Document:

Exhibit
      10.1

    

    VIRTUALSCOPICS,
      INC. 

    NON-EMPLOYEE
      DIRECTORS’ COMPENSATION PLAN

    

    SECTION
      1. PURPOSE. The
      purpose of the VirtualScopics, Inc. Non-Employee Directors’ Compensation Plan
      (the “Plan”) is to promote the success of VirtualScopics, Inc. (the “Company”)
      by compensating directors who are not employees of the Company or any of its
      affiliated companies (a "Participant") and enhancing the stock ownership of
      directors by providing a method whereby Participants may receive their annual
      Board, Committee and Chairman retainers (an "Annual Retainer") or meeting fees
      ("Meeting Fees") in shares of the Company's Common Stock ("Common Stock").
      

    

    The
      stock
      options and shares of Common Stock that may be issued pursuant to the Plan
      shall
      be issued under the VirtualScopics, Inc., 2006 Long-Term Incentive Plan, as
      it
      may be amended from time to time (“2006 Plan”), subject to all of the terms and
      conditions of the 2006 Plan. The terms contained in the 2006 Plan are
      incorporated into and made a part of this Plan with respect to the stock options
      and Common Stock granted pursuant hereto and any such awards shall be governed
      by and construed in accordance with the 2006 Plan. In the event of any actual
      or
      alleged conflict between the provisions of the 2006 Plan and the provisions
      of
      this Plan, the provisions of the 2006 Plan shall be controlling and
      determinative. This Plan does not constitute a separate source of shares for
      the
      grant of the equity awards described herein.

    

    SECTION
      2. FEES.
      Each Participant shall be entitled to compensation as follows: 

    

    A.
       INITIAL
      STOCK OPTION GRANT. Each Participant is entitled to a one-time stock option
      grant for 25,000 shares of Common Stock pursuant to the 2006 Plan. No option
      shall have an exercise price below any existing, applicable anti-dilution
      trigger price. Such option shall vest 25% on each anniversary of the date of
      grant. The initial stock option shall be granted at the first Board meeting
      attended by a Participant, to the extent the grant is permitted at such time,
      or
      such later regular Board meeting when such grant is permitted. 

    

    B. ANNUAL
      STOCK OPTION GRANT. Each Participant shall be eligible to receive an annual
      stock option grant under the 2006 Plan at or about the February board meeting.
      The amount of the grant will be determined by the Compensation Committee based
      on Participant performance during the previous year. The number of shares of
      Common Stock available, in the aggregate, for annual option grants will be
      determined by dividing (x) an amount up to Fifteen Thousand Dollars ($15,000)
      by
      (y) a per share amount equal to the Black-Scholes pricing model value of an
      option to purchase one share of Common Stock on such date. No option shall
      have
      an exercise price below any existing, applicable anti-dilution trigger price.
      

    

    C. ANNUAL
      RETAINER. Each Participant is entitled to an Annual Retainer of $5,000. A
      pro-rata Annual Retainer will be paid to any Participant based on the number
      of
      days during the year in which the Participant serves as a director.

     

    D. MEETING
      FEES. Participants will be entitled to receive the following Meeting Fees:
      

    

    
      	
              Board
                Meetings

            	 	
              $

            	
              1,500

            	 
	
              Committee
                Meetings

            	 	
              $

            	
              500

            	 
	
              Committee
                Chair

            	 	
              $

            	
              750

            	 

    

    

    Participants
      will not be paid for more than one meeting per day. In the event there are
      multiple meetings, payment will be made for the meeting requiring the highest
      fee. 

     

    
      
        
        

      

      
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    SECTION
      3. PAYMENT
      OF FEES. Each Participant shall be given an opportunity by the Company on an
      annual basis to elect (the “Annual Election”) to receive his or her Annual
      Retainer or Meeting Fees in shares of Common Stock under the 2006 Plan, as
      follows:

    

    A. ANNUAL
      RETAINER. If selected, the value of the shares of Common Stock payable in lieu
      of an Annual Retainer shall equal the amount of the Annual Retainer, subject
      to
      Section 3.C., below. 

