<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 1, 1999
REGISTRATION NO. 333-________________________
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
GRAPHON CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-3899021
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
150 HARRISON AVENUE
CAMPBELL, CA 95008
(Address of principal executive offices) (Zip Code)
-------------------
1998 STOCK OPTION/ STOCK ISSUANCE PLAN
(Full title of the Plan)
-------------------
WALTER KELLER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
GRAPHON CORPORATION
150 HARRISON AVENUE
CAMPBELL, CA 95008
(408) 370-4080
(Name, address including zip code, and telephone number, including
area code, of agent for service)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================================
Proposed Maximum Proposed Maximum
Title of Securities Amount to be Offering Price Aggregate Amount of
to be Registered Registered(1) per Share Offering Price Registration Fee
-------------------- ---------- --------- -------------- ----------------
<S> <C> <C> <C> <C>
1998 Stock Option/Stock Issuance Plan
Common Stock, $0.0001 par value 2,230,400 shares $7.375 (2) $16,449,200(2) $ 4,573
===================================================================================================================================
</TABLE>
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the 1998 Stock Option/Stock
Issuance Plan by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the
receipt of consideration which results in an increase in the number of
the outstanding shares of Common Stock of GraphOn Corporation.
(2) Calculated solely for purposes of this offering under Rule 457(c) of
the Securities Act of 1933, as amended, on the basis of the average of
the high and low selling prices per share of Common Stock of GraphOn
Corporation on September 30, 1999, as reported by the Nasdaq SmallCap
Market.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
GraphOn Corporation (the "Registrant") hereby incorporates by reference
into this Registration Statement the following documents previously filed with
the Securities and Exchange Commission (the "Commission"):
(a) The Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1999, filed with the Commission on
August 13, 1999;
(b) The Registrant's Current Report on Form 8-K filed with the
Commission on July 27, 1999;
(c) The Registrant's Registration Statement No. 333-76333 on Form
S-4 filed with the Commission on April 15, 1999, as amended on
Forms S-4/A filed with the Commission on June 4, 1999 and June
15, 1999, respectively;
(d) The Registrant's prospectus filed with the Commission pursuant
to Rule 424(b)(3) promulgated under the Securities Act of
1933, as amended (the "1933 Act"), in connection with the
Registrant's Registration Statement No. 333-76333, in which
there is set forth the audited financial statements for the
Registrant's fiscal year ended December 31, 1998; and
(d) The Registrant's Registration Statement No. 000-21683 on Form
8-A12G filed with the Commission on November 6, 1996, pursuant
to Section 12 of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), in which there is described the
terms, rights and provisions applicable to the Registrant's
outstanding Common Stock.
All reports and definitive proxy or information statements filed
pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of
this Registration Statement and prior to the filing of a post-effective
amendment which indicates that all securities offered hereby have been sold or
which deregisters all securities then remaining unsold shall be deemed to be
incorporated by reference into this Registration Statement and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Registration Statement
to the extent that a statement contained herein or in any subsequently filed
document which also is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Registration Statement.
ITEM 4. DESCRIPTION OF SECURITIES
Not Applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not Applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Subsection (a) of Section 145 of the General Corporation Law of the
State of Delaware empowers a corporation to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to
II-1
<PAGE>
be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by right of the corporation to
procure a judgment in its favor by reason of the fact that such person acted in
any of the capacities set forth above, against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification may be made in respect to any claim
issue or matter as to which such person shall have been adjudged to be liable to
the corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
Section 145 further provides that to the extent a director or officer
of a corporation has been successful on the merits or otherwise in the defense
of any such action, suit or proceeding referred to in subsections (a) and (b) of
Section 145 or in the defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith; that the indemnification provided for
by Section 145 shall not be deemed exclusive of any other rights which the
indemnified party may be entitled; that indemnification provided by Section 145
shall, unless otherwise provided when authorized or ratified, continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of such person's heirs, executors and administrators; and
empowers the corporation to purchase and maintain insurance on behalf of a
director or officer of the corporation against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liabilities under Section 145.
Section 102(b)(7) of the General Corporation Law or the State of
Delaware provides that a certificate of incorporation may contain a provision
eliminating or limiting the personal liability of a director to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that such provision shall not eliminate or limit the
liability of the director (i) for any breach of the director's duty of loyalty
to the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived an improper personal benefit.
Article VIII of the Registrant's Charter provides that, to the fullest
extent permitted by the Delaware General Corporation Law as the same exists or
as it may hereafter be amended, no director of the Registrant shall be
personally liable to the Registrant or its stockholders for monetary damages for
breach of fiduciary duty as a director.
Article VII, Section 6 of the Registrant's Bylaws further provides that
the Registrant shall, to the maximum extent and in the manner permitted by the
General Corporation Law of Delaware, indemnify each of its directors and
officers against expenses (including attorneys' fees), judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding, arising by reason of the fact that such person is or was an
agent of the Registrant.
The Registrant has entered into indemnification agreements with each of
its directors and officers.
The Registrant maintains $10,000,000 of officers' and directors'
liability insurance.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not Applicable.
II-2
<PAGE>
ITEM 8. EXHIBITS
Number Exhibit
------ -------
4 Instruments Defining the Rights of Stockholders. Reference
is made to Registrant's Registration Statement No. 000-21683
on Form 8-A12G, together with the amendments and exhibits
thereto, which are incorporated herein by reference pursuant
to Items 3(d) and 3(e).
5.2 Opinion and Consent of Brobeck, Phleger & Harrison LLP
23.1 Consent of BDO Seidman, LLP.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.2
24 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 1998 Stock Option/Stock Issuance Plan
99.2 Form of Notice of Grant of Stock Option
99.3 Form of Stock Option Agreement
99.4 Form of Addendum to Stock Option Agreement
99.5 Form of Stock Purchase Agreement
99.6 Form of Addendum to Stock Purchase Agreement
99.7 Form of Stock Issuance Agreement
99.8 Form of Addendum to Stock Issuance Agreement
ITEM 9. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes: (1) to file,
during any period in which offers or sales are being made, a post-effective
amendment to this Registration Statement (i) to include any prospectus required
by Section 10(a)(3) of the 1933 Act, (ii) to reflect in the prospectus any facts
or events arising after the effective date of this Registration Statement (or
the most recent post-effective amendment hereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in this
Registration Statement (except that any increase or decrease in the volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement) and (iii) to include any
material information with respect to the plan of distribution not previously
disclosed in this Registration Statement or any material change to such
information in this Registration Statement; provided, however, that clauses
(1)(i) and (1)(ii) shall not apply if the information required to be included in
a post-effective amendment by those paragraphs is contained in periodic reports
filed with or furnished to the Commission by the Registrant pursuant to Section
13 or Section 15(d) of the 1934 Act that are incorporated by reference into this
Registration Statement; (2) that for the purpose of determining any liability
under the 1933 Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof; and (3) to remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the Registrant's 1998 Stock Option/Stock Issuance
Plan.
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the 1933 Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
1934 Act that is incorporated by reference in this Registration Statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
(c) Insofar as indemnification for liabilities arising under
the 1933 Act may be permitted to directors, officers, or controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the SEC, such
indemnification is against public policy as expressed in the 1933 Act, and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer, or controlling person of
the Registrant in the successful defense of any action, suit, or proceeding)
is asserted by such director, officer, or controlling person in connection
with the securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act
and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8, and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Campbell, State of California on this 30th day
of September 1999.
GRAPHON CORPORATION
By: /s/ Walter Keller
-------------------------------------
Walter Keller
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned officers and directors of GraphOn Corporation, a
Delaware corporation, do hereby constitute and appoint Walter Keller and Edmund
Becmer and each of them, the lawful attorneys-in-fact and agents with full power
and authority to do any and all acts and things and to execute any and all
instruments which said attorneys and agents, and any one of them, determine may
be necessary or advisable or required to enable said corporation to comply with
the Securities Act of 1933, as amended, and any rules or regulations or
requirements of the Securities and Exchange Commission in connection with this
Registration Statement. Without limiting the generality of the foregoing power
and authority, the powers granted include the power and authority to sign the
names of the undersigned officers and directors in the capacities indicated
below to this Registration Statement, to any and all amendments, both
pre-effective and post-effective, and supplements to this Registration
Statement, and to any and all instruments or documents filed as part of or in
conjunction with this Registration Statement or amendments or supplements
thereof, and each of the undersigned hereby ratifies and confirms that all said
attorneys and agents, or any one of them, shall do or cause to be done by virtue
hereof. This Power of Attorney may be signed in several counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Walter Keller President, Chief Executive Officer (Principal September 30, 1999
- --------------------------------------- Executive Officer) and Chairman of the Board
Walter Keller
/s/ Edmund Becmer Chief Financial Officer (Principal Financial and September 30, 1999
- --------------------------------------- Accounting Officer) and Secretary
Edmund Becmer
- ---------------------------------------
Thomas A. Bevilacqua Director September 30, 1999
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
- ---------------------------------------
Robert Dilworth Director
/s/ Eric Kim
- ---------------------------------------
Eric Kim Director September 30, 1999
/s/ August P. Klein
- ---------------------------------------
August P. Klein Director September 30, 1999
/s/ Michael O'Reilly
- ---------------------------------------
Michael O'Reilly Director September 30, 1999
/s/ Lawrence Burstein
- ---------------------------------------
Lawrence Burstein Director September 30, 1999
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
Number Exhibit
- ------ -------
4 Instruments Defining the Rights of Stockholders. Reference is made
to Registrant's Registration Statement No. 000-21683 on Form 8-A12G,
together with the amendments and exhibits thereto, which are
incorporated herein by reference pursuant to Items 3(d) and 3(e).
5.2 Opinion and Consent of Brobeck, Phleger & Harrison LLP
23.1 Consent of BDO Seidman, LLP.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit
5.2
24 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 1998 Stock Option/Stock Issuance Plan
99.2 Form of Notice of Grant of Stock Option
99.3 Form of Stock Option Agreement
99.4 Form of Addendum to Stock Option Agreement
99.5 Form of Stock Purchase Agreement
99.6 Form of Addendum to Stock Purchase Agreement
99.7 Form of Stock Issuance Agreement
99.8 Form of Addendum to Stock Issuance Agreement
<PAGE>
EXHIBIT 5.2
OPINION AND CONSENT OF BROBECK, PHLEGER & HARRISON LLP
October 1, 1999
GraphOn Corporation
150 Harrison Avenue
Campbell, CA 95008
Re: GraphOn Corporation Registration Statement on Form S-8 for
2,230,400 Shares of Common Stock and Related Stock Options
Ladies and Gentlemen:
We have acted as counsel to GraphOn Corporation, a Delaware
corporation (the "Company") in connection with the registration on Form S-8 (the
"Registration Statement") under the Securities Act of 1933, as amended, of
2,230,400 shares of common stock (the "Shares") and related stock options for
issuance under the Company's 1998 Stock Option/Stock Issuance Plan, as amended
to date (the "Plan").
This opinion is being furnished in accordance with the requirements of
Item 8 of Form S-8 and Item 601(b)(5)(i) of Regulation S-K.
We have reviewed the Company's charter documents and the corporate
proceedings taken by the Company in connection with the establishment of the
Plan. Based on such review, we are of the opinion that, if, as and when the
Shares have been issued and sold (and the consideration therefor received)
pursuant to (a) the provisions of option agreements duly authorized under the
Plan and in accordance with the Registration Statement, or (b) duly authorized
direct stock issuances in accordance with the Plan and in accordance with the
Registration Statement, such Shares will be duly authorized, legally issued,
fully paid and nonassessable.
We consent to the filing of this opinion letter as Exhibit 5.2 to the
Registration Statement. In giving this consent, we do not thereby admit that we
are within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission promulgated thereunder, or Item 509 of
Regulation S-K.
This opinion letter is rendered as of the date first written above and
we disclaim any obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinion expressed herein. Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company, the
Plan or the Shares.
Very truly yours,
BROBECK, PHLEGER & HARRISON LLP
<PAGE>
EXHIBIT 23.1
[IBDO LETTERHEAD]
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Graphon Corporation
Campbell, California
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration on Form S-8 Statement of our report
dated February 25, 1999, relating to the financial statements of Graphon
Corporation appearing in the company's prospectus filed with the Commission
pursuant to Rule 424(b)(3) in connection with the Company's Registration
Statement No. 333-76333.
/s/ BDO Seidman, LLP
BDO Seidman, LLP
San Jose, California
September 30, 1999
<PAGE>
EXHIBIT 99.1
GRAPHON CORPORATION
1998 STOCK OPTION/STOCK ISSUANCE PLAN
-------------------------------------
ARTICLE ONE
GENERAL PROVISIONS
------------------
I. PURPOSE OF THE PLAN
This 1998 Stock Option/Stock Issuance Plan is intended to promote the
interests of GraphOn Corporation, a California corporation, by providing
eligible persons in the Corporation's employ or service with the opportunity to
acquire a proprietary interest, or otherwise increase their proprietary
interest, in the Corporation as an incentive for them to continue in such employ
or service.
Capitalized terms herein shall have the meanings assigned to such terms
in the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into two (2) separate equity programs:
(i) the Option Grant Program under which
eligible persons may, at the discretion of the Plan Administrator,
be granted options to purchase shares of Common Stock, and
(ii) the Stock Issuance Program under which
eligible persons may, at the discretion of the Plan Administrator,
be issued shares of Common Stock directly, either through the
immediate purchase of such shares or as a bonus for services
rendered the Corporation (or any Parent or Subsidiary).
B. The provisions of Articles One and Four shall apply to both equity
programs under the Plan and shall accordingly govern the interests of all
persons under the Plan.
III. ADMINISTRATION OF THE PLAN
A. The Plan shall be administered by the Board. However, any or all
administrative functions otherwise exercisable by the Board may be delegated to
the Committee. Members of the Committee shall serve for such period of time as
the Board may determine and shall be subject to removal by the Board at any
time. The Board may also at any time terminate the functions of the Committee
and reassume all powers and authority previously delegated to the Committee.
B. The Plan Administrator shall have full power and authority
(subject to the provisions of the Plan) to establish such rules and regulations
as it may deem appropriate for proper administration of the Plan and to make
such determinations under, and issue such interpretations of, the Plan and any
outstanding options or stock issuances thereunder as it may deem necessary or
advisable. Decisions of the Plan Administrator shall be final and binding on
all parties who have an interest in the Plan or any option or stock issuance
thereunder.
