5.	Commitments and Contingencies

Litigation

On April 22, 2013, the Company filed a complaint in the Complex Commercial Litigation Division of the Superior Court of the State of Delaware against Buyer, Marlin Executive Fund III, L.P. and Marlin Equity III, L.P. (collectively with Buyer, the “Marlin Parties”) in connection with the Asset Sale. The complaint asserted claims for breach of contract against the Marlin Parties and for declaratory judgment against Buyer for certain amounts due to the Company under the Asset Sale Agreement and certain agreements related thereto.

The complaint sought (1) judgment in favor of the Company in the amount of $894,598, together with interest accrued, with respect to reimbursement for the Company’s operation of Sycamore Networks (Shanghai) Co. Ltd. (“Sycamore Shanghai”) for the benefit of Buyer during the period from the Asset Sale until the receipt of regulatory approval for the transfer of Sycamore Shanghai to Buyer, (2) declaratory judgment that cash in the amount of $345,932 remaining in the accounts of subsidiaries of the Company transferred to Buyer in the Asset Sale are excluded assets under terms of the Asset Sale Agreement and, accordingly, belong to the Company and (3) declaratory judgment that Buyer’s assertion that a $1.1 million decrease in the calculation of net working capital is necessary was untimely because it was made after the expiration of the forty-five day time period set forth in the Asset Sale Agreement.

In connection with such litigation, on May 28, 2013, the Company, Buyer and the Marlin Parties reached an agreement pursuant to which (1) the Company agreed to dismiss the pending litigation without prejudice, (2) Buyer paid certain undisputed amounts of $1.7 million owed to the Company and (3) the parties agreed to submit the remaining issues relating to amounts in dispute of $1,456,747 to arbitration for resolution by a neutral accountant. The matters in dispute have been resolved by the neutral accountant in favor of the Company in the amount of $1,107,736, which includes reimbursement for a portion of the fees and expenses paid to the neutral accountant. On March 5, 2014, the Company received the $1,107,736 payment. Pending the resolution by the neutral accountant the Delaware Litigation was dismissed without prejudice. Now that all matters set forth in the Delaware Litigation have been finally resolved, it will be dismissed with prejudice.

Guarantees

As of January 25, 2014, the Company’s guarantees requiring disclosure consist of its indemnification obligations as set forth in the Asset Sale Agreement, indemnification for other claims and indemnification for officers and directors.

In connection with the closing of the Asset Sale and as set forth in the Asset Sale Agreement, the Company agreed to indemnify Buyer and certain of its related parties for any damages arising out of any breach of any of our representations or warranties or failure to perform any of our covenants or agreements in the Asset Sale Agreement, our failure to fully or timely pay, satisfy or perform any retained liabilities or our failure to pay any taxes associated with the assets and subsidiaries being sold for periods prior to the closing date of the Asset Sale, including any capital gain or corporate income taxes resulting from the transfer of our China subsidiary. The Company’s aggregate indemnification liability for breaches of representations or warranties was limited to $2,812,500. On January 31, 2014, all surviving representations and warranties under the Asset Sale Agreement expired without Buyer asserting any indemnification claims against the Company. Accordingly, the Company has not recorded, nor does it expect to record, any liability in connection with those obligations.

Prior to the Asset Sale and the Dissolution, in the normal course of business, the Company also agreed to indemnify other parties, including customers, lessors and parties to other transactions with the Company with respect to certain matters. Historically, payments made by the Company under these agreements had not had a material impact on the Company’s operating results or financial position. Furthermore, most of these obligations were assumed by Buyer in connection with the Asset Sale. Accordingly, the Company has not recorded a liability for these agreements as of January 25, 2014 or July 31, 2013, as the Company believes the exposure for any related payments is not material.

We have entered into our standard form of indemnification agreement with each of our directors and executive officers, which is in addition to the indemnification provided for in our amended and restated certificate of incorporation, as amended. The Plan of Dissolution also provides that we continue to indemnify our directors and executive officers in accordance with such agreements and our amended and restated certificate of incorporation, as amended. The indemnification agreements, among other things, provide for indemnification of our directors and executive officers for a number of expenses, including attorneys’ fees and other related expenses, as well as certain judgments, fines, penalties and settlement amounts incurred by any such person in any action, suit or proceeding, including any action by or in the right of the Company, arising out of such person’s services as a director or executive officer of the Company or any other company or enterprise to which the person provided services at our request. The Company did not incur any expense under these arrangements during the first six months of fiscal year 2014 or during fiscal year 2013. Due to the Company’s inability to estimate liabilities in connection with these agreements, if and when they might be incurred, the Company has not recorded any liability for these agreements as of January 25, 2014 or July 31, 2013. During the Dissolution period, we intend to continue to indemnify each of our current and former directors and executive officers to the extent permitted under Delaware law, our amended and restated certificate of incorporation, as amended, and the indemnification agreements. The Company has also continued to maintain directors’ and officers’ coverage since the filing of the Certificate of Dissolution, and intends to maintain such coverage through the Dissolution period.