly issued and outstanding, and are
fully paid (in compliance with applicable Laws) and, to the extent applicable,
non-assessable.  Except as set forth on Schedule 3.05(b)(i),
(i) each Subsidiary of SPI and SPSC is wholly owned by SPI or SPSC or
another Subsidiary of SPI or SPSC; (ii) all of the issued and outstanding
shares of capital stock or other equity interest of each Subsidiary of SPI and
SPSC are directly or indirectly owned by SPI or SPSC, free and clear of all
Liens, except for Permitted Liens, all of which Liens will be released at or
prior to the Closing; and (iii) there are no outstanding subscriptions,
options, warrants, commitments, preemptive rights, agreements, arrangements or
commitments of any kind for or relating to the issuance, sale, registration or
voting of, or outstanding securities convertible into or exchangeable for, any
shares of capital stock or other equity interests of any Subsidiary of SPI or
SPSC.

 

3.06                           Financial
Statements.

 

(a)                                  The Company has
furnished Buyer with copies of (i) its audited consolidated balance sheets
of SPI, SPSC and their Subsidiaries as of December 31, 2008 and 2009, and
the related audited consolidated statements of income and cash flows of SPI,
SPSC and their Subsidiaries for the fiscal years ended December 31, 2008
and 2009 (collectively, and including the related notes and schedules thereto,
the “Audited Financial Statements”), (ii) the unaudited
consolidated balance sheet of SPI, SPSC and their Subsidiaries as of
June 30, 2010, and the related unaudited consolidated statements of income
and cash flow of SPI, SPSC and their Subsidiaries for the six months ended
June 30, 2010, and (iii) the unaudited 
consolidated balance sheet of SPI, SPSC and their Subsidiaries as of
September 30, 2010 (the financial statements set forth in subclauses (ii) and
(iii) being collectively referred to as the “Interim Financial Statements”,  and together with the Audited Financial
Statements, collectively, the “Financial Statements”), copies of which
are attached to Schedule 3.06(a). 
Except as set forth on Schedule 3.06(a), such Financial
Statements were prepared in accordance with GAAP and 

 

7

 

present fairly in all material respects the
consolidated financial condition, results of operations and cash flows of SPI,
SPSC and their Subsidiaries (taken as a whole) as of the dates and for the
periods indicated (subject, in the case of the Interim Financial Statements, to
the absence of footnote disclosure and normal year-end audit adjustments).  The Financial Statements reflect all costs
and expenses of conducting the business of the Company and its Subsidiaries,
including proper allocations for all costs and expenses of services performed for
the Company and its Subsidiaries by Seller and its Subsidiaries (other than the
Company and its Subsidiaries), as required by GAAP.

 

(b)                                 Neither the
Company nor any of its Subsidiaries has any obligations or liabilities of any
kind (whether pursuant to Contracts or otherwise, accrued or unaccrued, matured
or unmatured, fixed or contingent) required to be recorded, reserved against or
otherwise described on a balance sheet prepared in accordance with GAAP or in
the notes thereto in accordance with GAAP, nor was any obligation or liability
considered by the Company and discussed with its accountants or otherwise
analyzed in any memorandum or other similar writing and excluded from financial
statements based on Financial Accounting Standard #5, other than (i) those
set forth or adequately provided for in the Latest Balance Sheet,
(ii) those current liabilities incurred in the ordinary course of business
consistent with past practice since the date of the Latest Balance Sheet and
prior to the date hereof, (iii) Indebtedness for borrowed money incurred in the
ordinary course of business consistent with past practice and (iv) those
incurred in connection with the execution of this Agreement and the performance
by the Company of its obligations hereunder.

 

(c)                                  The books of
account of the Company and its Subsidiaries, and the minute books, stock record
books and other records of the Company and its Subsidiaries, all of which have
been made available to Buyer, are in all material respects complete and correct
and have been maintained in accordance with sound business practices.  The minute books of the Company and its
Subsidiaries contain accurate and complete records of all meetings held of, and
corporate action taken by, the stockholders, the boards of directors and any
committees of the boards of directors of the Company and its Subsidiaries, and
no meeting of any of the stockholders, board of directors or committee has been
held for which minutes have not been prepared and are not contained in such
minute books.  At the Closing, all of
such books and records will be in the possession of the Company or its
Subsidiaries.

 

(d)                                 Seller and the
Company have established and maintain a system of internal accounting controls
with respect to the Company and its Subsidiaries which are in all material
respects effective in providing assurance regarding the reliability of
financial reporting and the preparation of financial statements (including the
Financial Statements) on a stand-alone basis in accordance with GAAP, including
policies and procedures that (i) require the maintenance of records that in
reasonable detail accurately and fairly reflect the transactions and
dispositions of the assets of the Company and its Subsidiaries, (ii) provide
assurance that transactions are recorded as necessary to permit preparation of
financial statements on a stand-alone basis in accordance with GAAP, and that
receipts and expenditures of the Company and its Subsidiaries are being made
only in accordance with appropriate authorizations of management and (iii)
provide assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the assets of the Company and its
Subsidiaries.

 

8

 

(e)                                  As of September
30, 2010, the Company and its Subsidiaries had on a consolidated, unaudited
basis (A) Cash on Hand totaling at least $4,358,998, (B) Net Working
Capital totaling at least $68,550,000, (C) Indebtedness totaling no more than
$47,569,627, (D) lines of credit or other indebtedness fully secured by
restricted cash and not constituting “Indebtedness” hereunder totaling no more
than $4,660,542, (E) sold or factored accounts receivable with a face amount of
$12,461,484 in the prior 92 days and (F) intercompany receivables owed by the
Company and its Subsidiaries to Seller or its Subsidiaries (other than the
Company and its Subsidiaries), net of intercompany payables owed by Seller or
its Subsidiaries (other than the Company and its Subsidiaries) to Company and
its Subsidiaries, of $18,320,322.  Except
as set forth on Schedule 3.06(e), between September 30, 2010 and the
date hereof, the Company has not (x) incurred aggregate Indebtedness in
excess of $5,000,000; (y) declared, paid or set aside any dividend or made any
distribution (whether in cash, stock, or property or any combination thereof)
on or in respect of, or repurchased, redeemed or otherwise acquired, any
outstanding equity interest or other securities of the Company or its
Subsidiaries (except for dividends by the Company’s Subsidiaries to other
Subsidiaries of the Company or to the Company) or (z) except for sales of
products to Seller and its Subsidiaries (other than the Company and its
Subsidiaries) or payment for or offset against any amounts in connection with
services provided by Seller and its Subsidiaries in the ordinary course of
business consistent with past practice and in accordance with pricing and other
terms historically applied in connection with sales of such products or payment
for such services, otherwise transferred or paid any amount to Seller or any of
its Affiliates (other than the Company or its Subsidiaries), including, without
limitation, the payment of any intercompany balances or receivables (other than
pursuant to Section 3.31). Except under the agreements set forth on Schedule
1.08 there are no “single trigger” change of control employee severance
payment obligations which become due and payable as a result of the execution
of this Agreement or the consummation of the transactions contemplated hereby,
or any transaction or incentive bonus, “stay put” or other similar compensatory
payments to be made to employees of the Company or any of its Subsidiaries as a
result of the execution of this Agreement or the consummation of the
transactions contemplated hereby.

 

(f)                                    Schedule
3.06(f) sets forth for each credit facility, line of credit, purchase facility
or other financing arrangement (including, without limitation, receivables
factoring arrangements and customer financing arrangements) (collectively, “Facilities”)
of the Company and its Subsidiaries, (i) the lender or purchaser thereunder,
(ii) the borrower(s) and/or seller(s) thereunder, (iii)  the geographical limitations on receivables
or other assets eligible for financing thereunder, (iv) the total amount of
accounts receivables financed under each Facility as of September 30, 2010, (v)
the discount rate, haircut rate or other calculation applied to the assets
being financed as of September 30, 2010, and (vi) the amount available to be drawn
as of September 30, 2010, under each Facility.

 

3.07                           Absence of
Certain Developments.  From June
30, 2010 until the date of this Agreement, (i) the Company and its Subsidiaries
have conducted their businesses only in the ordinary course of business consistent
with past practice and (ii) there has not been any circumstance, change,
effect, event, occurrence, state of facts or development that has had or would
reasonably be expected to have a Material Adverse Effect.  Without limiting the generality of the foregoing,
except as set forth on Schedule 3.07 or except as contemplated by 

 

9

 

this Agreement, from June 30, 2010 (or in the case
of subclause (i) below, since September 30, 2010), neither the Company nor any
Subsidiary of the Company has:

 

(a)                                  mortgaged,
pledged or subjected to any Lien, any material assets of the Company and its
Subsidiaries, taken as a whole, except for Permitted Liens;

 

(b)                                 acquired any
material assets or sold, leased, assigned or transferred any material asset of
the Company or its Subsidiaries, taken as a whole, except for Company Products
to customers of the Company or such Subsidiary, as applicable, in the ordinary
course of business consistent with past practice;

 

(c)                                  sold, assigned,
transferred or licensed any of the Company and its Subsidiaries’ Intellectual
Property, except for the sale or license of products to end-user customers in
the ordinary course of business;

 

(d)                                 redeemed or
repurchased, directly or indirectly, any shares of capital stock or declared,
set aside or paid any dividends or made any other distributions (whether in
cash or in kind) with respect to any shares of its capital stock;

 

(e)                                  issued, sold or
transferred any of its capital stock, securities convertible into its capital
stock or warrants, options or other rights to acquire its capital stock;

 

(f)                                    made any
material capital expenditures or commitments therefor, except in the ordinary
course of business consistent with past practice or pursuant to the Company’s
capital expenditure plan;

 

(g)                                 changed any of
its accounting policies, practices or procedures, except as required by GAAP;

 

(h)                                 amended or
modified its certificate of incorporation, bylaws or equivalent organizational
documents (including, in China, equivalent business licenses);

 

(i)                                     suffered any
material damage, destruction or loss (whether or not covered by insurance) to
its property;

 

(j)                                     experienced or
been subject to any labor dispute, other than routine individual grievances;

 

(k)                                  increased in
any manner the benefits, compensation, bonus or bonus opportunity of any
employee, director, officer, consultant or other service provider of or to, as
the case may be, the Company or its Subsidiaries, except for any increases in
the ordinary course of business consistent with past practice with respect to
operators with annual compensation of less than $10,000 after giving effect to
any such increase;

 

(l)                                     entered into,
established, amended or terminated (other than a termination in accordance with
its terms) any employment, consulting, retention, change in control, bonus,
incentive compensation, profit sharing, deferred compensation, severance,
non-competition or similar agreement, or any other plan, agreement, program,
policy or arrangement that would

 

10

 

constitute an Employee Benefit Plan, to which the
Company or its Subsidiaries would be a party or otherwise have any liability,
except, in each case, as required by applicable Law or as required by the terms
of any Employee Benefit Plan and except for any agreement entered into,
established, amended or terminated in the ordinary course of business
consistent with past practice with operators with annual compensation of less
than $10,000;

 

(m)          canceled or compromised any debt or claim or amended,
canceled, terminated (other than a termination in accordance with its terms),
relinquished, waived or released any Material Contract or right except in the
ordinary course of business consistent with past practice and which, in the
aggregate, would not be material to the Company and its Subsidiaries, taken as
a whole;

 

(n)           failed to make capital expenditures in the ordinary course
of business consistent with past practice;

 

(o)           allowed any material Permit that was issued to the Company
or any Subsidiary thereof or otherwise relates to the business of the Company
or its Subsidiaries to lapse or terminate or failed to renew such Permit; or

 

(p)           entered into any agreement, arrangement or commitment to
take any actions specified in this Section 3.07, except for this
Agreement.

 

3.08         Title to Properties.

 

(a)           Except as set forth on Schedule 3.08(a), the
Company and its Subsidiaries own good and marketable title to, or hold pursuant
to valid and enforceable leases or otherwise have the legal right to use, all
of the tangible personal property shown to be owned by them on the Latest
Balance Sheet  (except for such personal
property sold or disposed of subsequent to the date thereof in the ordinary
course of business consistent with past practice), free and clear of all Liens,
except for Permitted Liens.  Such
tangible personal property is generally in good operating condition and repair,
reasonable wear and tear excepted, and usable in the ordinary course of
business consistent with past practice and is suitable, sufficient in amount,
size and type and, in the aggregate, is adequate in all material respects for
the uses for which they are used to carry on the businesses of the Company and
its Subsidiaries as now conducted.

 

(b)           Neither the Company nor any of its Subsidiaries owns, has
owned in the last five (5) years, or, to the Company’s knowledge, has ever
owned, any real property.

 

(c)           The real property demised by the leases described on Schedule 3.08(c) (the
“Real Property Leases”) constitutes all of the material real property
leased by the Company and its Subsidiaries (the “Leased Real Property”).  Except as set forth on Schedule 3.08(c),
the Real Property Leases are in full force and effect, subject to proper
authorization and execution of such lease by the other party and the
limitations of bankruptcy Laws, other similar Laws affecting creditors’ rights
and general principles of equity affecting the availability of specific
performance and other equitable remedies. 
The Company has made available to Buyer copies of the Real Property
Leases.  With respect to the Real
Property Leases, except as set forth on Schedule 3.08(c), neither
the Company nor any of its Subsidiaries nor, to the Company’s 

 

11

 

knowledge, any other party thereto is in material
default under any such Real Property Lease. 
The Real Property Leases constitute all material interests in real
property currently used or currently held for use in connection with the
business of the Company and its Subsidiaries currently conducted.  To the Company’s knowledge, there does not
exist any actual or threatened or contemplated condemnation or eminent domain
proceedings that affect the Leased Real Property or any part thereof, and
neither Seller, the Company nor any of its Subsidiaries has received any
written notice of the intention of any Governmental Authority or other Person
to take or use all or any part thereof. 
Each of the Leased Real Property and all buildings, fixtures and improvements
thereon, are adequate in all material respects for their intended use in the
operation of the business of the Company and its Subsidiaries as currently
conducted.

 

(d)           To the Company’s knowledge, the Leased Real Property is in
material compliance with all currently applicable zoning and land use
regulations;

 

(e)           Neither the Company nor any of its Subsidiaries have
entered into any subleases with respect to the Leased Real Property.  To the Company’s knowledge, there are no
outstanding commitments, agreements or understandings which have been made to,
with or for the benefit of any Governmental Authority which could reasonably be
expected to impose any material obligation, liability or condition on the
Company or any of the Subsidiaries to grant any material easements or to make
any material payments, contributions or dedications of money or land or to
construct, install or maintain or to contribute to the construction,
installation or maintenance of any material improvements of a public or private
nature, whether on or off the Leased Real Property.

 

(f)            Each Leased Real Property is adequately serviced in all
material respects by all utilities utilized or necessary for the effective
operation of the business of the Company and its Subsidiaries as currently
conducted, and the Company and its Subsidiaries have not, during the last two
years, experienced any material interruption in the delivery of adequate
quantities of any utilities (including electricity, natural gas, potable water,
water for cooling or similar purposes and fuel oil, but excluding any
interruption due to natural events) or other public services, including
sanitary and industrial sewer services, utilized or required in the operation
of the business of the Company and its Subsidiaries at the Leased Real
Property.

 

3.09         Tax Matters.

 

(a)           All income Tax Returns and all other material Tax Returns
with respect to the Company and its Subsidiaries required to be filed have been
filed (taking into account all applicable extensions), and all such Tax Returns
(to the extent they relate to the Company and its Subsidiaries) are true,
correct and complete in all material respects. 
All material Taxes of the Company and its Subsidiaries required to be
shown as due and payable on such Tax Returns have been paid.  None of the Company nor any of its
Subsidiaries has been a member of a Company Group other than the Company Group
for which Seller is the common parent (the “Parent Group”).  None of the Company nor any of its
Subsidiaries has any liability for Taxes of another Person, other than the
Company or any Subsidiary, under (i) Treasury
Regulation Section 1.1502-6 (or any comparable provision of state,
local or foreign Law) other than members of the Parent Group or (ii) as a
transferee or successor, by contract, or otherwise.

 

12

 

(b)           No claim has been made since December 31, 2005, by
any Governmental Authority or any quasi-governmental or private body having
jurisdiction over the assessment, determination, collection or imposition of
any Tax (a “Taxing Authority”) in a jurisdiction where the Company or
any of its Subsidiaries does not file a Tax Return that the Company or any of
its  Subsidiaries is or may be subject to
taxation by that jurisdiction.  No
unresolved dispute or claim concerning any material Tax liability of the
Company or any of its Subsidiaries has been claimed or raised by any authority
in writing.  No closing agreement
pursuant to Section 7121 of the Code (or any corresponding or similar
provision of state, local or foreign income Tax Law) has been entered into by
or with respect to the Company or any of its Subsidiaries which could
reasonably be expected to have an effect on the Company’s or any of its
Subsidiaries’ liability for or reporting of Taxes in any period ending after the
Closing Date.

 

(c)           Neither the Company nor any of its Subsidiaries has waived
any statute of limitations in respect of Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency.

 

(d)           There are no Liens other than Permitted Liens on the
assets of the Company or any of its Subsidiaries relating to or attributable to
Taxes.

 

(e)           Neither the Company nor any of its Subsidiaries is, nor
has been at any time, a “United States real property holding corporation”
within the meaning of Section 897(c)(2) of the Code.

 

(f)            Neither the Company nor any of its Subsidiaries is a
party to, nor owes any amount under, any Tax sharing, indemnification or
allocation agreement that will not terminate in full as of the Closing Date.

 

(g)           The Company and its Subsidiaries have timely withheld,
collected, deposited or paid all material Taxes required to have been withheld,
collected, deposited or paid, as the case may be, in connection with amounts
paid or owing to any employee, independent contractor, creditor or stockholder.

 

(h)           The Company is a member of a “selling consolidated group”
within the meaning of Treasury Regulation Section 1.338(h)(10)-1(b)(2),
and the Shares meet the requirements of Code Section 1504(a)(2) with
respect to the Company.

 

(i)            None of the Company nor any of its Subsidiaries has
engaged in a “listed transaction” as defined in Treasury
Regulation Section 1.6011-4(b).

 

(j)            None of the Company nor any of its Subsidiaries has
distributed stock of another Person, or has had its stock distributed by
another Person, in a transaction that was purported or intended to be governed
in whole or in part by Section 355 of the Code.