IV. ELIGIBILITY
A. The persons eligible to participate in the Plan are as follows:
(i) Employees,
<PAGE>
(ii) non-employee members of the Board or
the non-employee members of the board of directors of any Parent
or Subsidiary, and
(iii) consultants and other independent
advisors who provide services to the Corporation (or any Parent or
Subsidiary).
B. The Plan Administrator shall have full authority to determine, (i)
with respect to the grants under the Option Grant Program, which eligible
persons are to receive the option grants, the time or times when those grants
are to be made, the number of shares to be covered by each such grant, the
status of the granted option as either an Incentive Option or a Non-Statutory
Option, the time or times when each option is to become exercisable, the vesting
schedule (if any) applicable to the option shares and the maximum term for which
the option is to remain outstanding, and (ii) with respect to stock issuances
under the Stock Issuance Program, which eligible persons are to receive such
stock issuances, the time or times when those issuances are to be made, the
number of shares to be issued to each Participant, the vesting schedule (if any)
applicable to the issued shares and the consideration to be paid by the
Participant for such shares.
C. The Plan Administrator shall have the absolute discretion either
to grant options in accordance with the Option Grant Program or to effect stock
issuances in accordance with the Stock Issuance Program.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock. The maximum number of shares of Common
Stock which may be issued over the term of the Plan shall not exceed 1,300,000
shares.
B. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) the options
expire or terminate for any reason prior to exercise in full or (ii) the options
are cancelled in accordance with the cancellation-regrant provisions of Article
Two. Unvested shares issued under the Plan and subsequently repurchased by the
Corporation, at the option exercise or direct issue price paid per share,
pursuant to the Corporation's repurchase rights under the Plan shall be added
back to the number of shares of Common Stock reserved for issuance under the
Plan and shall accordingly be available for reissuance through one or more
subsequent option grants or direct stock issuances under the Plan.
C. Should any change be made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and/or class of securities issuable
under the Plan and (ii) the number and/or class of securities and the exercise
price per share in effect under each outstanding option in order to prevent the
dilution or enlargement of benefits thereunder. The adjustments determined by
the Plan Administrator shall be final, binding and conclusive. In no event
shall any such adjustments be made in connection with the conversion of one or
more outstanding shares of the Corporation's preferred stock into shares of
Common Stock.
<PAGE>
ARTICLE TWO
OPTION GRANT PROGRAM
--------------------
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; PROVIDED, however, that each such document
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the
Plan Administrator in accordance with the following provisions:
(i) The exercise price per share shall not
be less than eighty-five percent (85%) of the Fair Market Value
per share of Common Stock on the option grant date.
(ii) If the person to whom the option is
granted is a 10% Shareholder, then the exercise price per share
shall not be less than one hundred ten percent (110%) of the Fair
Market Value per share of Common Stock on the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I of
Article Four and the documents evidencing the option, be payable in cash or
check made payable to the Corporation. Should the Common Stock be registered
under Section 12 of the 1934 Act at the time the option is exercised, then the
exercise price may also be paid as follows:
(i) in shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair
Market Value on the Exercise Date, or
(ii) to the extent the option is exercised
for vested shares, through a special sale and remittance procedure
pursuant to which the Optionee shall concurrently provide
irrevocable instructions (A) to a Corporation-designated brokerage
firm to effect the immediate sale of the purchased shares and
remit to the Corporation, out of the sale proceeds available on
the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all
applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such
exercise and (B) to the Corporation to deliver the certificates
for the purchased shares directly to such brokerage firm in order
to complete the sale.
Except to the extent such sale and remittance
procedure is utilized, payment of the exercise price for the purchased shares
must be made on the Exercise Date.
B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable at
such time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option grant. However, the Plan Administrator may not impose an exercise
schedule upon the option grant or any shares of Common Stock subject to that
option which is more restrictive than twenty percent (20%) of the option shares
becoming exercisable per year, with the initial installment to become
exercisable not later than one (1) year after the option grant date. Such
limitation shall not be applicable to any option grants made to individuals who
are officers of the Corporation, non-employee Board members or independent
consultants. In addition, no option shall have a term in excess of ten (10)
years measured from the option grant date.
C. EFFECT OF TERMINATION OF SERVICE.
<PAGE>
1. The following provisions shall govern the exercise
of any options held by the Optionee at the time of cessation of Service or
death:
(i) Should the Optionee cease to remain in
Service for any reason other than death, Disability or Misconduct,
then the Optionee shall have a period of three (3) months
following the date of such cessation of Service during which to
exercise each outstanding option held by such Optionee.
(ii) Should Optionee's Service terminate by
reason of Disability, then the Optionee shall have a period of
twelve (12) months following the date of such cessation of Service
during which to exercise each outstanding option held by such
Optionee.
(iii) If the Optionee dies while holding an
outstanding option, then the personal representative of his or her
estate or the person or persons to whom the option is transferred
pursuant to the Optionee's will or the laws of inheritance shall
have a twelve (12)-month period following the date of the
Optionee's death to exercise such option.
(iv) Under no circumstances, however, shall
any such option be exercisable after the specified expiration of
the option term.
(v) During the applicable post-Service
exercise period, the option may not be exercised in the aggregate
for more than the number of vested shares for which the option is
exercisable on the date of the Optionee's cessation of Service.
Upon the expiration of the applicable exercise period or (if
earlier) upon the expiration of the option term, the option shall
terminate and cease to be outstanding for any vested shares for
which the option has not been exercised. However, the option
shall, immediately upon the Optionee's cessation of Service,
terminate and cease to be outstanding with respect to any and all
option shares for which the option is not otherwise at the time
exercisable or in which the Optionee is not otherwise at that time
vested.
(vi) Should Optionee's Service be
terminated for Misconduct, then all outstanding options held by
the Optionee shall terminate immediately and cease to remain
outstanding.
2. The Plan Administrator shall have the discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:
(i) extend the period of time for which
the option is to remain exercisable following Optionee's cessation
of Service or death from the limited period otherwise in effect
for that option to such greater period of time as the Plan
Administrator shall deem appropriate, but in no event beyond the
expiration of the option term, and/or
(ii) permit the option to be exercised,
during the applicable post-Service exercise period, not only with
respect to the number of vested shares of Common Stock for which
such option is exercisable at the time of the Optionee's cessation
of Service but also with respect to one or more additional
installments in which the Optionee would have vested under the
option had the Optionee continued in Service.
D. SHAREHOLDER RIGHTS. The holder of an option shall have no
shareholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become the
holder of record of the purchased shares.
E. UNVESTED SHARES. The Plan Administrator shall have the discretion
to grant options which are exercisable for unvested shares of Common Stock.
Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such
repurchase right shall be exercisable (including the period and
<PAGE>
procedure for exercise and the appropriate vesting schedule for the purchased
shares) shall be established by the Plan Administrator and set forth in the
document evidencing such repurchase right. The Plan Administrator may not
impose a vesting schedule upon the option grant or any shares of Common Stock
subject to that option which is more restrictive than twenty percent (20%)
per year vesting, with the initial vesting to occur not later than one (1)
year after the option grant date. However, such limitation shall not be
applicable to any option grants made to individuals who are officers of the
Corporation, non-employee Board members or independent consultants.
F. FIRST REFUSAL RIGHTS. Until such time as the Common Stock is
first registered under Section 12 of the 1934 Act, the Corporation shall have
the right of first refusal with respect to any proposed disposition by the
Optionee (or any successor in interest) of any shares of Common Stock issued
under the Plan. Such right of first refusal shall be exercisable in accordance
with the terms established by the Plan Administrator and set forth in the
document evidencing such right.
G. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, the option shall be exercisable only by the Optionee and shall not be
assignable or transferable other than by will or by the laws of descent and
distribution following the Optionee's death.
H. WITHHOLDING. The Corporation's obligation to deliver shares of
Common Stock upon the exercise of any options granted under the Plan shall be
subject to the satisfaction of all applicable Federal, state and local income
and employment tax withholding requirements.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive Options.
Except as modified by the provisions of this Section II, all the provisions of
the Plan shall be applicable to Incentive Options. Options which are
specifically designated as Non-Statutory Options shall NOT be subject to the
terms of this Section II.
A. ELIGIBILITY. Incentive Options may only be granted to Employees.
B. EXERCISE PRICE. The exercise price per share shall not be less
than one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date.
C. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares
of Common Stock (determined as of the respective date or dates of grant) for
which one or more options granted to any Employee under the Plan (or any other
option plan of the Corporation or any Parent or Subsidiary) may for the first
time become exercisable as Incentive Options during any one (1) calendar year
shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two (2) or more such options which become exercisable
for the first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
D. 10% SHAREHOLDER. If any Employee to whom an Incentive Option is
granted is a 10% Shareholder, then the option term shall not exceed five (5)
years measured from the option grant date.
III. CORPORATE TRANSACTION
A. The shares subject to each option outstanding under the Plan at
the time of a Corporate Transaction shall automatically vest in full so that
each such option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable for all of the shares of Common Stock at
the time subject to that option and may be exercised for any or all of those
shares as fully-vested shares of Common Stock. However, the shares subject to
an outstanding option shall NOT vest on such an accelerated basis if and to the
extent: (i) such option is assumed by the successor corporation (or parent
thereof) in the Corporate Transaction and the Corporation's repurchase rights
with respect to the unvested option shares are concurrently assigned to such
successor corporation (or parent thereof) or (ii) such option is to be replaced
with a cash incentive program of the successor corporation which preserves the
spread existing on the unvested option shares at the time of the Corporate
Transaction and provides for subsequent payout in accordance with the same
vesting schedule applicable to those
<PAGE>
unvested option shares or (iii) the acceleration of such option is subject to
other limitations imposed by the Plan Administrator at the time of the option
grant.
B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate Transaction,
except to the extent: (i) those repurchase rights are assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations imposed by the
Plan Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction, had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to (i) the number and class of
securities available for issuance under the Plan following the consummation of
such Corporate Transaction and (ii) the exercise price payable per share under
each outstanding option, PROVIDED the aggregate exercise price payable for such
securities shall remain the same.
E. The Plan Administrator shall have the discretion, exercisable
either at the time the option is granted or at any time while the option remains
outstanding, to provide for the automatic acceleration (in whole or in part) of
one or more outstanding options (and the immediate termination of the
Corporation's repurchase rights with respect to the shares subject to those
options) upon the occurrence of a Corporate Transaction, whether or not those
options are to be assumed in the Corporate Transaction.
F. The Plan Administrator shall also have full power and authority,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to structure such option so that the shares subject
to that option will automatically vest on an accelerated basis should the
Optionee's Service terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Corporate Transaction in which the option is assumed and the
repurchase rights applicable to those shares do not otherwise terminate. Any
option so accelerated shall remain exercisable for the fully-vested option
shares until the EARLIER of (i) the expiration of the option term or (ii) the
expiration of the one (1)-year period measured from the effective date of the
Involuntary Termination. In addition, the Plan Administrator may provide that
one or more of the Corporation's outstanding repurchase rights with respect to
shares held by the Optionee at the time of such Involuntary Termination shall
immediately terminate on an accelerated basis, and the shares subject to those
terminated rights shall accordingly vest at that time.
G. The portion of any Incentive Option accelerated in connection with
a Corporate Transaction shall remain exercisable as an Incentive Option only to
the extent the applicable One Hundred Thousand Dollar limitation is not
exceeded. To the extent such dollar limitation is exceeded, the accelerated
portion of such option shall be exercisable as a Non-Statutory Option under the
Federal tax laws.
H. The grant of options under the Plan shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Plan and to grant in
substitution therefor new options covering the same or different number of
shares of Common Stock but with an exercise price per share based on the Fair
Market Value per share of Common Stock on the new option grant date.
<PAGE>
ARTICLE THREE
STOCK ISSUANCE PROGRAM
----------------------
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below.
A. PURCHASE PRICE.
1. The purchase price per share shall be fixed by the Plan
Administrator but shall not be less than eighty-five percent (85%) of the Fair
Market Value per share of Common Stock on the issue date. However, the purchase
price per share of Common Stock issued to a 10% Shareholder shall not be less
than one hundred and ten percent (110%) of such Fair Market Value.
2. Subject to the provisions of Section I of Article Four,
shares of Common Stock may be issued under the Stock Issuance Program for any of
the following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:
(i) cash or check made payable to the
Corporation, or
(ii) past services rendered to the Corporation (or
any Parent or Subsidiary).
B. VESTING PROVISIONS.
1. Shares of Common Stock issued under the Stock
Issuance Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon attainment of specified performance
objectives. However, the Plan Administrator may not impose a vesting schedule
upon any stock issuance effected under the Stock Issuance Program which is more
restrictive than twenty percent (20%) per year vesting, with initial vesting to
occur not later than one (1) year after the issuance date. Such limitation
shall not apply to any Common Stock issuances made to the officers of the
Corporation, non-employee Board members or independent consultants.
2. Any new, substituted or additional securities or
other property (including money paid other than as a regular cash dividend)
which the Participant may have the right to receive with respect to the
Participant's unvested shares of Common Stock by reason of any stock dividend,
stock split, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration shall be issued subject to (i) the same
vesting requirements applicable to the Participant's unvested shares of Common
Stock and (ii) such escrow arrangements as the Plan Administrator shall deem
appropriate.
3. The Participant shall have full shareholder rights
with respect to any shares of Common Stock issued to the Participant under the
Stock Issuance Program, whether or not the Participant's interest in those
shares is vested. Accordingly, the Participant shall have the right to vote
such shares and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service
while holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further shareholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the
<PAGE>
Corporation shall repay to the Participant the cash consideration paid for
the surrendered shares and shall cancel the unpaid principal balance of any
outstanding purchase-money note of the Participant attributable to such
surrendered shares.
5. The Plan Administrator may in its discretion
waive the surrender and cancellation of one or more unvested shares of Common
Stock (or other assets attributable thereto) which would otherwise occur upon
the non-completion of the vesting schedule applicable to such shares. Such
waiver shall result in the immediate vesting of the Participant's interest in
the shares of Common Stock as to which the waiver applies. Such waiver may
be effected at any time, whether before or after the Participant's cessation
of Service or the attainment or non-attainment of the applicable performance
objectives.
C. FIRST REFUSAL RIGHTS. Until such time as the Common Stock is
first registered under Section 12 of the 1934 Act, the Corporation shall have
the right of first refusal with respect to any proposed disposition by the
Participant (or any successor in interest) of any shares of Common Stock issued
under the Stock Issuance Program. Such right of first refusal shall be
exercisable in accordance with the terms established by the Plan Administrator
and set forth in the document evidencing such right.
