8-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

Current Report

Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 21, 2010

MRV COMMUNICATIONS, INC.

(Exact name of Registrant as specified in its charter)

DELAWARE
(State or other jurisdiction of
incorporation or organization) 001-11174
(Commission file number) 06-1340090
(I.R.S. employer
identification number)

20415 Nordhoff Street, Chatsworth, CA 91311

(Address of principal executive offices)(zip code)

Registrant’s telephone number, including area code: (818) 773-0900

Not Applicable

Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:

o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(e)           (1)MRV Communications, Inc. (the “Company”) previously announced in a Current Report on Form 8-K filed on December 21, 2009, that Guy Avidan, President of the Company’s Network Equipment Group, had decided to leave the Company.  By mutual agreement, Mr. Avidan stayed with the Company as a Vice President through February 11, 2010 to assist in the transition.  On May 26, 2010, Mr. Avidan and the Company executed a separation letter that set forth, among other things, the terms of his separation compensation and remaining obligations upon departure.  In addition to his funded manager’s insurance account in approximate amount U.S. $130,000, he shall receive four payments of approximate amount U.S. $17,500 each over a two-year period, during which term there are restrictive provisions, including but not limited to, confidentiality, non-competition and non-solicitation.  The foregoing description of the separation letter is not complete and is qualified in its entirety by the full text of such agreement, which is attached as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated by reference herein.

(2)           The Board of Directors determined that it was in the best interests of the Company to ensure the continued dedication, loyalty, and service of certain of its senior executives, including Chris King, the Company’s Chief Financial Officer, Jennifer Hankes Painter, the Company’s General Counsel, and Near Margalit, CEO of Source Photonics, Inc., the Company’s most significant subsidiary.  Therefore, at its meeting on May 21, 2010, the Board approved Executive Severance Agreements for Mr. King and Ms. Painter, and a similar Executive Retention Agreement for Mr. Margalit, which is entered into with Source Photonics.  The Executive Severance Agreements provide for a lump sum payment equal to one year base salary upon termination by the Company without cause or by the executive for good reason, and the Executive Retention Agreement provides for a lump sum payment equal to one year base salary and accelerated vesting of, and up to three-year extended expiration periods for, equity grants upon a change of control during a change of control period, as defined in the agreement.  If triggered, each of the agreements includes payment of a pro-rated bonus based on the number of months worked in the year of separation, and continuation of benefits for one year.  The agreements also include, among other things, confidentiality, non-compete and non-solicit provisions.  The foregoing description of the agreements is not complete and is qualified in its entirety by the full text of such agreements, which are attached as Exhibits 10.2 and 10.3 to this Current Report on Form 8-K and are incorporated by reference herein.

(3)            The Board of Directors approved annual stock option grants for employees and directors at its May 21, 2010 meeting.  The grant to directors addressed a change in an anticipated annual grant date from December 1 to June 1 or the next available grant date.  Therefore, upon the next available grant date, the directors will receive 1.5 times their annual stock option and restricted stock allocations previously approved in November 2009, which have not yet been granted to date.  The Board also approved annual stock option grants for certain management and key employees, which will be granted upon the next available grant date.  The stock options will vest over four years pro rata in annual installments from the grant date or upon a change of control, with an exercise price equal to the closing price of the Company’s Common Stock on the next available grant date in accordance with Company policy.  The Board approved stock option grants in the amounts set forth below for the following named executive officers:

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Name	Number of Options
Mary Jane Gruninger	20,000
Chris King	188,000
Near Margalit	173,000
Jennifer Hankes Painter	188,000

Item 5.07 of Matters to a Vote of Security Holders.

The Company held its Annual Meeting of Stockholders on May 21, 2010 (the “Annual Meeting”).  The matters voted upon and the results of the matters voted on by stockholders at the Annual Meeting are as follows:

a)Election of eight Directors to serve for the ensuing year and until their successors are elected and qualified:

Director Nominee	Votes For	Votes Withheld
Joan E. Herman	69,664,667	261,147
Noam Lotan	63,938,065	5,987,749
Charles M. Gillman	69,663,273	282,541
Michael E. Keane	69,647,555	278,259
Michael J. McConnell	69,655,215	270,599
Igal Shidlovsky	65,271,748	4,654,618
Kenneth Shubin Stein	69,658,493	267,321
Philippe Tartavull	69,629,284	596,530

b)Ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2010:  110,646,985 shares were voted in favor (41,015,344 of which were broker non-votes), 188,014 shares were voted against, and 106,159 shares were abstained from voting.

Item 8.01 Other Events.

Mary Jane Gruninger replaced Mr. Avidan in the role of President of the Company’s Network Equipment Group in December 2009, at which time her pay was raised to $180,000 per year.  She was also granted a special retention bonus of $3,000 per month for the duration of her term in such position to be paid out upon her departure, at which point she will receive salary continuation for seven months at a rate of $140,000 per year.

Item 9.01 Financial Statements and Exhibits

(d)     Exhibits

Exhibit 10.1	Separation Letter, dated as of May 25, 2010, by and between MRV Communications (Networks), Ltd. and Guy Avidan
Exhibit 10.2	Form of Executive Severance Agreement, by and between the Company and the Executive
Exhibit 10.3	Form of Executive Retention Agreement, by and between Source Photonics, Inc. and the Executive

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Company has duly caused this Report to be signed on its behalf by the undersigned, hereunto duly authorized.

Date: May 26, 2010
	MRV COMMUNICATIONS, INC.
	By:	/s/ Noam Lotan
		Noam Lotan
		Chief Executive Officer

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EX-10.1

Exhibit 10.1

To: Mr.  Guy Avidan	May 25, 2010
Dear Guy,

Re: Termination of Relationship

Further to our several conversations in December 2009 regarding your disagreement regarding your employment with MRV Communications (Networks), Ltd.(the “Employer”) and your services as Co - president of MRV Communications, Inc. (the “Company”) and President of its Network Equipment Group, I am writing to confirm the following:

1.The parties have jointly agreed that the effective date of the termination of your employment relationship with the Employer would be February 11, 2010 (the “Effective Date”).

2.[Intentionally omitted.]

3.As of the Effective Date, any entitlement or obligation you had or may have had under your secondment agreement dated July 2009 (the “Secondment Agreement”) and/or under any other understanding with the Employer and/or the Company, written or otherwise, ended, except for those entitlements and obligations set forth herein.