 

(k)           None of the Company nor any of its Subsidiaries will be
required to include any item of income in, or exclude any item of deduction
from, taxable income for any taxable period (or portion thereof) ending after
the Closing Date as a result of any:

 

13

 

(i)            change in method of accounting for a taxable period
ending on or prior to the Closing Date; or

 

(ii)           “closing agreement” as described in Section 7121 of
the Code (or any corresponding or similar provision of state, local or foreign
income Tax law) executed on or prior to the Closing Date.

 

3.10         Contracts and Commitments.

 

(a)           Schedule 3.10(a) sets forth all of the
following Contracts to which the Company or its Subsidiaries are a party (each,
a “Material Contract”):

 

(i)            employment, retention, severance or other agreement with
any current or former officer, individual employee or other individual
providing for annual payments in excess of $100,000;

 

(ii)           Contracts relating to Indebtedness;

 

(iii)          lease or agreement under which it is the lessee of, or
holds or operates any tangible personal property owned by, any other Person,
for which the annual rental exceeds $500,000;

 

(iv)          Contract, or group of related Contracts with the same party
(other than purchase orders entered into in the ordinary course of business
consistent with past practice), which by its terms requires payments to or by
the Company or any of its Subsidiaries in excess of $500,000 annually or in
excess of $1,000,000 over the remaining term of such Contract;

 

(v)           Contract containing covenants limiting the ability of the
Company or any of its Subsidiaries to compete in any line of business (other
than arrangements granting distributors the exclusive right to distribute
Company Products in particular jurisdictions entered into in the ordinary
course of business consistent with past practice);

 

(vi)          Contract by which the Company or any of its Subsidiaries is
granted the right to use any material Intellectual Property or any Intellectual
Property incorporated into any Company Products, other than licenses for
commercial software that is “off-the-shelf” or widely available and which
software has not been customized by the vendor for the Company or any
Subsidiary;

 

(vii)         Contract by which the Company or any of its Subsidiaries has
granted to any Person (A) the exclusive right to use any Intellectual
Property or (B) a non-exclusive right to any Intellectual Property that is
material to the conduct of its business, other than in the ordinary course of
business consistent with past practice;

 

(viii)        joint venture, partnership or similar
Contract that is material to the operation of the Company’s and its
Subsidiaries’ business;

 

14

 

(ix)           Contracts with Seller or any Affiliate of Seller (other
than the Company and its Subsidiaries);

 

(x)            Contracts containing “most-favored nation,” price
protection or similar provisions;

 

(xi)           Contracts relating to the sale or other disposition of any
of the assets of the Company or its Subsidiaries other than the sale of
inventory and immaterial sales or other dispositions of obsolete or excess
equipment or inventory, each in the ordinary course of business consistent with
past practice;

 

(xii)          Contracts relating to the acquisition by the Company or its
Subsidiaries of any operating business or the capital stock of any other
Person;

 

(xiii)         Contracts pertaining to any transaction
or incentive bonus, “stay-put” or other similar compensatory payments, in any
case, to be made to an employee of the Company or its Subsidiaries on or after
the Closing Date as a result of the execution of this Agreement or the
consummation of the transactions contemplated hereby; or

 

(xiv)        each commitment or agreement to enter into any of the
foregoing.

 

(b)           The Company has made available to Buyer true and complete
copies of all Material Contracts.  Each
of the Material Contracts and Real Property Leases is valid, binding and in
full force and effect on the Company and is enforceable in accordance with its
terms by the Company and its Subsidiaries party thereto, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors’ rights and remedies generally, and subject, as to enforceability, to
general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of whether enforcement
is sought in a proceeding at law or in equity). With respect to the Material
Contracts and the Real Property Leases, neither the Company nor any of its
Subsidiaries nor, to the Company’s knowledge, any other party thereto, is in
default under any such Material Contract, except where such default would not
have a Material Adverse Effect.  To the
Company’s knowledge, there does not exist any condition that, with notice or
lapse of time or both, would constitute a default in any material respect under
any of Material Contract or Real Property Lease, nor has Seller, the Company
nor any of its Subsidiaries received any written notice of default under any
Material Contract or Real Property Lease.

 

3.11         Intellectual Property.

 

(a)           Schedule 3.11(a)(i) contains a list of
all of the Intellectual Property owned by or under obligation of assignment to
the Company or any of its Subsidiaries which Intellectual Property is the
subject of a registration or pending application filed with any Governmental
Authority.  Except as set forth in Schedule
3.11(a)(ii), the Company or one of its Subsidiaries is the exclusive owner
of the entire right, title and interest, free and clear of all Liens, in and to
(i) each item of Intellectual Property required to be set forth on Schedule
3.11(a)(i) and (ii) all other Intellectual Property owned by or
under obligation of assignment to the Company or any of its Subsidiaries.  Without limiting the foregoing, neither the
Seller nor 

 

15

 

any present or former employee of Seller, the
Company or the Subsidiaries has any right, title, or interest, directly or
indirectly, in whole or in part, in any Intellectual Property owned or used by
the Company or the Subsidiaries.

 

(b)           The Company or one of its Subsidiaries owns, or possesses
the valid and enforceable right to use, the Intellectual Property used by the
Company or its Subsidiaries in the conduct of the businesses of the Company and
its Subsidiaries and to be used in the
products being developed by the Company and its Subsidiaries as set forth in
the Company’s October 2010 product roadmap provided to Buyer, which
ownership or right shall survive unchanged upon the consummation of the
transactions contemplated under this Agreement (it being understood this
representation does not include any change or addition to the Intellectual
Property requirements of such roadmap products made by the Company and its
Subsidiaries after the date hereof, other than as a result of the breach hereof
prior to the date of such change or addition, nor any new Intellectual Property
created by the Company or one or more of its Subsidiaries after the date hereof
and included in such roadmap products).

 

(c)           Except as set forth on Schedule 3.11(c), since
January 1, 2004, neither the Company nor any of its Subsidiaries (nor the
operation of the business by the Company and its Subsidiaries) has infringed or
misappropriated any Intellectual Property of any third party nor has Seller,
the Company or any of its Subsidiaries received any written notices of
infringement or misappropriation of such Intellectual Property from any third
party.

 

(d)           The Intellectual Property set forth in (or required to be
set forth in) Schedule 3.11(a)(i) is valid and enforceable and all
maintenance or other fees required to be paid to maintain such validity and
enforceability have been timely paid and neither Seller, the Company nor any of
its Subsidiaries has received any written notices challenging the validity or
enforceability of any such Intellectual Property.

 

(e)           To the Company’s knowledge, no third-party is infringing
or misappropriating any Intellectual Property owned by (or under obligation of
assignment to) the Company or any of its Subsidiaries in any material respect.

 

(f)            Each of the Company and its Subsidiaries has taken
reasonable steps to protect the confidentiality of all confidential
Intellectual Property used in the business of the Company and the Subsidiaries
as currently conducted.

 

(g)           Schedule 3.11(g)(i) contains a true and
complete list of all Public Software that is or has been used by the Company or
its Subsidiaries in any Company Product, setting forth for each such item of
Public Software the name of the applicable Public Software license agreement
and a description of the use of such Public Software.  Except as set forth in Schedule
3.11(g)(ii), no software embodied within or distributed with any Company
Product has been, or is being, combined, used or distributed by the Company or
any of its Subsidiaries with, in whole or in part, any Public Software in a
manner which would require that such software or Company Product (i) be
disclosed or distributed in source code form, (ii) be licensed for the
purpose of making derivative works, or (iii) be redistributable at no (or
a minimal) charge.  “Public Software”
shall mean any software that contains, or is derived in any manner (in whole or
in part) from, any software that is distributed as free software, open source
software (e.g., Linux) or 

 

16

 

similar licensing or distribution models requiring a
licensee to make its own source code available under the same terms as such
license or distribution model, including any of the following licenses or
distribution models, or licenses or distribution models similar to any of the
following: (A) GNU’s General Public License (GPL) or Lesser/Library GPL
(LGPL), (B) the Artistic License (e.g., PERL), (C) the Mozilla Public
License, (D) the Netscape Public License, (E) the Sun Community
Source License (SCSL), (F) the Sun Industry Standards License (SISL), (G) the
BSD License and (H) the Apache License.

 

3.12         Litigation.  Schedule
3.12 sets forth all Proceedings pending or, to the Company’s knowledge,
threatened against the Company or any of its Subsidiaries, before or by any
Governmental Authority.  There are no
Proceedings pending or, to the Company’s knowledge, threatened against the
Company or any of its Subsidiaries, before or by any Governmental Authority,
which if determined adversely to the Company or such Subsidiary of the Company
would have a Material Adverse Effect, and neither the Company nor any of its
Subsidiaries nor any of their respective properties or assets is or are subject
to any material outstanding Order of any Governmental Authority.  To the Company’s knowledge, there are no
formal or informal governmental inquiries or investigations or internal
investigations or material whistle-blower complaints pending or threatened,
relating to, affecting or involving the Company or any of its Subsidiaries.

 

3.13         Employee Benefit Matters.

 

(a)           Employee Benefit Plans.  Schedule 3.13(a) sets forth
a list of each Employee Benefit Plan, Seller Benefit Plan and Non-US Benefit
Plan.  Each Employee Benefit Plan and
Non-US Benefit Plan complies in all material respects in form and in operation
with the applicable provisions of ERISA, the Code and other applicable
Law.  Other than routine claims for
benefits, there are no material claims or lawsuits pending or, to the Company’s
knowledge, threatened against or arising out of an Employee Benefit Plan or
Non-US Benefit Plan, and there are no material audits or proceedings pending
or, to the Company’s knowledge, threatened in writing by the Internal Revenue
Service, Department of Labor, or other Governmental Authority with respect to
any Employee Benefit Plan or Non-US Benefit Plan.

 

(b)           Benefit Plan Documents.  With respect to each Employee Benefit Plan,
Seller Benefit Plan, and Non-US Benefit Plan, the Company has made available to
Buyer, as applicable, true and complete copies of (i) all plan documents,
including all amendments thereto, (ii) all summary plan descriptions,
(iii) the three most recent annual reports (including any reports on
Form 5500) filed with the Internal Revenue Service, (iv) each trust
agreement and insurance or group annuity contract, (v) the most recent
annual actuarial valuations, if any, for each Employee Benefit Plan, and
(vi) the most recent determination, opinion or other qualification letter,
if any, issued by the Internal Revenue Service.

 

(c)           Plan Qualification. 
Each Employee Benefit Plan that is intended to qualify under
Section 401(a) of the Code either is a prototype plan and is entitled
to rely on a favorable opinion letter or has received a favorable determination
letter from the Internal Revenue Service and, to the Company’s knowledge, (i) the
Internal Revenue Service has not taken action to revoke any such letter and (ii) no
event has occurred since the date of the most 

 

17

 

recent determination letter or application therefor
relating to any such plan that would adversely affect the qualification of the
plan.

 

(d)           Certain Pension Plans.  Neither the Company nor any ERISA Affiliate
of the Company maintains, contributes to or has any liability (contingent or
otherwise) in respect of  or related to
any Multiemployer Plan or any other pension plan (as defined in Section 3(2) of
ERISA) that is subject to Title IV of ERISA.

 

(e)           Funding.  All
contributions, premiums and benefit payments under or in connection with the
Employee Benefit Plans and Non-US Benefit Plans that are required to have been
made as of the date hereof have been timely made or accrued.

 

(f)            Certain Payments. 
Except as set forth on Schedule 3.13(f), there is no contract,
plan or arrangement covering any employee or former service provider to the
Company or any of its Subsidiaries that, individually or collectively, would
give rise to an excess parachute payment as a result of the transactions
contemplated by this Agreement.  The
execution of this Agreement and the consummation of the transactions
contemplated hereby (whether alone or together with any other event) will
not:  (1) entitle any Person to any
payment, forgiveness of indebtedness, vesting, distribution, or increase in
benefits under or with respect to any Employee Benefit Plan, Seller Benefit
Plan, or Non-US Benefit Plan, (2) otherwise trigger any acceleration of
vesting or payment of benefits under or with respect to any Employee Benefit
Plan, Seller Benefit Plan, or Non-US Benefit Plan, or (3) trigger any
obligation to fund any Employee Benefit Plan, Seller Benefit Plan or Non-US
Benefit Plan.

 

(g)           Retiree Welfare Benefits.  No Employee Benefit Plan or Non-US Benefit
Plan provides death or medical benefits, whether or not insured, with respect
to any former or current employee of the Company or any of its Subsidiaries, or
any spouse or dependent of any such employees, in any case, beyond the employee’s
retirement or other termination of employment with the Company and its
Subsidiaries, other than coverage mandated by Part 6 of Title I of ERISA
or Section 4980B of the Code or otherwise required by applicable Law.

 

(h)           Section 409A Compliance.  Each Employee Benefit Plan, Non-US Benefit
Plan or any other arrangement of the Company or any of its Subsidiaries, or
under which any employee of the Company or any of its Subsidiaries has deferred
any amount of compensation, that is, or was, subject to Section 409A of
the Code was administered in reasonable, good faith compliance in all material
respects with the requirements of Section 409A of the Code through December 31,
2008, and all Employee Benefit Plans subject to Section 409A of the Code
that provide payment after December 31, 2008, have been operated and
documented in compliance in all material respects with the requirements of the
final regulations under Section 409A of the Code since January 1,
2009.  Neither the Company nor any of its
Subsidiaries has any obligation to gross-up, indemnify or otherwise reimburse
any Person for any tax incurred by such Person, including pursuant to Section 409A
of the Code.

 

3.14         Insurance.  Schedule 3.14
sets forth a summary of each material insurance policy maintained by or in
favor of the Company and its Subsidiaries (including premiums, deductibles and
coverage amounts).  All of such insurance
policies are in full force and effect, and to the Company’s knowledge, neither
the Company nor any Subsidiary of the Company is in default 

 

18

 

with respect to its obligations under any of such
insurance policies, except where such default would not have a Material Adverse
Effect.  None of Seller, the Company or
any of its Subsidiaries have received any written notice of cancellation or
modification in coverage amounts of any such insurance policies.  All premiums due and payable under all such
insurance policies have been paid, and the Company and its Subsidiaries are
otherwise in material compliance with the terms of such insurance
policies.  There is no material claim by
the Company or its Subsidiaries pending under any of such insurance policies,
and to the Company’s knowledge, no incident has occurred since June 30,
2010, that could give rise to a material claim under any of such insurance
policies.  The Company and its
Subsidiaries have complied in all material respects with all requirements as
required by Law or pursuant to contract to purchase insurance.

 

3.15         Compliance with Laws.

 

(a)           The Company and its Subsidiaries are in compliance with
all Laws of any Governmental Authorities applicable to the business and
operations of the Company and its Subsidiaries as presently conducted, except
where the failure to comply would not have a Material Adverse Effect.  Neither Seller, the Company nor any of their
respective Subsidiaries have received any written notice of or been charged
with a material violation of any Laws.

 

(b)           The Company and its Subsidiaries have at all times
conducted their export and reexport transactions in accordance with all
applicable export and reexport controls, including the United States Export
Administration Act and Regulations and Foreign Assets Control Regulations and
all other applicable import/export controls in other countries from which the Company and/or its Subsidiaries exports or reexports its products, technologies, software or
services, or in which the Company and/or its Subsidiaries
otherwise conduct business.

 

(c)           The Company and its Subsidiaries have complied in all
material respects with all applicable privacy laws and their respective
internal privacy policies and guidelines, if any, relating to any Personally
Identifiable Information.  “Personally
Identifiable Information” means any information that alone or in
combination with other information held by a company can be used to
specifically identify a person.

 

3.16         Environmental Matters.  Except as set forth on Schedule 3.16:

 

(a)           The Company and its Subsidiaries are in compliance in all
material respects with all applicable Environmental Laws, and any past
non-compliance by the Company or its Subsidiaries has been fully resolved
without any pending, ongoing or future costs or obligations that are material.

 

(b)           The Company and its Subsidiaries have all material
permits, licenses and other authorizations required under applicable
Environmental Laws; the Company and its Subsidiaries are in compliance in all
material respects with such permits, licenses and authorizations; and any past
non-compliance by the Company or its Subsidiaries has been fully resolved
without any pending, ongoing or future costs or obligations that are material.

 

19

 

(c)           Neither the Company nor any of its Subsidiaries has
Released any Hazardous Materials, and there has not been a Release of Hazardous
Materials for which the Company or any of its Subsidiaries has any liability
under Environmental Law or pursuant to any contract to which it or they are a
party, that would require any material Remedial Action under Environmental Law
or that would reasonably be expected to result in a material liability.

 

(d)           Neither the Company nor any Subsidiary is currently
conducting or funding any Remedial Action.

 

(e)           This Section 3.16 constitutes the sole and
exclusive representations and warranties of the Company with respect to
compliance with Environmental Laws.

 

(f)            Neither Seller, the Company nor any of its Subsidiaries
has received any written notice from any Person, that alleges that any of them
is in violation of Environmental Laws or has any material liability arising
under applicable Environmental Laws, including any liability for any Remedial
Action.

 

(g)           Seller has provided Buyer with copies of all material
environmental reports, audits and analyses relating to the Company, any of its
Subsidiaries, any of its or their operations, or any of the Leased Real
Property that are in the possession or control of the Seller, the Company or
any of its Subsidiaries.

 

3.17         Affiliated Transactions.  Except as set forth on Schedule 3.17,
neither Seller nor any of its Subsidiaries (other than the Company or any of
its Subsidiaries), nor any officer, director or Affiliate (other than the
Company or any of its Subsidiaries) of Seller, the Company or any of their
Subsidiaries (i) is, or as of September 30, 2010 was, a party to any
Contract or transaction with the Company or any of its Subsidiaries, (ii) has,
or as of September 30, 2010 had, borrowed any moneys from or has, or as of
September 30, 2010 had, outstanding any Indebtedness or other similar obligation
to the Company or any of its Subsidiaries, or (iii) has any material
direct or indirect interest of any kind in any material property used by the
Company or its Subsidiaries.  Except as
set forth on Schedule 3.17, neither Seller nor any of its Subsidiaries
(other than the Company or any of its Subsidiaries) has any material ownership
interest (other than investments that result in such Person owning less than 2%
of the outstanding voting stock of a publicly traded company) in, or controls,
any Person that is a material supplier, customer or landlord of the Company or
its Subsidiaries, or is engaged in a business in competition with the business
of the Company or its Subsidiaries as conducted as of the date hereof.

