Xxxx Xxxxxxxxx
January 29, 2004
GraphOn Corporation
000 Xxxxxxxx Xxxxxx, Xxxxx X
Xxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
Fax Number: (000) 000-0000
Greetings:
1. This letter sets forth the terms of our agreement (the
"Agreement") concerning the compensation of Xxxx Xxxxxxxxx ("Xxxxxxxxx") for
services from time to time on a non-exclusive basis to GraphOn Corporation or
any of its direct or indirect affiliates ("GraphOn") in connection with the
introduction of GraphOn to any potential acquisitions (of assets or of or by
companies), strategic partners, merger partners or investors, or any direct or
indirect affiliate thereof (the "Targets"). GraphOn hereby agrees that in the
event a Transaction (as defined below) is consummated with or through a Target
introduced by Xxxxxxxxx, GraphOn shall pay to Xxxxxxxxx compensation (the
"Compensation") consisting of cash equal to 5% of the Value. A "Transaction"
shall mean any of various transactions in which a Target may be involved,
including, but not limited to, financings, acquisitions, mergers, joint
ventures, significant licenses and other business combinations or transactions,
but not including transactions in the ordinary course of GraphOn's business.
"Value" shall mean the aggregate purchase price or other consideration paid to
or by a Target or person introduced by the Target (each a "Transaction Partner")
in any Transaction including without limitation (i) the amount of any cash or
cash equivalents, (ii) the fair market value of any stock or the stated
principal amount of any securities issued by GraphOn or the Transaction Partner,
(iii) the stated principal amount of any debt issued or assumed by GraphOn or
the Transaction Partner in connection with the Transaction, (iv) the fair market
value of any non-competition, employment, consulting or similar arrangements
entered into in connection with the Transaction to the extent the compensation
provided therein exceeds reasonable compensation for services actually provided,
(v) the fair market value of any commission, licensing, royalty or similar
arrangements accruing as a result of a Transaction and (vi) the fair market
value of any other property exchanged by GraphOn and the Transaction Partner in
connection with the Transaction. The fair market value shall be determined in
good faith by the Board of Directors of GraphOn.
2. The Compensation shall be paid at the time GraphOn closes any
Transaction, except that any portion of Compensation due in respect of
installments or contingent payments of Value shall be paid to Xxxxxxxxx upon
receipt of such installment or contingent payment.
3. This Agreement shall be effective on the date hereof and shall
expire on the third anniversary of the date hereof. Notwithstanding anything
herein to the contrary, if GraphOn shall, within such period or within180 days
immediately following the termination of the three-year period provided above,
pay any consideration to, receive any consideration from, or consummate any
Transaction(s) with or through, any Transaction Partner, GraphOn shall also pay
Xxxxxxxxx Compensation as determined above.
4. Xxxxxxxxx shall be permitted full and complete access during
normal business hours and with reasonable prior notice to GraphOn to all books
and records of GraphOn necessary to permit Xxxxxxxxx to audit or verify the
accuracy of any Compensation. Xxxxxxxxx shall be responsible for any and all
costs of such verification or audit and for review of any determination of fair
market value, unless such verification, audit or review reveals that GraphOn has
underpaid Xxxxxxxxx by two percent or more for any applicable determination, in
which case GraphOn shall reimburse Xxxxxxxxx for all reasonable costs incurred
in connection with such verification, audit or review (including fees and costs
of independent accountants). In the event GraphOn disputes such verification,
audit or review, GraphOn shall retain a valuation expert to audit or verify the
accuracy of any Compensation and shall be responsible for any and all costs of
such expert. If Xxxxxxxxx disagrees with such expert's verification, audit or
review, such expert and Xxxxxxxxx shall designate a third, mutually acceptable
independent expert to audit or verify the accuracy of any Compensation, and the
determination of such third expert shall be binding on all parties. GraphOn and
Xxxxxxxxx shall each be responsible for fifty-percent of the costs of such third
expert. GraphOn shall pay to Xxxxxxxxx all amounts that are determined to be
payable to Xxxxxxxxx after such verification, audit or review within five (5)
days after the completion of such verification, audit or review. In addition,
GraphOn shall bear any costs of collection (including reasonable legal fees) of
Compensation and such fees.