4.As consideration for termination of your employment with the Employer, including without limitation, performing the duties for the Company, you shall be entitled to the consideration as described below (the “Consideration”). Sections 4.1- 4.4 shall be paid to you as part of your last pay-slip. The Employer shall withhold or charge you with all taxes and other compulsory payments as required under law in respect of the all the benefits as described thereof:

4.1.Salary: Through the Effective Date you were entitled to and paid out in full a gross monthly salary at the rate of 50,000 NIS and 5,416.67 U.S. dollars;

4.2.Accumulated Vacation Days: A gross sum equal to 289,347 NIS for any balance of accumulated vacation days which has been paid out to you;

4.3.Convalesce Pay: A gross sum equal to 425 NIS for a pro-rata portion of the annual convalesce which has been paid out to you;

4.4.Business Expenses and reimbursement for foreign exchange rate: A gross amount of 48,838.86 USD incurred by you in connection with your business expenses during your employment including reimbursement for foreign exchange rate.

4.5.Severance Fund:  The Employer shall make available to you the amounts accrued under the Kopot Gemel Le’Kizba in the approximate amount of 555,288 NIS (as of February 18, 2010).

4.6.Keren Hishtalmut Fund: The Employer made available to you all the amounts accumulated on your behalf in the study fund (Keren Hishtalmut Fund).

4.7.Special Compensation: In addition to the above-mentioned, in consideration for your undertakings according to Sections 7 - 9 below, the Employer hereby undertakes to pay you a special compensation equal to a gross amount of 209,283 NIS. Such Special Compensation shall be paid to you by the Employer, subject to your fulfillment of your undertakings according to

Sections 7 - 9 below, in four equal installments during 24 months, 25% upon completion of each period of six months following the Effective Date.  The tax rate of withholding shall be as provided to the Employer by you within two weeks of the execution of this Agreement, or if no certificate of withholding is provided, the maximum rate will be used.  The payments shall be made through Goldfarb, Levy, Eran, Meiri, Tzafrir & Co., Law Offices, acting as trustee for the payment of such amounts.

5.Without derogating from any right you might be entitled to in connection with the payments and other consideration described in this letter agreement, when received by you in accordance with the terms hereof in addition to all payments and other consideration which you had already received by the Employer, are a complete payment of any and all consideration owed to you by Employer, Company or anyone on their behalf (hereinafter collectively referred to as the “MRV Group”) arising out of your employment or the termination of your employment with the Employer, or that otherwise might be owed to you by the MRV Group, including, without limitation, any and all claims for wages, social benefits, commissions, incentives, stock or stock options, bonus, severance pay, severance pay which accumulated as a managers’ insurance, release funds, notice period, reimbursement for foreign exchange rate, deferred compensation payments, expenses, contractual obligations and all other payments, compensation, benefits, and reimbursement of any kind. Notwithstanding the provisions of the previous sentence, the waiver and release made by you shall not include your rights to indemnification as provided for in the Certificate of Incorporation and By-laws of the Company and the Employer, any agreements of the Company or existing as a matter of law for your acts or omissions as an officer of the Company and Employer.

6.You are required to deliver to the Employer, prior to execution of this letter agreement the Employer’s laptop, car, cellular phones and all documents of the Employer, which were received or prepared by you in connection with your employment with the Employer and are in your possession or control at the Employer’s premises or elsewhere, without retaining any copies thereof other than copies of such documents.  You hereby undertake that during your employment period you did not make any use, including duplication, production, sale, transfer, imitation and distribution, of all or any of the Confidential Information (as defined below), without the prior written consent of the Employer.

7.Confidentiality.

7.1.You hereby undertake that as of the date hereof and upon termination of your employment, you maintained and shall maintain in complete confidence any matters that relate to MRV Group and/or its business, including regarding Confidential Information (as defined below) and the terms and conditions of your termination of your employment pursuant to this letter, and that you shall not harm its goodwill or reputation, and you agree to the provisions of the confidentiality, non-competition and intellectual property sections as specified in this letter.

7.2.Without derogating from the generality of the foregoing, you hereby agree that you did not and shall not, directly or indirectly, disclose or transfer to any person or entity, at any time, either during or subsequent to your employment period, any trade secrets or other confidential information, whether patentable or not, of the MRV Group, including but not limited to, any (i) processes, formulas, trade secrets, innovations, inventions, discoveries, improvements, research or development and test results, survey, specifications, data and know-how; (ii) marketing plans, business plans, strategies, forecasts, unpublished financial information, budgets, projections, product plans and pricing; (iii) personnel information, including organizational structure, salary, and qualifications of Executives; (iv) customer and supplier information, including identities, product sales and purchase history or forecasts and agreements; and (v) any other information which is not known to the public (collectively, “Confidential Information”), of which you were, are, or becomes informed or aware during the employment period, whether or not developed by you.

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7.3.In the event that you shall be in breach of any of your above obligations, you shall be liable to compensate MRV Group in respect of all direct damages and/or direct expenses incurred by MRV Group as a result of such breach, including trial costs and legal fees and statutory VAT, and such being without derogating from any other relief and/or remedy available to MRV Group by virtue of any law.

8.Unfair Competition and Solicitation.

8.1.In addition, you hereby undertake that during the period of employment with the Employer and for a period of 24 months from the Effective Date, you shall not, anywhere in the world, do business, as an employee, independent contractor, consultant or otherwise, and shall not directly or indirectly participate in or accept any position, proposal or job offer that may directly compete with or harm MRV Group based on all activities known to you as of the Effective Date that the Company engages in, or is about to be engaged in (the “Competitive Occupation”) or which is reasonably likely to involve or require the use of any of the MRV Group’s Major Assets (as defined below), without the written consent of the Company’s Chief Executive Officer.

8.2.In addition, you undertake not to approach and/or solicit and/or recruit any employee or former employee (as defined below) of the Employer and/or Company to leave the Employer and/or Company for a period of 24 months from the Effective Date, and the hiring by you or your future employer (if with your knowledge prior to a hiring decision) of an employee or former employee of the Employer or Company during such 24-month period shall be considered a material breach of this Agreement.  For purposes of this paragraph, a “former employee” is defined as a person who was employed by the Employer and/or Company at any time within the period from three months prior to the Effective Date through two years after the Effective Date.

8.3.The foregoing shall apply irrespective of whether the Competitive Occupation is carried out by you alone or in cooperation with others and shall apply to the participation of you in a Competitive Occupation, whether as a controlling shareholder or as an interested party.

9.Ownership of Inventions.

9.1.You hereby assign to the Employer, all of your rights, title and interest in and to all inventions, trade secrets, professional secrets, innovations, copyrightable works, Confidential Information, discoveries, processes, designs, works of authorship, and other intellectual property and all improvements on existing inventions, discoveries, processes, designs, works and other intellectual property made or discovered by you or any person subordinate to you during your employment with the Employer or in connection thereof, for no additional consideration provided that you shall not be required to bear any expenses as a result of such assignment. The Employer and its successors shall be entitled to protect any invention and/or patent and/or trade secret and/or professional secret and/or innovation as aforesaid by way of registration and/or in any other manner, in U.S.A, Israel or anywhere else.