II. CORPORATE TRANSACTION
A. Upon the occurrence of a Corporate Transaction, all outstanding
repurchase rights under the Stock Issuance Program shall terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, except to the extent: (i) those repurchase
rights are assigned to the successor corporation (or parent thereof) in
connection with such Corporate Transaction or (ii) such accelerated vesting is
precluded by other limitations imposed by the Plan Administrator at the time the
repurchase right is issued.
B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase rights with respect to those shares remain
outstanding, to provide that those rights shall automatically terminate on an
accelerated basis, and the shares of Common Stock subject to those terminated
rights shall immediately vest, in the event the Participant's Service should
subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Corporate Transaction in which those repurchase rights are assigned
to the successor corporation (or parent thereof).
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held in
escrow by the Corporation until the Participant's interest in such shares vests
or may be issued directly to the Participant with restrictive legends on the
certificates evidencing those unvested shares.
<PAGE>
ARTICLE FOUR
MISCELLANEOUS
-------------
I. FINANCING
The Plan Administrator may permit any Optionee or Participant to pay the
option exercise price or the purchase price for shares issued to such person
under the Plan by delivering a full-recourse, interest-bearing promissory note
payable in one or more installments and secured by the purchased shares.
However, any promissory note delivered by a consultant must be secured by
collateral in addition to the purchased shares of Common Stock. In no event
shall the maximum credit available to the Optionee or Participant exceed the SUM
of (i) the aggregate option exercise price or purchase price payable for the
purchased shares plus (ii) any Federal, state and local income and employment
tax liability incurred by the Optionee or the Participant in connection with the
option exercise or share purchase.
II. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan shall become effective when adopted by the Board, but no
option granted under the Plan may be exercised, and no shares shall be issued
under the Plan, until the Plan is approved by the Corporation's shareholders.
If such shareholder approval is not obtained within twelve (12) months after the
date of the Board's adoption of the Plan, then all options previously granted
under the Plan shall terminate and cease to be outstanding, and no further
options shall be granted and no shares shall be issued under the Plan. Subject
to such limitation, the Plan Administrator may grant options and issue shares
under the Plan at any time after the effective date of the Plan and before the
date fixed herein for termination of the Plan.
B. The Plan shall terminate upon the EARLIEST of (i) the expiration
of the ten (10)-year period measured from the date the Plan is adopted by the
Board, (ii) the date on which all shares available for issuance under the Plan
shall have been issued as vested shares or (iii) the termination of all
outstanding options in connection with a Corporate Transaction. All options and
unvested stock issuances outstanding at that time under the Plan shall continue
to have full force and effect in accordance with the provisions of the documents
evidencing such options or issuances.
III. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
options or unvested stock issuances at the time outstanding under the Plan
unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require shareholder approval
pursuant to applicable laws and regulations.
B. Options may be granted under the Option Grant Program and shares
may be issued under the Stock Issuance Program which are in each instance in
excess of the number of shares of Common Stock then available for issuance under
the Plan, provided any excess shares actually issued under those programs shall
be held in escrow until there is obtained shareholder approval of an amendment
sufficiently increasing the number of shares of Common Stock available for
issuance under the Plan. If such shareholder approval is not obtained within
twelve (12) months after the date the first such excess issuances are made, then
(i) any unexercised options granted on the basis of such excess shares shall
terminate and cease to be outstanding and (ii) the Corporation shall promptly
refund to the Optionees and the Participants the exercise or purchase price paid
for any excess shares issued under the Plan and held in escrow, together with
interest (at the applicable Short Term Federal Rate) for the period the shares
were held in escrow, and such shares shall thereupon be automatically cancelled
and cease to be outstanding.
IV. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares of
Common Stock under the Plan shall be used for general corporate purposes.
<PAGE>
V. WITHHOLDING
The Corporation's obligation to deliver shares of Common Stock upon the
exercise of any options or upon the issuance or vesting of any shares issued
under the Plan shall be subject to the satisfaction of all applicable Federal,
state and local income and employment tax withholding requirements.
VI. REGULATORY APPROVALS
The implementation of the Plan, the granting of any options under the
Plan and the issuance of any shares of Common Stock (i) upon the exercise of any
option or (ii) under the Stock Issuance Program shall be subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the options granted under it and
the shares of Common Stock issued pursuant to it.
VII. NO EMPLOYMENT OR SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant any
right to continue in Service for any period of specific duration or interfere
with or otherwise restrict in any way the rights of the Corporation (or any
Parent or Subsidiary employing or retaining such person) or of the Optionee or
the Participant, which rights are hereby expressly reserved by each, to
terminate such person's Service at any time for any reason, with or without
cause.
VIII. FINANCIAL REPORTS
The Corporation shall deliver a balance sheet and an income statement at
least annually to each individual holding an outstanding option under the Plan,
unless such individual is a key Employee whose duties in connection with the
Corporation (or any Parent or Subsidiary) assure such individual access to
equivalent information.
<PAGE>
APPENDIX
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
B. CODE shall mean the Internal Revenue Code of 1986, as amended.
C. COMMITTEE shall mean a committee of two (2) or more Board members
appointed by the Board to exercise one or more administrative functions under
the Plan.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following
shareholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined
voting power of the Corporation's outstanding securities are
transferred to a person or persons different from the persons
holding those securities immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
F. CORPORATION shall mean GraphOn Corporation, a California
corporation, and any successor corporation to all or substantially all of the
assets or voting stock of GraphOn Corporation which shall by appropriate action
adopt the Plan.
G. DISABILITY shall mean the inability of the Optionee or the
Participant to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment and shall be determined by
the Plan Administrator on the basis of such medical evidence as the Plan
Administrator deems warranted under the circumstances.
H. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
I. EXERCISE DATE shall mean the date on which the Corporation shall
have received written notice of the option exercise.
J. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the
Nasdaq National Market, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in
question, as such price is reported by the National Association of
Securities Dealers on the Nasdaq National Market or any successor
system. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such
quotation exists.
(ii) If the Common Stock is at the time listed on any
Stock Exchange, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question on
the Stock Exchange determined by the Plan Administrator to be the
primary market for the Common Stock, as such price is officially
quoted in the composite tape of transactions on such exchange. If
there is no closing selling price for the Common Stock on the date
in question, then
<PAGE>
the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
(iii) If the Common Stock is at the time neither listed on
any Stock Exchange nor traded on the Nasdaq National Market, then
the Fair Market Value shall be determined by the Plan
Administrator after taking into account such factors as the Plan
Administrator shall deem appropriate.
K. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
L. INVOLUNTARY TERMINATION shall mean the termination of the Service
of any individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge
by the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following
(A) a change in his or her position with the Corporation which
materially reduces his or her duties and responsibilities or the
level of management to which he or she reports, (B) a reduction in
his or her level of compensation (including base salary, fringe
benefits and target bonuses under any corporate-performance based
bonus or incentive programs) by more than fifteen percent (15%) or
(C) a relocation of such individual's place of employment by more
than fifty (50) miles, provided and only if such change, reduction
or relocation is effected without the individual's consent.
M. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by such person adversely affecting the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of any Optionee, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).
N. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.
O. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
P. OPTION GRANT PROGRAM shall mean the option grant program in effect
under the Plan.
Q. OPTIONEE shall mean any person to whom an option is granted under
the Plan.
R. PARENT shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
S. PARTICIPANT shall mean any person who is issued shares of Common
Stock under the Stock Issuance Program.
T. PLAN shall mean the Corporation's 1998 Stock Option/Stock Issuance
Plan, as set forth in this document.
U. PLAN ADMINISTRATOR shall mean either the Board or the Committee
acting in its capacity as administrator of the Plan.
<PAGE>
V. SERVICE shall mean the provision of services to the Corporation
(or any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the
documents evidencing the option grant.
W. STOCK EXCHANGE shall mean either the American Stock Exchange or
the New York Stock Exchange.
X. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into by
the Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.
Y. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in
effect under the Plan.
Z. SUBSIDIARY shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
AA. 10% SHAREHOLDER shall mean the owner of stock (as determined under
Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
<PAGE>
EXHIBIT 99.2
GRAPHON CORPORATION
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of GraphOn Corporation (the "Corporation"):
OPTIONEE:
GRANT DATE:
VESTING COMMENCEMENT DATE:
EXERCISE PRICE: per share
NUMBER OF OPTION SHARES: shares of Common Stock
EXPIRATION DATE:
TYPE OF OPTION:
DATE EXERCISABLE:
VESTING SCHEDULE: The Option Shares shall initially be unvested
and subject to repurchase by the Corporation at the Exercise Price
paid per share. Optionee shall acquire a vested interest in, and
the Corporation's repurchase right shall accordingly lapse with
respect to, (i) two and twenty-two hundredths percent (2.22%) of
the Option Shares upon the Vesting Commencement Date, and (ii) the
balance of Option Shares in a series of forty-four (44) successive
equal monthly installments upon the completion of each month of
Service over the forty-four (44)-month period measured from the
three month anniversary of the Vesting Commencement Date. In no
event shall any additional Option Shares vest after Optionee's
cessation of Service.
Optionee understands and agrees that the Option is granted subject to and
in accordance with the terms of the GraphOn Corporation 1998 Stock Option/Stock
Issuance Plan (the "Plan"). Optionee further agrees to be bound by the terms of
the Plan and the terms of the Option as set forth in the Stock Option Agreement
attached hereto as Exhibit A.
Optionee understands that any Option Shares purchased under the Option
will be subject to the terms set forth in the Stock Purchase Agreement attached
hereto as Exhibit B. Optionee hereby acknowledges receipt of a copy of the Plan
in the form attached hereto as Exhibit C.
REPURCHASE RIGHTS. OPTIONEE HEREBY AGREES THAT ALL OPTION SHARES
ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO CERTAIN REPURCHASE
RIGHTS AND RIGHTS OF FIRST REFUSAL EXERCISABLE BY THE CORPORATION AND ITS
ASSIGNS. THE TERMS OF SUCH RIGHTS ARE SPECIFIED IN THE ATTACHED STOCK PURCHASE
AGREEMENT.
NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Notice or in the
attached Stock Option Agreement or Plan shall confer upon Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining Optionee) or of Optionee, which rights are
hereby expressly reserved by each, to terminate Optionee's Service at any time
for any reason, with or without cause.
DEFINITIONS. All capitalized terms in this Notice shall have the meaning
assigned to them in this Notice or in the attached Stock Option Agreement.
1
<PAGE>
DATED:___________
GRAPHON CORPORATION
By:_____________________________________
Title:__________________________________
________________________________________
, OPTIONEE
Address:________________________________
________________________________________
2
<PAGE>
EXHIBIT 99.3
STOCK OPTION AGREEMENT
RECITALS
A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board or the board
of directors of any Parent or Subsidiary and consultants and other independent
advisors in the service of the Corporation (or any Parent or Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1
<PAGE>
1. GRANT OF OPTION. The Corporation hereby grants to
Optionee, as of the Grant Date, an option to purchase up
to the number of Option Shares specified in the Grant
Notice. The Option Shares shall be purchasable from
time to time during the option term specified in
Paragraph 2 at the Exercise Price.
2. OPTION TERM. This option shall have a term of ten (10)
years measured from the Grant Date and shall accordingly
expire at the close of business on the Expiration Date,
unless sooner terminated in accordance with Paragraph 5
or 6.
3. LIMITED TRANSFERABILITY. During Optionee's lifetime,
this option shall be exercisable only by Optionee and
shall not be assignable or transferable other than by
will or by the laws of descent and distribution
following Optionee's death.
4. DATES OF EXERCISE. This option shall become exercisable
for the Option Shares in one or more installments as
specified in the Grant Notice. As the option becomes
exercisable for such installments, those installments
shall accumulate, and the option shall remain
exercisable for the accumulated installments until the
Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.
5. CESSATION OF SERVICE. The option term specified in
Paragraph 2 shall terminate (and this option shall cease
to be outstanding) prior to the Expiration Date should
any of the following provisions become applicable:
a. Should Optionee cease to remain in Service for any
reason (other than death, Disability or Misconduct)
while this option is outstanding, then Optionee
shall have a period of three (3) months (commencing
with the date of such cessation of Service) during
which to exercise this option, but in no event shall
this option be exercisable at any time after the
Expiration Date.
b. Should Optionee die while this option is
outstanding, then the personal representative of
Optionee's estate or the person or persons to whom
the option is transferred pursuant to Optionee's
will or in accordance with the laws of inheritance
shall have the right to exercise this option. Such
right shall lapse, and this option shall cease to be
outstanding, upon the EARLIER of (i) the expiration
of the twelve (12)-month period measured from the
date of Optionee's death or (ii) the Expiration
Date.
c. Should Optionee cease Service by reason of
Disability while this option is outstanding, then
Optionee shall have a period of twelve (12) months
(commencing with the date of such cessation of
Service) during which to exercise this option. In
no event shall this option be exercisable at any
time after the Expiration Date.
D. NOTE: Exercise of this option on a date later than
three (3) months following cessation of Service due
to Disability will result in loss of favorable
Incentive Option treatment, UNLESS such Disability
constitutes Permanent Disability. In the event that
Incentive Option treatment is not available, this
option will be taxed as a Non-Statutory Option upon
exercise.
e. During the limited period of post-Service
exercisability, this option may not be exercised in
the aggregate for more than the number of Option
Shares in which Optionee is, at the time of
Optionee's cessation of Service, vested pursuant to
the Vesting Schedule specified in the Grant Notice
or the special vesting acceleration provisions of
Paragraph 6. Upon the expiration of such limited
exercise period or (if earlier) upon the Expiration
Date, this option shall
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terminate and cease to be outstanding for any
vested Option Shares for which the option has not
been exercised. To the extent Optionee is not
vested in the Option Shares at the time of
Optionee's cessation of Service, this option
shall immediately terminate and cease to be
outstanding with respect to those shares.
f. Should Optionee's Service be terminated for
Misconduct, then this option shall terminate
immediately and cease to remain outstanding.