5. Neither any advice rendered by Xxxxxxxxx nor any communication
from Xxxxxxxxx in connection with the services performed by Xxxxxxxxx pursuant
to this Agreement will be quoted, in whole or in part, nor will any such advice
or communication or the name of Xxxxxxxxx be referred to, in any report,
document release or other communication, whether written or oral, prepared,
issued or transmitted by GraphOn or any officer, director, stockholder,
employee, agent or representative of GraphOn without the prior written
authorization of Xxxxxxxxx.
6. (a) GraphOn agrees to indemnify and hold harmless Xxxxxxxxx, his
employees, legal counsel, agents and affiliates, (all of such persons being
hereinafter collectively referred to as the "Indemnified Parties") against any
and all losses, claims, damages, obligations, penalties, judgments, awards,
liabilities, costs, expenses and disbursements (and any and all actions, suits,
proceedings and investigations in respect thereof and any and all legal and
other costs, expenses and disbursements reasonably incurred in giving testimony
or furnishing documents in response to a subpoena or otherwise), including,
without limitation, the reasonable costs, expenses and disbursements, as and
when incurred, of investigating, preparing or defending any such action, suit,
proceeding or investigation (whether or not in connection with litigation in
which an Indemnified Party is a party), directly or indirectly caused by,
relating to, based upon, arising out of or in connection with (i) Xxxxxxxxx'x
acting for GraphOn, including, without limitation, any act or omission by an
Indemnified Party in connection with acceptance of or the performance or
nonperformance of obligations under this Agreement, as it may be amended from
time to time; (ii) any untrue statement or alleged untrue statement of material
fact contained in, or omissions or alleged omissions from, any information
furnished to an Indemnified Party, an investor, lender, provider of funding to
GraphOn or any party to a Transaction; or (iii) any Transaction, provided,
however, the foregoing indemnity shall not apply to any portion of any such
loss, claim, damage, obligation, penalty, judgment, award, liability, cost,
expense or disbursement to the extent it is found in a final judgment by a court
of competent jurisdiction (not subject to further appeal) to have resulted
primarily and directly from the willful misconduct or gross negligence of the
particular Indemnified Party. GraphOn also agrees that an Indemnified Party
shall not have any liability (whether direct or indirect, in contract or tort or
otherwise) to GraphOn or to any person claiming through GraphOn for or in
connection with the engagement of Xxxxxxxxx, except to the extent that any such
liability is found in a final judgment by a court of competent jurisdiction (not
subject to further appeal) to have resulted primarily and directly from
Xxxxxxxxx'x willful misconduct or gross negligence.
(b) The indemnity provisions of this Section 6 shall be in addition to any
liability GraphOn may otherwise have to any of the Indemnified Parties.
(c) If any action, suit, proceeding or investigation is commenced, as to
which an Indemnified Party proposes to demand indemnification, such Indemnified
Party shall notify GraphOn with reasonable promptness; provided, however, that
any failure by an Indemnified Party to notify GraphOn shall not relieve GraphOn
from its obligations hereunder. Each Indemnified Party shall have the right to
retain counsel of his or its own choice to represent him or it, and GraphOn
shall pay the fees, expenses and disbursements of such counsel; and such
counsel shall to the extent consistent with its professional responsibilities
cooperate with GraphOn and any counsel designated by GraphOn. GraphOn shall be
liable for any settlement of any claim against an Indemnified Party made with
GraphOn 's written consent, which consent shall not be unreasonably withheld.
GraphOn shall not, without the prior written consent of an Indemnified Party,
settle or compromise any claim, or permit a default or consent to the entry of
any judgment in respect thereof, unless such settlement, compromise or consent
includes, as an unconditional term thereof, the giving by the claimant to the
respective Indemnified Party of an unconditional release from all liability in
respect of such claim.