9.2.You undertake that upon the demand of the Employer, you shall sign, execute and deliver to the Employer such documents as the Employer may request to confirm the assignment of your rights herein, and if requested by the Employer, shall assist the Employer, and shall execute any necessary documents, at the Employer’s expense, in applying for and prosecuting any patents, trademarks, trade secrets or copyright registration which may be available in respect thereof in accordance with the laws of the State of Israel or any other foreign country.

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10.General

10.1.Your obligations pursuant to Sections 7 - 9 above shall survive the termination of your employment with the Employer.

10.2.Your undertakings and obligations pursuant to Sections 7 - 9 derive from your status and your position in the Employer and in the Company, in view of your exposure to, and involvement in, the MRV Group’s sensitive and valuable proprietary information, property (including, Proprietary Rights) and technologies, as well as its goodwill and business plans (the “MRV Group’s Major Assets”), and along with all matters connected therewith, and the terms and conditions of this letter, including the Special Consideration (defined in Section 4.5 above), have been determined in part, inter alia, in consideration of these undertakings and obligations and constitute sufficient consideration for your said undertakings and obligations.

10.3.You acknowledge that the restricted period of time and geographical area specified in Section 8 are necessary to legitimately protect the MRV Group’s Major Assets, in view of your position and the nature of the business in which the Employer and the Company are engaged, your knowledge of the MRV Group’s business and the compensation you received during your employment at the Employer and as part of your resignation as described in this letter agreement, including the Special Consideration (defined in Section 4.5 above).  Notwithstanding anything contained herein to the contrary, if the period of time or the geographical area specified herein should be determined to be unreasonable in any judicial proceeding, then the period of time and area of the restriction shall be reduced so that this letter agreement may be enforced in such area and during such period of time as shall be determined to be reasonable by such judicial proceeding. You acknowledge that the compensation and benefits granted to you by the Employer under this letter agreement were determined, inter alia, in consideration for your obligations under Sections 7 - 9 above.

10.4.This letter agreement shall be governed by Israeli law (excluding its choice of law provisions), and the competent courts of Tel Aviv-Jaffa shall have the sole and exclusive jurisdiction over any dispute in connection herewith.

10.5.This letter agreement is and shall, be considered a settlement and notice of waiver in accordance with Section 29 of the Severance Pay Law of 1963.

10.6.A copy of a translation of this letter agreement in Hebrew is attached hereto as Exhibit B, however, if there are any discrepancies between this letter agreement and its translation, the terms of this letter agreement shall control.

We wish you success in your future plans.

Name:

Title:

MRV Communications (Networks), Ltd.

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I, Guy Avidan, hereby agree to the above letter agreement and obligate to fulfill my obligations according to it.

I hereby waive any and all rights I may have for the repayment of money from payments made by the Employer (or on its behalf) to me in respect to severance pay at any fund. I hereby confirm that the Employer is and shall be the sole owner of such severance pay made by the Employer (or on its behalf).

In addition, but without derogating from any right to the Compensation according to Section 4 above, I hereby accept the payments and Consideration described herein above as full, complete and unconditional payment and satisfaction of any and all obligations of the Employer and/or any of MRV Group arising out of all my employment period or termination of such period or that otherwise might be owed to me by the Employer and/or any of MRV Group including, without limitation, any and all claims for wages, social benefits, commissions, incentives, stock or stock options, bonus, severance pay, severance pay which accumulated at a managers’ insurance,  release funds, notice period, reimbursement for foreign exchange rate, deferred compensation payments, expenses, contractual obligations and all other payments, compensation, benefits, and reimbursement of any kind.

I hereby release and forever discharge MRV Group, its investors, stockholders, officers, affiliated organizations, or anyone on its behalf (hereinafter collectively referred to as the “Employers”), from any and all claims, rights, obligations, damages and liabilities of any nature whatsoever including severance pay, whether or not now known, suspected or claimed, which I ever had, now have, or may claim to have in connection with my employment with the Employer or termination thereof against the Employers.

I acknowledge that my obligations and undertakings mentioned above in Sections 7 - 9 shall survive the termination of my employment with the Employer. Such obligations and undertakings seem reasonable and necessary to legitimately protect the business of the Employer and/or any of MRV Group and the MRV Group’s Major Assets. The Special Consideration (defined in Section 4.5 above), have been determined in consideration of these undertakings and obligations and constitutes sufficient consideration for such undertakings and obligations.

I acknowledge that I have read and fully understand the terms of this letter agreement and fully understand the consequence thereof; that I have consulted and received advice of counsel regarding same and have had sufficient opportunity to do so; and that I have executed this letter agreement freely and voluntarily.

Date:
	Guy Avidan

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EX-10.2

Exhibit 10.2

EXECUTIVE SEVERANCE AGREEMENT

This EXECUTIVE SEVERANCE AGREEMENT (the “Agreement”) dated as of                       , 2010, by and between MRV Communications, Inc., a Delaware corporation (the “Company”), and                              (the “Executive”).

RECITALS

WHEREAS, the purpose of this Agreement is to ensure that the Company will receive the continued dedication, loyalty, and service of, and the availability of objective advice and counsel from, the Executive notwithstanding the possibility, threat or occurrence of a corporate transaction or other event that might eliminate the Executive’s employment with the Company; and

WHEREAS, the Board of Directors of the Company believes that it is in the best interests of the Company and its stockholders to provide the Executive with an incentive to continue his or her employment and to motivate the Executive to maximize the value of the Company for the benefit of its stockholders.

AGREEMENT

NOW THEREFORE, in consideration of the mutual covenants and agreements of the parties set forth in this Agreement, and other good and valuable consideration the receipt and sufficiency of which are acknowledged, the parties agree as follows:

1.Termination at the Company’s Convenience.  Subject to and conditioned upon the Executive’s execution and non-revocation of a general release and waiver, in form and substance reasonably satisfactory to the Company, of all claims against the Company and its affiliates, including without limitation claims relating to the Executive’s employment by the Company and the Separation from Service, discrimination claims, employment-related tort claims, contract claims and claims under this Agreement, the following payments and benefits will be provided to the Executive by the Company (in addition to any compensation or benefits to which the Executive may otherwise be entitled under any other agreement, plan or arrangement with the Company) in the event of a Separation from Service of the Executive requested by the Company.