6. ACCELERATED VESTING.
a. In the event of any Corporate Transaction, the
Option Shares at the time subject to this option but
not otherwise vested shall automatically vest in
full so that this option shall, immediately prior to
the effective date of the Corporate Transaction,
become exercisable for all of the Option Shares as
fully-vested shares and may be exercised for any or
all of those vested shares. However, the Option
Shares shall NOT vest on such an accelerated basis
if and to the extent: (i) this option is assumed by
the successor corporation (or parent thereof) in the
Corporate Transaction and the Corporation's
repurchase rights with respect to the unvested
Option Shares are assigned to such successor
corporation (or parent thereof) or (ii) this option
is to be replaced with a cash incentive program of
the successor corporation which preserves the spread
existing on the unvested Option Shares at the time
of the Corporate Transaction (the excess of the Fair
Market Value of those Option Shares over the
Exercise Price payable for such shares) and provides
for subsequent payout in accordance with the same
Vesting Schedule applicable to those unvested Option
Shares as set forth in the Grant Notice.
b. Immediately following the Corporate Transaction,
this option shall terminate and cease to be
outstanding, except to the extent assumed by the
successor corporation (or parent thereof) in
connection with the Corporate Transaction.
c. If this option is assumed in connection with a
Corporate Transaction, then this option shall be
appropriately adjusted, immediately after such
Corporate Transaction, to apply to the number and
class of securities which would have been issuable
to Optionee in consummation of such Corporate
Transaction had the option been exercised
immediately prior to such Corporate Transaction, and
appropriate adjustments shall also be made to the
Exercise Price, PROVIDED the aggregate Exercise
Price shall remain the same.
d. The Option Shares may also vest upon an accelerated
basis in accordance with the terms and conditions of
any special addendum attached to this Agreement.
e. This Agreement shall not in any way affect the right
of the Corporation to adjust, reclassify, reorganize
or otherwise change its capital or business
structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its
business or assets.
7. ADJUSTMENT IN OPTION SHARES. Should any change be made to
the Common Stock by reason of any stock split, stock
dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i)
the total number and/or class of securities subject to this
option and (ii) the Exercise Price in order to reflect such
change and thereby preclude a dilution or enlargement of
benefits hereunder.
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8. SHAREHOLDER RIGHTS. The holder of this option shall not
have any shareholder rights with respect to the Option
Shares until such person shall have exercised the option,
paid the Exercise Price and become the record holder of the
purchased shares.
9. MANNER OF EXERCISING OPTION.
a. In order to exercise this option with respect to all
or any part of the Option Shares for which this
option is at the time exercisable, Optionee (or any
other person or persons exercising the option) must
take the following actions:
(i) Execute and deliver to the Corporation a
Purchase Agreement for the Option Shares for
which the option is exercised.
(ii) Pay the aggregate Exercise Price for the
purchased shares in one or more of the
following forms:
(a) cash or check made payable to the
Corporation; or
(b) a promissory note payable to the
Corporation, but only to the extent
authorized by the Plan Administrator
in accordance with Paragraph 14.
(c) Should the Common Stock be registered
under Section 12 of the 1934 Act at
the time the option is exercised, then
the Exercise Price may also be paid as
follows:
(d) in shares of Common Stock held by
Optionee (or any other person or
persons exercising the option) for the
requisite period necessary to avoid a
charge to the Corporation's earnings
for financial reporting purposes and
valued at Fair Market Value on the
Exercise Date; or
(e) to the extent the option is exercised
for vested Option Shares, through a
special sale and remittance procedure
pursuant to which Optionee (or any
other person or persons exercising the
option) shall concurrently provide
irrevocable instructions (a) to a
Corporation-designated brokerage firm
to effect the immediate sale of the
purchased shares and remit to the
Corporation, out of the sale proceeds
available on the settlement date,
sufficient funds to cover the
aggregate Exercise Price payable for
the purchased shares plus all
applicable Federal, state and local
income and employment taxes required
to be withheld by the Corporation by
reason of such exercise and (b) to the
Corporation to deliver the
certificates for the purchased shares
directly to such brokerage firm in
order to complete the sale.
Except to the extent the
sale and remittance procedure
is utilized in connection with
the option exercise, payment of
the Exercise Price must
accompany the Purchase
Agreement delivered to the
Corporation in connection with
the option exercise.
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(iii) Furnish to the Corporation appropriate
documentation that the person or
persons exercising the option (if
other than Optionee) have the right to
exercise this option.
(iv) Execute and deliver to the Corporation
such written representations as may be
requested by the Corporation in order
for it to comply with the applicable
requirements of Federal and state
securities laws.
(v) Make appropriate arrangements with the
Corporation (or Parent or Subsidiary
employing or retaining Optionee) for
the satisfaction of all Federal, state
and local income and employment tax
withholding requirements applicable to
the option exercise.
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<PAGE>
b. As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee
(or any other person or persons exercising this
option) a certificate for the purchased Option
Shares, with the appropriate legends affixed
thereto.
c. In no event may this option be exercised for any
fractional shares.
10. REPURCHASE RIGHTS. ALL OPTION SHARES ACQUIRED UPON THE
EXERCISE OF THIS OPTION SHALL BE SUBJECT TO CERTAIN RIGHTS
OF THE CORPORATION AND ITS ASSIGNS TO REPURCHASE THOSE
SHARES IN ACCORDANCE WITH THE TERMS SPECIFIED IN THE
PURCHASE AGREEMENT.
11. COMPLIANCE WITH LAWS AND REGULATIONS.
a. The exercise of this option and the issuance of the
Option Shares upon such exercise shall be subject to
compliance by the Corporation and Optionee with all
applicable requirements of law relating thereto and
with all applicable regulations of any stock
exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed
for trading at the time of such exercise and
issuance.
b. The inability of the Corporation to obtain approval
from any regulatory body having authority deemed by
the Corporation to be necessary to the lawful
issuance and sale of any Common Stock pursuant to
this option shall relieve the Corporation of any
liability with respect to the non-issuance or sale
of the Common Stock as to which such approval shall
not have been obtained. The Corporation, however,
shall use its best efforts to obtain all such
approvals.
12. SUCCESSORS AND ASSIGNS. Except to the extent otherwise
provided in Paragraphs 3 and 6, the provisions of this
Agreement shall inure to the benefit of, and be binding
upon, the Corporation and its successors and assigns and
Optionee, Optionee's assigns and the legal representatives,
heirs and legatees of Optionee's estate.
13. NOTICES. Any notice required to be given or delivered to
the Corporation under the terms of this Agreement shall be
in writing and addressed to the Corporation at its
principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and
addressed to Optionee at the address indicated below
Optionee's signature line on the Grant Notice. All notices
shall be deemed effective upon personal delivery or upon
deposit in the U.S. mail, postage prepaid and properly
addressed to the party to be notified.
14. FINANCING. The Plan Administrator may, in its absolute
discretion and without any obligation to do so, permit
Optionee to pay the Exercise Price for the purchased Option
Shares by delivering a full-recourse, interest-bearing
promissory note secured by those Option Shares. The
payment schedule in effect for any such promissory note
shall be established by the Plan Administrator in its sole
discretion.
15. CONSTRUCTION. This Agreement and the option evidenced
hereby are made and granted pursuant to the Plan and are in
all respects limited by and subject to the terms of the
Plan. All decisions of the Plan Administrator with respect
to any question or issue arising under the Plan or this
Agreement shall be conclusive and binding on all persons
having an interest in this option.
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16. GOVERNING LAW. The interpretation, performance and
enforcement of this Agreement shall be governed by the laws
of the State of California without resort to that State's
conflict-of-laws rules.
17. SHAREHOLDER APPROVAL. If the Option Shares covered by this
Agreement exceed, as of the Grant Date, the number of
shares of Common Stock which may be issued under the Plan
as last approved by the shareholders, then this option
shall be void with respect to such excess shares, unless
shareholder approval of an amendment sufficiently
increasing the number of shares of Common Stock issuable
under the Plan is obtained in accordance with the
provisions of the Plan.
18. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION. In the
event this option is designated an Incentive Option in the
Grant Notice, the following terms and conditions shall also
apply to the grant:
a. This option shall cease to qualify for favorable tax
treatment as an Incentive Option if (and to the
extent) this option is exercised for one or more
Option Shares: (i) more than three (3) months after
the date Optionee ceases to be an Employee for any
reason other than death or Permanent Disability or
(ii) more than twelve (12) months after the date
Optionee ceases to be an Employee by reason of
Permanent Disability.
b. This option shall not become exercisable in the
calendar year in which granted if (and to the
extent) the aggregate Fair Market Value (determined
at the Grant Date) of the Common Stock for which
this option would otherwise first become exercisable
in such calendar year would, when added to the
aggregate value (determined as of the respective
date or dates of grant) of the Common Stock and any
other securities for which one or more other
Incentive Options granted to Optionee prior to the
Grant Date (whether under the Plan or any other
option plan of the Corporation or any Parent or
Subsidiary) first become exercisable during the same
calendar year, exceed One Hundred Thousand Dollars
($100,000) in the aggregate. To the extent the
exercisability of this option is deferred by reason
of the foregoing limitation, the deferred portion
shall become exercisable in the first calendar year
or years thereafter in which the One Hundred
Thousand Dollar ($100,000) limitation of this
Paragraph 18(b) would not be contravened, but such
deferral shall in all events end immediately prior
to the effective date of a Corporate Transaction in
which this option is not to be assumed, whereupon
the option shall become immediately exercisable as a
Non-Statutory Option for the deferred portion of the
Option Shares.
c. Should Optionee hold, in addition to this option,
one or more other options to purchase Common Stock
which become exercisable for the first time in the
same calendar year as this option, then the
foregoing limitations on the exercisability of such
options as Incentive Options shall be applied on the
basis of the order in which such options are
granted.
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APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Option Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following
shareholder-approved transactions to which the Corporation is a
party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined
voting power of the Corporation's outstanding securities are
transferred to a person or persons different from the persons
holding those securities immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of
all or substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
F. CORPORATION shall mean GraphOn Corporation, a California
corporation, and any successor corporation to all or substantially
all of the assets or voting stock of GraphOn Corporation which
shall by appropriate action adopt the Plan.
G. DISABILITY shall mean the inability of Optionee to engage in any
substantial gainful activity by reason of any medically
determinable physical or mental impairment and shall be determined
by the Plan Administrator on the basis of such medical evidence as
the Plan Administrator deems warranted under the circumstances.
Disability shall be deemed to constitute PERMANENT DISABILITY in
the event that such Disability is expected to result in death or
has lasted or can be expected to last for a continuous period of
twelve (12) months or more.
H. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control
and direction of the employer entity as to both the work to be
performed and the manner and method of performance.
I. EXERCISE DATE shall mean the date on which the option shall have
been exercised in accordance with Paragraph 9 of the Agreement.
J. EXERCISE PRICE shall mean the exercise price payable per Option
Share as specified in the Grant Notice.
K. EXPIRATION DATE shall mean the date on which the option expires as
specified in the Grant Notice.
L. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on
the Nasdaq National Market, then the Fair Market Value shall be
the closing selling price per share of Common Stock on the date in
question, as the price is reported by the National Association of
Securities Dealers on the Nasdaq National Market. If there is no
closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.
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(ii) If the Common Stock is at the time listed on
any Stock Exchange, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in
question on the Stock Exchange determined by the Plan
Administrator to be the primary market for the Common Stock, as
such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling
price for the Common Stock on the date in question, then the Fair
Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
(iii) If the Common Stock is at the time neither
listed on any Stock Exchange nor traded on the Nasdaq National
Market, then the Fair Market Value shall be determined by the Plan
Administrator after taking into account such factors as the Plan
Administrator shall deem appropriate.
M. GRANT DATE shall mean the date of grant of the option as specified
in the Grant Notice.
N. GRANT NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been
informed of the basic terms of the option evidenced hereby.
O. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
P. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by Optionee, any unauthorized use or
disclosure by Optionee of confidential information or trade
secrets of the Corporation (or any Parent or Subsidiary), or any
other intentional misconduct by Optionee adversely affecting the
business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall
not be deemed to be inclusive of all the acts or omissions which
the Corporation (or any Parent or Subsidiary) may consider as
grounds for the dismissal or discharge of Optionee or any other
individual in the Service of the Corporation (or any Parent or
Subsidiary).
Q. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.
R. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
S. OPTION SHARES shall mean the number of shares of Common Stock
subject to the option.
T. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.
U. PARENT shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations ending with the Corporation,
provided each corporation in the unbroken chain (other than the
Corporation) owns, at the time of the determination, stock
possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other
corporations in such chain.
V. PLAN shall mean the Corporation's 1998 Stock Option/Stock Issuance
Plan.
W. PLAN ADMINISTRATOR shall mean either the Board or a committee of
the Board acting in its capacity as administrator of the Plan.
X. PURCHASE AGREEMENT shall mean the stock purchase agreement in
substantially the form of Exhibit B to the Grant Notice.
Y. SERVICE shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an
Employee, a non-employee member of the board of directors or an
independent consultant.
Z. STOCK EXCHANGE shall mean the American Stock Exchange or the New
York Stock Exchange.
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AA. SUBSIDIARY shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last
corporation) in the unbroken chain owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the
other corporations in such chain.
BB. VESTING SCHEDULE shall mean the vesting schedule specified in the
Grant Notice pursuant to which the Optionee is to vest in the
Option Shares in a series of installments over his or her period
of Service.
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EXHIBIT 99.4
ADDENDUM TO STOCK OPTION AGREEMENT
The following provisions are hereby incorporated into, and are hereby
made a part of, that certain Stock Option Agreement dated __________________,
199__ (the "Option Agreement") by and between GraphOn Corporation (the
"Corporation") and _____________________________________________ ("Optionee")
evidencing the stock option (the "Option") granted on such date to Optionee
under the terms of the Corporation's 1998 Stock Option/Stock Issuance Plan, and
such provisions shall be effective immediately. All capitalized terms in this
Addendum, to the extent not otherwise defined herein, shall have the meanings
assigned to them in the Option Agreement.
INVOLUNTARY TERMINATION FOLLOWING
CORPORATE TRANSACTION
1. To the extent the Option is, in connection with a Corporate
Transaction, to be assumed in accordance with Paragraph 6 of the Option
Agreement, none of the Option Shares shall vest on an accelerated basis upon the
occurrence of that Corporate Transaction, and Optionee shall accordingly
continue, over his or her period of Service following the Corporate Transaction,
to vest in the Option Shares in one or more installments in accordance with the
provisions of the Option Agreement. However, upon an Involuntary Termination of
Optionee's Service within eighteen (18) months following such Corporate
Transaction, all the Option Shares at the time subject to the Option shall
automatically vest in full on an accelerated basis so that the Option shall
immediately become exercisable for all the Option Shares as fully-vested shares
and may be exercised for any or all of those Option Shares as vested shares.
The Option shall remain so exercisable until the EARLIER of (i) the Expiration
Date or (ii) the expiration of the one (1)-year period measured from the date of
the Involuntary Termination.
