8-K out:
Item 1.01 Entry into a Material Definitive Agreement
On September 10, 2010, MRV Communications, Inc. (the “Company”) and its wholly-owned subsidiary, Source Photonics, Inc., entered into a Settlement and Cross License Agreement (the “Agreement”) with Finisar Corporation. Pursuant to the Agreement, the parties resolved the claims and counterclaims asserted in Civil Action No. CV 10-00032 WHA filed in the Northern District of California, and further resolved issues raised in an arbitration involving a patent license agreement previously entered into between Finisar and a company subsequently acquired by MRV in 2007.
Pursuant to the Settlement Agreement, Source Photonics shall pay a license fee to Finisar in the amount of $14.5 million for a fully paid-up license through December 31, 2015, to be paid by September 30, 2010. The Settlement Agreement also provides a license to Finisar of certain Source Photonics patents through December 31, 2015. The agreement also contains a covenant not to sue for certain products currently made or sold by Source Photonics through December 31, 2015. If Source Photonics is subject to a change of control, the license fee will cover sales up to an annual growth of 20% per year, and provides for a 5% royalty on products exceeding this amount which may be exercised at the sole discretion of Source Photonics or its assignee.
The Company estimates that the portion of the Settlement Agreement attributable to past damages is approximately $4.3 million. During the second quarter of 2010, the Company recorded an accrual related to this litigation of $1.4 million and disclosed a range of potential loss of $1.4 million to $8.1 million, based on the settlement discussions at the time. Accordingly, the Company expects to report an additional expense in the third quarter of 2010 of approximately $2.9 million in selling, general and administrative expenses related to this settlement.
Other terms and conditions of the Settlement Agreement apply. The foregoing description of the Settlement Agreement 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.
Item 8.01 Other Events
On September 10, 2010, the Board of Directors of the Company approved a repurchase of shares of Common Stock of the Company in an amount up to $10,000,000 under a stock repurchase program operated in accordance with the requirements of Rule 10b-18 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Upon review of the Company’s financial position, business needs and recent prices of shares of the Company’s Common Stock, the Board determined that it was in the best interests of the Company and its stockholders to authorize a repurchase of the Company’s Common Stock from time to time at prevailing market prices by means of open market purchases, privately negotiated transactions, or otherwise. This authorization expires on December 31, 2011.