1.1Lump Sum Payment.  Within 60 days after the Executive’s Separation from Service, subject to Section 3 below, the Company shall pay to the Executive a lump sum cash payment equal to the aggregate amount of 12 months of the Executive’s base salary as in effect immediately prior to the Separation from Service.

1.2Bonus.  The Company shall pay to the Executive a pro rata share of his or her cash incentive bonus for the year in which the Separation from Service occurs determined by multiplying (a) the Executive’s cash incentive bonus amount for such year calculated as if he or she was employed during the entire year, or if not yet determined for such year, the cash

incentive bonus for the prior year, in either case, times (b) a fraction, the numerator of which equals the number of days in the fiscal year through and including the date on which the Separation from Service occurs and the denominator of which equals 365.  Subject to Section 3 below, the pro rata bonus shall be paid in a lump sum within 60 days after the end of the applicable fiscal year in which the Separation from Service occurs.

1.3Benefits.  The Executive’s participation in the life, medical, dental, vision, AD&D, and long-term disability programs provided to the Executive prior to the date of Separation from Service shall be continued or equivalent benefits provided by the Company, at the Company’s expense, for a period of one year from the date of the Executive’s Separation from Service, subject to the Executive’s continued payment of his or her pro rata contributions of premiums or other contributions in existence immediately prior to the Separation of Service.  In addition, the Executive’s health coverage will be pursuant to COBRA and will reduce and count against the applicable COBRA period.   If for any reason the Company is unable to continue the benefits, as required by the preceding sentence, the Company shall pay to the Executive a lump sum cash payment equal to the company’s share of the premiums associated with the benefits which the Company is unable to provide, payable within 60 days after the date of the Separation from Service.  The Company shall also pay to the Executive all accrued compensation and benefits to which the Executive has a vested right at the time of Separation from Service in accordance with applicable law and the terms of the plans, documents or agreements governing those benefits.

2.Definitions.

2.1Separation from Service.  “Separation from Service” means the Executive’s “separation from service” (within the meaning of Section 409A (as defined below)) from the Company occurring as a result of the Executive’s termination of employment either: (a) by the Company without Cause (as defined below); or (b) by the Executive with Good Reason (as defined below).  Termination of the Executive’s employment under any other circumstances shall not constitute a Separation from Service for purposes of the Executive’s eligibility to receive payments and benefits under this Agreement.

2.2Cause.  “Cause” is determined by the Board of Directors and is defined as the Executive’s (a) willful failure to perform the material duties of the Executive’s position after receiving written notice of such failure and being given reasonable opportunity to cure such failure; (b) willful misconduct injurious to the Company; or (c) conviction of, or plea of nolo contendere to, a felony or any other crime involving moral turpitude.  No act or failure to act on the part of the Executive shall be considered “willful” unless it is done or omitted to be done in bad faith or without reasonable belief that the action or omission was in the best interest of the Company.

2.3Good Reason.“Good Reason” shall mean, without the Executive’s written consent: (a) a material diminution in the Executive’s duties or responsibilities; (b) the Company requires the Executive, without his or her consent, to be based at a location which is more than 50 miles from the Executive’s principal work location as of the date of the request; (c) the Executive’s base salary is reduced by greater than 15%; or (d) the Executive

experiences in any year a reduction in the target ratio of the Executive’s annual short-term incentive compensation, bonus or other such payments to base compensation greater than 15%, or a change in the method of calculation of the Executive’s annual short-term incentive compensation, bonus or other such payments that results in a reduction of the Executive’s target annual short-term incentive compensation, bonus or other such payments to base compensation greater than 15%, unless such reductions are due to an increase in base compensation.  Notwithstanding the above, any reduction in base salary, annual short-term incentive compensation, bonus or other such payments that affects substantially all U.S. employees, shall not constitute Good Reason.  In addition, the Executive agrees that a termination of employment shall not be deemed to be for Good Reason unless (i) the Executive gives the Company written notice describing the event or events which are the basis for such termination within 45 days after the event or events occur, (ii) such grounds for termination (if susceptible to correction) are not corrected by the Company within 45 days of the Company’s receipt of such notice, and (iii) the Executive terminates employment no later than 30 days after the expiration of the cure period described in clause (ii) of this paragraph.

3.Delay of Payment Pursuant to Section 409A.The parties agree that this Agreement is intended to comply with the requirements of Section 409A of the Code and the regulations promulgated thereunder (“Section 409A”) or an exemption from Section 409A.  For purposes of this Agreement, each amount to be paid or benefit to be provided hereunder shall be construed as a separate identified payment for purposes of Section 409A.  With respect to any reimbursement of expenses of, or any provision of in-kind benefits to, the Executive, as specified under this Agreement, such reimbursement of expenses or provision of in-kind benefits shall be subject to the following conditions: (i) the expenses eligible for reimbursement or the amount of in-kind benefits provided in one taxable year shall not affect the expenses eligible for reimbursement or the amount of in-kind benefits provided in any other taxable year, except for any medical reimbursement arrangement providing for the reimbursement of expenses referred to in Section 105(b) of the Code; (ii) the reimbursement of an eligible expense shall be made no later than the end of the year after the year in which such expense was incurred; and (iii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.  Notwithstanding anything to the contrary in this Agreement,  no compensation or benefits payable in connection with a Separation from Service shall be paid to the Executive during the six-month period following such Separation from Service to the extent that the Company reasonably determines that the Executive is a “specified employee” at the time of such Separation from Service and that paying such amounts at the time or times indicated in this Agreement would be a prohibited distribution under Internal Revenue Code Section 409A(a)(2)(b)(i).  If the payment of any such amounts is delayed as a result of the previous sentence, then on the first business day following the end of such six-month period (or such earlier date upon which such amount can be paid under Section 409A without being subject to such additional taxes, including as a result of the Executive’s death), the Company shall pay to the Executive a lump-sum amount equal to the cumulative amount that would have otherwise been payable to the Executive during such six-month period, without interest thereon.

4.Dispute Resolution. Either the Executive or the Company may elect to have any good faith dispute or controversy arising under or in connection with this Agreement settled by

arbitration by providing written notice of such election to the other party specifying the nature of the dispute to be arbitrated.  If arbitration is selected, such proceeding shall be submitted to confidential, final and binding arbitration before JAMS (formerly known as Judicial Arbitration and Meditation Services) sitting in a location agreed to by the Company and the Executive within 50 miles from the location of the Executive’s principal place of employment and conducted under the auspices and then-existing Employment Arbitration Rules of JAMS.  The decision of the arbitrator shall be final and binding on both parties, provided however, that the arbitrator shall not have the authority to alter or amend, or add to or delete from the provisions of this Agreement in any way, except as provided herein.  To the extent that the Executive prevails on the material issues in any litigation or arbitration seeking to enforce the provisions of this Agreement, the Executive is entitled to reimbursement by the Company of all expenses of such litigation or arbitration, including any reasonable legal fees and expenses and any costs and disbursements as such costs may be awarded by the court or arbitrator.