2. For purposes of this Addendum, an INVOLUNTARY TERMINATION
shall mean the termination of Optionee's Service by reason of:
(i) Optionee's involuntary dismissal or discharge by the
Corporation for reasons other than for Misconduct, or
(ii) Optionee's voluntary resignation following (A) a
change in Optionee's position with the Corporation (or Parent or
Subsidiary employing Optionee) which materially reduces Optionee's
duties and responsibilities or the level of management to which he
or she reports, (B) a reduction in Optionee's level of
compensation (including base salary, fringe benefits and target
bonuses under any corporate-performance based incentive programs)
by more than fifteen percent (15%) or (C) a relocation of
Optionee's place of employment by more than fifty (50) miles,
provided and only if such change, reduction or relocation is
effected by the Corporation without Optionee's consent.
3. The provisions of Paragraph 1 of this Addendum shall govern
the period for which the Option is to remain exercisable following the
Involuntary Termination of Optionee's Service within eighteen (18) months after
the Corporate Transaction and shall supersede any provisions to the contrary in
Paragraph 5 of the Option Agreement. The provisions of this Addendum shall also
supersede any provisions to the contrary in Paragraph 18 of the Option Agreement
concerning the deferred exercisability of the Option.
IN WITNESS WHEREOF, GraphOn Corporation has caused this Addendum
to be executed by its duly-authorized officer as of the Effective Date specified
below.
GRAPHON CORPORATION
By:______________
Title:___________
<PAGE>
EFFECTIVE DATE: _______, 199_
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EXHIBIT 99.5
GRAPHON CORPORATION
STOCK PURCHASE AGREEMENT
AGREEMENT made this ______ day of ____________, 199__, by and between
GraphOn Corporation, a California corporation, and _____________________,
Optionee under the Corporation's 1998 Stock Option/Stock Issuance Plan.
All capitalized terms in this Agreement shall have the meaning assigned
to them in this Agreement or in the attached Appendix.
A. EXERCISE OF OPTION
1. EXERCISE. Optionee hereby purchases ______________ shares of
Common Stock (the "Purchased Shares") pursuant to that certain option (the
"Option") granted Optionee on ____________________, 199__ (the "Grant Date") to
purchase up to _______________ shares of Common Stock (the "Option Shares")
under the Plan at the exercise price of $___________ per share (the "Exercise
Price").
2. PAYMENT. Concurrently with the delivery of this Agreement to the
Corporation, Optionee shall pay the Exercise Price for the Purchased Shares in
accordance with the provisions of the Option Agreement and shall deliver
whatever additional documents may be required by the Option Agreement as a
condition for exercise, together with a duly-executed blank Assignment Separate
from Certificate (in the form attached hereto as Exhibit I) with respect to the
Purchased Shares.
3. SHAREHOLDER RIGHTS. Until such time as the Corporation exercises
the Repurchase Right or the First Refusal Right, Optionee (or any successor in
interest) shall have all the rights of a shareholder (including voting, dividend
and liquidation rights) with respect to the Purchased Shares, subject, however,
to the transfer restrictions of Articles B and C.
B. SECURITIES LAW COMPLIANCE
1. RESTRICTED SECURITIES. The Purchased Shares have not been
registered under the 1933 Act and are being issued to Optionee in reliance upon
the exemption from such registration provided by SEC Rule 701 for stock
issuances under compensatory benefit plans such as the Plan. Optionee hereby
confirms that Optionee has been informed that the Purchased Shares are
restricted securities under the 1933 Act and may not be resold or transferred
unless the Purchased Shares are first registered under the Federal securities
laws or unless an exemption from such registration is available. Accordingly,
Optionee hereby acknowledges that Optionee is prepared to hold the Purchased
Shares for an indefinite period and that Optionee is aware that SEC Rule 144
issued under the 1933 Act which exempts certain resales of unrestricted
securities is not presently available to exempt the resale of the Purchased
Shares from the registration requirements of the 1933 Act.
2. RESTRICTIONS ON DISPOSITION OF PURCHASED SHARES. Optionee shall
make no disposition of the Purchased Shares (other than a Permitted Transfer)
unless and until there is compliance with all of the following requirements:
(i) Optionee shall have provided the Corporation with a
written summary of the terms and conditions of the proposed
disposition.
(ii) Optionee shall have complied with all requirements of
this Agreement applicable to the disposition of the
Purchased Shares.
(iii) Optionee shall have provided the Corporation with
written assurances, in form and substance satisfactory to
the Corporation, that (a) the proposed disposition does not
require registration of the Purchased Shares under the 1933
Act or (b) all appropriate
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action necessary for compliance with the registration
requirements of the 1933 Act or any exemption from
registration available under the 1933 Act (including
Rule 144) has been taken.
The Corporation shall NOT be required (i) to transfer on its books
any Purchased Shares which have been sold or transferred in violation of the
provisions of this Agreement OR (ii) to treat as the owner of the Purchased
Shares, or otherwise to accord voting, dividend or liquidation rights to, any
transferee to whom the Purchased Shares have been transferred in contravention
of this Agreement.
3. RESTRICTIVE LEGENDS. The stock certificates for the Purchased
Shares shall be endorsed with one or more of the following restrictive legends:
"The shares represented by this certificate have not
been registered under the Securities Act of 1933. The
shares may not be sold or offered for sale in the absence
of (a) an effective registration statement for the shares
under such Act, (b) a "no action" letter of the Securities
and Exchange Commission with respect to such sale or offer
or (c) satisfactory assurances to the Corporation that
registration under such Act is not required with respect to
such sale or offer."
"The shares represented by this certificate are subject
to certain repurchase rights and rights of first refusal
granted to the Corporation and accordingly may not be sold,
assigned, transferred, encumbered, or in any manner disposed of
except in conformity with the terms of a written agreement
dated _______________, 199__ between the Corporation and the
registered holder of the shares (or the predecessor in interest
to the shares). A copy of such agreement is maintained at the
Corporation's principal corporate offices."
C. TRANSFER RESTRICTIONS
1. RESTRICTION ON TRANSFER. Except for any Permitted Transfer,
Optionee shall not transfer, assign, encumber or otherwise dispose of any of the
Purchased Shares which are subject to the Repurchase Right. In addition,
Purchased Shares which are released from the Repurchase Right shall not be
transferred, assigned, encumbered or otherwise disposed of in contravention of
the First Refusal Right or the Market Stand-Off.
2. TRANSFEREE OBLIGATIONS. Each person (other than the Corporation)
to whom the Purchased Shares are transferred by means of a Permitted Transfer
must, as a condition precedent to the validity of such transfer, acknowledge in
writing to the Corporation that such person is bound by the provisions of this
Agreement and that the transferred shares are subject to (i) the Repurchase
Right, (ii) the First Refusal Right and (iii) the Market Stand-Off, to the same
extent such shares would be so subject if retained by Optionee.
3. MARKET STAND-OFF.
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(a) In connection with any underwritten public offering by the
Corporation of its equity securities pursuant to an effective
registration statement filed under the 1933 Act, including the
Corporation's initial public offering, Owner shall not sell, make
any short sale of, loan, hypothecate, pledge, grant any option for
the purchase of, or otherwise dispose or transfer for value or
otherwise agree to engage in any of the foregoing transactions
with respect to, any Purchased Shares without the prior written
consent of the Corporation or its underwriters. Such restriction
(the "Market Stand-Off") shall be in effect for such period of
time from and after the effective date of the final prospectus for
the offering as may be requested by the Corporation or such
underwriters. In no event, however, shall such period exceed one
hundred eighty (180) days and the Market Stand-Off shall in all
events terminate two (2) years after the effective date of the
Corporation's initial public offering.
(b) Owner shall be subject to the Market Stand-Off PROVIDED AND
ONLY IF the officers and directors of the Corporation are also
subject to similar restrictions.
(c) Any new, substituted or additional securities which are by
reason of any Recapitalization or Reorganization distributed with
respect to the Purchased Shares shall be immediately subject to
the Market Stand-Off, to the same extent the Purchased Shares are
at such time covered by such provisions.
(d) In order to enforce the Market Stand-Off, the Corporation
may impose stop-transfer instructions with respect to the
Purchased Shares until the end of the applicable stand-off period.
D. REPURCHASE RIGHT
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1. GRANT. The Corporation is hereby granted the right (the
"Repurchase Right"), exercisable at any time during the sixty (60)-day
period following the date Optionee ceases for any reason to remain in
Service or (if later) during the sixty (60)-day period following the
execution date of this Agreement, to repurchase at the Exercise Price any
or all of the Purchased Shares in which Optionee is not, at the time of
his or her cessation of Service, vested in accordance with the Vesting
Schedule applicable to those shares or the special vesting acceleration
provisions of Paragraph D.6 of this Agreement (such shares to be
hereinafter referred to as the "Unvested Shares").
2. EXERCISE OF THE REPURCHASE RIGHT. The Repurchase Right shall be
exercisable by written notice delivered to each Owner of the Unvested
Shares prior to the expiration of the sixty (60)-day exercise period.
The notice shall indicate the number of Unvested Shares to be repurchased
and the date on which the repurchase is to be effected, such date to be
not more than thirty (30) days after the date of such notice. The
certificates representing the Unvested Shares to be repurchased shall be
delivered to the Corporation on or before the close of business on the
date specified for the repurchase. Concurrently with the receipt of such
stock certificates, the Corporation shall pay to Owner, in cash or cash
equivalents (including the cancellation of any purchase-money
indebtedness), an amount equal to the Exercise Price previously paid for
the Unvested Shares which are to be repurchased from Owner.
3. TERMINATION OF THE REPURCHASE RIGHT. The Repurchase Right shall
terminate with respect to any Unvested Shares for which it is not timely
exercised under Paragraph D.2. In addition, the Repurchase Right shall
terminate and cease to be exercisable with respect to any and all
Purchased Shares in which Optionee vests in accordance with the Vesting
Schedule. All Purchased Shares as to which the Repurchase Right lapses
shall, however, remain subject to (i) the First Refusal Right and (ii)
the Market Stand-Off.
4. AGGREGATE VESTING LIMITATION. If the Option is exercised in more
than one increment so that Optionee is a party to one or more other Stock
Purchase Agreements (the "Prior Purchase Agreements") which are executed
prior to the date of this Agreement, then the total number of Purchased
Shares as to which Optionee shall be deemed to have a fully-vested
interest under this Agreement and all Prior Purchase Agreements shall not
exceed in the aggregate the number of Purchased Shares in which Optionee
would otherwise at the time be vested, in accordance with the Vesting
Schedule, had all the Purchased Shares (including those acquired under
the Prior Purchase Agreements) been acquired exclusively under this
Agreement.
5. RECAPITALIZATION. Any new, substituted or additional securities
or other property (including cash paid other than as a regular cash
dividend) which is by reason of any Recapitalization distributed with
respect to the Purchased Shares shall be immediately subject to the
Repurchase Right and any escrow requirements hereunder, but only to the
extent the Purchased Shares are at the time covered by such right or
escrow requirements. Appropriate adjustments to reflect such
distribution shall be made to the number and/or class of Purchased Shares
subject to this Agreement and to the price per share to be paid upon the
exercise of the Repurchase Right in order to reflect the effect of any
such Recapitalization upon the Corporation's capital structure; PROVIDED,
however, that the aggregate purchase price shall remain the same.
6. CORPORATE TRANSACTION.
(a) The Repurchase Right shall automatically terminate in its
entirety, and all the Purchased Shares shall vest in full,
immediately prior to the consummation of any Corporate
Transaction, except to the extent the Repurchase Right is to be
assigned to the successor entity in such Corporate Transaction.
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(b) To the extent the Repurchase Right remains in effect
following a Corporate Transaction, such right shall apply to any
new securities or other property (including any cash payments)
received in exchange for the Purchased Shares in consummation of
the Corporate Transaction, but only to the extent the Purchased
Shares are at the time covered by such right. Appropriate
adjustments shall be made to the price per share payable upon
exercise of the Repurchase Right to reflect the effect of the
Corporate Transaction upon the Corporation's capital structure;
PROVIDED, however, that the aggregate purchase price shall remain
the same. The new securities or other property (including any
cash payments) issued or distributed with respect to the Purchased
Shares in consummation of the Corporate Transaction shall be
immediately deposited in escrow with the Corporation (or the
successor entity) and shall not be released from escrow until
Optionee vests in such securities or other property in accordance
with the same Vesting Schedule in effect for the Purchased Shares.
(c) The Repurchase Right may also terminate on an accelerated
basis, and the Purchased Shares shall immediately vest in full, in
accordance with the terms and conditions of any special addendum
attached to this Agreement.
E. RIGHT OF FIRST REFUSAL
1. GRANT. The Corporation is hereby granted the right of first
refusal (the "First Refusal Right"), exercisable in connection with any
proposed transfer of the Purchased Shares in which Optionee has vested in
accordance with the provisions of Article D. For purposes of this
Article E, the term "transfer" shall include any sale, assignment,
pledge, encumbrance or other disposition of the Purchased Shares intended
to be made by Owner, but shall not include any Permitted Transfer.
2. NOTICE OF INTENDED DISPOSITION. In the event any Owner of
Purchased Shares in which Optionee has vested desires to accept a bona
fide third-party offer for the transfer of any or all of such shares (the
Purchased Shares subject to such offer to be hereinafter referred to as
the "Target Shares"), Owner shall promptly (i) deliver to the Corporation
written notice (the "Disposition Notice") of the terms of the offer,
including the purchase price and the identity of the third-party offeror,
and (ii) provide satisfactory proof that the disposition of the Target
Shares to such third-party offeror would not be in contravention of the
provisions set forth in Articles B and C.
3. EXERCISE OF THE FIRST REFUSAL RIGHT. The Corporation shall, for a
period of twenty-five (25) days following receipt of the Disposition
Notice, have the right to repurchase any or all of the Target Shares
subject to the Disposition Notice upon the same terms as those specified
therein or upon such other terms (not materially different from those
specified in the Disposition Notice) to which Owner consents. Such right
shall be exercisable by delivery of written notice (the "Exercise
Notice") to Owner prior to the expiration of the twenty-five (25)-day
exercise period. If such right is exercised with respect to all the
Target Shares, then the Corporation shall effect the repurchase of such
shares, including payment of the purchase price, not more than five (5)
business days after delivery of the Exercise Notice; and at such time the
certificates representing the Target Shares shall be delivered to the
Corporation.
Should the purchase price specified in the Disposition Notice be
payable in property other than cash or evidences of indebtedness, the
Corporation shall have the right to pay the purchase price in the form of
cash equal in amount to the value of such property. If Owner and the
Corporation cannot agree on such cash value within ten (10) days after
the Corporation's receipt of the Disposition Notice, the valuation shall
be made by an appraiser of recognized standing selected by Owner and the
Corporation or, if they cannot agree on an appraiser within twenty (20)
days after the Corporation's receipt of the Disposition Notice, each
shall select an appraiser of recognized standing and the two (2)
appraisers shall designate a third appraiser of recognized standing,
whose appraisal shall be determinative of such value. The cost of such
appraisal shall be shared equally by Owner and the Corporation. The
closing shall then be held on the LATER of (i) the fifth (5th) business
day following delivery of the Exercise Notice or (ii) the fifth (5th)
business day after such valuation shall have been made.
