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Exhibit 10.1

 
GRAPHON CORPORATION

DIRECTOR SEVERANCE PLAN

SECTION 1.  INTRODUCTION

GraphOn Corporation Director Severance Plan (the “Plan”) is designed to provide
certain benefits to eligible terminating directors.

SECTION 2.  ELIGIBILITY AND PARTICIPATION

You become eligible to participate in the Plan if (i) you are a director of
GraphOn Corporation (the “Company”); (ii) you are notified in writing that you
are eligible to participate in the Plan; (iii) your services as a non-employee
director with the Company terminates due to an “Involuntary Termination” (as
hereinafter defined) or a “Constructive Termination” (as hereinafter defined)
within twelve (12) months following a “Designated Event” (as hereinafter
defined).  You are not eligible for benefits under the Plan if you are
terminated due to death, disability or any other reason other than an
Involuntary Termination or a Constructive Termination that occurs within twelve
(12) months following a Designated Event.

If you are eligible to participate in the Plan, you are automatically a
“Participant” in the Plan and may receive benefits as described
below.  Participation ends when you are no longer eligible to receive any Plan
benefits.

For purposes of this Plan, the following terms shall have the meanings set forth
below:

a.           “Cause” means any one of the following:

i.           your conviction of any felony or of a misdemeanor involving fraud,
dishonesty or moral turpitude,

ii.           your loss of any professional license required to perform your
duties at the Company, or entry of an order or judgment by a tribunal or agency
which has the effect of prohibiting you from performing your duties at the
Company,
 
iii.           your violation of any law or significant policy of the
Company  committed in connection with the performance of your duties, or your
violation of any other policy of the Company that would constitute grounds for
immediate dismissal in accordance with the terms of such policy, regardless of
whether within or outside the scope of your authority,
 
 
 

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iv.           your willful or intentional misconduct, recklessness or gross
negligence in the performance of your duties, regardless of whether within or
outside the scope of your authority at the Company,
 
v.           your failure or refusal to comply with a specific direction of the
person or persons you report to at the Company provided that to the extent such
failure or refusal is susceptible to cure, it is not cured to the best of your
ability within five (5) business days after the delivery of written notice of
such failure or refusal to you, or
 
vi.           you have engaged in an action or inaction which resulted in
a  material loss, damage or an injury to the Company.
 
b.           “Constructive Termination” means that you voluntarily terminate
your service with the Company (and all other entities that together with the
Company would be treated as a single “service recipient” for purposes of Section
409A of the Internal Revenue Code of 1986, as amended (the “Code”)) after any of
the following acts or omissions are undertaken without your express written
consent:

i.           a reduction by the Company in your annual director fee as in effect
immediately prior to a Designated Event; or

ii.           any failure by the Company to obtain the assumption of this Plan
by any successor or assign of the Company;

provided, however, that you do not resign your directorship unless and until you
have provided the Company with written notice of the acts or omissions that
constitute grounds for a Constructive Termination and the Company fails to cure
such acts or omissions within thirty (30) days after receiving such written
notice.

c.           “Designated Event” means any transaction or series of transactions
that constitute a change in the ownership or effective control of the Company,
or in the ownership of a substantial portion of the assets of the Company, as
defined in regulations promulgated under Section 409A of the Code.

d.           “Involuntary Termination” means your dismissal or discharge by the
Company (and all other entities that together with the Company would be treated
as a single “service recipient” for purposes of Section 409A of the Code) for
reasons other than for Cause.  The termination of your position as director will
not be deemed to be an “Involuntary Termination” if your termination occurs as a
result of your death or disability.

SECTION 3.  BENEFITS

As a Participant in the Plan, you are eligible to receive the following benefits
after your Constructive Termination or Involuntary Termination that occurs
within twelve (12) months following a Designated Event:
 
 
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a.           Stock Options.  Each outstanding stock option granted to you by the
Company prior to the Designated Event which remains outstanding immediately
prior to the occurrence of a Designated Event shall be fully vested and
exercisable as of the date of your Constructive Termination or Involuntary
Termination; provided, however, that if the Company’s successor does not assume
the Company’s stock options in connection with a Designated Event, your
outstanding stock options will become fully vested and exercisable immediately
prior to the occurrence of the Designated Event.  In addition, unless the
Company’s successor does not assume the Company’s stock options in connection
with a Designated Event, the time within which each outstanding stock option may
be exercised shall be the period beginning as of the date of your Constructive
Termination or Involuntary Termination and ending on the earlier of (i) the
tenth (10th) anniversary of the date such options were granted or (ii) the date
on which such options would have expired if you had remained in continuous
service as a non-employee director of the Company through such expiration date.

b.           Parachute Payments.  If any payment or benefit you would receive
under this Plan when combined with any other payment or benefit you receive
after the occurrence of the Designated Event that would constitute a “parachute
payment” within the meaning of Section 280G of the Code (a “Payment”) that, but
for this sentence, would be subject to the excise tax imposed by Section 4999 of
the Code (the “Excise Tax”), then such Payments shall be reduced (with any cash
Payments being reduced before any Payment attributable to the accelerated
vesting of stock options or any other non-cash Payment) to such lesser amount as
would result in no portion of the Payments being subject to the Excise Tax.

SECTION 4.  ADMINISTRATION AND OPERATION OF THE PLAN

The Company is the “plan sponsor” and the Board of Directors of the Company (the
“Board”) is the administrator of the Plan.  The Board has the sole discretion to
make such rules, regulations, interpretations of the Plan and computations and
shall take such other actions to administer the Plan as it may deem appropriate
in its sole discretion.  Such rules, regulations, interpretations, computations,
and other actions shall be conclusive and binding upon all persons.  The Board
may delegate any or all of its responsibilities hereunder to a committee
comprised of two or more directors of the Company (the “Committee”).  In
addition, the Board or the Committee may engage the services of such persons or
organizations to render advice or perform services with respect to its
responsibilities under the Plan as the Board or the Committee, as applicable
shall determine to be necessary or appropriate.  Such persons or organizations
may include (without limitation) actuaries, attorneys, accountants and
consultants.

SECTION 5.  BASIS OF PAYMENTS TO AND FROM THE PLAN
 
 
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All benefits under the Plan shall be paid by the Company.  The Plan shall be
unfunded and benefits hereunder shall be paid only from the general assets of
the Company.

SECTION 6.  AMENDMENT AND TERMINATION

The Company reserves the right to amend or terminate this Plan at any time;
provided, however, that this Plan may not be amended or terminated following the
occurrence of a Designated Event but shall, in any event, terminate on December
31, 2013 if a Designated Event has not occurred before that date.

SECTION 7.  NON-ALIENATION OF BENEFITS

No Plan benefit may be anticipated, alienated, sold, transferred, assigned,
pledged, encumbered or charged, and any attempt to do so will be void.

SECTION 8.  LEGAL CONSTRUCTION

This Plan shall be interpreted in accordance with the laws of the State of
California.
 
 
 
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