(d) In order to provide for just and equitable contribution, if a claim
for indemnification pursuant to these indemnification provisions is made but it
is found in a final judgment by a court of competent jurisdiction (not subject
to further appeal) that such indemnification may not be enforced in such case,
even though the express provisions hereof provide for indemnification in such
case, then GraphOn, on the one hand, and the respective Indemnified Party or
Indemnified Parties, as applicable on the other hand, shall contribute to the
losses, claims, damages, obligations, penalties, judgments, awards,
liabilities, costs, expenses and disbursements to which the indemnified persons
may be subject in accordance with the relative benefits received by GraphOn, on
the one hand, and the respective Indemnified Party or Indemnified Parties, as
applicable on the other hand, and also the relative fault of GraphOn, on the
one hand, and the respective Indemnified Party or Indemnified Parties, as
applicable on the other hand, in connection with the statements, acts or
omissions which resulted in such losses, claims, damages, obligations,
penalties, judgments, awards, liabilities, costs, expenses and disbursements
and the relative equitable considerations shall also be considered. No person
found liable for a fraudulent misrepresentation shall be entitled to
contribution from any person who is not also found liable for such fraudulent
misrepresentation. Notwithstanding the foregoing, the respective Indemnified
Party or Indemnified Parties, as applicable, shall not be obligated to
contribute any amount hereunder that exceeds the amount of fees previously
received by the respective Indemnified Party or Indemnified Parties, as
applicable, in connection with the foregoing.
(e) Neither termination nor completion of the engagement of Xxxxxxxxx
pursuant to the Agreement shall affect the provisions of this Section 6, which
shall remain operative and in full force and effect.
7. Upon completion of a Transaction, GraphOn shall pay or reimburse
Xxxxxxxxx'x reasonable expenses incurred in connection with performance of his
services hereunder, including without limitation travel expenses and the
reasonable fees and expenses of his outside counsel and experts; provided that
Xxxxxxxxx will obtain GraphOn's prior approval before incurring expenses in
excess of $2,000 in the aggregate for a single project for travel or retaining
experts or counsel.
8. Neither GraphOn nor Xxxxxxxxx shall make any public statement
about this Agreement or any transactions or services described herein
mentioning the other party without the prior written consent of the other
party, unless that party determines in good faith, on the advice of legal
counsel, that public disclosure is required by law, in which case that party
shall consult with the other party prior to making a statement.
9. GraphOn represents and warrants to Xxxxxxxxx that Xxxxxxxxx'x
engagement hereunder has been duly authorized and approved by GraphOn, and that
this Agreement has been duly executed and delivered by GraphOn and constitutes
a legal, valid and binding obligation of GraphOn. Xxxxxxxxx shall not be under
any legal obligation to introduce a Transaction. GraphOn shall not be under any
legal obligation to accept any Transaction initiated by Xxxxxxxxx and it may
refuse, in its sole discretion, for any reason or for no reason whatsoever, to
accept or close any such Transaction.
10. The parties hereto acknowledge and agree that Xxxxxxxxx is not
acting as an agent or a fiduciary of GraphOn or its stockholders in connection
with any services that may be performed hereunder.
11. Any advice rendered by Xxxxxxxxx hereunder is solely for the
benefit of XxxxxXx 's board of directors and may not be relied upon by any
other person.
12. This Agreement has been executed and delivered in the State of
New York and shall be governed by the laws of such state, without giving effect
to the conflict of laws rules thereunder. Each party hereby irrevocably
consents and submits to the jurisdiction of any New York State or United States
Federal Court sitting in the State of New York, County of New York, over any
action or proceeding arising out of or relating to this Agreement and
irrevocably consents to the service of any and all process in any such action
or proceeding by registered mail addressed to such party at his or its address
set forth above (or as otherwise noticed to the other party). Each party
further waives any objection to venue in New York and any objection to an
action or proceeding in such state and county on the basis of forum non
conveniens. Each party also waives any right to trial by jury.
13. This Agreement shall be binding upon, and enforceable against,
the successors and assigns of each of the undersigned; provided that this
Agreement may not be assigned by Xxxxxxxxx. Notwithstanding the foregoing,
Xxxxxxxxx may assign a portion of his Compensation as he determines in his sole
discretion.
14. This Agreement may be executed in counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument.
Please signify your agreement to the foregoing at the place indicated
below.
Cordially,
/s/ XXXX XXXXXXXXX
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Xxxx Xxxxxxxxx
Agreed to and accepted:
GRAPHON CORPORATION
By:/s/ X.X. XXXXXXXX
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