    

    B. MEETING
      FEES. If selected, the value of shares of Common Stock payable in lieu of the
      Meeting Fees shall equal the amount of such Meetings Fees, subject to Section
      3.C., below.

    

    C. ALL
      FEES.

    

    1.
      All
      fees shall be paid quarterly on or about the tenth business day following the
      end of a quarter for the previous quarter. 

    

    2.
      Each
      Participant will be asked to declare his or her Annual Election on the date
      of
      each annual shareholders meeting for the coming year. For those directors
      electing to fees in the form of an award of shares, the Fair Market Value (as
      defined in Section 4 hereof) on the last business day of the quarter will be
      used to calculate the number of shares contained in the award in lieu of cash
      for the quarter. Each such award shall be approved by the Board of Directors.
      Such price, however, shall not be below any existing anti-dilution trigger
      price
      applicable to the Company. 

    

    3.
      The
      shares awarded in lieu of fees may contain such restrictions and vesting
      criteria, or no restrictions and immediate vesting, to the extent determined
      by
      the Compensation Committee.

    

    SECTION
      4. SHARE
      CERTIFICATES, VOTING AND OTHER RIGHTS.

    

    A. SHARE
      CERTIFICATES. The certificates for shares of Common Stock issued under Section
      3
      hereof may be registered in the name of the Participant, or in the name of
      the
      Participant and one other individual as joint tenants. Any dividends, or
      distributions, payable in cash or in kind with respect to the shares of Common
      Stock that have been issued, shall be paid to the Participant. All shares of
      Common Stock issued hereunder shall be fully paid and non-assessable and the
      Participant shall have all voting rights with respect thereto. 

    

    B. FAIR
      MARKET VALUE. "Fair Market Value," shall be as defined in the 2006
      Plan.

    

    C. FRACTIONS
      OF SHARES. The Company shall not issue fractions of shares. Whenever under
      the
      terms of the Plan, a fractional share would otherwise be required to be issued,
      the unpaid amount shall be added to the fees for the next quarterly
      period.

    

    D. GENERAL
      RESTRICTIONS. Notwithstanding any other provision of the Plan, the Company
      shall
      have no liability to deliver any Common Stock under the Plan or make any other
      distribution of benefits under the Plan unless such delivery or distribution
      would comply with all applicable laws (including, without limitation, the
      requirements of the Securities Act of 1933, as amended), and the applicable
      requirements of any securities exchange or similar entity. 

    

    E. CHANGE
      IN
      CAPITAL STRUCTURE. In the event of any change in the Common Stock by reason
      of
      any stock dividend, split, combination of shares, exchange of shares, warrants
      or rights offering to purchase Common Stock at a price below its fair market
      value, reclassification, recapitalization, merger, consolidation or other change
      in capitalization, appropriate adjustment shall be made by the Company in the
      number and kind of shares subject to the Plan and any other relevant provisions
      of the Plan, whose determination shall be binding and conclusive on all
      persons.

     

    
      
        
        

      

      
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    SECTION
      7. TAXES.
      The Company shall be authorized to withhold from any payment due under the
      Plan
      the amount of withholding taxes, if any, due in respect of an award hereunder,
      unless other provisions satisfactory to the Company shall have been made for
      the
      payment of such taxes.

    

    SECTION
      8. MISCELLANEOUS

    

    A. ADMINISTRATION.
      Except as may be specifically provided elsewhere herein, the Plan shall be
      administered by the Compensation Committee of the Board (the "Compensation
      Committee"), which shall have full authority to construe and interpret the
      Plan,
      to establish, amend and rescind rules and regulations relating to the Plan,
      and
      to take all such actions and make all such determinations in connection with
      the
      Plan as it may deem necessary or desirable. The Compensation Committee may
      from
      time to time make such amendments to the Plan, or an award made hereunder,
      as it
      may deem proper, necessary, and in the best interests of the
      Company.