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4. NON-EXERCISE OF THE FIRST REFUSAL RIGHT. In the event the
Exercise Notice is not given to Owner prior to the expiration of the
twenty-five (25)-day exercise period, Owner shall have a period of thirty
(30) days thereafter in which to sell or otherwise dispose of the Target
Shares to the third-party offeror identified in the Disposition Notice
upon terms (including the purchase price) no more favorable to such
third-party offeror than those specified in the Disposition Notice;
PROVIDED, however, that any such sale or disposition must not be effected
in contravention of the provisions of Articles B and C. The third-party
offeror shall acquire the Target Shares free and clear of the First
Refusal Right, but the acquired shares shall remain subject to the
provisions of Article B and Paragraph C.3. In the event Owner does not
effect such sale or disposition of the Target Shares within the specified
thirty (30)-day period, the First Refusal Right shall continue to be
applicable to any subsequent disposition of the Target Shares by Owner
until such right lapses.
5. PARTIAL EXERCISE OF THE FIRST REFUSAL RIGHT. In the event the
Corporation makes a timely exercise of the First Refusal Right with
respect to a portion, but not all, of the Target Shares specified in the
Disposition Notice, Owner shall have the option, exercisable by written
notice to the Corporation delivered within five (5) business days after
Owner's receipt of the Exercise Notice, to effect the sale of the Target
Shares pursuant to either of the following alternatives:
(i) sale or other disposition of all the Target Shares
to the third-party offeror identified in the Disposition
Notice, but in full compliance with the requirements of
Paragraph E.4, as if the Corporation did not exercise the
First Refusal Right; or
(ii) sale to the Corporation of the portion of the Target
Shares which the Corporation has elected to purchase, such
sale to be effected in substantial conformity with the
provisions of Paragraph E.3. The First Refusal Right shall
continue to be applicable to any subsequent disposition of
the remaining Target Shares until such right lapses.
Owner's failure to deliver timely notification to the Corporation
shall be deemed to be an election by Owner to sell the Target Shares
pursuant to alternative (i) above.
6. RECAPITALIZATION/REORGANIZATION.
(a) Any new, substituted or additional securities or other
property which is by reason of any Recapitalization distributed
with respect to the Purchased Shares shall be immediately subject
to the First Refusal Right, but only to the extent the Purchased
Shares are at the time covered by such right.
(b) In the event of a Reorganization, the First Refusal Right
shall remain in full force and effect and shall apply to the new
capital stock or other property received in exchange for the
Purchased Shares in consummation of the Reorganization, but only
to the extent the Purchased Shares are at the time covered by such
right.
7. LAPSE. The First Refusal Right shall lapse upon the EARLIEST to
occur of (i) the first date on which shares of the Common Stock are held
of record by more than five hundred (500) persons, (ii) a determination
is made by the Board that a public market exists for the outstanding
shares of Common Stock or (iii) a firm commitment underwritten public
offering, pursuant to an effective registration statement under the 1933
Act, covering the offer and sale of the Common Stock in the aggregate
amount of at least ten million dollars ($10,000,000). However, the
Market Stand-Off shall continue to remain in full force and effect
following the lapse of the First Refusal Right.
F. SPECIAL TAX ELECTION
The acquisition of the Purchased Shares may result in adverse tax
consequences which may be avoided or mitigated by filing an election
under Code Section 83(b). Such election must be filed within
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thirty (30) days after the date of this Agreement. A description of
the tax consequences applicable to the acquisition of the Purchased
Shares and the form for making the Code Section 83(b) election are set
forth in Exhibit II. OPTIONEE SHOULD CONSULT WITH HIS OR HER TAX
ADVISOR TO DETERMINE THE TAX CONSEQUENCES OF ACQUIRING THE PURCHASED
SHARES AND THE ADVANTAGES AND DISADVANTAGES OF FILING THE CODE SECTION
83(b) ELECTION. OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE
RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A TIMELY ELECTION
UNDER CODE SECTION 83(b), EVEN IF OPTIONEE REQUESTS THE CORPORATION OR
ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.
G. GENERAL PROVISIONS
1. ASSIGNMENT. The Corporation may assign the Repurchase Right
and/or the First Refusal Right to any person or entity selected by the
Board, including (without limitation) one or more shareholders of the
Corporation. If the assignee of the Repurchase Right is other than (i) a
wholly owned subsidiary of the Corporation or (ii) the parent corporation
owning one hundred percent (100%) of the Corporation's outstanding
capital stock, then such assignee must make a cash payment to the
Corporation, upon the assignment of the Repurchase Right, in an amount
equal to the excess (if any) of (i) the Fair Market Value of the
Purchased Shares at the time subject to the assigned Repurchase Right
over (ii) the aggregate repurchase price payable for the Purchased
Shares.
2. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement or
in the Plan shall confer upon Optionee any right to continue in Service
for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining Optionee) or of Optionee, which rights
are hereby expressly reserved by each, to terminate Optionee's Service at
any time for any reason, with or without cause.
3. NOTICES. Any notice required to be given under this Agreement
shall be in writing and shall be deemed effective upon personal delivery
or upon deposit in the U.S. mail, registered or certified, postage
prepaid and properly addressed to the party entitled to such notice at
the address indicated below such party's signature line on this Agreement
or at such other address as such party may designate by ten (10) days
advance written notice under this paragraph to all other parties to this
Agreement.
4. NO WAIVER. The failure of the Corporation in any instance to
exercise the Repurchase Right or the First Refusal Right shall not
constitute a waiver of any other repurchase rights and/or rights of first
refusal that may subsequently arise under the provisions of this
Agreement or any other agreement between the Corporation and Optionee.
No waiver of any breach or condition of this Agreement shall be deemed to
be a waiver of any other or subsequent breach or condition, whether of
like or different nature.
5. CANCELLATION OF SHARES. If the Corporation shall make available,
at the time and place and in the amount and form provided in this
Agreement, the consideration for the Purchased Shares to be repurchased
in accordance with the provisions of this Agreement, then from and after
such time, the person from whom such shares are to be repurchased shall
no longer have any rights as a holder of such shares (other than the
right to receive payment of such consideration in accordance with this
Agreement). Such shares shall be deemed purchased in accordance with the
applicable provisions hereof, and the Corporation shall be deemed the
owner and holder of such shares, whether or not the certificates therefor
have been delivered as required by this Agreement.
H. MISCELLANEOUS PROVISIONS
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1. OPTIONEE UNDERTAKING. Optionee hereby agrees to take whatever
additional action and execute whatever additional documents the
Corporation may deem necessary or advisable in order to carry out or
effect one or more of the obligations or restrictions imposed on either
Optionee or the Purchased Shares pursuant to the provisions of this
Agreement.
2. AGREEMENT IS ENTIRE CONTRACT. This Agreement constitutes the
entire contract between the parties hereto with regard to the subject
matter hereof. This Agreement is made pursuant to the provisions of the
Plan and shall in all respects be construed in conformity with the terms
of the Plan.
3. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of California without resort to
that State's conflict-of-laws rules.
4. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
5. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
inure to the benefit of, and be binding upon, the Corporation and its
successors and assigns and upon Optionee, Optionee's permitted assigns
and the legal representatives, heirs and legatees of Optionee's estate,
whether or not any such person shall have become a party to this
Agreement and have agreed in writing to join herein and be bound by the
terms hereof.
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IN WITNESS WHEREOF, the parties have executed this Agreement on
the day and year first indicated above.
GRAPHON CORPORATION
By: ____________________________________
Title: _________________________________
Address: _______________________________
________________________________________
OPTIONEE
By: ____________________________________
Title: _________________________________
Address: _______________________________
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APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Purchase Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following
shareholder-approved transactions:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
F. CORPORATION shall mean GraphOn Corporation, a California
corporation, and any successor corporation to all or substantially
all of the assets or voting stock of GraphOn Corporation which
shall by appropriate action adopt the Plan.
G. DISPOSITION NOTICE shall have the meaning assigned to such term in
Paragraph E.2.
H. EXERCISE NOTICE shall have the meaning assigned to such term in
Paragraph E.3.
I. EXERCISE PRICE shall have the meaning assigned to such term in
Paragraph A.1.
J. FAIR MARKET VALUE of a share of Common Stock on any relevant date,
prior to the initial public offering of the Common Stock, shall be
determined by the Plan Administrator after taking into account
such factors as it shall deem appropriate.
K. FIRST REFUSAL RIGHT shall mean the right granted to the
Corporation in accordance with Article E.
L. GRANT DATE shall have the meaning assigned to such term in
Paragraph A.1.
M. GRANT NOTICE shall mean the Notice of Grant of Stock Option
pursuant to which Optionee has been informed of the basic terms of
the Option.
N. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
O. MARKET STAND-OFF shall mean the market stand-off restriction
specified in Paragraph C.3.
P. 1933 ACT shall mean the Securities Act of 1933, as amended.
Q. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.
R. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
S. OPTION shall have the meaning assigned to such term in Paragraph
A.1.
<PAGE>
T. OPTION AGREEMENT shall mean all agreements and other documents
evidencing the Option.
U. OPTIONEE shall mean the person to whom the Option is granted under
the Plan.
V. OWNER shall mean Optionee and all subsequent holders of the
Purchased Shares who derive their chain of ownership through a
Permitted Transfer from Optionee.
W. PARENT shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations ending with the Corporation,
provided each corporation in the unbroken chain (other than the
Corporation) owns, at the time of the determination, stock
possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other
corporations in such chain.
X. PERMITTED TRANSFER shall mean (i) a gratuitous transfer of the
Purchased Shares, provided and only if Optionee obtains the
Corporation's prior written consent to such transfer, (ii) a
transfer of title to the Purchased Shares effected pursuant to
Optionee's will or the laws of intestate succession following
Optionee's death or (iii) a transfer to the Corporation in pledge
as security for any purchase-money indebtedness incurred by
Optionee in connection with the acquisition of the Purchased
Shares.
Y. PLAN shall mean the Corporation's 1998 Stock Option/Stock Issuance
Plan.
Z. PLAN ADMINISTRATOR shall mean either the Board or a committee of
the Board acting in its capacity as administrator of the Plan.
AA. PRIOR PURCHASE AGREEMENT shall have the meaning assigned to such
term in Paragraph D.4.
BB. PURCHASED SHARES shall have the meaning assigned to such term in
Paragraph A.1.
CC. RECAPITALIZATION shall mean any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or
other change affecting the Corporation's outstanding Common Stock
as a class without the Corporation's receipt of consideration.
DD. REORGANIZATION shall mean any of the following transactions:
(i) a merger or consolidation in which the Corporation
is not the surviving entity,
(ii) a sale, transfer or other disposition of all or
substantially all of the Corporation's assets,
(iii) a reverse merger in which the Corporation is the
surviving entity but in which the Corporation's outstanding voting
securities are transferred in whole or in part to a person or persons
different from the persons holding those securities immediately prior to
the merger, or
(iv) any transaction effected primarily to change the
state in which the Corporation is incorporated or to create a holding
company structure.
EE. REPURCHASE RIGHT shall mean the right granted to the Corporation
in accordance with Article D.
FF. SEC shall mean the Securities and Exchange Commission.
GG. SERVICE shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an
employee, subject to the control and direction of the employer
entity as to both the work to be performed and the manner and
method of performance, a non-employee member of the board of
directors or an independent consultant.
<PAGE>
HH. SUBSIDIARY shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last
corporation) in the unbroken chain owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the
other corporations in such chain.
II. TARGET SHARES shall have the meaning assigned to such term in
Paragraph E.2.
JJ. VESTING SCHEDULE shall mean the vesting schedule specified in the
Grant Notice pursuant to which the Optionee is to vest in the
Option Shares in a series of installments over his or her period
of Service.
KK. UNVESTED SHARES shall have the meaning assigned to such term in
Paragraph D.1.
<PAGE>
EXHIBIT 99.6
ADDENDUM
TO
STOCK PURCHASE AGREEMENT
The following provisions are hereby incorporated into, and are hereby
made a part of, that certain Stock Purchase Agreement dated ________________,
199__ (the "Purchase Agreement") by and between GraphOn Corporation (the
"Corporation") and __________________________________ ("Optionee") evidencing
the shares of Common Stock purchased on such date by Optionee pursuant to the
option granted to him or her under the Corporation's 1998 Stock Option/Stock
Issuance Plan, and such provisions shall be effective immediately. All
capitalized terms in this Addendum, to the extent not otherwise defined herein,
shall have the meanings assigned to such terms in the Purchase Agreement.
INVOLUNTARY TERMINATION FOLLOWING
CORPORATE TRANSACTION
1. To the extent the Repurchase Right is assigned to the successor
corporation (or parent thereof) in connection with a Corporate Transaction,
no accelerated vesting of the Purchased Shares shall occur upon such
Corporate Transaction, and the Repurchase Right shall continue to remain in
full force and effect in accordance with the provisions of the Purchase
Agreement. Optionee shall, over his or her period of Service following the
Corporate Transaction, continue to vest in the Purchased Shares in one or
more installments in accordance with the provisions of the Purchase
Agreement. However, upon an Involuntary Termination of Optionee's Service
within eighteen (18) months following the Corporate Transaction, the
Repurchase Right shall terminate automatically, and all the Purchased Shares
shall immediately vest in full at that time.
2. For purposes of this Addendum, the following definitions shall
be in effect:
An INVOLUNTARY TERMINATION shall mean the termination of
Optionee's Service by reason of:
(i) Optionee's involuntary dismissal or discharge
by the Corporation for reasons other than for Misconduct, or
(ii) Optionee's voluntary resignation following
(A) a change in his or her position with the Corporation (or
Parent or Subsidiary employing Participant) which materially
reduces Optionee's duties and responsibilities or the level of
management to which he or she reports, (B) a reduction in
Optionee's level of compensation (including base salary, fringe
benefits and target bonuses under any corporate-performance based
incentive programs) by more than fifteen percent (15%) or (C) a
relocation of Optionee's place of employment by more than
fifty (50) miles, provided and only if such change, reduction or
relocation is effected by the Corporation without Optionee's
consent.