The Executive shall be entitled to reimbursement of the fees and expenses described under this Section 4 during the period commencing on the effective date of this Agreement and ending on the Executive’s death.  Any reimbursement of fees and expenses under this Agreement shall be made on or before the last day of the year following the year in which the expense is incurred.  The amount of fees and expenses eligible for reimbursement during a year shall not affect the expenses eligible for reimbursement in any other year except for any medical reimbursement arrangement providing for the reimbursement of expenses referred to in Section 105(b) of the Code.  The right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

5.Miscellaneous.

5.1Entire Agreement.  This Agreement supersedes any prior agreements or understandings, oral or written, between the Executive and the Company with respect to the subject matter hereof, and constitutes the entire agreement of the parties with respect thereto.

5.2Modification.  This Agreement shall not be varied, altered, modified, cancelled, changed or in any way amended except by mutual agreement of the parties in a written instrument executed by the parties or their legal representatives.

5.3Severability.  In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall be unaffected and shall remain in full force and effect.

5.4Tax Withholding.  The Company may withhold all Federal, state, city or other taxes required pursuant to any law or governmental regulation or ruling.

5.5Board Committee.   Any action taken or determination made by the Board of Directors under this Agreement may be taken or made by the Compensation Committee or any other Committee of the Board of Directors.

5.6No Offset or Mitigation.  All amounts payable by the Company hereunder shall be paid without notice or demand.  The Executive shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under this Agreement, and the obtaining of any other employment shall not result in a reduction of the Company’s obligations to make the payments, benefits and arrangements required to be made under this Agreement.

5.7Confidentiality.  The Executive understands that, in the course of employment with the Company, the Executive has been, and will be, given access to confidential information and trade secrets concerning the Company and its businesses and shall during his or her employment with the Company and thereafter retain in confidence and not directly or indirectly reveal, report, publish, disclose, or transfer such confidential information and trade secrets to any person or entity, or utilize any confidential information and trade secrets for any purpose, except in the good faith performance of the Executive’s duties on behalf of the Company.  Notwithstanding the foregoing, “confidential information” shall not apply to information that (i) was known to the public prior to its disclosure to the Executive; (ii) becomes generally known to the public subsequent to disclosure to the Executive through no wrongful act of the Executive or any representative of the Executive; or (iii) the Executive is required to disclose by applicable law, regulation or legal process (provided that the Executive provides the Company with prior notice of the contemplated disclosure and reasonably cooperates with the Company at its expense in seeking a protective order or other appropriate protection of such information).  The Executive agrees to turn over all copies of confidential information and trade secrets in his control to the Company upon request or upon termination of his or her employment with the Company.

5.8Solicitation.  The Executive agrees that, during his employment with the Company and for the period of one year beginning from the date of the Executive’s Separation from Service, Executive shall not, directly or indirectly or by action in concert with others, hire current or former employees, agents, independent contractors, or other service providers of the Company (which shall for this purpose only include individuals employed by the Company at any point during the 12 months preceding such hiring), disrupt, damage, impair or interfere with the Company’s relationships with its work staff, or induce or influence (or seek to induce or influence) any person who is engaged (as an employee, agent, independent contractor, or otherwise) by the Company to alter or terminate his or her employment or engagement, except in the good faith performance of the Executive’s duties on behalf of the Company; provided that the Executive may serve as a reference for such individuals and actions taken by any person or entity with which the Executive is associated if the Executive is not, directly or indirectly, personally involved in such solicitation and has not identified such individual for soliciting will not be considered a violation for purposes of this Section 5.8.  This shall not be construed to prohibit general solicitations of employment through the placing of advertisements.

The obligations contained in Section 5.7 and this Section 5.8 shall survive the termination of the Executive’s employment with the Company for any reason and shall be fully enforceable thereafter.

The Company may bring an action or proceeding to temporarily, preliminarily or permanently enforce any part of Section 5.7 and this Section 5.8.  The Executive agrees that (a) violating any part of Section 5.7 and this Section 5.8 would cause damage to the Company that cannot be measured or repaired and that the Company’s remedies at law for a breach or threatened breach of any of the provisions of Section 5.7 and this Section 5.8 would be inadequate, (b) the Company therefore is entitled to an injunction, restraining order or other equitable relief restraining any actual or threatened violation of Section 5.7 and this Section 5.8 in addition to any remedies at law, (c) no bond will need to be posted for the Company to receive such an injunction, order or other relief, and (d) no proof will be required that monetary damages for violations of Section 5.7 and this Section 5.8 would be difficult to calculate and that remedies at law would be inadequate.  In addition, in the event of a violation by the Executive of Section 5.7 and this Section 5.8, any severance payments or benefits being paid to the Executive pursuant to this Agreement or otherwise shall immediately cease and any severance previously paid to the Executive shall be immediately repaid to the Company.

5.9Non-Compete.  Eligibility for payments and benefits under Section 1 is contingent upon the Executive’s agreement and compliance with the Company’s requirement that the Executive not accept employment or an engagement as a consultant with a competitor for a period of one year beginning on the date of the Executive’s Separation from Service whereupon such position is comparable to the position the Executive held with the Company and where the Executive cannot reasonably satisfy the Company that the new employer is prepared to and/or does take adequate steps to preclude and to prevent inevitable disclosure of trade secrets, as prohibited under the Company’s policies with respect to the use and disclosure of confidential and proprietary information, as set forth in the most-recent confidentiality and inventions agreement that the Executive has executed with the Company and by this reference made a part hereof.  It is a specific condition of this Agreement that, for a period of one year following the date of the Executive’s Separation from Service, the Executive is obligated to immediately notify the Company as to the specifics of the new position that the Executive is planning to commence as an employee or consultant for any company which is a competitor of the Company.

5.10Successors.  This Agreement shall be binding upon and inure to the benefit of the Executive and his or her estate, and the Company and any successor of the Company or affiliate of a successor to the Company, but neither this Agreement nor any rights arising hereunder may be assigned or pledged by the Executive.  All references in this Agreement to the Company shall include its subsidiaries and affiliates and any successors, affiliates of successors or assigns of the Company. Any successor of the Company shall be deemed substituted for all purposes of the “Company” under the terms of this Agreement.  As used in this Agreement, the term “successor” shall mean any person, firm, corporation or business entity or affiliate thereof which at any time, whether by merger, purchase or otherwise, directly or indirectly acquires all or substantially all of the assets or the business of the Company, including any entity that shall be the surviving corporation in a merger with the Company or the acquiring person or affiliate of the acquiring person in an acquisition of the Company and/or of all or substantially all of its business or assets, regardless of whether such transaction constitutes a change of control.  In all cases, the Company or successor shall remain jointly and severally liable for all obligations hereunder.