 

3.18         Employees.  The
Company has made available to Buyer a complete and accurate list of the titles
and current annual salary rates of, and all bonuses paid or payable within the
past twelve (12) months to, all present officers and senior management
employees whose annual (or annualized) rate of compensation (base salary and
target bonus) exceeds $100,000.  Neither
the Company nor any of its Subsidiaries is a party to any collective bargaining
agreement with respect to its employees, nor, to the Company’s knowledge, have
there been any attempts to organize the employees of the Company or any of its
Subsidiaries since January 1, 2008. 
There is no labor strike or other organized work stoppage pending
against the Company or any of its Subsidiaries. 
There are no, nor in the three (3) years prior to the Closing Date
have there been

 

20

 

any, material Proceedings pending or, to the Company’s
knowledge, threatened against the Company or any of its Subsidiaries before the
U.S. Equal Employment Opportunity Commission, or any Governmental Authority or
any arbitrator concerning alleged employment discrimination or any other
material matter related to employment, wages, hours, equal opportunity,
nondiscrimination, immigration, benefits, collective bargaining, payment of
social security and similar taxes, income tax withholding, occupational safety
and health, and/or privacy rights of employees. 
There is no, nor in the three (3) years prior to the Closing Date
has there been any, unfair labor practice charge or complaint pending or, to
the Company’s knowledge, threatened against the Company or any of its
Subsidiaries before the National Labor Relations Board, or any similar state,
local or foreign Governmental Authority. 
Each of the Company and its Subsidiaries has
complied in all material respects with all applicable Laws relating to social
insurance obligations in respect of all their employees. In the three (3) years
prior to the Closing Date, neither the Company nor any of the Subsidiaries has
effectuated (i) a “plant closing” as defined in the Worker Adjustment and
Retraining Notification Act, 29 U.S.C. §§ 2101 et seq.
(the “WARN Act”) (or any similar state, local or foreign law) affecting
any site of employment or one or more facilities or operating units within any
site of employment or facility of the Company or any of the Subsidiaries or (ii) a
“mass layoff” as defined in the WARN Act (or any similar state, local or
foreign law) affecting any site of employment or facility of the Company or any
of the Subsidiaries, and which liability therefor remains unsatisfied.

 

3.19         Brokerage. 
Neither the Company nor any of its Subsidiaries has incurred, nor shall
any of them become liable for, any brokerage commissions, finders’ fees or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of Seller,
the Company or any of their Affiliates, other than any fees and expenses of
Oppenheimer & Co. Inc., which fees and expenses shall be paid by
Seller.

 

3.20         Permits.  Schedule 3.20
contains a list of all material permits and licenses of Governmental
Authorities (collectively, the “Permits”) owned or possessed by the
Company or its Subsidiaries, and no other permits and licenses of governmental
entities are required in the conduct of their respective businesses or used by
the Company and its Subsidiaries in the conduct of their businesses, in each
case as of the date of this Agreement, except where the failure to obtain, own,
possess and/or use such other permits and licenses of Governmental Authorities
would not reasonably be expected to materially interfere with or limit the
operation of the respective businesses of the Company and its Subsidiaries as
of the date of this Agreement.  Neither
the Company nor any of its Subsidiaries are in default or violation (and no
event has occurred which, with notice or the lapse of time or both, would
constitute a default or violation) of any term, condition or provision of any
Permit to which it is a party, except which such default or violation would not
reasonably be expected to have a Material Adverse Effect.  No proceeding to modify, suspend, revoke,
withdraw, terminate or otherwise limit in any material respect any such Permit
is pending or, to the Company’s knowledge, threatened.

 

3.21         Product Warranties. 
Schedule 3.21 sets forth the standard written forms of product
and service warranties and guarantees utilized by the Company and its
Subsidiaries as of the date of this Agreement. 
There has not been any claim under any contractual warranty, guaranty or
other indemnity with respect to the Company’s or any of its Subsidiaries’
products or 

 

21

 

services during a period of three (3) years
prior to the Closing Date, except for claims which do not exceed $500,000 in
any single case, or $1,000,000 in the aggregate.  All
material service or warranty liabilities of the Company or any of its
Subsidiaries to customers or other Persons as of June 30, 2010, are
reflected on the Financial Statements to the extent required by GAAP, and the reserve
for warranty liabilities reflected thereon has been determined and recorded in
accordance with GAAP consistently applied as of such date.  To the Company’s knowledge, Schedule 3.21 sets forth as
of the date hereof any problem or issue with respect to any of the Company
Products which does, or may reasonably be expected to, materially adversely
affect the value, functionality, or fitness for the intended purpose of such
Company Products.

 

3.22         Bank Accounts. 
Schedule 3.22 sets forth a list of all bank accounts, and
all safe deposit boxes, maintained by the Company and its Subsidiaries, and a
listing of the persons authorized to draw thereon or make withdrawals therefrom
or, in the case of safe deposit boxes, authorized to obtain access thereto.

 

3.23         Accounts Receivable. 
Seller has made available to Buyer a list of all accounts receivable of
the Company and its Subsidiaries as of September 30, 2010, together with a
range of days elapsed since invoice. 
Except to the extent, if any, reserved for in the Financial Statements,
all accounts receivable of the Company and its Subsidiaries reflected on the
Financial Statements arose from, and all accounts receivable of the Company and
its Subsidiaries existing on the Closing Date have arisen from, the sale of inventory
or services rendered in the ordinary course of business consistent with past
practice to Persons not Affiliated with Seller, the Company or their respective
Subsidiaries.  Since the date of the
Latest Balance Sheet, the Company has not sold or factored more than $4,400,000  of accounts receivable. 
Except as set forth on Schedule 3.23(i), no Person has any Lien
on any of the accounts receivable of the Company and its Subsidiaries.  As of the date hereof, the Company does not
reasonably expect that the collections rate of its and its Subsidiaries’
currently outstanding accounts receivable will be materially worse than its
historical collection rate.

 

3.24         Foreign Corrupt Practices.  None of the Company, its Subsidiaries, or any
director, officer, agent, employee or other Person acting on behalf of the
Company or any of its Subsidiaries has, in the course of its actions for, or on
behalf of, the Company or its Subsidiaries (i) used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the
U.S. Foreign Corrupt Practices Act of 1977, as amended or any rules or
regulations thereunder; or (iv) made any unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.

 

3.25         Customers.  Schedule 3.25
sets forth the names of the top 20 customers of the Company and its
Subsidiaries that purchased goods or services from the Company or its
Subsidiaries based on total revenues received from such customers during the
twelve (12) month period ended June 30, 2010, and the amount for which
each such customer was invoiced during such period.  Except as disclosed in Schedule 3.25,
neither Seller, the Company nor any of its Subsidiaries has received any notice
that any such customer of the Company or its Subsidiaries will not purchase
goods or services from the Company in the future.

 

22

 

3.26         Suppliers.  Schedule 3.26
sets forth the names of the top 20 suppliers from which the Company and its
Subsidiaries ordered raw materials, supplies, merchandise and other goods for
the Company and its Subsidiaries based on the amount paid to each supplier by
the Company during the twelve (12) month period ended June 30, 2010, and
the amount paid to each such supplier by the Company or such Subsidiary during
such period. Except as disclosed in Schedule 3.26, neither Seller, the
Company nor any of its Subsidiaries has received any notice that any such
supplier will not sell raw materials, supplies, merchandise or other goods to
the Company or its Subsidiaries in the future.

 

3.27         Sufficiency of Assets.

 

(a)           Schedule 3.27(a) contains a true and complete
list of all of the properties, assets, rights, Contracts and claims of Seller
and its Subsidiaries (other than the Company and its Subsidiaries) used or held
for use in, or necessary for, the conduct of the business of the Company and
its Subsidiaries as presently conducted, and of all services performed for the
Company and its Subsidiaries by Seller and its Subsidiaries (other than the
Company).

 

(b)           Following the
Closing, neither Seller nor any of its Subsidiaries (other than the Company or
any of its Subsidiaries) will have any interest in any properties, rights and
assets used in or relating to the conduct of the business of the Company and
its Subsidiaries as presently conducted.

 

3.28         Complete Copies of Materials.  The Company has made available to Buyer true
and complete copies of each of the documents listed or referred to on the
Disclosure Schedules.

 

3.29         Grants and Benefits. 
Schedule 3.29 provides a list of all material pending and
outstanding grants, incentives, Tax benefits, subsidies and other similar
benefits or incentives, and all applications therefor (collectively, “Grants”),
provided by a Governmental Authority to or for the benefit of the Company or
any of its Subsidiaries or applicable to or affecting any of their respective
businesses, properties, rights or assets. 
The Company provided to Buyer, prior to the date hereof, true and
correct copies of all documents evidencing Grants submitted by the Company or
any of its Subsidiaries, and all letters of approval and supplements thereto,
granted to the Company or any of its Subsidiaries.  Schedule
3.29 sets forth a summary of the Company’s
estimated savings and benefits under the Grants for the time periods and types
of savings and benefits specified therein.  Except as set forth on Schedule 3.29,
the Company or its Subsidiary, as appropriate, is in compliance, in all
material respects, with the terms and conditions of their respective Grants and
has duly fulfilled, in all material respects, all the undertakings relating
thereto.  No submissions made to any
Governmental Authority in connection with obtaining any Grant contained any
misstatement or omission that would have affected the granting of such
Grant.  As of the date hereof, the
Company has not been informed in writing by a Governmental Authority that they
have any intent to revoke or materially modify any of the Grants.  To the Company’s knowledge, the consummation
of the transactions contemplated by this Agreement in and of itself will not
have any adverse effect on the continued validity and effectiveness of any such
Grants.  Each Subsidiary has, in accordance
with applicable Law, duly registered with the relevant Governmental Authority
and obtained and maintained the validity of all national and local tax
registration certificates.  To the
Company’s knowledge, the Company has not taken or omitted to take any action
that can reasonably be 

 

23

 

expected to form the basis of any Governmental
Authorities rejecting the renewal or extension of the Grants with respect to
the High-Technology Enterprise status as the current three-year term of such
status is due to expire.

 

3.30         Director and Officer Claims.  No director or officer of the Company or its
Subsidiaries has made a claim for indemnification pursuant to the certificate
of incorporation, bylaws or other similar organizational documents of the Company
or any of its Subsidiaries or any other agreement with the Company or any of
its Subsidiaries, and, to the Company’s knowledge, no basis for any such claim
exists.   Schedule 3.30 sets forth
each of the directors and officers of the Company and its Subsidiaries.  Except as set forth on Schedule 3.30,
none of the directors or officers of the Company or any of its Subsidiaries is
an employee of Seller or its Subsidiaries (other than the Company and its
Subsidiaries).

 

3.31         Termination of Intercompany Obligations, Guarantees and
Indemnity Obligations.  As of the Closing Date, Seller has caused to be terminated and cancelled
all (i) intercompany accounts payable by the Company and its Subsidiaries
to Seller and its Subsidiaries (other than the Company and its Subsidiaries)
and (ii) intercompany accounts payable (other than commercial accounts
payable related to the sale of products or services, if any, included in the
accounts receivable line in the Latest Balance Sheet or that would be
included in a consolidated, unaudited balance sheet of the Company and its
Subsidiaries prepared in the same manner as the Latest Balance Sheet  on
the Closing Date) by the Seller and its Subsidiaries (other than the Company
and its Subsidiaries) to the Company and its Subsidiaries.  The
intercompany payable line on the Latest Balance Sheet is calculated on a net
basis, and, for the avoidance of doubt, the accounts receivable line on the
Latest Balance Sheet does not include such commercial accounts receivable from
MRV and its Subsidiaries (excluding the Company and its Subsidiaries).  As of the Closing Date, Seller has caused to
be terminated and cancelled all indemnity obligations from the Company or any
of its Subsidiaries to Seller or its Subsidiaries (other than the Company and
its Subsidiaries).  None of the Company’s
Cash on Hand was used to satisfy any such intercompany accounts payable on or
after September 30, 2010. As of the Closing Date, Seller has caused the
Company and its Subsidiaries to be released from any obligation to guarantee or
provide indemnity for any obligation of Seller and its Subsidiaries (except the
Company and its Subsidiaries) to a third party and has caused the beneficiaries
of any such guarantees or indemnities to release the Company from any liabilities
or obligations under each such guarantee and indemnity.

 

3.32         No Other Representations.  Except for the representations and warranties
contained in Article II and this Article III, as
qualified by the Disclosure Schedules delivered pursuant hereto, and as made in
any certificate delivered at Closing pursuant to this Agreement, none of the
Company, its Subsidiaries, Seller or any other Person makes any express or
implied representation or warranty in respect or on behalf of the Company, its
Subsidiaries or Seller, and the Company and Seller disclaim any such
representation or warranty, whether by Seller, the Company or any of its
Subsidiaries or any of their respective officers, directors, employees, agents
or representatives or any other Person, with respect to the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby or thereby or the business or assets of the Company and its
Subsidiaries, notwithstanding the delivery or disclosure to Buyer or any of its
officers, directors, employees, agents or representatives or any other Person
of any documentation or other information with respect to the foregoing.

 

24

 

ARTICLE IV.

 

REPRESENTATIONS AND
WARRANTIES OF BUYER

 

Buyer
represents and warrants to the Company and Seller as follows:

 

4.01         Organization and Authority.  Buyer is a private company with limited
liability duly organized, validly existing and in good standing under the Laws
of its jurisdiction of incorporation, with all requisite power and authority
and full legal capacity to execute and deliver this Agreement and perform its
obligations hereunder.

 

4.02         Authorization; Valid and Binding Agreement.  The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all requisite action on the part of Buyer.  This Agreement has been duly and validly
executed and delivered by Buyer and, assuming that this Agreement is a valid
and binding obligation of the Company and Seller, this Agreement constitutes a
legally valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms, except as enforceability may be limited by
bankruptcy Laws, other similar Laws affecting creditors’ rights and general
principles of equity affecting the availability of specific performance and
other equitable remedies.

 

4.03         No Breach.  The
execution, delivery and performance of this Agreement by Buyer and the
consummation of the transactions contemplated hereby do not result (with or
without notice or lapse of time, or both) in any breach of, constitute a
default under, result in a violation of, or require any material permit,
authorization, consent or approval by, filing with or notice or declaration to
any Governmental Authority, under (a) the provisions of Buyer’s
certificate of incorporation, bylaws or equivalent organizational documents,
(b) any government registration or Contract to which Buyer is a party or
by which Buyer or its properties or assets may be bound or affected, or
(c) any Law or Order to which the Buyer is subject, except, in the case of
clauses (b) and (c), where the failure of any of the foregoing to be
true would not have a material adverse effect on the ability of Buyer to
consummate the transactions contemplated by this Agreement.

 

4.04         Litigation. 
There are no Proceedings pending or, to Buyer’s knowledge, overtly
threatened against or affecting Buyer before or by Governmental Authority,
which would have a material adverse effect on the ability of Buyer to
consummate the transactions contemplated by this Agreement.

 

4.05         Brokerage. 
There are no claims for brokerage commissions, finders’ fees or similar
compensation in connection with the transactions contemplated by this Agreement
based on any arrangement or agreement made by or on behalf of Buyer.

 

4.06         Investment Representation.  Buyer is purchasing the Shares for its own
account with the present intention of holding such securities for investment
purposes and not with a view to or for sale in connection with any public
distribution of such securities in violation of any federal or state securities
Laws.  Buyer is an “accredited investor”
as defined in Regulation D promulgated by the Securities and Exchange
Commission under the Securities Act of 1933, as 

 

25

 

amended (the “Securities Act”).  Buyer acknowledges that it is informed as to
the risks of the transactions contemplated hereby and of ownership of the
Shares.  Buyer acknowledges that the
Shares have not been registered under the Securities Act or any state or
foreign securities Laws and that the Shares may not be sold, transferred,
offered for sale, pledged, hypothecated or otherwise disposed of unless such
transfer, sale, assignment, pledge, hypothecation or other disposition is
pursuant to the terms of an effective registration statement under the
Securities Act and are registered under any applicable state or foreign
securities Laws or pursuant to an exemption from registration under the
Securities Act and any applicable state or foreign securities Laws.

 

4.07         Limited Guarantee. 
The Fund has provided the Limited Guarantee to Seller.  There are no other agreements, side letters
or arrangements relating to the Limited Guarantee that could affect the
availability of the Fund to perform its obligations thereunder.  The Limited Guarantee is in full force and
effect.  There are no conditions precedent
or other contingencies related to performance by the Fund of its obligations
under the Limited Guarantee.

 

4.08         No Other Representations.  Except for the representations and warranties
contained in this Article IV, none of Buyer or any other Person
makes any express or implied representation or warranty in respect or on behalf
of Buyer, and Buyer disclaims any such representation or warranty, whether by
Buyer or any of its officers, directors, employees, agents or representatives
or any other Person, with respect to the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby or
thereby or the business or assets of Buyer, notwithstanding the delivery or
disclosure to Company or Seller or any of their respective officers, directors,
employees, agents or representatives or any other Person of any documentation
or other information with respect to the foregoing.

 

ARTICLE V.

 

COVENANTS OF SELLER AND THE
COMPANY

 

5.01         Access to Books and Records.  After the Closing, Seller shall from time to
time provide Buyer and its authorized representatives (including, without
limitation, its legal advisors and accountants) with reasonable access, upon
advance notice and during normal business hours, to the books and records
relating to the Company and its Subsidiaries in Seller’s possession as Buyer
reasonably requests and to make extracts and copies of such books and
records.  Effective upon, and only upon,
the consummation of the Closing, the Confidentiality Agreement shall terminate.  Unless otherwise consented to in writing by
Buyer, Seller shall not, for a period of six years following the Closing Date,
destroy, alter or otherwise dispose of any of its books and records, or any
portions thereof, relating to the Company and its Subsidiaries for periods on
or prior to the Closing Date without first giving at least 30 days prior
written notice to Buyer and offering to surrender to Buyer such books and
records or such portions thereof.