MISCONDUCT shall mean the termination of Optionee's Service by
reason of Optionee's commission of any act of fraud, embezzlement or
dishonesty, any unauthorized use or disclosure by Optionee of confidential
information or trade secrets of the Corporation (or any Parent or
Subsidiary), or any other intentional misconduct by Optionee adversely
affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be
deemed to be inclusive of all the acts or omissions which the Corporation (or
any Parent or Subsidiary) may consider as grounds for the dismissal or
discharge of Optionee or any other individual in the Service of the
Corporation (or any Parent or Subsidiary).
IN WITNESS WHEREOF, GraphOn Corporation has caused this
Addendum to be executed by its duly-authorized officer as of the Effective
Date specified below.
<PAGE>
GRAPHON CORPORATION
By: _______________________________
Title: ____________________________
EFFECTIVE DATE: __________________, 199__
<PAGE>
EXHIBIT 99.7
GRAPHON CORPORATION
STOCK ISSUANCE AGREEMENT
AGREEMENT made as of this _____ day of ______________ 199__, by and
between GraphOn Corporation, a California corporation, and __________________,
Participant in the Corporation's 1998 Stock Option/Stock Issuance Plan.
All capitalized terms in this Agreement shall have the meaning assigned
to them in this Agreement or in the attached Appendix.
A. PURCHASE OF SHARES
1. PURCHASE. Participant hereby purchases _______________ shares of
Common Stock (the "Purchased Shares") pursuant to the provisions of the
Stock Issuance Program at the purchase price of $0.075 per share (the
"Purchase Price").
2. PAYMENT. Concurrently with the delivery of this Agreement to the
Corporation, Participant shall pay the Purchase Price for the Purchased
Shares in cash or cash equivalent and shall deliver a duly-executed blank
Assignment Separate from Certificate (in the form attached hereto as
Exhibit I) with respect to the Purchased Shares.
3. SHAREHOLDER RIGHTS. Until such time as the Corporation exercises
the Repurchase Right or the First Refusal Right, Participant (or any
successor in interest) shall have all shareholder rights (including
voting, dividend and liquidation rights) with respect to the Purchased
Shares, subject, however, to the transfer restrictions of Articles B
and C.
B. SECURITIES LAW COMPLIANCE
1. RESTRICTED SECURITIES. The Purchased Shares have not been
registered under the 1933 Act and are being issued to Participant in
reliance upon the exemption from such registration provided by SEC Rule
701 for stock issuances under compensatory benefit plans such as the
Plan. Participant hereby confirms that Participant has been informed
that the Purchased Shares are restricted securities under the 1933 Act
and may not be resold or transferred unless the Purchased Shares are
first registered under the Federal securities laws or unless an exemption
from such registration is available. Accordingly, Participant hereby
acknowledges that Participant is prepared to hold the Purchased Shares
for an indefinite period and that Participant is aware that SEC Rule 144
issued under the 1933 Act which exempts certain resales of unrestricted
securities is not presently available to exempt the resale of the
Purchased Shares from the registration requirements of the 1933 Act.
2. DISPOSITION OF PURCHASED SHARES. Participant shall make no
disposition of the Purchased Shares (other than a Permitted Transfer)
unless and until there is compliance with all of the following
requirements:
(i) Participant shall have provided the Corporation with a written
summary of the terms and conditions of the proposed disposition.
(ii) Participant shall have complied with all requirements of this
Agreement applicable to the disposition of the Purchased Shares.
(iii) Participant shall have provided the Corporation with written
assurances, in form and substance satisfactory to the Corporation,
that (a) the proposed disposition does not require registration of
the Purchased Shares under the 1933 Act or (b) all appropriate
action necessary for compliance with the registration requirements
of the 1933 Act or any exemption from registration available under
the 1933 Act (including Rule 144) has been taken.
<PAGE>
The Corporation shall NOT be required (i) to transfer on its books
any Purchased Shares which have been sold or transferred in violation of
the provisions of this Agreement OR (ii) to treat as the owner of the
Purchased Shares, or otherwise to accord voting, dividend or liquidation
rights to, any transferee to whom the Purchased Shares have been
transferred in contravention of this Agreement.
3. RESTRICTIVE LEGENDS. The stock certificates for the Purchased
Shares shall be endorsed with one or more of the following restrictive
legends:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933. The shares may not be sold
or offered for sale in the absence of (a) an effective registration
statement for the shares under such Act, (b) a "no action" letter of the
Securities and Exchange Commission with respect to such sale or offer or
(c) satisfactory assurances to the Corporation that registration under
such Act is not required with respect to such sale or offer."
"The shares represented by this certificate are subject to certain
repurchase rights and rights of first refusal granted to the Corporation
and accordingly may not be sold, assigned, transferred, encumbered, or in
any manner disposed of except in conformity with the terms of a written
agreement dated _________________, 199 between the Corporation and the
registered holder of the shares (or the predecessor in interest to the
shares). A copy of such agreement is maintained at the Corporation's
principal corporate offices."
C. TRANSFER RESTRICTIONS
1. RESTRICTION ON TRANSFER. Except for any Permitted Transfer,
Participant shall not transfer, assign, encumber or otherwise dispose of
any of the Purchased Shares which are subject to the Repurchase Right.
In addition, Purchased Shares which are released from the Repurchase
Right shall not be transferred, assigned, encumbered or otherwise
disposed of in contravention of the First Refusal Right or the Market
Stand-Off.
2. TRANSFEREE OBLIGATIONS. Each person (other than the Corporation)
to whom the Purchased Shares are transferred by means of a Permitted
Transfer must, as a condition precedent to the validity of such transfer,
acknowledge in writing to the Corporation that such person is bound by
the provisions of this Agreement and that the transferred shares are
subject to (i) the Repurchase Right, (ii) the First Refusal Right and
(iii) the Market Stand-Off, to the same extent such shares would be so
subject if retained by Participant.
3. MARKET STAND-OFF.
(a) In connection with any underwritten public offering by the
Corporation of its equity securities pursuant to an effective
registration statement filed under the 1933 Act, including the
Corporation's initial public offering, Owner shall not sell, make
any short sale of, loan, hypothecate, pledge, grant any option for
the purchase of, or otherwise dispose or transfer for value or
otherwise agree to engage in any of the foregoing transactions
with respect to, any Purchased Shares without the prior written
consent of the Corporation or its underwriters. Such restriction
(the "Market Stand-Off") shall be in effect for such period of
time from and after the effective date of the final prospectus for
the offering as may be requested by the Corporation or such
underwriters. In no event, however, shall such period exceed one
hundred eighty (180) days and the Market Stand-Off shall in all
events terminate two (2) years after the effective date of the
Corporation's initial public offering.
(b) Owner shall be subject to the Market Stand-Off PROVIDED AND
ONLY IF the officers and directors of the Corporation are also
subject to similar restrictions.
(c) Any new, substituted or additional securities which are by
reason of any Recapitalization or Reorganization distributed with
respect to the Purchased Shares shall be immediately subject to
the Market Stand-Off, to the same extent the Purchased Shares are
at such time covered by such provisions.
<PAGE>
(d) In order to enforce the Market Stand-Off, the Corporation
may impose stop-transfer instructions with respect to the
Purchased Shares until the end of the applicable stand-off period.
D. REPURCHASE RIGHT
1. GRANT. The Corporation is hereby granted the right (the
"Repurchase Right"), exercisable at any time during the sixty (60)-day
period following the date Participant ceases for any reason to remain in
Service, to repurchase at the Purchase Price any or all of the Purchased
Shares in which Participant is not, at the time of his or her cessation
of Service, vested in accordance with the Vesting Schedule set forth in
Paragraph D.3 or the special accelerated vesting provisions of Paragraph
D.5 (such shares to be hereinafter referred to as the "Unvested Shares").
2. EXERCISE OF THE REPURCHASE RIGHT. The Repurchase Right shall be
exercisable by written notice delivered to each Owner of the Unvested
Shares prior to the expiration of the sixty (60)-day exercise period.
The notice shall indicate the number of Unvested Shares to be repurchased
and the date on which the repurchase is to be effected, such date to be
not more than thirty (30) days after the date of such notice. The
certificates representing the Unvested Shares to be repurchased shall be
delivered to the Corporation on or before the close of business on the
date specified for the repurchase. Concurrently with the receipt of such
stock certificates, the Corporation shall pay to Owner, in cash or cash
equivalents (including the cancellation of any purchase-money
indebtedness), an amount equal to the Purchase Price previously paid for
the Unvested Shares which are to be repurchased from Owner.
3. TERMINATION OF THE REPURCHASE RIGHT. The Repurchase Right shall
terminate with respect to any Unvested Shares for which it is not timely
exercised under Paragraph D.2. In addition, the Repurchase Right shall
terminate and cease to be exercisable with respect to any and all
Purchased Shares in which Participant vests in accordance with the
following Vesting Schedule:
Participant shall vest in two and twenty-two
hundredths percent (2.22%) of the Purchased Shares, and the
Repurchase Right shall concurrently lapse with respect to those
Purchased Shares, on .
Participant shall vest in the remaining ninety-seven
and seventy-eight hundredths percent (97.78%) of the Purchased
Shares, and the Repurchase Right shall concurrently lapse with
respect to those Purchased Shares, in a series of forty-four (44)
successive equal monthly installments upon Participant's
completion of each additional month of Service over the forty-four
(44)-month period measured from .
All Purchased Shares as to which the Repurchase Right lapses
shall, however, remain subject to (i) the First Refusal Right and
(ii) the Market Stand-Off.
4. RECAPITALIZATION. Any new, substituted or additional securities
or other property (including cash paid other than as a regular cash
dividend) which is by reason of any Recapitalization distributed with
respect to the Purchased Shares shall be immediately subject to the
Repurchase Right and any escrow requirements hereunder, but only to the
extent the Purchased Shares are at the time covered by such right or
escrow requirements. Appropriate adjustments to reflect such
distribution shall be made to the number and/or class of Purchased Shares
subject to this Agreement and to the price per share to be paid upon the
exercise of the Repurchase Right in order to reflect the effect of any
such Recapitalization upon the Corporation's capital structure; PROVIDED,
however, that the aggregate purchase price shall remain the same.
5. CORPORATE TRANSACTION.
(a) The Repurchase Right shall automatically terminate in its
entirety, and all the Purchased Shares shall vest in full, immediately
prior to the consummation of any Corporate Transaction, except to the
extent the Repurchase Right is to be assigned to the successor entity in
such Corporate Transaction.
<PAGE>
(b) To the extent the Repurchase Right remains in effect
following a Corporate Transaction, such right shall apply to any new
securities or other property (including any cash payments) received in
exchange for the Purchased Shares in consummation of the Corporate
Transaction, but only to the extent the Purchased Shares are at the time
covered by such right. Appropriate adjustments shall be made to the
price per share payable upon exercise of the Repurchase Right to reflect
the effect of the Corporate Transaction upon the Corporation's capital
structure; PROVIDED, however, that the aggregate purchase price shall
remain the same. The new securities or other property (including any
cash payments) issued or distributed with respect to the Purchased Shares
in consummation of the Corporate Transaction shall be immediately
deposited in escrow with the Corporation (or the successor entity) and
shall not be released from escrow until Participant vests in such
securities or other property in accordance with the same Vesting Schedule
in effect for the Purchased Shares.
(c) The Repurchase Right may also terminate on an accelerated
basis, and the Purchased Shares shall immediately vest in full, in
accordance with the terms and conditions of any special addendum attached
to this Agreement.
E. RIGHT OF FIRST REFUSAL
1. GRANT. The Corporation is hereby granted the right of first
refusal (the "First Refusal Right"), exercisable in connection with any
proposed transfer of the Purchased Shares in which Participant has vested
in accordance with the provisions of Article D. For purposes of this
Article E, the term "transfer" shall include any sale, assignment,
pledge, encumbrance or other disposition of the Purchased Shares intended
to be made by Owner, but shall not include any Permitted Transfer.
2. NOTICE OF INTENDED DISPOSITION. In the event any Owner of
Purchased Shares in which Participant has vested desires to accept a bona
fide third-party offer for the transfer of any or all of such shares (the
Purchased Shares subject to such offer to be hereinafter referred to as
the "Target Shares"), Owner shall promptly (i) deliver to the Corporation
written notice (the "Disposition Notice") of the terms of the offer,
including the purchase price and the identity of the third-party offeror,
and (ii) provide satisfactory proof that the disposition of the Target
Shares to such third-party offeror would not be in contravention of the
provisions set forth in Articles B and C.
3. EXERCISE OF THE FIRST REFUSAL RIGHT. The Corporation shall, for a
period of twenty-five (25) days following receipt of the Disposition
Notice, have the right to repurchase any or all of the Target Shares
subject to the Disposition Notice upon the same terms as those specified
therein or upon such other terms (not materially different from those
specified in the Disposition Notice) to which Owner consents. Such right
shall be exercisable by delivery of written notice (the "Exercise
Notice") to Owner prior to the expiration of the twenty-five (25)-day
exercise period. If such right is exercised with respect to all the
Target Shares, then the Corporation shall effect the repurchase of such
shares, including payment of the purchase price, not more than five (5)
business days after delivery of the Exercise Notice; and at such time the
certificates representing the Target Shares shall be delivered to the
Corporation.
Should the purchase price specified in the Disposition Notice be
payable in property other than cash or evidences of indebtedness, the
Corporation shall have the right to pay the purchase price in the form of
cash equal in amount to the value of such property. If Owner and the
Corporation cannot agree on such cash value within ten (10) days after
the Corporation's receipt of the Disposition Notice, the valuation shall
be made by an appraiser of recognized standing selected by Owner and the
Corporation or, if they cannot agree on an appraiser within twenty (20)
days after the Corporation's receipt of the Disposition Notice, each
shall select an appraiser of recognized standing and the two (2)
appraisers shall designate a third appraiser of recognized standing,
whose appraisal shall be determinative of such value. The cost of such
appraisal shall be shared equally by Owner and the Corporation. The
closing shall then be held on the LATER of (i) the fifth (5th) business
day following delivery of the Exercise Notice or (ii) the fifth (5th)
business day after such valuation shall have been made.
4. NON-EXERCISE OF THE FIRST REFUSAL RIGHT. In the event the
Exercise Notice is not given to Owner prior to the expiration of the
twenty-five (25)-day exercise period, Owner shall have a period of thirty
(30)
<PAGE>
days thereafter in which to sell or otherwise dispose of the Target
Shares to the third-party offeror identified in the Disposition Notice
upon terms (including the purchase price) no more favorable to such
third-party offeror than those specified in the Disposition Notice;
PROVIDED, however, that any such sale or disposition must not be effected
in contravention of the provisions of Articles B and C. The third-party
offeror shall acquire the Target Shares free and clear of the First
Refusal Right, but the acquired shares shall remain subject to the
provisions of Article B and Paragraph C.3. In the event Owner does not
effect such sale or disposition of the Target Shares within the specified
thirty (30)-day period, the First Refusal Right shall continue to be
applicable to any subsequent disposition of the Target Shares by Owner
until such right lapses.