5.11Governing Law.   To the extent not preempted by Federal law, the provisions of this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of California.

5.12Notice.   Any notices, requests, demands or other communications required by or provided for in this Agreement shall be sufficient if in writing and sent by either party by personal delivery, recognized overnight commercial courier, or registered or certified United States mail to the Executive at the last address  shown on the records of the Company or, in the case of the Company, at its principal office, or to such other address as either party may have furnished to the other in writing in accordance herewith, and shall be deemed to have been duly given when delivered or five days after deposit in the United States mail (except that notices of change of address shall be effective only upon receipt (or refusal of receipt)).

5.13Scope of Agreement.  Nothing in this Agreement shall be deemed to alter the “at-will” nature of the Executive’s employment or entitle the Executive to continued employment with the Company.

5.14Counterparts.  This Agreement may be executed (including by facsimile or scanned electronic mail transmission) in counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement as of the date first above written.

MRV COMMUNCATIONS, INC.	EXECUTIVE
By:	By:
Name:
Title:

EX-10.3

Exhibit 10.3

EXECUTIVE RETENTION AGREEMENT

This EXECUTIVE RETENTION AGREEMENT (the “Agreement”) dated as of May       , 2010, by and between Source Photonics, Inc., a Delaware corporation (the “Company”), and                              (the “Executive”).

RECITALS

WHEREAS, the purpose of this Agreement is to ensure that the Company will receive the continued dedication, loyalty, and service of, and the availability of objective advice and counsel from, the Executive notwithstanding the possibility, threat or occurrence of a corporate transaction or other event that might eliminate the Executive’s employment with the Company; and

WHEREAS, the Board of Directors of the Company believes that it is in the best interests of the Company and its stockholders to provide the Executive with an incentive to continue his or her employment and to motivate the Executive to maximize the value of the Company upon a Change of Control (as defined below) for the benefit of its stockholders.

AGREEMENT

NOW THEREFORE, in consideration of the mutual covenants and agreements of the parties set forth in this Agreement, and other good and valuable consideration the receipt and sufficiency of which are acknowledged, the parties agree as follows:

1.Termination after a Change of Control. Subject to and conditioned upon the Executive’s execution and non-revocation of a general release and waiver, in form and substance reasonably satisfactory to the Company, of all claims against the Company and its affiliates, including without limitation claims relating to the Executive’s employment by the Company and the Separation from Service, discrimination claims, employment-related tort claims, contract claims and claims under this Agreement, the following payments and benefits will be provided to the Executive by the Company (in addition to any compensation or benefits to which the Executive may otherwise be entitled under any other agreement, plan or arrangement with the Company) in the event of a Separation from Service (as defined below) of the Executive during a Change of Control Period (as defined below) of the Company.

1.1Lump Sum Payment.  Within 60 days after the Executive’s Separation from Service, subject to Section 3 below, the Company shall pay to the Executive a lump sum cash payment equal to the aggregate amount of 12 months of the Executive’s base salary as in effect immediately prior to the Separation from Service or, if higher, immediately prior to the Change of Control (in either case, the “Base Salary”).

1.2Bonus.  The Company shall pay to the Executive a pro rata share of his or her cash incentive bonus for the year in which the Separation from Service occurs determined by multiplying (a) the Executive’s cash incentive bonus amount for such year calculated as if he

or she was employed during the entire year, or if not yet determined for such year, the cash incentive bonus for the prior year, in either case, times (b) a fraction, the numerator of which equals the number of days in the fiscal year through and including the date on which the Separation from Service occurs and the denominator of which equals 365.  Subject to Section 3 below, the pro rata bonus shall be paid in a lump sum within 60 days after the end of the Company’s fiscal year in which the Separation from Service occurs.

1.3Benefits.  The Executive’s participation in the life, medical, dental, vision, AD&D, and long-term disability programs provided to the Executive prior to the date of Separation from Service shall be continued or equivalent benefits provided by the Company, at the Company’s expense, for a period of one year from the date of the Executive’s Separation from Service, subject to the Executive’s pro rata contributions of premiums or other contributions in existence immediately prior to the Separation of Service.  In addition, the Executive’s health coverage will be pursuant to COBRA and will reduce and count against the applicable COBRA period.  If for any reason the Company is unable to continue the benefits, as required by the preceding sentence, the Company shall pay to the Executive a lump sum cash payment equal to the premiums associated with the benefits which the Company is unable to provide, payable within 60 days after the date of the Separation from Service.  The Company shall also pay to the Executive all accrued compensation and benefits to which the Executive has a vested right at the time of Separation from Service in accordance with applicable law and the terms of the plans, documents or agreements governing those benefits.

1.4Accelerated Vesting.  The Executive shall vest in full in any unvested grants of stock options, restricted stock, restricted stock units or other equity awards previously received upon the occurrence of a Change of Control, and notwithstanding provisions in the equity grant agreements regarding expiration upon termination of employment, the grants shall not expire until the sooner of a) three years from the date of the Change of Control and b) the expiration date of the equity grant.  All such vested awards shall be administered and, as applicable, paid in accordance with the terms of the governing plan or program; provided, however, that if any such equity award is subject to Section 409A (as defined below), the provisions of this Section 1.4 will not result in the immediate payment of such award if such payment would result in the imposition of tax, interest and/or penalties upon the Executive under Section 409A, in which case such payment shall be made at the earliest time such payment can be made without resulting in the imposition of tax, interest and/or penalties upon the Executive under Section 409A.

2.Definitions.

2.1Separation from Service.  “Separation from Service” means the Executive’s “separation from service” (within the meaning of Section 409A) from the Company occurring as a result of the Executive’s termination of employment either: (a) by the Company without Cause (as defined below); or (b) by the Executive with Good Reason (as defined below). .Termination of the Executive’s employment under any other circumstances shall not constitute a Separation from Service for purposes of the Executive’s eligibility to receive payments and benefits under this Agreement.

2.2Cause.  “Cause” is determined by the Board of Directors and is defined as the Executive’s (a) willful failure to perform the material duties of the Executive’s position after receiving written notice of such failure and being given reasonable opportunity to cure such failure; (b) willful misconduct injurious to the Company; or (c) conviction of, or plea of nolo contendere to, a felony or any other crime involving moral turpitude.  No act or failure to act on the part of the Executive shall be considered “willful” unless it is done or omitted to be done in bad faith or without reasonable belief that the action or omission was in the best interest of the Company.