    

    B. RIGHTS
      OF
      DIRECTORS. Nothing in the plan shall confer upon any Participant any right
      to
      serve on the Board for any period of time or to continue his or her current
      or
      any other rate of compensation. 

    

    C. GOVERNING
      LAW. The Plan and all actions taken thereunder shall be governed and construed
      in accordance with the laws of the State of New York.

    

    D. EFFECTIVE
      DATE AND TERM. The Plan initially was approved by the Board on February 26,
      2008
      (the “Effective Date”), subject to subsequent approval and ratification by the
      Company’s stockholders. The Plan shall be effective as of the Effective Date,
      but subject to subsequent approval and ratification by the Company’s
      stockholders no later than the annual meeting of stockholders next following
      the
      Effective Date. The Plan shall have a term of ten years.

    

    E. Section
      409A Savings Clause.
      Notwithstanding any provision of this Plan, in the event any term, condition
      or
      feature of an Option would result in the Option being subject to the provisions
      of Section 409A of the Internal Revenue Code of 1986, as amended, the terms
      of
      the Option shall be amended to the minimum extent necessary such that the Option
      shall not be subject to the provisions of such Section 409A.

     

    
      
        
        

      

      
        3Exhibit
      10.1

     

    CONFIDENTIAL
      AND WITHOUT PREJUDICE

    FOR
      SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. OF EVIDENCE. 408

     

    MEMORANDUM
      OF UNDERSTANDING AMONG PLAINTIFFS AND 

    DEFENDANTS
      IN IN
      RE INFOSONICS CORPORATION SECURITIES 

    LITIGATION,
      No. 06-CV-1231 JLS (WMc)

    

    This
      Memorandum of Understanding (“MOU”) contains the material terms of a settlement
      (the “Settlement”) of In
      re
      InfoSonics Securities Litigation,
      Case No. 06-CV01231 JLS (WMc) (the “Action”) pending in the United States
      District Court for the Southern District of California (the “Court”) by and
      between Robert Sibley (“Lead Plaintiff”) and Plaintiffs Robert Lorizio and Joel
      Webb (collectively, “Plaintiffs”), individually and on behalf of all other
      persons and entities similarly situated and Defendants InfoSonics Corporation
      (“InfoSonics” or the “Company”) and Joseph Ram, John J. Althoff, Jeffrey
      Klausner, Joseph Murgo, and Abraham Rosler (collectively, with InfoSonics,
      the
“Defendants”). The Settlement provides for the dismissal with prejudice of the
      Action and for the releases defined below, subject to the approval of the Court
      and such approval becoming final.

    

    Plaintiffs
      and Defendants (collectively the “Parties”) contemplate that this MOU will be
      superceded by a more detailed “Stipulation of Settlement” incorporating the
      terms and conditions set forth herein and other customary terms and conditions
      as agreed upon by counsel for the Parties.

    

    1.  InfoSonics
      will pay or cause its insurer AIG (National Union Fire Insurance Co. of
      Pittsburg, PA) (“AIG”) to pay the sum of $3,800,000.00 (three million eight
      hundred thousand dollars) (the “Settlement Amount”) in the following timeframe
      by depositing the following amounts into an interest bearing escrow account
      to
      be established by Lead Counsel for Plaintiffs (“Lead Counsel”), controlled by
      Lead Counsel, and made subject to the Court’s jurisdiction and oversight by Lead
      Counsel (the “Settlement Fund”): (a) depositing $150,000.00 (one hundred fifty
      thousand dollars) no later than ten (10) days following the notice of entry
      of
      an order by the Court preliminarily approving the Settlement described herein
      (the “First Payment Date”); and (b) depositing $3,650,000.00 (three million six
      hundred and fifty thousand dollars), no later than twenty-one (21) days
      following notice of entry of an order by the Court preliminarily approving
      the
      Settlement described herein (the “Second Payment Date”), but in no case shall
      the Second Payment Date be earlier than September 10, 2008. If the Settlement
      Amount is not paid into the Settlement Fund by the First and Second Payment
      Dates, as set forth herein, interest shall accrue on any unpaid portion of
      the
      Settlement Amount then due at the 3-month T-Bill rate until paid. Except as
      provided in paragraphs 3 and 9, the Settlement Amount will not be disbursed
      until all of the conditions set forth in paragraph 14 have been
      met.