5. PARTIAL EXERCISE OF THE FIRST REFUSAL RIGHT. In the event the
Corporation makes a timely exercise of the First Refusal Right with
respect to a portion, but not all, of the Target Shares specified in the
Disposition Notice, Owner shall have the option, exercisable by written
notice to the Corporation delivered within five (5) business days after
Owner's receipt of the Exercise Notice, to effect the sale of the Target
Shares pursuant to either of the following alternatives:
(a) sale or other disposition of all the Target Shares to the
third-party offeror identified in the Disposition Notice, but in
full compliance with the requirements of Paragraph E.4, as if the
Corporation did not exercise the First Refusal Right; or
(b) sale to the Corporation of the portion of the Target Shares
which the Corporation has elected to purchase, such sale to be
effected in substantial conformity with the provisions of
Paragraph E.3. The First Refusal Right shall continue to be
applicable to any subsequent disposition of the remaining Target
Shares until such right lapses.
Owner's failure to deliver timely notification to the Corporation
shall be deemed to be an election by Owner to sell the Target Shares
pursuant to alternative (i) above.
6. RECAPITALIZATION/REORGANIZATION.
(a) Any new, substituted or additional securities or other
property which is by reason of any Recapitalization distributed
with respect to the Purchased Shares shall be immediately subject
to the First Refusal Right, but only to the extent the Purchased
Shares are at the time covered by such right.
(b) In the event of a Reorganization, the First Refusal Right
shall remain in full force and effect and shall apply to the new
capital stock or other property received in exchange for the
Purchased Shares in consummation of the Reorganization, but only
to the extent the Purchased Shares are at the time covered by such
right.
7. LAPSE. The First Refusal Right shall lapse upon the EARLIEST to
occur of (i) the first date on which shares of the Common Stock are held
of record by more than five hundred (500) persons, (ii) a determination
is made by the Board that a public market exists for the outstanding
shares of Common Stock or (iii) a firm commitment underwritten public
offering, pursuant to an effective registration statement under the 1933
Act, covering the offer and sale of the Common Stock in the aggregate
amount of at least ten million dollars ($10,000,000). However, the
Market Stand-Off shall continue to remain in full force and effect
following the lapse of the First Refusal Right.
F. SPECIAL TAX ELECTION
1. SECTION 83(b) ELECTION. Under Code Section 83, the excess of the
Fair Market Value of the Purchased Shares on the date any forfeiture
restrictions applicable to such shares lapse over the Purchase Price paid
for such shares will be reportable as ordinary income on the lapse date.
For this purpose, the term "forfeiture restrictions" includes the right
of the Corporation to repurchase the Purchased Shares pursuant to the
Repurchase Right. Participant may elect under Code Section 83(b) to be
taxed at the time the Purchased Shares are acquired, rather than when and
as such Purchased Shares cease to be subject to
<PAGE>
such forfeiture restrictions. Such election must be filed with the
Internal Revenue Service within thirty (30) days after the date of this
Agreement. Even if the Fair Market Value of the Purchased Shares on the
date of this Agreement equals the Purchase Price paid (and thus no tax
is payable), the election must be made to avoid adverse tax consequences
in the future. THE FORM FOR MAKING THIS ELECTION IS ATTACHED AS EXHIBIT
II HERETO. PARTICIPANT UNDERSTANDS THAT FAILURE TO MAKE THIS FILING
WITHIN THE APPLICABLE THIRTY (30)-DAY PERIOD WILL RESULT IN THE
RECOGNITION OF ORDINARY INCOME AS THE FORFEITURE RESTRICTIONS LAPSE.
2. FILING RESPONSIBILITY. PARTICIPANT ACKNOWLEDGES THAT IT IS
PARTICIPANT'S SOLE RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A
TIMELY ELECTION UNDER CODE SECTION 83(b), EVEN IF PARTICIPANT REQUESTS
THE CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER
BEHALF.
G. GENERAL PROVISIONS
1. ASSIGNMENT. The Corporation may assign the Repurchase Right
and/or the First Refusal Right to any person or entity selected by the
Board, including (without limitation) one or more shareholders of the
Corporation. If the assignee of the Repurchase Right is other than (i) a
wholly owned subsidiary of the Corporation or (ii) the parent corporation
owning one hundred percent (100%) of the Corporation's outstanding
capital stock, then such assignee must make a cash payment to the
Corporation, upon the assignment of the Repurchase Right, in an amount
equal to the excess (if any) of (i) the Fair Market Value of the
Purchased Shares at the time subject to the assigned Repurchase Right
over (ii) the aggregate repurchase price payable for the Purchased
Shares.
2. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement or
in the Plan shall confer upon Participant any right to continue in
Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any
Parent or Subsidiary employing or retaining Participant) or of
Participant, which rights are hereby expressly reserved by each, to
terminate Participant's Service at any time for any reason, with or
without cause.
3. NOTICES. Any notice required to be given under this Agreement
shall be in writing and shall be deemed effective upon personal delivery
or upon deposit in the U.S. mail, registered or certified, postage
prepaid and properly addressed to the party entitled to such notice at
the address indicated below such party's signature line on this Agreement
or at such other address as such party may designate by ten (10) days
advance written notice under this paragraph to all other parties to this
Agreement.
4. NO WAIVER. The failure of the Corporation in any instance to
exercise the Repurchase Right or the First Refusal Right shall not
constitute a waiver of any other repurchase rights and/or rights of first
refusal that may subsequently arise under the provisions of this
Agreement or any other agreement between the Corporation and Participant.
No waiver of any breach or condition of this Agreement shall be deemed to
be a waiver of any other or subsequent breach or condition, whether of
like or different nature.
5. CANCELLATION OF SHARES. If the Corporation shall make available,
at the time and place and in the amount and form provided in this
Agreement, the consideration for the Purchased Shares to be repurchased
in accordance with the provisions of this Agreement, then from and after
such time, the person from whom such shares are to be repurchased shall
no longer have any rights as a holder of such shares (other than the
right to receive payment of such consideration in accordance with this
Agreement). Such shares shall be deemed purchased in accordance with the
applicable provisions hereof, and the Corporation shall be deemed the
owner and holder of such shares, whether or not the certificates therefor
have been delivered as required by this Agreement.
H. MISCELLANEOUS PROVISIONS
1. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of California without resort to
that State's conflict-of-laws rules.
<PAGE>
2. PARTICIPANT UNDERTAKING. Participant hereby agrees to take
whatever additional action and execute whatever additional documents the
Corporation may deem necessary or advisable in order to carry out or
effect one or more of the obligations or restrictions imposed on either
Participant or the Purchased Shares pursuant to the provisions of this
Agreement.
3. AGREEMENT IS ENTIRE CONTRACT. This Agreement constitutes the
entire contract between the parties hereto with regard to the subject
matter hereof. This Agreement is made pursuant to the provisions of the
Plan and shall in all respects be construed in conformity with the terms
of the Plan.
4. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
5. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
inure to the benefit of, and be binding upon, the Corporation and its
successors and assigns and upon Participant, Participant's assigns and
the legal representatives, heirs and legatees of Participant's estate,
whether or not any such person shall have become a party to this
Agreement and have agreed in writing to join herein and be bound by the
terms hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.
GRAPHON CORPORATION
By: _______________________________
Title: ____________________________
Address: __________________________
, PARTICIPANT
Address:___________________________
<PAGE>
APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Issuance Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following
shareholder-approved transactions:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined
voting power of the Corporation's outstanding securities are
transferred to a person or persons different from the persons
holding those securities immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
F. CORPORATION shall mean GraphOn Corporation, a California
corporation, and any successor corporation to all or substantially all of the
assets or voting stock of GraphOn Corporation which shall by appropriate action
adopt the Plan.
G. DISPOSITION NOTICE shall have the meaning assigned to such term in
Paragraph E.2.
H. EXERCISE NOTICE shall have the meaning assigned to such term in
Paragraph E.3.
I. FAIR MARKET VALUE of a share of Common Stock on any relevant date,
prior to the initial public offering of the Common Stock, shall be determined by
the Plan Administrator after taking into account such factors as it shall deem
appropriate.
J. FIRST REFUSAL RIGHT shall mean the right granted to the
Corporation in accordance with Article E.
K. MARKET STAND-OFF shall mean the market stand-off restriction
specified in Paragraph C.3.
L. 1933 ACT shall mean the Securities Act of 1933, as amended.
M. OWNER shall mean Participant and all subsequent holders of the
Purchased Shares who derive their chain of ownership through a Permitted
Transfer from Participant.
N. PARENT shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
O. PARTICIPANT shall mean the person to whom shares are issued under
the Stock Issuance Program.
P. PERMITTED TRANSFER shall mean (i) a gratuitous transfer of the
Purchased Shares, PROVIDED AND ONLY IF Participant obtains the Corporation's
prior written consent to such transfer, (ii) a transfer of title to the
Purchased Shares effected pursuant to Participant's will or the laws of
intestate succession following Participant's death or (iii) a transfer to the
Corporation in pledge as security for any purchase-money indebtedness incurred
by Participant in connection with the acquisition of the Purchased Shares.
<PAGE>
Q. PLAN shall mean the Corporation's 1998 Stock Option/Stock Issuance
Plan attached hereto as Exhibit III.
R. PLAN ADMINISTRATOR shall mean either the Board or a committee of
the Board acting in its capacity as administrator of the Plan.
S. PURCHASE PRICE shall have the meaning assigned to such term in
Paragraph A.1.
T. PURCHASED SHARES shall have the meaning assigned to such term in
Paragraph A.1.
U. RECAPITALIZATION shall mean any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the Corporation's outstanding Common Stock as a class without the
Corporation's receipt of consideration.
V. REORGANIZATION shall mean any of the following transactions:
(i) a merger or consolidation in which the Corporation
is not the surviving entity,
(ii) a sale, transfer or other disposition of all or
substantially all of the Corporation's assets,
(iii) a reverse merger in which the Corporation is the
surviving entity but in which the Corporation's outstanding voting
securities are transferred in whole or in part to a person or
persons different from the persons holding those securities
immediately prior to the merger, or
(iv) any transaction effected primarily to change the
state in which the Corporation is incorporated or to create a
holding company structure.
W. REPURCHASE RIGHT shall mean the right granted to the Corporation
in accordance with Article D.
X. SEC shall mean the Securities and Exchange Commission.
Y. SERVICE shall mean the Participant's performance of services for
the Corporation (or any Parent or Subsidiary) in the capacity of an employee,
subject to the control and direction of the employer entity as to both the work
to be performed and the manner and method of performance, a non-employee member
of the board of directors or an independent consultant.
Z. STOCK ISSUANCE PROGRAM shall mean the Stock Issuance Program under
the Plan.
AA. SUBSIDIARY shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
BB. TARGET SHARES shall have the meaning assigned to such term in
Paragraph E.2.
CC. VESTING SCHEDULE shall mean the vesting schedule specified in
Paragraph D.3 pursuant to which Participant is to vest in the Purchased Shares
in a series of installments over the Participant's period of Service.
DD. UNVESTED SHARES shall have the meaning assigned to such term in
Paragraph D.1.
<PAGE>
EXHIBIT 99.8
ADDENDUM
TO
STOCK ISSUANCE AGREEMENT
The following provisions are hereby incorporated into, and are hereby
made a part of, that certain Stock Issuance Agreement dated _________________
(the "Issuance Agreement") by and between GraphOn Corporation (the
"Corporation") and ______________________________ ("Participant") evidencing the
shares of Common Stock purchased on such date by Participant pursuant to the
shares granted to him or her under the Corporation's 1998 Stock Option/Stock
Issuance Plan, and such provisions shall be effective immediately. All
capitalized terms in this Addendum, to the extent not otherwise defined herein,
shall have the meanings assigned to such terms in the Issuance Agreement.
INVOLUNTARY TERMINATION FOLLOWING
CORPORATE TRANSACTION
1. To the extent the Repurchase Right is assigned to the successor
corporation (or parent thereof) in connection with a Corporate Transaction, no
accelerated vesting of the Purchased Shares shall occur upon such Corporate
Transaction, and the Repurchase Right shall continue to remain in full force and
effect in accordance with the provisions of the Issuance Agreement. Participant
shall, over his or her period of Service following the Corporate Transaction,
continue to vest in the Purchased Shares in one or more installments in
accordance with the provisions of the Issuance Agreement. However, upon an
Involuntary Termination of Participant's Service within eighteen (18) months
following the Corporate Transaction, the Repurchase Right shall terminate
automatically and all the Purchased Shares shall immediately vest in full.
2. For purposes of this Addendum, the following definitions shall be
in effect:
An INVOLUNTARY TERMINATION shall mean the termination of
Participant's Service by reason of:
a. Participant's involuntary dismissal or discharge by the
Corporation for reasons other than for Misconduct, or
b. Participant's voluntary resignation following (A) a change
in his or her position with the Corporation (or Parent or Subsidiary
employing Participant) which materially reduces his or her level of
responsibility, (B) a reduction in Participant's level of compensation
(including base salary, fringe benefits and target bonuses under any
corporate-performance based incentive programs) by more than fifteen
percent (15%) or (C) a relocation of Participant's place of employment by
more than fifty (50) miles, provided and only if such change, reduction
or relocation is effected by the Corporation without Participant's
consent.
MISCONDUCT shall include the termination of Participant's Service
by reason or Participant's commission of any act of fraud, embezzlement or
dishonesty, any unauthorized use or disclosure by Participant of confidential
information or trade secrets of the Corporation (or any Parent or Subsidiary),
or any other intentional misconduct by Participant adversely affecting the
business or affairs of the Corporation (or any Parent or Subsidiary) in a
material manner. The foregoing definition shall not be deemed to be inclusive
of all the acts or omissions which the Corporation (or any Parent or Subsidiary)
may consider as grounds for the dismissal or discharge of the Participant or any
other individual in the Service of the Corporation (or any Parent or
Subsidiary).
IN WITNESS WHEREOF, GraphOn Corporation has caused this Addendum to be
executed by its duly-authorized officer as of the Effective Date specified
below.
GRAPHON CORPORATION
By: _______________________________
<PAGE>
Title: ____________________________
EFFECTIVE DATE: __________________, 199__