2.3Good Reason.“Good Reason” shall mean, without the Executive’s written consent: (a)  a material diminution in the Executive’s duties or responsibilities; (b) the Company requires the Executive, without his or her consent, to be based at a location which is more than 50 miles from the Executive’s principal work location as of the date of the request; (c) the Executive’s Base Salary is materially reduced greater than 15%; or (d) the Executive experiences in any year a reduction in the target ratio of the Executive’s annual short-term incentive compensation, bonus or other such payments to base compensation greater than 15%, or a change in the method of calculation of the Executive’s annual short-term incentive compensation, bonus or other such payments that results in a reduction of the Executive’s target annual short-term incentive compensation, bonus or other such payments to base compensation greater than 15%, unless such reductions are due to an increase in base compensation.  Notwithstanding the above, any reduction in Base Salary, annual short-term incentive compensation, bonus or other such payments that affects substantially all U.S. employees, shall not constitute Good Reason.  In addition, the Executive agrees that a termination of employment shall not be deemed to be for Good Reason unless (i) the Executive gives the Company written notice describing the event or events which are the basis for such termination within 45 days after the event or events occur, (ii) such grounds for termination (if susceptible to correction) are not corrected by the Company within 45 days of the Company’s receipt of such notice, and (iii) the Executive terminates employment no later than 30 days after the expiration of the cure period described in clause (ii) of this paragraph.

2.4Change of Control.  A “Change of Control” shall take place on the date of the earlier to occur of any of the following events:

(a)The acquisition by any person, other than the Company or the Company’s parent or any of the parent’s subsidiaries, of beneficial ownership of 50% or more of the combined voting power of the Company’s then outstanding voting securities;

(b)The purchase of a majority of the shares of Common Stock of the Company under a tender offer or exchange offer, other than an offer by the Company or the Company’s parent or any of the parent’s subsidiaries; or

(c)Completion of a merger, liquidation or dissolution of the Company, or the sale of all or substantially all of the assets of the Company, in each case that does not result in the Company’s parent retaining direct or indirect control of the Company.

2.5Change of Control Period.  A “Change of Control Period” shall mean the period of time commencing with the date on which the Change of Control occurs, or if earlier, the date upon which the Company publicly announces the entrance into an agreement with a third party to complete a proposed transaction which would result in a Change of Control, and ending on the first to occur of: (a) six months after the effective date of the Change of Control; or (b) the date on which the proposed Change of Control is no longer discussed or proposed to occur.

3.Delay of Payment Pursuant to Section 409A.The parties agree that this Agreement is intended to comply with the requirements of Section 409A of the Code and the regulations promulgated thereunder (“Section 409A”) or an exemption from Section 409A.  For purposes of this Agreement, each amount to be paid or benefit to be provided hereunder shall be construed as a separate identified payment for purposes of Section 409A.  With respect to any reimbursement of expenses of, or any provision of in-kind benefits to, the Executive, as specified under this Agreement, such reimbursement of expenses or provision of in-kind benefits shall be subject to the following conditions: (i) the expenses eligible for reimbursement or the amount of in-kind benefits provided in one taxable year shall not affect the expenses eligible for reimbursement or the amount of in-kind benefits provided in any other taxable year, except for any medical reimbursement arrangement providing for the reimbursement of expenses referred to in Section 105(b) of the Code; (ii) the reimbursement of an eligible expense shall be made no later than the end of the year after the year in which such expense was incurred; and (iii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.  Notwithstanding anything to the contrary in this Agreement,  no compensation or benefits payable in connection with a Separation from Service shall be paid to the Executive during the six-month period following such Separation from Service to the extent that the Company reasonably determines that the Executive is a “specified employee” at the time of such Separation from Service and that paying such amounts at the time or times indicated in this Agreement would be a prohibited distribution under Internal Revenue Code Section 409A(a)(2)(b)(i).  If the payment of any such amounts is delayed as a result of the previous sentence, then on the first business day following the end of such six-month period (or such earlier date upon which such amount can be paid under Section 409A without being subject to such additional taxes, including as a result of the Executive’s death), the Company shall pay to the Executive a lump-sum amount equal to the cumulative amount that would have otherwise been payable to the Executive during such six-month period, without interest thereon.

4.Dispute Resolution. Either the Executive or the Company may elect to have any good faith dispute or controversy arising under or in connection with this Agreement settled by arbitration by providing written notice of such election to the other party specifying the nature of the dispute to be arbitrated.  If arbitration is selected, such proceeding shall be submitted to confidential, final and binding arbitration before JAMS (formerly known as Judicial Arbitration and Meditation Services) sitting in a location agreed to by the Company and the Executive within 50 miles from the location of the Executive’s principal place of employment and conducted under the auspices and then-existing Employment Arbitration Rules of JAMS.  The decision of the arbitrator shall be final and binding on both parties, provided however, that the arbitrator shall not have the authority to alter or amend, or add to or delete from the

provisions of this Agreement in any way, except as provided herein.  Judgment may be entered on the award of or decision made by the arbitrators in any court having competent jurisdiction.  To the extent that the Executive prevails on the material issues in any litigation or arbitration seeking to enforce the provisions of this Agreement, the Executive is entitled to reimbursement by the Company of all expenses of such litigation or arbitration, including any reasonable legal fees and expenses and any costs and disbursements as such costs may be awarded by the court or arbitrator.

The Executive shall be entitled to reimbursement of the fees and expenses described under this Section 4 during the period commencing on the effective date of this Agreement and ending on the Executive’s death.  Any reimbursement of fees and expenses under this Agreement shall be made on or before the last day of the year following the year in which the expense is incurred.  The amount of fees and expenses eligible for reimbursement during a year shall not affect the expenses eligible for reimbursement in any other year except for any medical reimbursement arrangement providing for the reimbursement of expenses referred to in Section 105(b) of the Code.  The right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

5.Miscellaneous.

5.1Termination of Agreement.  This Agreement shall terminate and no longer be in force upon the occurrence of an initial public offering of the Company.

5.2Entire Agreement.  This Agreement supersedes any prior agreements or understandings, oral or written, between the Executive and the Company with respect to the subject matter hereof, and constitutes the entire agreement of the parties with respect thereto.

5.3Modification.  This Agreement shall not be varied, altered, modified, cancelled, changed or in any way amended except by mutual agreement of the parties in a written instrument executed by the parties or their legal representatives.

5.4Severability.  In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall be unaffected and shall remain in full force and effect.