 

5.02         Confidentiality. 
Seller recognizes that by reason of its ownership of the Company and its
Subsidiaries, Seller and its Subsidiaries (other than the Company and its
Subsidiaries) have acquired confidential information and trade secrets
concerning the Company and its Subsidiaries and the Company and its
Subsidiaries’ business the use or disclosure of which could cause Buyer or its
Subsidiaries (including the Company and its Subsidiaries) substantial loss and 

 

26

 

damages that could not be readily calculated and for
which no remedy at law would be adequate. 
Accordingly, Seller covenants and agrees with Buyer that neither Seller
nor any of its Subsidiaries will at any time, except in performance of their
respective obligations to Buyer or with the prior written consent of Buyer,
directly or indirectly, disclose any proprietary, secret or confidential
information relating to the Company and its Subsidiaries and the Company and
its Subsidiaries’ business that any such Person may learn or has learned by
reason of its ownership of the Company and its Subsidiaries and the Company and
its Subsidiaries’ business, unless (i) such information becomes known to
the public generally through no fault of Seller or any of its Subsidiaries,
(ii) disclosure is required by applicable Law, or (iii) such
information was not previously known to Seller or any of its Subsidiaries but
becomes rightfully known to Seller or such Subsidiary after Closing, without
restriction, from a source (other than Buyer and its Subsidiaries) not related
to Seller’s prior ownership of the Company and its Subsidiaries and the Company
and its Subsidiaries’ business and without any breach of duty to Buyer or its
Subsidiaries.  The parties hereto agree
that the covenant contained in this Section 5.02 imposes a
reasonable restraint on Seller and its Subsidiaries and employees.

 

5.03         Non-Competition.

 

(a)           In consideration of Buyer entering into this Agreement and
in order that Buyer may enjoy the full benefit of the business of the Company,
for a period of three (3) years from and after the Closing Date,
neither Seller nor any of its Subsidiaries shall, directly or indirectly,
whether as principal, agent, partner, officer, director, stockholder, employee,
consultant or otherwise, alone or in association with any other Person, own,
manage, operate, control, participate in, invest in (other than an investment
that results in such Person owning less than 2% of the outstanding voting stock
of a publicly traded company) or carry on a business which, directly or
indirectly, is in competition with the Company or its Subsidiaries as conducted
on the date hereof; provided, however, that Seller shall be
allowed to (i) sell the Appointech, Inc. (“Appointech”)
business to any third party or parties which is not an Affiliate of Seller or
its Subsidiaries and (ii) continue operation of the business of
Appointech, without material expansion of or deviation from the business of
Appointech as historically conducted; provided, further, however,
that no restrictions pursuant to this Section 5.03(a) shall
apply with respect to Appointech following the closing of any sale of
Appointech to a third party which is not an Affiliate of Seller or its
Subsidiaries.

 

(b)           Seller acknowledges and agrees that the remedy at law for
any breach, or threatened breach, of any of the provisions of this Section 5.03
will be inadequate and, accordingly, Seller covenants and agrees that Buyer
shall, in addition to any other rights and remedies which Buyer may have at
Law, be entitled to equitable relief, including injunctive relief, and to the
remedy of specific performance with respect to any breach or threatened breach
of such covenant, as may be available from any court of competent
jurisdiction.  In addition, Seller and
Buyer agree that the terms of the covenant in this Section 5.03 are
fair and reasonable in light of Buyer’s plans for the business of the Company
and are necessary to accomplish the full transfer of the goodwill and other
intangible assets contemplated hereby. 
In the event that any of the covenants contained in this Section 5.03
shall be determined by any court of competent jurisdiction to be unenforceable
for any reason whatsoever, then any such provision or provisions shall not be
deemed void, and the parties hereto agree that said limits may be modified by
the court and that said covenant contained in this Section 5.03
shall be amended in 

 

27

 

accordance with said modification, it being
specifically agreed by the parties that it is their continuing desire that this
covenant be enforced to the full extent of its terms and conditions or if a
court finds the scope of the covenant unenforceable, the court should redefine
the covenant so as to comply with applicable Law.

 

5.04         Non-Solicitation. 
For a period of two (2) years after the Closing Date, Seller shall not,
and shall cause its Subsidiaries not to, whether for their own account or for
the account of any Person, solicit, offer employment to or hire any individual
that is employed by the Company or its Subsidiaries on the Closing Date; provided,
however, that Seller and its Subsidiaries shall not be prohibited from (i) initiating
searches for employees through the use of general advertisement or through the
engagement of firms to conduct searches that are not targeted or focused on the
Company and its Subsidiaries (and the hiring of employees that respond to any
such searches), (ii) hiring any such employee not employed by the Company
or its Subsidiaries at the time of solicitation or (iii) hiring any
employee who contacts Seller or its Subsidiaries on his or her own initiative.

 

5.05         Successors.  In the event that Seller (or any of its
successors or assigns) shall (i) consolidate or merge with any other
Person and shall not be the continuing or surviving corporation or entity in
such consolidation or merger, (ii) transfer all or substantially all of
its properties and assets to any other Person, or (iii) adopt a plan of
dissolution or liquidation, then in each case proper provision shall be made so
that the continuing or surviving corporation or entity (or its successors or
assigns, if applicable), or transferee of such assets, or such liquidating
trust or other agent, as the case may be, shall expressly assume all of Seller’s
obligations under this Agreement, including Seller’s obligations pursuant to Article VII
and Section 8.03 hereof, which shall continue in effect after the
consummation of such transaction.  Prior
to any such transaction, Seller shall notify Buyer of any transaction that
would trigger the terms of this Section 5.05 and the terms thereof,
including the identity of the continuing or surviving corporation or entity,
transferee, liquidating trust or other agent, as the case may be.

 

5.06         Third
Party Consents.  Seller shall,
subsequent to the Closing, use reasonable best efforts to obtain those consents
required for the consummation of the transactions contemplated hereby under the
contracts set forth on, or required to be set forth on, Schedule 3.04
(the “Consents”) and shall use commercially reasonable efforts to
provide assistance for any notices required to be given under the contracts set
forth on, or required to be set forth on, Schedule 3.04, as
applicable.  If a Consent cannot be
obtained, Seller shall use its reasonable best efforts to provide the Company
with substantially similar rights and benefits of the affected contract for the
term thereof, and to enable Buyer to conduct the business of the Company and
its Subsidiaries until such Consent is obtained and shall indemnify Buyer for
any losses suffered by the Company or its Subsidiaries for any Losses resulting
from the loss of the benefits of such contract. 
If Seller provides the rights and benefits under any such contract, the
Company shall assume the obligations and burdens under such contract.

 

28

 

ARTICLE VI.

 

COVENANTS OF BUYER

 

6.01         Access to Books and Records.  From and after the Closing, Buyer shall, and
shall cause the Company to (a) provide Seller and its authorized
representatives with reasonable access (for the purpose of examining and
copying), upon advance notice and during normal business hours, to the books
and records of the Company and its Subsidiaries with respect to periods on or
prior to the Closing Date and/or in connection with any matter relating to or
arising out of this Agreement or the transactions contemplated hereby and (b) make
available and deliver to Seller,  in
a timely manner, the records, files, data and information, including
the information consisting of the Company’s consolidation file and other
disclosure schedules, necessary for Seller to prepare and complete its
quarterly and annual consolidated financial statements and other public reports
required to be filed with the U.S. Securities and Exchange Commission, for each
of the periods (i) beginning on July 1, 2010 through September 30,
2010 and (ii) beginning on October 1, 2010 through the Closing Date,
in each case consistent with past practice. 
Unless otherwise consented to in writing by Seller, Buyer shall not
permit the Company or any of its Subsidiaries, for a period of six (6) years
following the Closing Date, to destroy, alter or otherwise dispose of any of
its books and records, or any portions thereof, relating to the Company and its
Subsidiaries for periods on or prior to the Closing Date without first giving
at least thirty (30) days prior written notice to Seller and offering to
surrender to Seller such books and records or such portions thereof.

 

6.02         Directors and Officer Liability.  The Company and its Subsidiaries shall have
no obligation post-Closing to indemnify or advance any expenses to any director
or officer of the Company and its Subsidiaries if such individual is or was a
director, officer or employee of Seller or its Subsidiaries (other than the
Company and its Subsidiaries) as of or prior to the Closing Date, and Seller
shall indemnify the Company in connection with any such payment or related
claim.

 

6.03         Employees and Employee Benefits.

 

(a)           Continuing
Employees.  Seller shall take
all necessary action to ensure that upon the Closing, (i) all Employees
will cease to participate in, and (ii) the Company and/or its Subsidiaries
shall cease to be “participating employers” (or comparable participating
entities) under, each of the Seller Benefit Plans; provided, however,
that Seller shall continue to provide benefits under Seller Benefit Plans to
the Continuing Employees (as defined below) and any Employees hired following
the date of the Closing under the Seller Benefit Plans set forth on Schedule
6.03(a) for the period beginning upon the Closing and through December 31,
2010, to the extent to which the Continuing Employees participate in each such
Seller Benefit Plan immediately prior to the Closing.  Buyer will reimburse Seller for Seller’s
actual costs (determined based on premium or self-insured equivalent rates) in
providing such benefits promptly, but in no event later than thirty (30) days
after receipt of Seller’s invoice for such costs.  In addition, to the extent that Seller or any
Seller Benefit Plan incurs any cost, expense or other Loss resulting from any
Seller Benefit Plan being characterized by an appropriate 

 

29

 

Governmental Authority as a “multi-employer welfare
arrangement” (within the meaning of ERISA), Buyer shall indemnify and hold
Seller harmless against such cost, expense or other Loss and shall promptly
reimburse any such amounts to Seller upon receipt of notice thereof from
Seller.  From and after the date through
which such benefits continue, Seller shall retain all obligations and
liabilities under the Seller Benefit Plans, and neither Buyer nor any of its
Affiliates will have any obligation or liability with respect thereto.  Neither the Buyer nor any of its Affiliates
shall assume sponsorship or any liability with respect to any of the Seller
Benefit Plans or any part thereof, and no Seller Benefit Plan and no assets of
any Seller Benefit Plan will be transferred to Buyer or any of its Affiliates
or to any plan of Buyer or any of its Affiliates.  Upon the Closing, each individual who is an
employee of the Company and/or any of its Subsidiaries (an  “Employee”) immediately prior to the
Closing shall continue as an employee of the Company or one of its Subsidiaries
or Affiliates immediately after the Closing (each, a “Continuing Employee”).  For purposes of this Section 6.03(a),
the term “Employee” shall include any individual who, on the Closing Date, is
on an authorized medical or short-term (but not long-term) disability leave of
absence or any other approved leave of absence from the Company or any of its
Subsidiaries who return to full time status within six (6) months after
the Closing.  Nothing contained in this Section 6.03(a) shall
limit the right of Buyer or any of its Affiliates to terminate the employment
of any Continuing Employee after the Closing.

 

(b)           Credit.  With respect
to each “employee benefit plan” (as such term is defined in Section 3(3) of
ERISA) that is maintained, sponsored or contributed to by Buyer or its
Subsidiaries (the “Buyer Plans”) in which any Continuing Employee
becomes eligible to participate, Buyer shall: 
(A)  ensure that each Continuing Employee shall receive full credit
for purposes of eligibility for such employees’ service with the Company and/or
any of its Subsidiaries prior to the Closing, to the extent such credit was
recognized under comparable Employee Benefit Plans immediately prior to the
Closing (including, without limitation, for purposes of determining benefit
levels applicable under any severance or termination pay arrangement), and (B) make
commercially reasonable efforts to cause there to be waived any eligibility
requirements or pre-existing condition limitations and give effect, in
determining any deductible and maximum out-of-pocket limitations, to amounts
paid by Continuing Employees under comparable Employee Benefit Plans, in each
case, to the extent waived and given effect (as applicable) under comparable
Employee Benefit Plans immediately prior to the Closing.

 

(c)           Employment Practices.  From and after the Closing, the Company and
its Subsidiaries shall be solely responsible for, and Buyer shall indemnify,
defend and hold the Seller and its Affiliates harmless from and against, any
Losses arising from or relating to any acts or omissions of Buyer or its
Affiliates (including the Company and its Subsidiaries) in connection with the
employment or termination of employment of the Continuing Employees.

 

(d)           Performance.  From and
after the Closing, Buyer shall cause the Company and its Subsidiaries to honor
in accordance with their terms all agreements between either such party and any
Continuing Employee as set forth on Schedule 6.03(d) and to
continue to satisfy all other legal obligations of the Company to any Company
Employees.

 

(e)           Allocation.  For purposes of allocating responsibility
under this Section 6.03, a medical claim is deemed incurred when
the services that are the subject of the claim are performed; in the case of
hospitalization, upon commencement of hospitalization; in the case of 

 

30

 

life insurance,
when the death occurs; in the case of long-term disability benefits, the later
of when the disability is determined to have occurred by the Company’s
insurance carrier or when the employee ceased active employment as a result of
the disability; and, in the case of workers’ compensation, when the event
giving rise to the claim occurs.

 

(f)            COBRA.  Buyer shall (i) assume any and all
obligations to provide continuation coverage pursuant to Section 601 of
ERISA, et. seq. (“COBRA”), with respect to Continuing Employees and
their qualified beneficiaries (excluding any individual who became a qualified
beneficiary prior to Closing), and (ii) indemnify Seller and its
Affiliates for any and all Losses incurred as a result of Buyer’s failure to
provide continuation coverage to any Continuing Employee or qualified
beneficiary (excluding any individual who became a qualified beneficiary prior
to Closing), including, but not limited to, any Losses or excise taxes arising
pursuant to Code Section 4980B. 
Notwithstanding the foregoing, during any transition period during which
Continuing Employees receive benefits under Seller benefit plans in accordance
with Section 6.03(a) above, Seller shall provide continuation
coverage under its plans as required by COBRA, the costs of which shall be
reimbursed by Buyer in accordance with Section 6.03(a) above.

 

(g)           No
Other Rights.  Nothing in
this Section 6.03 shall be deemed to create or confer any rights or
remedies (including any agreement for employment or other benefits) in any
Person other than the parties hereto.

 

6.04         Insurance; Risk of Loss.

 

(a)           As of the close of business on the Closing Date:  (i) Seller will terminate or cause its
Affiliates to terminate all insurance coverage with respect to events occurring
on or after the Closing Date relating to the Company and its Subsidiaries and
their respective businesses, assets and employees under the policies of
insurance of Seller maintained for the benefit of all of its controlled subsidiaries,
including the Company and its Subsidiaries; provided, however,
that (A) no such termination of any “occurrence based” policy in force as
of the Closing Date shall be effected so as to prevent the Company and its
Subsidiaries from recovering under such policies for losses covered thereby
from events occurring on or prior to the Closing Date, it being understood that
the Company and its Subsidiaries shall be responsible for any deductible
payable under the terms of the applicable policy in connection with any such
claims; (B) no such termination of any “claims made” policy in force as of
the Closing Date shall be effected so as to prevent the Company and its
Subsidiaries from recovering under such policies for losses covered thereby
arising from or out of any claim made on or prior to the Closing Date, it being
understood that the Company and its Subsidiaries shall be responsible for any
deductible payable under the terms of the applicable policy in connection with
any such claims; and (ii) Buyer shall become solely responsible for all
insurance coverage and related risk of loss with respect to the Company and its
Subsidiaries and their respective businesses, assets and employees in
connection with events occurring on or after the Closing Date.

 

(b)           Seller shall use its commercially reasonable efforts to
cooperate with Buyer and its Affiliates to make claims for indemnification
under the terms of the policies set forth in clause (a) above.

 

31

 

6.05        Non-Solicitation.  For a period of two (2) years after the
Closing Date, Buyer shall cause the Company and the Company’s Subsidiaries not
to, whether for their own account or for the account of any Person, solicit,
offer employment to or hire any individual that is employed by Seller or its
Subsidiaries (other than the Company and its Subsidiaries) on the Closing Date;
provided, however, that the Company and its Subsidiaries shall
not be prohibited from (i) initiating searches for employees through the
use of general advertisement or through the engagement of firms to conduct
searches that are not targeted or focused on Seller and its Subsidiaries (and
the hiring of employees that respond to any such searches), (ii) hiring
any such employee not employed by Seller or its Subsidiaries at the time of
solicitation or (iii) hiring any employee who contacts the Company or its
Subsidiaries on his or her own initiative.

 

6.06        Restricted
Stock Unit Awards.  Following the Closing, SPI shall, and Buyer shall cause SPI to (i) send,
upon or within 15 Business Days after the Closing Date, an RSU acknowledgement
in the form attached hereto as Exhibit A (the “RSU
Acknowledgement”) to each holder of a Restricted Stock Unit Award listed on
Schedule 6.06 (each, an “RSU Holder”) and (ii) pay from the
Aggregate RSU Amount, on the 45th day following the Closing Date (or if such
date is not a Business Day, the first Business Day thereafter) (in any case,
the “RSU Settlement Date”), to each RSU Holder who has delivered an
executed RSU Acknowledgement back to SPI on or prior to the fifth day prior to
the RSU Settlement Date, the amounts listed next to the name of such RSU Holder
on Schedule 6.06 (subject to applicable tax withholding
requirements).  Seller shall have taken
all action necessary or desirable to ensure that all Restricted Stock Unit
Awards shall terminate upon the Closing and, except as expressly provided in
this Section 6.06, RSU Holders shall have no rights or interest in
Restricted Stock Unit Awards thereafter, other than the right to receive the
amount listed next to such RSU Holders’ name on Schedule 6.06.  Notwithstanding the foregoing, payments to
RSU Holders pursuant to this Section 6.06 shall be subject to and
conditioned upon the RSU Holder’s execution and delivery of an RSU
Acknowledgement in accordance herewith; in no event shall SPI pay any portion
of the Aggregate RSU Amount to any RSU Holder who has not delivered to SPI an
executed RSU Acknowledgement.  All
payments made by SPI at any time relating to or in connection with a claim by
any Person to rights under any Restricted Stock Unit Awards shall be offset by
the remaining Aggregate RSU Amount until the remaining Aggregate RSU Amount is
zero, and thereafter such amounts shall be indemnifiable Losses pursuant to Article VII
and Seller shall be responsible for and shall pay any such amounts.

 

6.07        Lease Guaranty.  Buyer, the Company and its Subsidiaries shall
indemnify Seller for any and all Losses arising out of, relating to, or in
connection with Seller’s obligations under that
certain Guaranty of Lease given by Seller to Nordhoff Industrial Complex, dated
August 19, 2004.

 

ARTICLE VII.

 

INDEMNIFICATION

 

7.01        Survival of
Representations, Warranties, Covenants and Agreements.  The representations, warranties, and
agreements set forth in this Agreement and in any certificates delivered at the
Closing in connection with this Agreement shall survive the Closing until the
15-

 

32

 

month anniversary of the Closing Date
notwithstanding any investigation at any time made by or on behalf of Buyer and
shall thereafter be of no further force or effect; provided, however,
that (a) any covenant or agreement required to be performed or complied
with following the Closing Date will survive the Closing in accordance with its
terms, (b) the representations and warranties set forth in Section 3.11
shall survive the Closing and continue in full force and effect until the
36-month anniversary of the Closing Date notwithstanding any investigation at
any time made by or on behalf of Buyer and shall thereafter be of no further
force or effect, (c) the representations and warranties set forth in Sections 3.09,
3.13 and 3.16 shall survive the Closing and continue in full
force and effect until the date that is ninety (90) days after the
expiration of the applicable statute of limitations and shall thereafter be of
no further force or effect, and (d) the representations and warranties set
forth in Sections 2.01, 2.02, 2.03, 3.01(a), 3.02,
3.03, 3.05(b), 3.06(e), 3.19, 3.27(a), 4.01,
4.02 and 4.05 will survive the Closing indefinitely (the
representations and warranties set forth in Section 3.09 and the
sections listed in this Section 7.01(d), the “Specified
Representations”).

 

7.02        Indemnification
by Seller for the Benefit of Buyer.

 

(a)           Subject to the
provisions of this Article VII, from and after the Closing, Seller
shall indemnify and hold Buyer, its Affiliates (including the Company and its
Subsidiaries) and its and their respective officers, directors, partners,
members, employees, agents, representatives, successors and permitted assigns
(collectively, the “Buyer Indemnified Parties”) harmless from and
against any and all losses, liabilities, obligations, damages, Proceedings,
demands, claims, assessments, judgments, penalties, costs and expenses,
including attorneys’ and other professionals’ fees and disbursements and the
costs of investigation and litigation (collectively, “Expenses”)
(collectively, with any Expenses, “Losses”), which the Buyer Indemnified
Parties may incur, accrue or suffer based upon, attributable to or resulting
from:  (i) any breach by Seller of
any representation or warranty set forth in Article II or Article III
of this Agreement or any certificate delivered by or on behalf of Seller
hereunder at the Closing, (ii) any breach of any covenant or agreement
contained in this Agreement to be performed or complied with by the Company at
the Closing, (iii) any breach of any covenant or agreement contained in
this Agreement to be performed or complied with by Seller, (iv) any
inaccuracy in the Minimum Cash Certificate, if and to the extent that the
actual amount of Cash on Hand as of the Closing was less than the Minimum Cash
Amount, or that the actual amount of Cash on Hand located in bank or brokerage
accounts in the United States as of the Closing was less than the US Minimum
Cash Amount (it being agreed that the amount of any such inaccuracy is an
indemnifiable Loss hereunder), (v) any Losses in respect of or related to
any Seller Benefit Plan under Title IV of ERISA, or Section 412 or
Section 4975 of the Code and (vi) the matters set forth on Schedule
7.02; provided, however, that any claim for indemnification
relating to, arising out of, or in connection with the Restricted Stock Unit
Awards shall be brought as a Third Party Claim pursuant to Section 7.05,
and Losses with respect to such claim shall first be offset by the remaining Aggregate RSU Amount
until the remaining Aggregate RSU Amount is zero and thereafter may be sought
directly against Seller.

 

(b)           Notwithstanding
any other provision in this Agreement to the contrary, (i) Seller shall
not have any liability under clause (i) of Section 7.02(a) above,
unless the aggregate amount of all Losses relating thereto for which Seller
would be liable, but for this section (including the proviso to this clause
(i)), exceeds on a cumulative basis $1,000,000 (the 

 

33

 

“Deductible”), and then only to the extent
such Losses exceed the Deductible; provided, that Seller shall not have
any liability under clause (i) of Section 7.02(a) above
for any claim or group of related claims if the Losses relating to such claim
or group of related claims are less than $10,000 in the aggregate (the “Mini-Basket”),
and (ii) the aggregate liability of Seller under clause (i) of Section 7.02(a) shall
in no event exceed $20,000,000  (the “Cap”).  The Deductible, the Mini-Basket and the Cap
shall not apply to breaches of any of the Specified Representations or to any
claim for indemnification under clauses (ii) through (vi) of Section 7.02(a),
nor shall any breaches of any of the Specified Representations or any claim for
indemnification under clauses (ii) through (vi) of Section 7.02(a) be
taken into account in the calculation of whether the Deductible or the Cap have
been met.  The Mini-Basket shall cease to
apply when $300,000 worth of Losses for which the Buyer Indemnified Parties
would have otherwise been able to seek indemnification from Seller pursuant to
clause (i) of Section 7.02(a) above were excluded by
application of the Mini-Basket.

 

(c)           Notwithstanding
any other provision in this Agreement to the contrary (other than Section 8.03),
Seller shall not be liable to, or indemnify, the Buyer Indemnified Parties for
any Losses that are punitive, special, consequential, incidental, exemplary or
otherwise not actual damages (except to the extent constituting and paid in
respect of Third Party Claims).  The Buyer
Indemnified Parties shall not use “multiple of profits” or “multiple of cash
flow” or any similar valuation methodology in calculating the amount of any
Losses not constituting Third Party Claims; provided, however,
that the foregoing shall not limit Losses resulting from any final, non-appealable
injunction, court order, judgment or binding settlement materially restricting
the freedom of the Company or any of its Subsidiaries to operate its business
as the same is conducted as of the date hereof. 
This Section 7.02 constitutes the Buyer Indemnified Parties’
sole and exclusive remedy for any and all Losses or other claims relating to or
arising from this Agreement and the transactions contemplated hereby (other
than with respect to Taxes as to which Section 8.03 governs).  For the avoidance of doubt, following the
Closing, Seller shall not be liable for any Losses or liabilities of Buyer,
Company and its Subsidiaries, other than those set forth in this Agreement.

 

(d)           Notwithstanding
anything in this Agreement to the contrary, solely for purposes of Seller’s
indemnification obligations under this Article VII, all of the
representations and warranties of Seller and the Company set forth in this
Agreement or any certificate or schedule that are qualified as to “material,” “materiality,”
“material respects,” “Material Adverse Effect” or words of similar import or
effect shall be deemed to have been made without any such qualification for
purposes of determining (i) whether a breach of any such representation or
warranty has occurred and (ii) the amount of Losses resulting from,
arising out of or relating to any such breach of representation or warranty; provided,
that the foregoing clause (i) shall not apply to the representation
and warranty in the first sentence of Section 3.07, the
representations and warranties in Sections 3.07(f), (m), (o),
the first and fifth sentences in Section 3.08(c), 3.10(a),
the first sentence of Section 3.14, the first clause of Section 3.20,
and the first sentence in Section 3.29 or be deemed to modify or
eliminate any dollar amount set forth in any representation and warranty.

 

(e)           No indemnifying
party or any of its Affiliates shall have any right of contribution from any
indemnified party or any of its Affiliates with respect to any Losses claimed
by an indemnified party.

 

34

 

(f)            Notwithstanding
anything to the contrary herein, the parties hereto agree and acknowledge that
any Buyer Indemnified Party may bring a claim for indemnification for any Loss
under this Article VII notwithstanding the fact that such Buyer
Indemnified Party had knowledge of the breach, event or circumstance giving
rise to such Loss prior to the Closing.

 

(g)           The Buyer
Indemnified Parties shall not be entitled to recover for the amount of any Loss
arising under one provision of this Agreement to the extent that the Buyer
Indemnified Parties had already recovered for such amount of such Loss pursuant
to another provision of this Agreement.

 

7.03        Indemnification
by Buyer for the Benefit of Seller.  Subject to the provisions of this Article VII,
from and after the Closing, Buyer shall indemnify and hold Seller, its
Affiliates and its and their respective officers, directors, partners, members,
employees, agents, representatives, successors and permitted assigns
(collectively, the “Seller Indemnified Parties”) harmless from and
against any and all Losses which the Seller Indemnified Parties may incur,
accrue or suffer based upon, attributable to or resulting from:  (a) any breach by Buyer of any representation
or warranty set forth in Article IV of this Agreement or any
certificate delivered by or on behalf of Buyer hereunder at or in connection
with the Closing, or (b) any non-fulfillment or breach of any covenant or
agreement contained in this Agreement to be performed or complied with by Buyer
and/or, from and after the Closing, the Company or any of its Subsidiaries.

 

7.04        Manner of
Payment.  Any
indemnification payment pursuant to this Article VII shall be
effected by wire transfer of immediately available funds from the applicable
indemnifying party to an account designated in writing by each applicable
indemnified party within five (5) days after the determination thereof.

 

7.05        Notice and
Defense of Third Party Claims.

 

(a)           Any Person
making a claim for indemnification under Section 7.02 or Section 7.03
(an “Indemnitee”) shall notify the indemnifying party (an “Indemnitor”)
of the claim in writing promptly after receiving notice of any Proceeding,
demand or other claim against the Indemnitee (if by a third party, a “Third
Party Claim”), describing the claim, the amount thereof (if known and
quantifiable) and the basis thereof in reasonable detail (such written notice,
an “Indemnification Notice”); provided that the failure to so
notify an Indemnitor shall not relieve the Indemnitor of its obligations
hereunder except to the extent that (and only to the extent that) such failure
shall have caused the Losses for which the Indemnitor is obligated to be
greater than such Losses would have been had the Indemnitee given the
Indemnitor prompt notice hereunder.  Any
Indemnitor shall be entitled to participate in the defense of a Third Party
Claim giving rise to an Indemnitee’s claim for indemnification at such
Indemnitor’s expense, and at its option (but subject to Section 7.05(b) in
the case of Excluded Claims) shall be entitled to assume the defense thereof
within thirty (30) days after its receipt of notice of a Third Party Claim
from the Indemnitee (or sooner, if the nature of the Third Party Claim so
requires) by notifying the Indemnitee in writing within such thirty (30)
day period of such election and by appointing a reputable counsel reasonably
acceptable to the Indemnitee to be the lead counsel in connection with such
defense; provided that the Indemnitee shall be entitled to participate
in the defense of such Third Party Claim and to employ counsel of its choice
for such purpose; 

 

35

 

provided, however, that the
fees and Expenses of such separate counsel shall be borne by the Indemnitee and
shall not be recoverable from such Indemnitor under this Article VII unless
(i) the Indemnitee is requested by the Indemnitor to so participate or (ii) in
the reasonable opinion of counsel to the Indemnitee, a conflict or potential
conflict exists between the Indemnitee and the Indemnitor that would make such
separate representation advisable.  If
the Indemnitor shall control the defense of any such Third Party Claim, the
Indemnitor shall only be entitled to settle such Third Party Claim if (i) the
Indemnitor obtains the prior written consent of the Indemnitee (which consent
shall not be unreasonably withheld) before entering into any settlement of a
Third Party Claim and (ii) such settlement expressly and unconditionally releases
the Indemnitee from all liabilities and obligations with respect to such
claim.  If the Indemnitor assumes such
defense, (i) the Indemnitor shall acknowledge the Indemnitor’s
indemnification obligations hereunder with respect to such Third Party Claim,
and shall not thereafter contest the Indemnitor’s obligation to indemnify the
Indemnitee for all Losses resulting therefrom, (ii) the Indemnitor shall
not thereafter cease to defend such Third Party Claim and (iii) the
Indemnitor shall not be liable for any amount required to be paid by the
Indemnitee that exceeds, where the Indemnitee has unreasonably withheld or
delayed consent in connection with the proposed compromise or settlement of
such Third Party Claim, the amount for which that Third Party Claim could have
been settled pursuant to that proposed compromise or settlement.  In all cases, the Indemnitee shall provide
its reasonable cooperation with the Indemnitor in defense of Third Party
Claims, including by making employees, information and documentation reasonably
available.  If the Indemnitor shall not
assume the defense of any such Third Party Claim, the Indemnitee may defend
against such matter as it deems appropriate and the Indemnitor shall reimburse the
Indemnitee for all reasonable and documented Expenses of defending such Third
Party Claim upon submission of periodic bills; provided the Indemnitee
shall not settle any such matter without the written consent of the Indemnitor
(which consent shall not be unreasonably withheld); provided, further,
that notwithstanding the foregoing proviso, if such Third Party Claim would
reasonably be expected to result in the Buyer Indemnified Parties incurring,
accruing or suffering Losses, which taken together with all other Losses of the
Buyer Indemnified Parties for which Seller has indemnified the Buyer
Indemnified Parties, that exceed the Cap, the Indemnitee may settle any such
matter without the written consent of the Indemnitor, and such settlement shall
not be determinative of the Indemnitor’s indemnification obligations hereunder
with respect to such Third Party Claim or the amount of Losses relating to such
Third Party Claim.  In the event that the
Indemnitor has consented to any such settlement, the Indemnitor shall have no
power or authority to object under any provision of this Article VII
to the amount of any Losses reasonably claimed by the Indemnitee with respect
to such settlement.  If there is a Third
Party Claim that, if adversely determined would give rise to a right of
recovery for Losses hereunder, then any amounts incurred or accrued by the
Indemnitee in defense of such Third Party Claim, regardless of the outcome of
such claim, shall be deemed Losses hereunder.

 

(b)           Notwithstanding
the foregoing, if a Third Party Claim involves a claim (A) seeking
injunctive relief with respect to the operation of the business of the Company
and its Subsidiaries, (B) seeking to impose criminal (other than
misdemeanors) fines, penalties or sanctions or (C) by a current material
customer or supplier of the Company and its Subsidiaries (each such Third Party
Claim, an “Excluded Claim”), then the Indemnitee shall, upon written
notice to the Indemnitor at the time notice of such Excluded Claim is first
given to the Indemnitor, have the right to elect to either (x) assume the
defense of such Excluded Claim, in 

 

36

 

which case, such Excluded Claim shall be subject to
this paragraph (b), or (y) submit such Excluded Claim to the
Indemnitor pursuant to paragraph (a) above, in which case the procedures
in paragraph (a) above shall apply and such Third Party Claim shall
thereafter no longer constitute an Excluded Claim.  If the Indemnitee elects to assume the
defense of an Excluded Claim, the Indemnitee shall, at its own expense, be
permitted to defend against, negotiate, settle or otherwise deal with such
Excluded Claim and shall not be obligated to seek the Indemnitor’s consent to
any settlement; provided, that if the Indemnitee shall settle any such
Excluded Claim without the written consent of the Indemnitor (which consent
shall not unreasonably be withheld), such settlement shall not be determinative
of the amount of Losses relating to such Third Party Claim.  In the event that the Indemnitor has
consented to any such settlement, the Indemnitor shall have no power or
authority to object under any provision of this Article VII to the
amount of any Losses reasonably claimed by the Indemnitee with respect to such
settlement.  The Indemnitor shall be
permitted, at its own expense, to participate in the defense of such Excluded
Claim.  Upon a final determination of
such Excluded Claim, the Indemnitee shall be permitted to proceed directly
against the Indemnitor for the amount of Losses incurred by reason of such
Excluded Claim pursuant to paragraph (a) above.

 

7.06        Determination
of Loss Amount.  The amount
of any Loss subject to indemnification under Section 7.02 or Section 7.03
or Section 8.03 shall be calculated net of (i) any Tax Benefit
actually (and not potentially) realized by the Indemnitee on account of such
Loss, (ii) any reserves set forth in the Latest Balance Sheet relating
specifically to such Loss and (iii) any insurance proceeds or other
amounts under indemnification agreements actually (and not potentially) received
by the Indemnitee on account of such Loss. 
If the Indemnitee actually realizes a Tax Benefit on account of such
Loss after an indemnification payment is made to it, the Indemnitee shall
promptly pay to the Person or Persons that made such indemnification payment
the amount of such Tax Benefit at such time or times as and to the extent that
such Tax Benefit is realized by the Indemnitee. 
For purposes hereof, “Tax Benefit” shall mean any refund of Taxes
to be paid or reduction in the amount of Taxes which otherwise would be owed by
the Indemnitee, in each case computed at the highest marginal tax rates
applicable to the recipient of such benefit. 
The Indemnitee shall use commercially reasonable efforts to seek full
recovery under any insurance policies and/or indemnification agreements
potentially covering any Loss.  For the
purposes of this Section 7.06 only, “commercially reasonable” means
the Indemnitee’s actions must be commercially reasonable taking into account
all relevant considerations, including the risk of increased insurance
premiums, the impact on insurance claims history, the risk of insurance
non-renewal, other insurance policy risks and consequences and all other
foreseeable consequences related to third parties, including foreseeable impacts
on customer, reseller, vendor, distributor, supplier, strategic alliance,
partner or other relationships.  In the
event that an insurance or other recovery is made by any Indemnitee with
respect to any Loss for which any such Person has been indemnified hereunder,
then a refund equal to the aggregate amount of the recovery (after deducting
related costs and Expenses and any resulting increased premium costs) shall be
made promptly to the Person or Persons that provided such indemnity payments to
such Indemnitee.  The Indemnitors shall
be subrogated to all rights of the Indemnitees in respect of any Losses
indemnified by the Indemnitors.  For Tax
purposes, the parties agree that all payments made under this Article VII
and Section 8.03 constitute adjustments to the Purchase Price and
shall report any payments as such on their Tax Returns, unless otherwise
required by applicable Law.

 

37

 

7.07        Termination of
Indemnification.  The
obligations to indemnify and hold harmless a party hereto in respect of a
breach of representation, warranty, covenant or agreement shall terminate when
the applicable representation, warranty, covenant or agreement terminates
pursuant to Section 7.01; provided, however, that
such obligations to indemnify and hold harmless shall not terminate with
respect to any item as to which an Indemnitee shall have, prior to the
expiration of the applicable survival period, previously made a claim by
delivering an Indemnification Notice to the Indemnitor.

 

7.08        Limitation on
Recourse.  No claim
shall be brought or maintained by Buyer or any of its Subsidiaries (including
the Company and its Subsidiaries) or their respective successors or permitted
assigns against any officer, director, employee (present or former) or
Affiliate of any party hereto or any direct or indirect equity holder of the
Seller, in each case, which is not otherwise expressly identified as a party
hereto, and no recourse shall be brought or granted against any of them, by virtue
of or based upon any alleged misrepresentation or inaccuracy in or breach of
any of the representations, warranties, covenants or agreements of any party
hereto set forth or contained in this Agreement or any exhibit or schedule
hereto or any certificate delivered hereunder.

 

7.09        Mediation and
Arbitration.  From and
after the Closing Date, in the event any claim, demand, disagreement,
controversy or dispute (a “Dispute”) arises from or in connection with
any claim for Losses under this Article VII and if the Dispute
cannot be settled through direct discussions, the parties agree to endeavor
first to settle such Dispute in an amicable manner by non-binding mediation to
be held in Los Angeles, California, administered by the American Arbitration
Association under its Commercial Mediation Rules before resorting to
arbitration.  Thereafter, any unresolved
Dispute shall be settled by binding arbitration to be held in Los Angeles,
California, administered by the American Arbitration Association in accordance
with its Commercial Arbitration Rules. 
At the conclusion of such arbitration, the arbitrator(s) shall
issue a reasoned award to the parties, and judgment on the award rendered by
the arbitrator(s) may be entered in any court having jurisdiction thereof
pursuant to Section 10.15.

 

ARTICLE VIII.

 

ADDITIONAL COVENANTS AND
AGREEMENTS

 

8.01        Disclosure
Generally.  If and to
the extent any information required to be furnished in any schedule is
contained in this Agreement or in any other schedule, such information shall be
deemed to be included in all schedules in which the information is required to
be included to the extent that the meaning of such disclosure is reasonably
apparent on its face.  The inclusion of
any information in any schedule shall not be deemed to be an admission or
acknowledgment by the Company or Seller, in and of itself, that such
information is material to or outside the ordinary course of the businesses of
the Company and its Subsidiaries.

 

8.02        Acknowledgment
by Buyer.

 

(a)           Buyer
acknowledges that it has conducted to its satisfaction an independent
investigation and verification of the financial condition, results of
operations, assets, liabilities, properties and projected operations of the
Company and its Subsidiaries and, in 

 

38

 

making its determination to proceed with the
transactions contemplated by this Agreement, Buyer has relied on the results of
its own independent investigation and verification and on the representations
and warranties of the Company and Seller expressly and specifically set forth
in this Agreement, including the schedules hereto.  SUCH REPRESENTATIONS AND
WARRANTIES BY THE COMPANY AND SELLER CONSTITUTE THE SOLE AND EXCLUSIVE
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLER TO BUYER IN CONNECTION
WITH THE TRANSACTIONS CONTEMPLATED HEREBY, AND BUYER UNDERSTANDS, ACKNOWLEDGES
AND AGREES THAT ALL OTHER IMPLIED REPRESENTATIONS AND WARRANTIES OF ANY KIND OR
NATURE (INCLUDING, BUT NOT LIMITED TO, ANY RELATING TO THE FUTURE OR HISTORICAL
FINANCIAL CONDITION OR PROJECTIONS, RESULTS OF OPERATIONS, ASSETS OR
LIABILITIES OF THE COMPANY) ARE SPECIFICALLY DISCLAIMED BY THE COMPANY AND
SELLER.  The Company and
Seller do not make or provide, and Buyer hereby waives, any implied warranty or
representation, as to the quality, merchantability, fitness for a particular
purpose, conformity to samples, or condition of the Company’s or any of its
Subsidiaries’ assets or any part thereto.

 

(b)           In connection
with Buyer’s investigation of the Company and its Subsidiaries, Buyer has
received from or on behalf of the Company, its Subsidiaries or Seller certain
projections.  Buyer acknowledges and
agrees that there are uncertainties inherent in attempting to make such
estimates, projections and other forecasts and plans, that Buyer is familiar
with such uncertainties, that Buyer has made its own independent evaluation of
the adequacy and accuracy of all estimates, projections and other forecasts and
plans so furnished to it (including the reasonableness of the assumptions
underlying such estimates, projections and forecasts), and that Buyer shall
have no claim against the Company, its Subsidiaries, Seller or any direct or
indirect equity holder of Seller with respect thereto.  Accordingly, neither the Company, any of its
Subsidiaries nor Seller makes any representations or warranties whatsoever with
respect to such estimates, projections and other forecasts and plans (including
the reasonableness of the assumptions underlying such estimates, projections
and forecasts).

 

8.03        Tax Matters. The following
provisions shall govern the allocation of responsibility as between Buyer and
Seller for certain tax matters following the Closing Date.

 

(a)           Tax Indemnity.  Seller
shall be liable for and pay, and shall indemnify Buyer (and the Company and
each Subsidiary) against, (A) all Taxes of any Person (other than
the Company or any Subsidiary) imposed on the Company or any Subsidiary,
or for which the Company or any Subsidiary may otherwise be liable, as a result
of having been a member of a Company Group (including, but not limited to, the
Parent Group) for any period prior to or including the Closing Date (including,
without limitation, Taxes for which the Company or any of its Subsidiaries may
be liable pursuant to Treasury Regulation Section 1.1502-6 or similar
provisions of state, local or foreign Tax law as a result of having been a
member of a Company Group for any period prior to or including the Closing
Date), (B) (x) all income Taxes imposed on the Company or any of its
Subsidiaries for any taxable period (or portion thereof) ending on or before September 30,
2010 (as determined pursuant to Section 8.03(c)) to the extent that
such Taxes exceed the $488,911 amount for income taxes payable that is set forth
on the Latest Balance Sheet , provided, however, that such income Taxes shall
not include (and hence Seller shall not be liable for) any income Tax items
that result in either (i) a non-current deferred tax 

 

39

 

asset to the extent that such asset is reasonably
expected to result in a deduction or income exclusion recognized (through an
actual reduction of Taxes) for a taxable year ending on or prior to December 31,
2012, or (ii) a current deferred tax asset relating to a current asset or
liability, and (y) all non-income Taxes imposed on the Company or any of
its Subsidiaries for any taxable period (or portion thereof) ending on or
before September 30, 2010 (as determined pursuant to Section 8.03(c))
to the extent that such Taxes exceed the $208,426 amount for such non-income
Taxes liability that is included within the accrued liabilities amount set
forth on the Latest Balance Sheet, (C) all Taxes imposed on the Company or
any of its Subsidiaries for any taxable period (or portion thereof) beginning October 1,
2010, and ending at the end of the Closing Date to the extent that such Taxes
were incurred outside the ordinary course of business or otherwise inconsistent
with past custom and practice, it being understood for the avoidance of doubt
that such Taxes shall include Tax for any such period resulting from (x) any
Section 338(h)(10) Elections to be made with respect to the purchase
and sale (actual or deemed) of stock of any of the Company or any of its Subsidiaries 
pursuant hereto, (y) any Taxes imposed on the Company or any of its
Subsidiaries as a result of transactions contemplated hereby (other than Taxes allocated to Buyer under Section 8.03(g))
and (z) any Taxes imposed on the Company or any of its Subsidiaries as a
result of the termination, satisfaction or cancellation of any intercompany
accounts pursuant to or as contemplated by Section 3.31 hereof, (D) all
Taxes imposed on the Seller as a result of the transactions contemplated
hereby, including any failure of Buyer to withhold any such Taxes (other than (1) any withholding of
Taxes by a jurisdiction arising solely as a result of a present or former
connection of the Buyer to such jurisdiction and (2) Taxes allocated to
Buyer under Section 8.03(g)) and (E) Losses
arising as a result of any breach of a representation or warranty under Section 3.09.  Section 7.06 shall apply to the
previous sentence.

 

(b)           Filing of Tax
Returns; Payment of Taxes.

 

(i)            Pre-Closing Tax
Returns Required to Be Filed on or Prior to the Closing Date.  Seller shall file, or cause to be filed, all
Tax Returns of, or which include, the Company and its Subsidiaries and which
are required to be filed (taking into account any extensions of time) on or
prior to the Closing Date, and pay, or cause the Company or its Subsidiaries,
as the case may be, to pay, any and all Taxes required to be shown as due on
such Tax Returns.

 

(ii)           Pre-Closing Tax
Returns Required to Be Filed after the Closing Date.  Seller shall prepare, in a manner consistent
with prior practice unless otherwise required by applicable Tax Laws, all
foreign, state and local Tax Returns required to be filed by the Company and
its Subsidiaries on a separate return basis after the Closing Date (“Separate
Pre-Closing Tax Returns”) with respect to taxable periods (excluding
partial taxable periods) that, to the extent they relate to the Company and its
Subsidiaries, end on or before the Closing Date (the “Pre-Closing Taxable
Period”).  To the extent that any
such Separate Pre-Closing Tax Return would reasonably be expected to have an
adverse effect on any of the Company or its Subsidiaries for a taxable period
beginning after the Closing Date (the “Post-Closing Taxable Period”),
Buyer shall (but only to such extent) have the right to review and comment on
such return and Seller shall consider in good faith any comments reasonably
requested by Buyer.  Each Separate
Pre-Closing Tax Return shall be filed timely by the Company or its Subsidiaries,
and the Company or its Subsidiaries shall pay the Tax required to be shown due
thereon.  On or prior to the 

 

40

 

due date for payment of
Taxes with respect to any such Separate Pre-Closing Tax Return, or, in the
event of a dispute, upon resolution thereof, Seller shall pay to the Company or
its Subsidiaries the amount of such Tax required to be shown due to the extent
such Tax is allocable to the portion of the Tax period ending on or before September 30,
2010 (provided however, Seller shall only be required to pay such Taxes (x) with
respect to income Taxes,  to the extent
that such Taxes exceed the $488,911 amount for income taxes payable that is set
forth on the Latest Balance Sheet, provided, however, that such income Taxes
shall not include (and hence Seller shall not be liable for) any income Tax
items that result in either (i) a non-current deferred tax asset to the
extent that such asset is reasonably expected to result in a deduction or
income exclusion recognized (through an actual reduction of Taxes) for a
taxable year ending on or prior to December 31, 2012, or (ii) a
current deferred tax asset relating to a current asset or liability, and (y) with
respect to non-income Taxes, to the extent that such Taxes exceed the $208,426
amount for such non-income Taxes liability that is included within the accrued
liabilities amount set forth on the Latest Balance Sheet).  In addition, Seller will prepare and file all
federal, state, local or foreign Tax Returns with respect to any Pre-Closing
Taxable Period that are (x) filed on a consolidated, combined or unitary
basis with Seller, (y) include the Company and its Subsidiaries and (z) are
required to be filed after the Closing Date (“Consolidated Pre-Closing Tax
Returns”), and shall pay or cause to be paid the amount of Tax shown to be
due thereon with respect to any such Consolidated Pre-Closing Tax Returns.  The Company and its Subsidiaries shall
cooperate fully in providing all information in their possession and not
otherwise available to Seller that is required to be included in such Separate
Pre-Closing Tax Returns or Consolidated Pre-Closing Tax Returns as the Seller
may reasonably request within ten (10) Business Days of such request.

 

(iii)          Tax Returns for
Post-Closing Taxable Periods (other than Straddle Periods).  Buyer shall prepare and file, or cause to be
prepared and filed, all Tax Returns of or which include the Company or its
Subsidiaries and which are required to be filed after the Closing Date with
respect to a Post-Closing Taxable Period, but excluding any Straddle Period,
and shall pay or cause to be paid the amount of Tax shown to be due thereon
with respect to any such Tax Return.

 

(iv)          Tax Returns
Required to be Filed after the Closing Date for Straddle Periods.  Seller and Buyer shall, unless prohibited by
applicable Tax law, take or cause to be taken all commercially reasonable
action necessary or appropriate to close the taxable period of the Company and
its Subsidiaries as of the Closing Date. 
None of Seller, Buyer, the Company or its Subsidiaries shall take any
position inconsistent with the preceding sentence on any Tax Return.

 

In addition, Buyer shall
prepare and file, or cause to be prepared and filed, all Tax Returns of or
which include the Company or its Subsidiaries for all taxable periods that
begin on or before and end after the Closing Date (“Straddle Periods”),
and in each such case shall pay any and all Taxes due with respect to such Tax
Returns.  To the extent any Taxes shown
due on such Tax Returns are allocable to the portion of such Straddle Period
that ends on the Closing Date, such Tax Returns shall be prepared in a manner
consistent with prior practice unless otherwise required by applicable Tax
Laws, Seller 

 

41

 

shall have the right to review and comment on such
Tax Returns and Buyer shall consider in good faith any comments reasonably
requested by Seller.  On or prior to the
due date for payment of Taxes with respect to any such Tax Returns, or, in the event
of a dispute, upon a final resolution thereof, Seller shall pay to the Company
or its Subsidiaries the amount of Taxes shown as due on such Tax Return
allocable to and otherwise payable by Seller under the following paragraph for
the portion of such Straddle Period ending on September 30, 2010  (provided however, Seller shall only be
required to pay such Taxes (x) with respect to income Taxes,  to the extent that such Taxes exceed the
$488,911 amount for income taxes payable that is set forth on the Latest
Balance Sheet, provided, however, that such income Taxes shall not include (and
hence Seller shall not be liable for) any income Tax items that result in
either (i) a non-current deferred tax asset to the extent that such asset
is reasonably expected to result in a deduction or income exclusion recognized
(through an actual reduction of Taxes) for a taxable year ending on or prior to
December 31, 2012, or (ii) a current deferred tax asset relating to a
current asset or liability, and (y) with respect to non-income Taxes, to
the extent that such Taxes exceed the $208,426 amount for such non-income Taxes
liability that is included within the accrued liabilities amount set forth on
the Latest Balance Sheet).

 

(c)           For purposes of
allocating Taxes of the Company or its Subsidiaries for a portion of a Tax
period that includes September 30, 2010, the portion of any such Tax that
is allocable to the portion of the taxable period ending on September 30,
2010, shall be:

 

(i)            in the case of
Taxes that are either (x) based upon or related to income or receipts or
(y) imposed in connection with any sale or other transfer or assignment of
property (real or personal, tangible or intangible) (other than conveyances
pursuant to this Agreement, as provided under Section 8.03(g)),
deemed equal to the amount which would be payable (after giving effect to
amounts which may be deducted from or offset against such Taxes) if the taxable
period ended on September 30, 2010; and

 

(ii)           in the case of
Taxes imposed on a periodic basis with respect to the assets of the Company or
any Subsidiary, or otherwise measured by the level of any item, deemed to be
the amount of such Taxes for the entire taxable period (after giving effect to
amounts which may be deducted from or offset against such Taxes) (or, in the
case of such Taxes determined on an arrears basis, the amount of such Taxes for
the immediately preceding period), multiplied by a fraction the numerator of
which is the number of days in the period ending on September 30, 2010,
and the denominator of which is the number of days in the entire taxable
period.

 

(d)           Cooperation on
Tax Matters.  Buyer, the
Company and its Subsidiaries, and Seller shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the filing
of Tax Returns pursuant to this Agreement and any Tax Contest.  Such cooperation shall include the retention
and (upon the other party’s request) the provision of records and information
which are reasonably relevant to any such Tax Contest and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder.

 

42

 

(e)           Contest Provisions. 
If, subsequent to the Closing, Buyer or the Company or its Subsidiaries
receives notice of a Tax Contest with respect to any Tax Return for a Tax
period or portion thereof ending on or before the Closing Date, then within
fifteen (15) days after receipt of such notice, Buyer shall notify Seller
of such notice.  Buyer shall have the
right to control the conduct and resolution of such Tax Contest; provided,  however, that
Buyer shall keep Seller reasonably informed of the progress of such Tax Contest
and shall not effect any such settlement or compromise of such Tax Contest
without obtaining Seller’s prior written consent thereto, which shall not be
unreasonably withheld;  provided,
further, that Seller shall have the sole right to control the conduct
and resolution of any Tax Contest that relates any Tax Return of the Company or
its Subsidiaries for a Tax period or portion thereof ending on or before the
Closing Date that is filed on a combined, consolidated or unitary basis.

 

(f)            Amended Returns; Refund Claims.

 

(i)            Buyer, the
Company or its Subsidiaries shall not amend (or cause to be amended) any Tax
Return of the Company or its Subsidiaries for any period or portion thereof
ending on or before the Closing Date without the prior written consent of
Seller, which consent shall not be unreasonably withheld.

 

(ii)           In respect of the U.S. consolidated federal income tax
return filed by the Parent Group, Buyer shall cause the Company and its
Subsidiaries to forgo any carry-back to a Pre-Closing Taxable Period of any
item of deduction or credit incurred by the Company or its Subsidiaries, as the
case may be, after the Closing Date.  In
respect of any other Tax Return, the carry-back to a Pre-Closing Taxable Period
of any item of deduction or credit incurred by the Company or its Subsidiaries,
as the case may be, after the Closing Date shall be subject to the prior
written consent of Seller, which consent may not be unreasonably withheld.

 

(g)           Certain Taxes. 
Buyer, on the one hand, and Seller, on the other hand, shall share
equally all transfer, documentary, sales, use, stamp, registration and other
substantially similar Taxes and fees (including any penalties and interest)
incurred in connection with this Agreement (collectively, “Transfer Taxes”).  Buyer will file all necessary Tax Returns and
other documentation with respect to all such Transfer Taxes, and shall provide
Seller with evidence satisfactory to Seller that such Transfer Taxes, if any,
have been paid by Buyer.  Neither Buyer
nor Seller is currently aware of any obligation to pay any Transfer Taxes in
connection with this Agreement.

 

(h)           338(h)(10) Elections.

 

(i)            Seller shall join with Buyer in making elections under
Section 338(h)(10) of the Code and the Treasury Regulations promulgated
thereunder and any corresponding or similar elections under state or local Tax
Law (collectively, the “Section 338(h)(10) Elections”) with
respect to the purchase and sale of stock of SPI and SPSC and their
Subsidiaries.

 

(ii)           In addition to the Internal Revenue Service
Form 8023, Seller shall execute (or cause to be executed) and deliver to
Buyer such additional documents or 

 

43

 

forms as are reasonably
requested to complete properly the Section 338(h)(10) Elections at
least thirty (30) days prior to the date such Section 338(h)(10) Elections
are required to be filed.  All forms will
be agreed to by the parties prior to the filing thereof.

 

(iii)          Within ninety (90) days after Closing, Seller shall prepare
and deliver to Buyer a statement setting forth the allocation of the applicable
purchase consideration (as determined for U.S. federal, state or local Tax
purposes) among the assets of SPI and SPSC and their Subsidiaries that are
deemed purchased by reason of the Section 338(h)(10) Elections (as
revised under this Section 8.03(h)(iii), the “Allocation
Statement”).  If Buyer disagrees with
the Allocation Statement, Buyer shall notify Seller of such disagreement within
ten (10) days after Seller’s delivery of the Allocation Statement, and
Buyer and Seller shall negotiate in good faith to resolve such
disagreement.  If Seller and Buyer are
unable to resolve any such dispute, such dispute shall be resolved promptly by
a nationally recognized accounting firm acceptable to Buyer and Seller, the
costs of which shall be borne equally by Buyer and Seller.  If the Purchase Price is subsequently
adjusted in any manner as provided in this Agreement, Seller and Buyer shall
promptly revise the Allocation Statement in a manner consistent with the
foregoing.

 

(iv)          Buyer and Seller shall file all Tax Returns and statements,
forms and schedules in connection therewith in a manner consistent with the
Section 338(h)(10) Elections and the Allocation Statement and shall
take no position contrary thereto unless required to do so by applicable Tax
Laws; provided  however, that nothing contained herein shall
prevent Buyer or Seller from settling any proposed deficiency or adjustment by
any Taxing Authority based upon or arising out of the Allocation Statement, and
neither Buyer nor Seller shall be required to litigate before any court any
proposed deficiency or adjustment by any Taxing Authority challenging the
Allocation Statement.

 

(i)            Tax Agreements. 
Any Tax sharing agreement or arrangement between the Seller or any of
its Affiliates (other than the Company and its Subsidiaries), on the one hand,
and any of the Company or its Subsidiaries, on the other hand, shall have been
terminated, and all payments thereunder settled, immediately prior to the
Closing Date with no payments permitted to be made thereunder on or after the
Closing Date.

 

(j)            338(g) Elections.  In
connection with the transactions contemplated under this Agreement, Buyer shall
make elections under Section 338(g) and
the Treasury Regulations promulgated thereunder and any corresponding or
similar elections under state or local Tax Law with respect to all of the
Company’s Subsidiaries that are treated as non-U.S. corporations for United
States tax purposes.

 

In
the event of any conflict or overlap between the provisions of this Section 8.03
and Article VII,  the provisions
of this Section 8.03 shall control.

 

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

 

44

 

party may reasonably deem necessary or desirable to
evidence and effectuate the transactions contemplated by this Agreement.

 

8.05        Release. 
Effective as of the Closing, except for claims brought against the individuals
party to the agreements set forth on Schedule 8.05(i) for fraud,
willful misconduct, and breach of the respective agreement set forth on Schedule
8.05(i) that individual is party to, and with respect to the agreement
set forth on Schedule 8.05(ii), Seller, on behalf of itself and its
Subsidiaries (other than the Company and its Subsidiaries), hereby fully,
finally and irrevocably releases, acquits and forever discharges the Company
and its Subsidiaries and their respective officers, directors, employees,
agents and representatives from any and all commitments, actions, debts,
claims, counterclaims, suits, causes of action, damages, losses, demands,
liabilities, obligations, costs, expenses, and compensation of every kind and
nature whatsoever, whether known or unknown, contingent or otherwise, whether
directly, as a guarantor or indemnitor, or otherwise, which Seller or its
Subsidiaries (other than the Company and its Subsidiaries) has or may have had
at time in the past until and including the Closing against the Company and its
Subsidiaries and their respective officers, directors, employees, agents and
representatives or any of them, except for any claims Seller may have under
this Agreement or as otherwise expressly provided herein.

 

ARTICLE IX.

 

DEFINITIONS

 

9.01        Definitions. 
For purposes hereof, the following terms, when used herein with initial
capital letters, shall have the respective meanings set forth herein:

 

“Affiliate”
of any particular Person means any other Person that, directly or indirectly
through one or more intermediaries, controls, is controlled by or is under
common control with such particular Person. 
For the purposes of this definition, “control” (including the terms “controlled
by” and “under common control with”) means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person whether through the ownership of voting securities,
contract or otherwise.

 

“Aggregate
RSU Amount” means $833,566.

 

“Business
Day” means a day other than Saturday or Sunday or any other day on which
banks in New York City, Los Angeles and San Francisco are required to or may be
closed.

 

“Cash
on Hand” means, with respect to the Company and its Subsidiaries, all cash
(excluding restricted cash and net of
issued but uncleared checks and drafts) and cash equivalents (as such terms are defined under GAAP) and
any direct obligations of the United States of America or obligations for which
the full faith and credit of the United States of America is pledged to provide
for the payment of principal and interest.

 

“Code”
means the Internal Revenue Code of 1986, as amended.

 

“Company
Group” means any “affiliated group” (as defined in Section 1504(a) of
the Code) that, at any time before the Closing Date, includes or has included
the Company or 

 

45

 

any
Subsidiary or any predecessor of or successor to the Company or any Subsidiary
(or another such predecessor or successor), or any other group of corporations
that, at any time on or before the Closing Date, files or has filed Tax Returns
on a combined, consolidated or unitary basis with the Company or any Subsidiary
or any predecessor of or successor to the Company or any Subsidiary (or another
such predecessor or successor).

 

“Company
Product” means all products, services or offerings that have been or are
currently sold, licensed, provided, supported, distributed or otherwise
disposed of by the Company or any of its Subsidiaries.

 

“Company’s
Accounting Practices and Procedures” means the customary accounting
methods, policies, practices and procedures, including classification and
estimation methodology, used by the Company in the preparation of the Financial
Statements.

 

“Contract”
means any binding written, oral or other agreement, contract, subcontract,
lease, mortgage, indenture, arrangement, instrument, note, bond, option,
warranty, purchase order, license, sublicense, franchise or other binding
obligation, commitment or undertaking of any nature.

 

“Employee
Benefit Plan” means each “employee benefit plan” (as such term is defined
in Section 3(3) of ERISA) and any other material employee benefit,
bonus or other incentive compensation, stock option or other equity-based
award, deferred compensation, profit-sharing, retirement or supplemental
unemployment benefit, vacation or severance plan, policy or agreement
maintained by the Company or any of its Subsidiaries, or with respect to which
the Company or any of its Subsidiaries has any liability (contingent or
otherwise), but shall not include any Seller Benefit Plan that will not be
transferred or assumed by Buyer in connection with Buyer’s acquisition of the
Company and its Subsidiaries hereunder or any 

Non-US Benefit Plan.

 

“Environmental
Laws” means all federal, state, local and foreign Laws enacted and in
effect on or prior to the Closing Date, and the common law, concerning
pollution or protection of the environment or health, including without
limitation all those relating to the presence, use, production, generation,
handling, transportation, treatment, storage, disposal, processing, discharge,
Release, threatened Release, control, or Remedial Action of, or exposure to,
any Hazardous Materials.

 

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

 

“ERISA
Affiliate,” with respect to any Person, shall mean any entity other than
such Person that, together with such Person, is required to be treated as a
single employer under Section 414(b), (c), (m) or (o) of the
Code.

 

“GAAP”
means United States generally accepted accounting principles, consistently
applied.

 

“Governmental
Authority” means any domestic or foreign multinational, federal, state,
provincial, municipal or local government (or any political subdivision
thereof) or any 

 

46

 

domestic
or foreign governmental, regulatory or administrative authority or any
department, commission, board, agency, court, tribunal, judicial body or
instrumentality thereof, or any other body exercising, or entitled to exercise,
any administrative, executive, judicial, legislative, police, regulatory or
Taxing Authority or power of any nature (including any arbital body).

 

“Hazardous
Material” means (a) petroleum and petroleum products, by-products or
breakdown products, radioactive materials, asbestos-containing materials, toxic
mold and polychlorinated biphenyls and (b) any other chemicals, materials
or substances defined or regulated as toxic or hazardous or as a pollutant,
contaminant or waste under any applicable Environmental Law.

 

“Indebtedness”
means, without duplication, the sum of (a) all obligations of the Company
and its Subsidiaries for borrowed money or evidenced by bonds, notes,
debentures or similar instruments, whether current or funded, secured or
unsecured, (b) all obligations of the Company and its Subsidiaries for the
deferred purchase price of any property or services (other than trade accounts
payable incurred in the ordinary course of business consistent with past practice),
including all seller notes and contingent or earn-out payments, (c) all
obligations of the Company and its Subsidiaries created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by the Company and its Subsidiaries (even though the rights and
remedies of the seller or lender under such agreement in the event of a default
may be limited to repossession or sale of such property), (d) all
obligations of the Company and its Subsidiaries secured by a purchase money
mortgage or other Lien to secure all or part of the purchase price of property
subject to such mortgage or Lien, (e) all obligations under leases which
shall have been or should be, in accordance with GAAP, recorded as capital
leases in respect of which the Company and its Subsidiaries is liable as
lessee, (f) any obligation of the Company and its Subsidiaries in respect
of bankers’ acceptances, bank guarantees, letters of credit (including
reimbursement obligations in respect thereof), (g) any obligations secured
by Liens on property acquired by the Company and its Subsidiaries, whether or
not such obligations were assumed by the Company and its Subsidiaries at the
time of acquisition of such property, (h) any indebtedness, liabilities or
other obligations of the Company and its Subsidiaries under any transaction or
Contract that provides for an interest rate, foreign exchange, currency,
commodity, credit or equity swap, cap, collar, floor, option, forward or cross
right, or any combination thereof, or any transaction or Contract of a similar
nature, (i) any purchase facility or other financing arrangement
(including, without limitation, receivables factoring arrangements and customer
financing arrangements), (j) all obligations of any other Person of a type
referred to in clauses (a), (b), (c), (d), (e), (f), (g), (h), or (i) above
which are directly or indirectly guaranteed by the Company or any of its
Subsidiaries or which it has agreed (contingently or otherwise) to purchase or
otherwise acquire or in respect of which it has otherwise assured a credit
against loss, (k) any refinancings of any of the foregoing obligations,
and (l) and any accrued interest, change of control payments or prepayment
premiums or penalties related to any of the foregoing obligations, in each
case, except as specifically provided above, whether or not required to be
recorded as indebtedness on a balance sheet prepared in accordance with
GAAP.  For the avoidance of doubt, Indebtedness
shall not include (i) any intercompany accounts, payables or loans of any
kind or nature between or among the Company and its Subsidiaries or (ii) any
lines of credit or other Indebtedness to the extent secured by restricted cash
(for the avoidance of doubt, if the amounts of such lines of credit or other
Indebtedness are in excess of the restricted cash securing securing such
Indebtedness then the amount in excess of such 

 

47

 

restricted
cash shall be included in Indebtedness hereunder).  For the avoidance of doubt, the current
portion of any of the foregoing shall constitute “Indebtedness” and shall not
be taken into account in calculating “Net Working Capital.”

 

“Intellectual
Property” means patents, trademarks, service marks, domain names, mask
works, and copyrights, any registrations and applications for the registration
of any of the foregoing, and any trade secrets, confidential information, and
know-how.

 

“Latest
Balance Sheet” means the unaudited, consolidated balance sheet of the
Company and its Subsidiaries, as of September 30, 2010.

 

“Law”
means any law, statute, code, ordinance, rule, regulation, Order or other
legally-binding requirement of any Governmental Authority.

 

“Liens”
means any, lien, charge, security interest, mortgage, pledge, deed of trust,
encumbrance, lease, option, right of first refusal, easement, right of way or
transfer restriction.

 

“Material
Adverse Effect” means any circumstance, change, effect, event, occurrence,
state of facts or development that, individually or together with any other
circumstance, change, effect, event, occurrence, state of facts or development,
is or would reasonably be expected to be (i) materially adverse to the
business, assets, liabilities, properties, condition (financial or otherwise) or
results of operations of the Company and its Subsidiaries, taken as a whole, or
(ii) materially adverse to the ability of Seller, the Company or its
Subsidiaries to consummate the transactions contemplated by this Agreement; provided,
however, that none of the following shall be deemed in themselves,
either alone or in combination, to constitute, and none of the following shall
be taken into account in determining whether there has been or will be, a
Material Adverse Effect:  (a) any
adverse circumstance, change, effect, event, occurrence, state of facts or
development attributable to the public announcement or pendency of the
transactions contemplated by this Agreement (including, without limitation, the
impact thereof on the Company’s and its Subsidiaries’ relationships with
customers, suppliers, partners and employees); (b) any adverse
circumstance, change, effect, event, occurrence, state of facts or development
attributable to conditions affecting the industry in which the Company and its
Subsidiaries participate, the U.S. economy or any other economy where the
Company or its Subsidiaries do business (in each case, as a whole) or the
capital markets in general or the markets in which the Company and its
Subsidiaries operate, provided, in each case, that it does not have a
materially disproportionate effect on the Company and its Subsidiaries, taken
as a whole; (c) the effect of any circumstance, change, effect, event,
occurrence, state of facts or development arising in connection with any “act
of God” including weather, natural disasters and earthquakes, hostilities, acts
of war, sabotage or terrorism or military actions or any escalation or material
worsening of any such hostilities, acts of war, sabotage or terrorism or
military actions, provided, in each case, that it does not have a
materially disproportionate effect on the Company and its Subsidiaries, taken
as a whole; (d) any adverse circumstance, change, effect, event,
occurrence, state of facts or development arising from or relating to any change
in accounting requirements or principles or any change in applicable Laws or
the interpretation thereof; or (e) any failure by the Company or any of
its subsidiaries to meet internal projections for any period ending (or for
which revenues, earnings or other financial data are released) on or after the
date of this Agreement in and of itself (but not 

 

48

 

excluding
any circumstance, change, effect, event, occurrence, state of facts or
development that gave rise to, contributed to or caused such failure to meet
any such projections);

 

“Multiemployer
Plan” shall have the meaning set forth in Section 3(37) of ERISA.

 

“Net Working Capital” means the result of (i) all current
assets (excluding Cash on Hand and deferred income Taxes) of the Company and
its Subsidiaries minus (ii) all current liabilities (excluding
Indebtedness and deferred income Taxes) of the Company and its Subsidiaries, in
each case determined in accordance with GAAP applied on a basis consistent with
the Interim Financial Statements; provided, that, notwithstanding
anything herein to the contrary, for purposes of calculating “Net Working
Capital,” in no event will the determination of “Net Working Capital” include
any intercompany accounts between or among the Company and its Subsidiaries.

 

“Non-US
Benefit Plan” means each material employee benefit, bonus or other
incentive compensation, stock option or other equity-based award, deferred
compensation, profit-sharing, retirement or supplemental unemployment benefit,
vacation or severance plan, policy or agreement maintained, sponsored or
contributed to by the Company or any of its Subsidiaries, or with respect to
which the Company or any of its Subsidiaries has any liability (contingent or
otherwise), in any case, that is maintained by the Company or a Company
Subsidiary outside the jurisdiction of the United States or for the benefit of
employees residing or working outside the United States.

 

“Order”
means any order, injunction, judgment, decree, ruling, writ, assessment or
arbitration award of a Governmental Authority.

 

“Permitted
Liens” means (i) any restriction on transfer arising under applicable
securities Law, (ii) statutory Liens for current Taxes or other
governmental charges not yet due and payable or the amount or validity of which
is being contested in good faith by appropriate Proceedings by the Company and
its Subsidiaries, provided an appropriate reserve is established therefor in
accordance with GAAP on the Latest Balance Sheet; (iii) mechanics’,
carriers’, workers’, repairers’, landlords’ and similar statutory Liens arising
by operation of Law and incurred in the ordinary course of business consistent
with past practice for amounts which are not delinquent and which are not,
individually or in the aggregate, material; (iv) zoning, entitlement,
building and other land use regulations imposed by Governmental Authorities
having jurisdiction over the Leased Real Property which are not violated by the
current use and operation of the Leased Real Property; (v) covenants,
conditions, restrictions, easements and other similar matters of record
affecting title to the Leased Real Property which would not, individually or in
the aggregate, reasonably be expected to materially detract from the value of
or materially impair the occupancy or use of the Leased Real Property for the
purposes for which it is currently used or proposed to be used in connection
with the Company’s and its Subsidiaries’ businesses; (vi) Liens identified
on title policies, title opinions or preliminary title reports or other
documents or writings which have been made available to Buyer; (vii) Liens
arising under worker’s compensation, unemployment insurance, social security,
retirement and similar legislation; (viii) purchase money Liens and Liens
securing rental payments under capital lease arrangements, in each case which
financial liabilities are reflected on the Latest Balance Sheet; 

 

49

 

(ix) Liens
of lessors and licensors arising under lease agreements or license
arrangements; and (x)  Liens under other Indebtedness to be paid off at
the Closing, provided that such Liens are released promptly following the
repayment of such Indebtedness.

 

“Person”
means an individual, a partnership, a corporation, a limited liability company,
an association, a joint stock company, a trust, a limited liability
partnership, a labor union, a joint venture, an unincorporated organization or
Governmental Authority.

 

“Proceeding”
means any judicial, administrative or arbitral actions, claims, suits,
arbitrations, investigations or proceedings (public or private), whether civil,
criminal, administrative or investigative, by or before a Governmental
Authority or any arbitrator.

 

“Release”
means disposing, discharging, injecting, spilling, leaking, leaching, dumping,
emitting, escaping, emptying, seeping, placing and the like into or upon any
land or water or air or otherwise entering into the environment.

 

“Remedial
Action” means all action to (i) clean up, remove, abate, encapsulate,
cover, treat or handle in any other way Hazardous Materials in the environment
or in building material; (ii) restore or reclaim the environment or
natural resources; (iii) prevent the Release of Hazardous Materials so
that they do not migrate, endanger or threaten to endanger public health or the
environment; or (iv) perform remedial investigations, feasibility studies,
corrective actions, closures and post-remedial or post-closure studies,
investigations, operations, maintenance or monitoring of or with respect to
Hazardous Materials.

 

“Restricted
Stock Unit Awards” means all restricted stock unit and similar awards
granted by the Company or Seller or their predecessors or Subsidiaries pursuant
to the Luminent, Inc. 2007 Omnibus Incentive Plan or any similar
arrangement whether or not authorized and approved by the board of directors of
the Company or Seller or evidenced by a written grant document; provided,
however, that Restricted Stock Unit Awards shall not include any restricted
stock unit and similar awards granted by the Company after the Closing, except
pursuant to an agreement entered into by the Company prior to the Closing.

 

“Seller
Benefit Plan” means each “employee benefit plan” (as such term is defined
in Section 3(3) of ERISA) and any other material employee benefit,
bonus or other incentive compensation, stock option or other equity-based
award, deferred compensation, profit-sharing, retirement or supplemental
unemployment benefit, vacation or severance plan, policy or agreement, in any
case, that (i) provides compensation or benefits to any service provider
of the Company and/or its Subsidiaries (or any dependent thereof), and (ii) is
maintained by Seller and/or any of its Affiliates other than the Company and its
Subsidiaries.

 

“Subsidiary”
or “Subsidiaries” means, with respect to any Person, any other Person of
which (i) if a corporation, a majority of the total voting power of shares
of stock entitled to vote in the election of directors thereof is at the time
owned or controlled, directly or indirectly, by that Person or (ii) if a
limited liability company, partnership, association or other business entity
(other than a corporation), (A) a majority of the ownership interests
thereof is at the time owned or controlled, directly or indirectly, by that
Person or (B) that Person shall be or control, directly or indirectly, any
managing director or general partner of such business entity.

 

50

 

“Tax”
or “Taxes” means any federal, state, local or foreign income, gross
receipts, franchise, estimated, alternative minimum, add-on minimum, sales,
use, transfer, real property gains, registration, value added, excise, natural
resources, severance, stamp, occupation, premium, windfall profit,
environmental, customs, duties, real property, special assessment, personal
property, capital stock, social security, unemployment, disability, payroll,
license, employee or other withholding, or other tax, of any kind whatsoever,
including any interest, penalties or additions to tax or additional amounts in
respect of the foregoing.

 

“Tax Contest”  means any
audit, Proceeding or inquiry involving Taxes.

 

“Tax
Return” or “Tax Returns” means any return, report, information
return or other document (including schedules or any related or supporting
information) filed or required to be filed with any Governmental Authority in
connection with the determination, assessment or collection of any Tax or the
administration of any Laws or administrative requirements relating to any Tax.

 

9.02         Cross-Reference of Other Definitions.  Each capitalized term listed below is defined
in the corresponding Section of this Agreement:

 

	
  Term

  	
   

  	
  Section No.

  
	
   

  	
   

  	
   

  
	
  Agreement

  	
   

  	
  Preamble

  
	
  Allocation
  Statement

  	
   

  	
  8.03(h)(iii)

  
	
  Appointech

  	
   

  	
  5.03(a)(i)

  
	
  Audited
  Financial Statements

  	
   

  	
  3.06(a)(i)

  
	
  Buyer

  	
   

  	
  Preamble

  
	
  Buyer
  Indemnified Parties

  	
   

  	
  7.02(a)

  
	
  Buyer
  Plan

  	
   

  	
  6.03(b)(ii)

  
	
  Cap

  	
   

  	
  7.02(b)

  
	
  Closing

  	
   

  	
  1.02

  
	
  Closing
  Date

  	
   

  	
  1.02

  
	
  COBRA

  	
   

  	
  6.03(g)

  
	
  Common
  Stock

  	
   

  	
  Recitals

  
	
  Company

  	
   

  	
  Preamble

  
	
  Confidentiality
  Agreement

  	
   

  	
  10.10

  
	
  Consents

  	
   

  	
  5.06

  
	
  Consolidated
  Pre-Closing Tax Returns

  	
   

  	
  8.03(b)(ii)

  
	
  Continuing
  Employee

  	
   

  	
  6.03(a)

  
	
  Deductible

  	
   

  	
  7.02(b)(i)

  
	
  Disclosure
  Schedule

  	
   

  	
  Article II

  
	
  Dispute

  	
   

  	
  7.09

  
	
  Employee

  	
   

  	
  6.03(a)

  
	
  Equity
  Financing

  	
   

  	
  4.07

  
	
  Excluded
  Claim

  	
   

  	
  7.05(b)

  
	
  Expenses

  	
   

  	
  7.02(a)

  
	
  Facilities

  	
   

  	
  3.06(e)

  
	
  Final
  Funding Amount

  	
   

  	
  1.06

  

 

51

 

	
  Financial
  Statements

  	
   

  	
  3.06(a)(ii)

  
	
  Fund

  	
   

  	
  Recitals

  
	
  Funding
  Account

  	
   

  	
  1.03(a)

  
	
  Grants

  	
   

  	
  3.29

  
	
  Indemnification
  Notice

  	
   

  	
  7.05(a)

  
	
  Indemnitee

  	
   

  	
  7.05(a)

  
	
  Indemnitor

  	
   

  	
  7.05(a)

  
	
  Initial
  Funding Amount

  	
   

  	
  1.03(a)

  
	
  Interim
  Financial Statements

  	
   

  	
  3.06(a)(ii)

  
	
  Leased
  Real Property

  	
   

  	
  3.08(c)

  
	
  Limited
  Guarantee

  	
   

  	
  Recitals

  
	
  Losses

  	
   

  	
  7.02(a)

  
	
  Material
  Contracts

  	
   

  	
  3.10(a)

  
	
  Minimum
  Cash Amount

  	
   

  	
  1.04(f)

  
	
  Minimum
  Cash Certificate

  	
   

  	
  1.04(f)

  
	
  Mini-Basket

  	
   

  	
  7.02(b)(i)

  
	
  Parent
  Group

  	
   

  	
  3.09(a)

  
	
  Permits

  	
   

  	
  3.20

  
	
  Personally
  Identifiable Information

  	
   

  	
  3.15(c)

  
	
  Post-Closing
  Taxable Period

  	
   

  	
  8.03(b)(ii)

  
	
  Pre-Closing
  Taxable Period

  	
   

  	
  8.03(b)(ii)

  
	
  Public
  Software

  	
   

  	
  3.11(g)

  
	
  Purchase
  Price

  	
   

  	
  1.01

  
	
  Real
  Property Leases

  	
   

  	
  3.08(c)

  
	
  RSU
  Acknowledgment

  	
   

  	
  6.06(i)

  
	
  RSU
  Holder

  	
   

  	
  6.06(i)

  
	
  RSU
  Settlement Date

  	
   

  	
  6.06(ii)

  
	
  Second
  Funding Amount

  	
   

  	
  1.06

  
	
  Section 338(h)(10) Elections

  	
   

  	
  8.03(h)(i)

  
	
  Securities
  Act

  	
   

  	
  4.06

  
	
  Seller

  	
   

  	
  Preamble

  
	
  Seller
  Indemnified Parties

  	
   

  	
  7.03

  
	
  Separate
  Pre-Closing Tax Returns

  	
   

  	
  8.03(b)(ii)

  
	
  Shares

  	
   

  	
  Recitals

  
	
  Specified
  Representations

  	
   

  	
  7.01(d)

  
	
  SPI

  	
   

  	
  Preamble

  
	
  SPI
  Common Stock

  	
   

  	
  Recitals

  
	
  SPI
  Shares

  	
   

  	
  Recitals

  
	
  SPSC

  	
   

  	
  Preamble

  
	
  SPSC
  Common Stock

  	
   

  	
  Recitals

  
	
  SPSC
  Shares

  	
   

  	
  Recitals

  
	
  Straddle
  Period

  	
   

  	
  8.03(a)

  
	
  Taxing
  Authority

  	
   

  	
  3.09(b)

  
	
  the
  Company’s knowledge

  	
   

  	
  10.03

  
	
  Third
  Party Claim

  	
   

  	
  7.05(a)

  
	
  Transfer
  Taxes

  	
   

  	
  8.03(g)

  

 

52

 

	
  US
  Minimum Cash Amount

  	
   

  	
  1.04(f)

  
	
  WARN
  Act

  	
   

  	
  3.18(i)

  

 

ARTICLE X.

 

MISCELLANEOUS

 

10.01       Press Releases and Communications.  No press release or public announcement
related to this Agreement or the transactions contemplated herein, any other
announcement or communication to the employees, consultants, customers or
suppliers of the Company or any of its Subsidiaries, shall be issued or made by
any party hereto without the joint approval of Buyer and Seller, unless
required (upon the reasonable advice of counsel) by applicable Law or the rules and
regulations of any national stock exchange or market upon which such party’s
(or its Affiliate’s) securities are traded, in which case Buyer and Seller
shall have the right to review and comment on such press release, announcement
or communication prior to its issuance, distribution or publication.  If either Buyer or Seller determines, with
the advice of counsel, that it is required by Law or the rules and
regulations of, or pursuant to agreement with, any such national stock exchange
or market to publicly disclose or file this Agreement or publicly disclose any
of the terms hereof or transactions contemplated hereby, it shall, a reasonable
time before making any such public disclosure or filing, consult with the other
parties hereto regarding such public disclosure 
or filing and provide the other party the right to review and comment on
any such disclosure or filing prior to its disclosure or filing.

 

10.02       Expenses.  Each
of the parties hereto shall pay the fees and expenses incurred by it in
connection with the negotiation, preparation, execution and performance of this
Agreement, including, without limitation, brokers’ fees, attorneys’ fees or
accountants’ fees; provided, Seller shall be solely responsible for all
fees and expenses incurred by the Company.

 

10.03       Knowledge Defined. 
For purposes of this Agreement, the term “the Company’s knowledge”
as used herein shall mean the actual knowledge of Near Margalit, Alexis Black,
Brett Chloupek, Chris D. King, Yu-Heng Jan and Weiming Li.

 

10.04       Notices.  All
notices, demands and other communications to be given or delivered under or by
reason of the provisions of this Agreement shall be in writing and shall be
deemed to have been given when personally delivered, one day after deposit with
Federal Express or similar overnight courier service or three days after being
mailed by first class mail, return receipt requested.  Notices, demands and communications to Buyer,
the Company, and Seller shall, unless another address is specified in writing,
be sent to the addresses indicated below:

 

Notices to Buyer, or, following the Closing, the Company:

 

Magnolia
Source B.V.

Dam 7

1012
JS Amsterdam

The
Netherlands

Attn:  Keith Toh, Petri Oksanen and Sara
Douwes

 

53

 

with a copy to:

 

One
Letterman Drive

Building
C – Suite 410

San
Francisco, CA 94129

Attn:  Keith Toh and Petri Oksanen

Fax:  (415) 418-2999

 

with a copy to:

 

Shearman &
Sterling LLP

525
Market Street, Suite 1500

San
Francisco, California 94105

Attn:  Michael J. Kennedy, Michael S.
Dorf and Jeffrey C. Wolf

Fax:
(415)  616-1199

 

Notices to Seller and, prior to Closing, the Company:

 

MRV
Communications, Inc.

20415 Nordhoff Street

Chatsworth, CA 91311

Attn:  General Counsel

Fax:  (818) 407-5656

 

and

 

Source
Photonics, Inc.

c/o MRV Communications, Inc.

20550 Nordhoff Street

Chatsworth, CA 91311

Attn:  General Counsel

Fax:  (818) 576-9456

 

with a copy to:

 

Latham &
Watkins LLP

355 South Grand Avenue

Los Angeles, California 90071

Attn:  Steven B. Stokdyk 

Fax:  (213) 891-8763

 

Notwithstanding
the foregoing, any party may send any notice, request, demand, claim, or other
communication required or permitted hereunder to the intended recipient at the
address set forth above by personal delivery, messenger service, ordinary mail
and/or facsimile transmission; provided, however, that no such
notice, request, demand, claim, or other communication will be deemed to have
been duly given unless and until it actually is received by 

 

54

 

the
intended recipient or, in the case of facsimile communications, when receipt is
electronically confirmed.  Any party may
change the address to which notices, requests, demands, claims, and other
communications required or permitted hereunder are to be delivered by giving
the other party(ies) notice in the manner herein set forth.

 

10.05       Assignment; Third Party Beneficiaries.  The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the prior written consent of each other party hereto; provided,
however, that Buyer may assign its rights and interests without Seller’s
or the Company’s consent (i) to any of its Affiliates or (ii) for
collateral security purposes, to any lender providing debt financing to Buyer
or any of its Affiliates in connection with the transactions contemplated by
this Agreement; provided, further, however, in each case
of clauses (i) and (ii), any such assignment shall not relieve Buyer
of its obligations hereunder.  Nothing in
this Agreement, express or implied, is intended to or shall confer upon any
Person other than the parties hereto or their respective successors and
permitted assigns, any rights, remedies or liabilities under or by reason of
this Agreement, other than Article VII and Section 8.03,
which is intended to be for the benefit of the Persons covered thereby or to be
paid thereunder and may be enforced by such Persons.

 

10.06       Severability. 
Whenever possible, each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable Law, but if any
provision of this Agreement is held to be prohibited by or invalid under
applicable Law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party.  Upon
any determination that any provision of this Agreement is invalid, illegal, or
incapable of being enforced, the parties hereto 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 in order that the transactions
contemplated hereby are consummated as originally contemplated to the greatest
extent possible.

 

10.07       References.  The
table of contents and the section and other headings and subheadings contained
in this Agreement and the exhibits hereto are solely for the purpose of
reference, are not part of the agreement of the parties hereto, and shall not
in any way affect the meaning or interpretation of this Agreement or any
exhibit hereto.  All references to days
or months shall be deemed references to calendar days or months.  All references to “$” or “dollars” shall be
deemed references to United States dollars. 
Unless the context otherwise requires, any reference to a “Section,” “Exhibit,”
or “Schedule” shall be deemed to refer to a section of this Agreement, exhibit
to this Agreement or a schedule to this Agreement, as applicable.  Any reference to any federal, state, county,
local or foreign  Law shall be deemed
also to refer to all rules and regulations promulgated thereunder and all
amendments thereto in force from time to time (including amendments to provision
references) and every applicable Law in effect that supplements, replaces or
supersedes such Law, unless the context requires otherwise.  For all purposes of and under this Agreement,
(i) the word “including” shall be deemed to be immediately followed by the
words “without limitation”; (ii) words (including defined terms) in the
singular shall be deemed to include the plural and vice versa; (iii) words
of 

 

55

 

one gender shall be deemed to include the other
gender as the context requires; (iv) “or” is not exclusive; and
(v) the terms “hereof,” “herein,” “hereto,” “herewith” and any other words
of similar import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole (including the exhibits hereto and the Disclosure
Schedules) and not to any particular term or provision of this Agreement,
unless otherwise specified.

 

10.08       No Strict Construction. 
The language used in this Agreement shall be deemed to be the language
chosen by the parties hereto to express their mutual intent, and no rule of
strict construction shall be applied against any Person.

 

10.09       Amendment and Waiver. 
Any provision of this Agreement or the schedules or exhibits hereof may
be amended or waived only in a writing signed by the party against whom
enforcement of any such amendment or waiver is sought.  No action or nonaction taken pursuant to this
Agreement, including without limitation, any investigation by or on behalf of any
party, shall be deemed to constitute a waiver by the party taking such action
or nonaction of compliance with any representation, warranty, covenant or
agreement contained herein.  No failure
on the part of any party to exercise, and no delay in exercising, any right,
power or remedy hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of such right, power or remedy by such party
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy.  No waiver of any
provision hereunder or any breach or default thereof shall extend to or affect
in any way any other provision or prior or subsequent breach or default.

 

10.10       Complete Agreement. 
This Agreement (including the Disclosure Schedules and the Exhibits
hereto) and the Confidentiality Agreement, dated May 12, 2009, by and
between Seller and Buyer’s Affiliate as amended, restated or otherwise modified
(the “Confidentiality Agreement”), contain the complete agreement
between the parties hereto and supersede any prior understandings, agreements
or representations by or between the parties, written or oral, which may have
related to the subject matter hereof in any way.

 

10.11       Counterparts. 
This Agreement may be executed in multiple counterparts (including
by means of facsimile signature pages), any one of which need not contain the
signatures of more than one party, but all such counterparts taken together
shall constitute one and the same instrument.

 

10.12       Waiver of Jury Trial. 
EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO
ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.  EACH OF THE PARTIES HERETO HEREBY
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, 

 

56

 

AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.12.

 

10.13       Specific Performance. 
Each of the parties to this Agreement acknowledges and agrees that the
other parties to this Agreement would be irreparably damaged in the event that
any of the terms or provisions of this Agreement are not performed in
accordance with their specific terms or otherwise are breached.  Therefore, notwithstanding anything to the
contrary set forth in this Agreement, each of the parties to this Agreement
hereby agrees that the other parties to this Agreement shall be entitled to an
injunction or injunctions to prevent breaches of any of the terms or provisions
of this Agreement, and to enforce specifically the performance by such first
party under this Agreement, and each party to this Agreement hereby agrees to
waive the defense in any such suit that the other parties to this Agreement
have an adequate remedy at law and to interpose no opposition, legal or
otherwise, as to the propriety of injunction or specific performance as a
remedy, and hereby agrees to waive any requirement to post any bond in
connection with obtaining such relief. 
The equitable remedies described in this Section 10.13 shall
be in addition to, and not in lieu of, any other remedies at law or in equity
that the parties to this Agreement may elect to pursue.

 

10.14       Governing Law. 
All matters relating to the interpretation, construction, validity and
enforcement of this Agreement shall be governed by and construed in accordance
with the domestic Laws of the State of New York without giving effect to any choice
or conflict of law provision or rule (whether of the State of New York or
any other jurisdiction) that would cause the application of Laws of any
jurisdiction other than the State of New York.

 

10.15       Jurisdiction. 
Except as otherwise expressly provided in this Agreement and subject to Section 7.09
above, any Proceeding seeking to enforce any provision of, or based on any
matter arising out of or in connection with, this Agreement or the transactions
contemplated hereby shall be brought in New York City, New York or any federal
court located in New York City, New York, and each of the parties hereby
consents to the jurisdiction of such courts (and of the appropriate appellate
courts therefrom) in any such Proceeding and irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to
the laying of the venue of any such Proceeding in any such court or that any
such Proceeding which is brought in any such court has been brought in an
inconvenient forum.  Process in any such
Proceeding may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. 
Without limiting the foregoing, each party agrees that service of
process on such party as provided in Section 10.04 shall be deemed
effective service of process on such party.

 

*  *  *  *

 

57

 

IN
WITNESS WHEREOF, the parties hereto have executed this Stock Purchase Agreement
on the day and year first above written.

 

	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  SOURCE
  PHOTONICS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Near Margalit

  
	
   

  	
  Name:
  Near Margalit

  
	
   

  	
  Its:
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SOURCE
  PHOTONICS SANTA CLARA, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Near Margalit

  
	
   

  	
  Name:
  Near Margalit

  
	
   

  	
  Its:
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
  BUYER:

  
	
   

  	
   

  
	
   

  	
  MAGNOLIA
  SOURCE B.V.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Petri Oksanen

  
	
   

  	
  Name:
  Petri Oksanen

  
	
   

  	
  Its:
  Managing Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  S.A. Douwes

  
	
   

  	
  Name:
  S.A. Douwes

  
	
   

  	
  Its:
  Managing Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SELLER:

  
	
   

  	
   

  
	
   

  	
  MRV
  COMMUNICATIONS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Dilip Singh

  
	
   

  	
  Name:
  Dilip Singh

  
	
   

  	
  Its:
  Chief Executive Officer

  

 

[Signature Page to
SPA]

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