    

    2.  Defendants
      will stipulate to the certification of a class, for settlement purposes only,
      consisting of all purchasers of securities of InfoSonics between February 6,
      2006 and August 9, 2006, inclusive (the “Class”). Excluded from the Class are
      the Defendants herein, the directors, officers and employees of the Company,
      the
      members of each individual defendant’s immediate family, any entity in which any
      Defendant has a controlling interest, and the legal affiliates, representatives,
      heirs, controlling persons, successors and predecessors in interest or assigns
      of any such excluded party, and any person who submits a timely and valid
      request for exclusion from the Class.

     

    
      
        SD
          642 367.2

        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    
      CONFIDENTIAL
        AND WITHOUT PREJUDICE

      FOR
        SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. OF EVIDENCE. 408

       

    

    3.  All
      costs
      of providing notice to the members of the Class, processing claims and
      distributing the “Net Settlement Fund” (the Settlement Amount less Court
      authorized payments for fees, expenses and taxes) to Class members (“Notice and
      Administration Costs”) shall be paid out of the Settlement Amount. The Notice of
      Pendency and Settlement of Class Action to be provided to Class members and
      summary notice to be published in the national edition of The
      Wall Street Journal
      (or
      other similar widely circulated national publication) shall include notice
      of
      the separate settlement of In
      re
      InfoSonics Corporation Derivative Litigation, Case
      No.
      06-CV-1336 JLS (WMc) (the “Derivative Action”), provided, however, that the
      Settlement Amount will not be charged with that portion of the total costs
      of
      notification of the settlements in this Action and the Derivative Action
      attributable solely to the settlement of the Derivative Action. Notice and
      Administration Costs shall include, but are not limited to, the cost of
      publishing summary notice, printing and mailing a Notice of Pendency and
      Settlement of Class Action, as directed by the Court, and reimbursing nominees,
      if they request reimbursement, for their reasonable expenses of identifying
      members of the Class, and related costs.

    

    4.  This
      is
      not a “claims-made” settlement. Accordingly, if all conditions of the
      Stipulation of Settlement are satisfied and the Settlement receives final Court
      approval and that approval is not overturned on appeal or overturned as a result
      of further proceedings on remand, and the Settlement does not fail for any
      other
      reason, then the funds on deposit in the Settlement Fund will not be returned
      to
      InfoSonics or AIG. If, however, the Settlement fails to receive court
      confirmation, or the judgment fails to become final, or the Settlement fails
      for
      any other reasons, then the Settlement Amount paid (including any interest
      earned on such payments), shall promptly be returned in accordance with
      paragraph 11 below.

    

    5.  The
      settlement notice and claims process will be administered by an independent
      claims administrator selected by Lead Counsel and approved by the Court. The
      allocation of the Net Settlement Fund among Class members who submit timely
      and
      valid proofs of claim shall be the subject of a plan of allocation to be
      proposed by Plaintiffs and approved by the Court. Neither the Defendants nor
      their counsel will have any involvement in the plan of allocation or in
      reviewing or challenging any proof of claim or any liability with respect to
      the
      plan of allocation or the claims administration process. Subject to the
      provisions of paragraphs 1 and 9, the Settlement Amount shall be held in escrow
      pending the entry of a final, non-appealable order by the Court dismissing
      with
      prejudice the Action, at which time the Settlement Amount, less any award of
      attorneys’ fees and costs, and any taxes and/or any Notice and Administration
      Costs, plus any accrued interest at the rate paid on the escrow account, shall
      be distributed to the Class Members in the Action.

    

    6.  The
      Parties will not assert that the Action was brought by Plaintiffs or defended
      by
      the Defendants in bad faith or without reasonable cause under Rule 11 of the
      Federal Rules of Civil Procedure. 

    

    7.  This
      MOU
      shall not be used in any way to indicate liability or wrongdoing as to any
      claims that were or could have been asserted in the Action or otherwise be
      deemed an admission (a) by the Defendants: (i) of any wrongdoing, violation
      of
      law, liability, negligence or culpability of any kind whatsoever, or (ii) that
      recovery could be had in any amount should the Action not be settled; or (b)
      by
      the Plaintiffs of any lack of merit of any claim asserted against

     

    
      
        SD
          642 367.2

        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    CONFIDENTIAL
      AND WITHOUT PREJUDICE

    
      FOR
        SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. OF EVIDENCE. 408

       

      Defendants,
        and may not be used in any proceeding for
        any purpose except to enforce the terms of the MOU. Defendants deny any
        liability or responsibility for the claims made in the Action and make no
        admission of any wrongdoing. 

       

    

    8.  The
      “Final Judgment” to be entered by the Court will include releases, subject to
      the Final Judgment becoming final as defined in the Stipulation of Settlement,
      providing, in substance, as follows:

    

    (a)
      a
      release by Plaintiffs and all members of the Class of all claims, demands,
      rights, liabilities and causes of action, known or unknown, asserted in the
      Action or that have been asserted in any forum or could have been asserted
      by
      them in any forum based upon any violation of state, federal or any country’s
      securities laws, against any of the Defendants, parents, subsidiaries,
      affiliates, directors, officers, employees, agents, bankers, commercial bankers,
      lenders, accountants, advisors, consultants, insurers, attorneys, and any past,
      present or future officers, directors and employees of Defendants, their
      predecessors, successors, heirs, executors, trustees, estates, families, spouses
      and marital communities, and their subsidiaries, affiliates and agents, and
      all
      similar persons and/or entities, based upon or related to (i) their purchase
      of
      InfoSonics securities during the Class Period held at the end of the Class
      Period or any sales of such securities; and (ii) the facts, transactions,
      events, occurrences, acts, disclosures, statements, omissions or failures to
      act
      which were or could have been alleged in the Action, including without
      limitation, any misstatement or omission, any breach of duty, any negligence
      or
      fraud (or any other alleged wrongdoing or misconduct) relating in any way to
      the
      accounting for the 2006 warrants, InfoSonics’ public filings and financial
      results publicly disseminated during the Class Period, InfoSonics’ stock split
      announced in May 2006, the issues with VK Mobile phone manufacturing, approvals,
      distribution, distribution agreements, distribution arrangements, sales,
      acceptance, success, or defects alleged or that could have been alleged in
      the
      Complaint, and/or any alleged trading by Defendants in InfoSonics
      stock.

    

    (b)
      a
      release, waiver and relinquishment to the fullest extent permitted by law,
      of
      the provisions, rights and benefits of Section 1542 of the California Civil
      Code, which provides as follows:

    

    A
      GENERAL
      RELEASE DOES NOT EXTEND TO CLAIMS, WHICH THE  CREDITOR
      DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER  FAVOR
      AT
      THE TIME OF EXECUTED THE RELEASE, WHICH IF KNOWN  BY
      HIM OR
      HER MUST HAVE MATERIALLY AFFECTED HIS OR HER  SETTLEMENT
      WITH THE DEBTOR

    

    by
      Plaintiffs and all members of the Class, and all other persons and entities
      whose claims are being released.

    
       

      (c)
        a
        release by each Defendant and any other released person of each Plaintiff,
        and
        counsel for each Plaintiff from all claims, demands, rights, liabilities
        and
        causes of action, known or unknown, asserted or that might have been asserted
        arising out of, based 

       

    

    
      
        SD
          642 367.2

        
        

      

      
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    CONFIDENTIAL
      AND WITHOUT PREJUDICE

    
      FOR
        SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. OF EVIDENCE. 408

       

    

    upon
      or
      related to the institution, prosecution, assertion, settlement or resolution
      of
      the Action; and 

    

    (d)
      a
      provision providing for the dismissal of the Action with prejudice and without
      costs, except as otherwise provided in the Stipulation of
      Settlement.

    

    The
      foregoing does not represent the precise wording of the release, but rather
      is
      intended to summarize the intent of the releases contemplated by the Settlement.
      The Stipulation of Settlement shall provide that the Parties shall request
      the
      Court to reserve jurisdiction over all matters relating to the administration
      and effectuation of the Settlement.

     

    9.  Any
      attorneys’ fees and expenses awarded Plaintiffs’ Counsel (identified in the
      signature blocks to this Settlement and/or Plaintiffs’ Third Consolidated
      Amended Class Action Complaint, filed May 23, 2008) by the Court shall be paid
      solely from the Settlement Amount and may be paid to Plaintiffs’ Counsel
      immediately following an award of such fees and expenses by the Court,
      notwithstanding the existence of any timely filed objections thereto, or
      potential for appeal therefrom, subject to each Plaintiff’s Counsel’s joint and
      several obligations to make appropriate refunds or repayments to the Settlement
      Fund, plus accrued interest at the same rate as is earned by the Settlement
      Fund
      in the escrow account if, and when, as the result of any appeal and/or further
      proceedings on remand, or successful collateral attack, the fee or cost award
      is
      reduced or reversed. Each Plaintiff’s Counsel shall make the appropriate refund
      or repayment, in full, within ten (10) business days following written notice
      of
      any such reduction of the fee or cost award, or the termination of the
      Settlement. The obligation to make appropriate refund or repayment may be
      enforced by summary orders of the Court. The Settlement Amount shall be the
      sole
      source of payment of any award of attorneys’ fees and costs to plaintiffs’
counsel. The Parties agree that the denial, in whole or in part, of any
      application for attorneys’ fees and costs shall in no way affect the
      enforceability, validity or finality of the Settlement. Defendants will take
      no
      position with respect to Plaintiffs’
      Counsel’s
      request for or award of attorneys’ fees or expenses. 

    

    10.  The
      Stipulation of Settlement shall contain a provision providing that Defendants
      have the right to terminate this Settlement in the event that purchasers of
      more
      than seven (7) percent of the total number of shares of InfoSonics common stock
      purchased during the Class Period submit timely and valid requests for exclusion
      from the Class.

    

    11.  If
      for
      any reason the Settlement does not become final as defined in the Stipulation
      of
      Settlement, or if the Stipulation of Settlement is voided, canceled or
      terminated or the Final Judgment approving the Settlement is overturned on
      appeal, or does not become final as result of further proceedings on remand,
      the
      Settlement Amount plus accrued interest, less any notice costs, administration
      costs, taxes or tax expenses paid or owing, shall be returned to InfoSonics
      and/or AIG, respectively, to the extent each funded the Settlement Amount,
      as
      instructed by each party that funded the Settlement Amount, within ten (10)
      days
      after written notification of such event. This provision shall survive any
      other
      failure of the Stipulation of Settlement, and may be specifically enforced
      by
      the Court.

     

    
      
        SD
          642 367.2

        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    CONFIDENTIAL
      AND WITHOUT PREJUDICE

    
      FOR
        SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. OF EVIDENCE. 408

       

    

    12.  If
      a case
      is commenced concerning InfoSonics under Title 11 of the United States Code
      (Bankruptcy), or a trustee, receiver or conservator is appointed under any
      similar law, and in the event of the entry of a final order of a court of
      competent jurisdiction determining the transfer of the Settlement Amount
      pursuant to paragraph 1 hereof or any portion thereof by InfoSonics to be a
      preference, voidable transfer, fraudulent transfer or similar transaction,
      and
      any portion thereof is required to be returned, and is, in fact, returned,
      and
      such amount is not promptly re-deposited by others, then, at the election of
      Lead Counsel, Plaintiffs shall move (and Defendants shall not oppose) the Court
      to vacate and set aside both the releases given and the Final Judgment, if
      entered by such time. In such event, the releases and Final Judgment shall
      be
      null and void, and the parties shall be restored to their respective positions
      in the litigation immediately prior to the execution of the Stipulation, and
      the
      Settlement Amount shall be returned subject to the provisions of paragraph
      11
      above.

    

    13.  If
      a case
      is commenced concerning AIG, Defendants’ insurance carrier, under Title 11 of
      the United States Code (Bankruptcy), or a trustee, receiver or conservator
      is
      appointed under any similar law, and in the event of that the entry of a final
      order of a court of competent jurisdiction determining the transfer of the
      Settlement Amount pursuant to paragraph 1 hereof or any portion thereof to
      be a
      preference, voidable transfer, fraudulent transfer or similar transaction,
      and
      any portion thereof is required to be returned, and is, in fact, returned,
      and
      such amount is not promptly re-deposited by others, then, at the election of
      either Plaintiffs or Defendant(s), Plaintiffs or Defendant(s) shall move (and
      no
      other party shall oppose) the Court to vacate and set aside both the releases
      given and the Final Judgment, if entered by such time. In such event, the
      releases and Final Judgment shall be null and void, and the parties shall be
      restored to their respective positions in the litigation immediately prior
      to
      the execution of the Stipulation, and the Settlement Amount shall be returned
      subject to the provisions of paragraph 11 above.

    

    14.  The
      Settlement is conditioned upon receiving final judicial approval of the
      Stipulation of Settlement from the Court, the entry of a Final Judgment, and
      the
      Final Judgment becoming final, as will be provided and defined in the
      Stipulation of Settlement. This MOU is binding on the Parties, but it is
      understood that the Settlement is subject to and contingent on: (a) good faith
      documentation and execution of a Stipulation of Settlement containing the
      releases described in Paragraph 8, and other essential terms contained herein;
      (b) the preliminary approval of the Settlement by the Court; (c) payment of
      the
      Settlement Amount, as set forth in Paragraph 1 hereof; (d) final approval of
      the
      Court upon notice as described in Paragraph 3 to the Class Members and after
      a
      hearing (meaning that the Court has entered an order approving the Settlement
      and that such order is finally affirmed on appeal or is no longer subject to
      appeal); (e) AIG funding the Settlement Amount as set forth in Paragraph 1;
      and
      (f) the settlement of In
      Re
      InfoSonics Derivative Litigation,
      including receiving final judicial approval therein, entry of a Final Judgment
      therein, and the Final Judgment therein becoming final. This MOU and/or the
      Settlement shall be voidable by the Parties should any of conditions (a) to
      (d)
      not be met, and voidable by the Defendants only if conditions (e) or (f) is
      not
      met; in such event, if any Party voids this MOU and/or the Settlement, then
      this
      MOU and/or the Settlement shall be null and void, and shall not be admissible
      in
      any proceeding or be deemed to prejudice any of the positions of the Parties
      in
      or with respect to the Action or any other action. In order to void the MOU
      and/or the Settlement pursuant to this paragraph 14, the Party seeking to void
      the MOU 

     

    
      
        SD
          642 367.2

        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    CONFIDENTIAL
      AND WITHOUT PREJUDICE

    
      FOR
        SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. OF EVIDENCE. 408

       

    

    and/or
      the Settlement must give notice to the other
      Party within thirty (30) days of the event giving rise to the right to void
      the
      MOU and/or Settlement. In the event that the Settlement is voided or terminated
      or fails to become effective for any reason, including pursuant to Paragraph
      11,
      the Parties shall be deemed to have reverted to their respective status in
      the
      Action as of the date immediately preceding the execution of this MOU, and
      the
      Parties shall proceed in all respects as if this MOU and any related orders
      had
      not been executed and/or entered.

     

    15.  Promptly
      upon execution of this MOU, counsel for the parties shall work cooperatively
      and
      in good faith to: (a) jointly request that the Court enter a stay of all
      proceedings in the Action, and, if such stay is granted, shall cease any and
      all
      work in connection with the Action except for work relating to the consummation
      of the Settlement; (b) in the event that the Court does not stay all proceedings
      in the Action, Plaintiffs and Defendants shall agree to extensions of time
      with
      respect to court filings and other submissions as may be appropriate and
      necessary; (c) negotiate and prepare expeditiously a binding Stipulation of
      Settlement embodying the essential terms contained herein and such other
      documentation as may be required in order to obtain the Court’s preliminary and
      final approval of the Settlement; (d) file the Stipulation of Settlement and
      other papers with the Court; and (e) cooperate and use best efforts to allow
      for
      joint hearings and other judicial efficiencies to facilitate the separate
      settlement of the In
      Re
      InfoSonics Derivative Litigation.
      Plaintiffs shall be responsible for moving for preliminary approval of the
      Settlement by the Court. 

    

    16.  This
      MOU
      shall be binding upon the Parties, and inure to the benefit of the successors,
      assigns, executors, administrators, heirs, insurers, and legal representatives
      of the Parties hereto, provided, however, that no assignment by any party shall
      operate to relieve such party of its obligations hereunder. This MOU shall
      also
      inure to the benefit of the parties to the In
      Re
      InfoSonics Derivative Litigation, only
      insofar as it relates specifically to that litigation.
      

    

    17.  This
      MOU may be executed in one or more counterparts.

     

    
      
        	
                Dated:August
                  8, 2008

              	
                Dated:August
                  6, 2008

              
	 	 
	
                HULETT
                  HARPER STEWART LLP

              	
                LATHAM
                  & WATKINS LLP

              
	
                BLAKE
                  MUIR HARPER

              	
                PETER
                  H. BENZIAN

              
	
                SARAH
                  P. WEBER

              	
                KIMBERLY
                  AROUH HICKS

              
	 	 
	
                /s/
                  Blake Muir Harper (SW)

              	
                
                  /s/
                    Kimberly Arouh Hicks

                

              
	
                BLAKE
                  MUIR HARPER

              	
                KIMBERLY
                  AROUH HICKS

              
	 	 
	
                550
                  West C Street, Suite 1600

              	
                600
                  West Broadway, Suite 1800

              
	
                San
                  Diego, CA 92101

              	
                San
                  Diego, CA 92101

              
	
                Telephone:  
                  (619) 338-1133

              	
                Telephone:  
                  (619) 236-1234

              
	
                Facsimile:     (619)
                  338-1139

              	
                Facsimile:     (619)
                  696-7419

              
	 	 
	
                Liaison
                  Counsel for Plaintiffs

              	
                Counsel
                  for Defendants InfoSonics Corporation

              
	 	
                Joseph
                  Ram, John J. Althoff, Jeffrey Klausner,

              
	 	
                Joseph
                  Murgo, and Abraham Rosler 

              

      

    

     

    
      
        SD
          642 367.2

        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    CONFIDENTIAL
      AND WITHOUT PREJUDICE

    
      FOR
        SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. OF EVIDENCE. 408

       

    

    KLAFTER
      OLSEN & LESSER LLP

    KURT
      B.
      OLSEN 

    

    

    
      /s/
        Kurt Olsen

    

    KURT
      B.
      OLSEN

    

    1250
      Connecticut Avenue NW, Suite 200

    Washington,
      DC 20036

    Telephone:  
      (202)
      261-3553

    Facsimile:    
      (202)
      261-3533

    

    KLAFTER
      OLSEN & LESSER LLP

    JEFFREY
      A. KLAFTER

    1311
      Mamaroneck Avenue, Suite 220

    White
      Plains, NY 10605

    Telephone:  
      (914)
      997-5656

    Facsimile:     (914)
      997-2444 

    

    

    BERGER
      & MONTAGUE PC

    TODD
      S.
      COLLINS 

    

    

    
      /s/
        Todd S. Collins

    

    TODD
      S.
      COLLINS

    

    1622
      Locust Street

    Philadelphia,
      PA 19103

    Telephone:  
      (215)
      875-3000

    Facsimile:     (215)
      875-5715

    

    Co-Lead
      Counsel for Plaintiffs

     

     

    
      
        SD
          642 367.2

        
        

      

      
        7

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