5.5Tax Withholding.  The Company may withhold all Federal, state, city or other taxes required pursuant to any law or governmental regulation or ruling.

5.6Board Committee.   Any action taken or determination made by the Board of Directors under this Agreement may be taken or made by the Compensation Committee or any other committee of the Board of Directors.

5.7No Offset or Mitigation.  All amounts payable by the Company hereunder shall be paid without notice or demand.  The Executive shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under this Agreement, and the obtaining of any other employment shall not result in a reduction of the Company’s

obligations to make the payments, benefits and arrangements required to be made under this Agreement.

5.8Confidentiality.  The Executive understands that, in the course of employment with the Company, the Executive has been, and will be, given access to confidential information and trade secrets concerning the Company and its businesses and shall during his or her employment with the Company and thereafter retain in confidence and not directly or indirectly reveal, report, publish, disclose, or transfer such confidential information and trade secrets to any person or entity, or utilize any confidential information and trade secrets for any purpose, except in the good faith performance of the Executive’s duties on behalf of the Company.  Notwithstanding the foregoing, “confidential information” shall not apply to information that (i) was known to the public prior to its disclosure to the Executive; (ii) becomes generally known to the public subsequent to disclosure to the Executive through no wrongful act of the Executive or any representative of the Executive; or (iii) the Executive is required to disclose by applicable law, regulation or legal process (provided that the Executive provides the Company with prior notice of the contemplated disclosure and reasonably cooperates with the Company at its expense in seeking a protective order or other appropriate protection of such information).  The Executive agrees to turn over all copies of confidential information and trade secrets in his control to the Company upon request or upon termination of his or her employment with the Company.

5.9Solicitation.  The Executive agrees that, during his employment with the Company and for the period of one year beginning from the date of the Executive’s Separation from Service, Executive shall not, directly or indirectly or by action in concert with others, hire current or former employees, agents, independent contractors, or other service providers of the Company (which shall for this purpose only include individuals employed by the Company at any point during the 12 months preceding such hiring), disrupt, damage, impair or interfere with the Company’s relationships with its work staff, or induce or influence (or seek to induce or influence) any person who is engaged (as an employee, agent, independent contractor, or otherwise) by the Company to alter or terminate his or her employment or engagement, except in the good faith performance of the Executive’s duties on behalf of the Company; provided that the Executive may serve as a reference for such individuals and actions taken by any person or entity with which the Executive is associated if the Executive is not, directly or indirectly, personally involved in such solicitation and has not identified such individual for soliciting will not be considered a violation for purposes of this Section 5.9.  This shall not be construed to prohibit general solicitations of employment through the placing of advertisements.

The obligations contained in Section 5.8 and this Section 5.9 shall survive the termination of the Executive’s employment with the Company for any reason and shall be fully enforceable thereafter.

The Company may bring an action or proceeding to temporarily, preliminarily or permanently enforce any part of Section 5.8 and this Section 5.9.  The Executive agrees that (a) violating any part of Section 5.8 and this Section 5.9 would cause damage to the Company that cannot be measured or repaired and that the Company’s remedies at law for a breach or

threatened breach of any of the provisions of Section 5.8 and this Section 5.9 would be inadequate, (b) the Company therefore is entitled to an injunction, restraining order or other equitable relief restraining any actual or threatened violation of Section 5.8 and this Section 5.9 in addition to any remedies at law, (c) no bond will need to be posted for the Company to receive such an injunction, order or other relief, and (d) no proof will be required that monetary damages for violations of Section 5.9 and this Section 5.9 would be difficult to calculate and that remedies at law would be inadequate.  In addition, in the event of a violation by the Executive of Section 5.8 and this Section 5.9, any severance payments or benefits being paid to the Executive pursuant to this Agreement or otherwise shall immediately cease and any severance previously paid to the Executive shall be immediately repaid to the Company.

5.10Non-Compete.  Eligibility for payments and benefits under Section 1 is contingent upon the Executive’s agreement and compliance with the Company’s requirement that the Executive not accept employment or an engagement as a consultant with a competitor for a period of one year beginning on the date of the Executive’s Separation from Service whereupon such position is comparable to the position the Executive held with the Company and where the Executive cannot reasonably satisfy the Company that the new employer is prepared to and/or does take adequate steps to preclude and to prevent inevitable disclosure of trade secrets, as prohibited under the Company’s policies with respect to the use and disclosure of confidential and proprietary information, as set forth in the most-recent confidentiality and inventions agreement that the Executive has executed with the Company and by this reference made a part hereof.  It is a specific condition of this Agreement that, for a period of one year following the date of the Executive’s Separation from Service, the Executive is obligated to immediately notify the Company as to the specifics of the new position that the Executive is planning to commence as an employee or consultant for any company which is a competitor of the Company.

5.11Successors.  This Agreement shall be binding upon and inure to the benefit of the Executive and his or her estate, and the Company and any successor of the Company or affiliate of a successor to the Company, but neither this Agreement nor any rights arising hereunder may be assigned or pledged by the Executive.  All references in this Agreement to the Company shall include its subsidiaries and affiliates and any successors, affiliates of successors or assigns of the Company. Any successor of the Company shall be deemed substituted for all purposes of the “Company” under the terms of this Agreement.  As used in this Agreement, the term “successor” shall mean any person, firm, corporation or business entity or affiliate thereof which at any time, whether by merger, purchase or otherwise, directly or indirectly acquires all or substantially all of the assets or the business of the Company, including any entity that shall be the surviving corporation in a merger with the Company or the acquiring person or affiliate of the acquiring person in an acquisition of the Company and/or of all or substantially all of its business or assets, regardless of whether such transaction constitutes a change of control.

5.12Governing Law.   To the extent not preempted by Federal law, the provisions of this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of California.

5.13Notice.   Any notices, requests, demands or other communications required by or provided for in this Agreement shall be sufficient if in writing and sent by either party by personal delivery, recognized overnight commercial courier, or registered or certified United States mail, to the Executive at the last address shown on the records of the Company or, in the case of the Company, at its principal office, or to such other address as either party may have furnished to the other in writing in accordance herewith, and shall be deemed to have been duly given when delivered or five days after deposit in the United States mail (except that notices of change of address shall be effective only upon receipt (or refusal of receipt)).

5.14Scope of Agreement.  Nothing in this Agreement shall be deemed to alter the “at-will” nature of the Executive’s employment or entitle the Executive to continued employment with the Company.

5.15Counterparts.  This Agreement may be executed (including by facsimile or scanned electronic mail transmission) in counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement as of the date first above written.

SOURCE PHOTONICS, INC.	EXECUTIVE
By:	By:
Name:
Title: