Document:

exhbt41.htm

                                                                                                                                                                                                                                                                                                                                                                                                           Exhibit 4.1

GRAPHON CORPORATION

 

WARRANT TO PURCHASE COMMON STOCK

 

 

Warrant No.: IPCG-1

Number of Shares of Common Stock: 400,000

Date of Issuance: October 11, 2011 (“Issuance Date”)

_________________

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND, ACCORDINGLY, MAY NOT BE TRANSFERRED UNLESS (I) SUCH SECURITIES HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, (II) SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE 144, OR (III) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

_________________

 

GRAPHON CORPORATION, a Delaware corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, ipCAPITAL GROUP Inc., the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company, at the Exercise Price (as defined below) then in effect, upon surrender of this Warrant to Purchase Common Stock (including any Warrants to Purchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the Issuance Date (the “Exercisability Date”), but not after 11:59 p.m., New York time, on the Expiration Date (as defined below), Four Hundred Thousand (400,000) fully paid nonassessable shares of Common Stock (as defined below) (the “Warrant Shares”).  Except as otherwise defined herein, capitalized terms in this Warrant shall have the meanings set forth in Section 15.

 

1. EXERCISE OF WARRANT.

 

(a) Mechanics of Exercise.  Subject to the terms and conditions hereof, this Warrant may be exercised by the Holder on any day on or after the Exercisability Date, in whole or in part (but not as to fractional shares), by (i) delivery of a written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant and (ii) payment to the Company of an amount equal to the applicable Exercise Price multiplied by the number of Warrant Shares as to which this Warrant is being exercised (the “Aggregate Exercise Price”) in cash or wire transfer of immediately available funds (a “Cash Exercise”) (the items under (i) and (ii) above, the “Exercise Delivery Documents”).  The Holder shall not be required to surrender this Warrant in order to effect an exercise hereunder; provided, however, that in the event that this Warrant is exercised in full or for the remaining unexercised portion hereof, the Holder shall deliver this Warrant to the Company for cancellation within a reasonable time after such exercise.  On or before the first Trading Day following the date on which the Company has received the Exercise Delivery Documents (the date upon which the Company has

 

 

  

  

  

received all of the Exercise Delivery Documents, the “Exercise Date”), the Company shall transmit by facsimile or e-mail transmission an acknowledgment of confirmation of receipt of the Exercise Delivery Documents to the Holder and the Company’s transfer agent for the Common Stock (the “Transfer Agent”). The Company shall deliver any objection to the Exercise Delivery Documents on or before the second Trading Day following the date on which the Company has received all of the Exercise Delivery Documents.  On or before the second Trading Day following the date on which the Company has received all of the Exercise Delivery Documents (or, if later, the second Trading Day after the resolution of any reasonable objection by the Company to the Exercise Delivery Documents) (the “Share Delivery Date”), the Company shall, (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program (the “FAST Program”) and so long as the certificates therefor are not required to bear a legend regarding restriction on transferability, upon the request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit Withdrawal Agent Commission system, or (Y), if the Transfer Agent is not participating in the FAST Program or if the certificates are required to bear a legend regarding restriction on transferability, issue and dispatch by overnight courier to the address as specified in the Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise.  Upon the delivery of the Exercise Delivery Documents (or, if the Company reasonably objects to the Exercise Delivery Documents, upon the resolution of such objection), the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of delivery of the certificates evidencing such Warrant Shares, as the case may be.  If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a) and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exercise, then the Company shall as soon as practicable and in no event later than three Trading Days after any such submission and at its own expense, issue a new Warrant (in accordance with Section 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant has been and/or is exercised.  The Company shall pay any and all taxes and other expenses of the Company (including overnight delivery charges) that may be payable with respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder or an affiliate thereof.  The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof.

 

(b) Exercise Price.  For purposes of this Warrant, “Exercise Price” means $0.26, subject to adjustment as provided herein.

 

(c) Disputes.  In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed.

 

2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.  The Exercise Price and the number of Warrant Shares shall be adjusted from time to time as follows:

 

(a) Adjustment upon Subdivision or Combination of Common Stock.  If the Company at any time on or after the Issuance Date subdivides (by any stock split, stock dividend, recapitalization,

 

 

  

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reorganization, scheme, arrangement or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced and the number of Warrant Shares will be proportionately increased.  If the Company at any time on or after the Issuance Date combines (by any stock split, stock dividend, recapitalization, reorganization, scheme, arrangement or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of Warrant Shares will be proportionately decreased.  Any adjustment under this Section 2(a) shall become effective at the close of business on the date the subdivision or combination becomes effective.

 

(b) Consolidation, Merger, etc.  In the case of any consolidation of the Company with, or merger of the Company into, another corporation (other than a consolidation or merger in which the Company is the surviving corporation and which does not result in any reclassification or change of the outstanding shares of Common Stock, except a change as a result of a subdivision or combination of such shares or a change in nominal value), or in the case of a sale or conveyance to another corporation of the property of the Company as an entirety, then, in each such case, the Holder shall be entitled to purchase the kind and number of shares of capital stock and other securities and property receivable upon such consolidation, merger, sale or conveyance to the same extent as if the Holder had held the maximum number of shares of Common Stock acquirable upon exercise of this Warrant immediately prior to any such events at a price equal to the product of (x) the number of Warrant Shares issuable upon exercise of this Warrant and (y) the Exercise Price in effect immediately prior to the record date for such consolidation, merger, sale or conveyance as if the Holder had exercised this Warrant.

 

(c) Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.

 

3. VESTING.  This Warrant shall vest and become exercisable pursuant to the following schedule:

 

(i) This Warrant shall vest and become exercisable to the extent of 16-2/3% of the then underlying Warrant Shares upon each of the first, second and third anniversary dates, respectively, of the Issuance Date; and

 

(ii) This Warrant shall vest and become exercisable to the extent of 50% of the then underlying Warrant Shares only upon the Holder’s satisfactory performance and completion of all services that the Company elects in its sole discretion to utilize of the Holder pursuant to that certain IP services engagement letter dated October 11, 2011 by and between the Company and the Holder.

 

4. RIGHTS UPON DISTRIBUTION OF ASSETS.

 

(a) If the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the maximum number of shares of Common Stock acquirable upon exercise of this Warrant immediately before the date of which a record is taken for

 

 

  

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such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution.

 

5. NONCIRCUMVENTION.  The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation, Bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith comply with all the provisions of this Warrant and take all actions consistent with effectuating the purposes of this Warrant.

 

6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER.  Except as otherwise specifically provided herein, the Holder, solely in such Person’s capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in such Person’s capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which such Person is then entitled to receive upon the due exercise of this Warrant.  In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.

 

7. REISSUANCE OF WARRANTS.

 

(a) Transfer of Warrant.  If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company and deliver the completed and executed Assignment Form, in the form attached hereto as Exhibit B, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right to purchase the number of Warrant Shares being transferred by the Holder and, if less then the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.

 

(b) Lost, Stolen or Mutilated Warrant.  Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing the right to purchase the Warrant Shares then underlying this Warrant.

 

(c) Exchangeable for Multiple Warrants.  This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of such surrender; provided, however, that no Warrants for fractional shares of Common Stock shall be given.  Notwithstanding anything to the contrary herein, in no event shall the original Warrant be subdivided into more than three (3) separate Warrants and such new Warrants shall not be further subdivided.

 

 

  

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(d) Issuance of New Warrants.  Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added to the number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shall have the same rights and conditions as this Warrant.

 

8. NOTICES.  Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given as follows:

 

If to the Company to:

 

GraphOn Corporation

                5400 Soquel Avenue, Suite A2

                               Santa Cruz, California  95062

                               Telephone:  (800) 472-7466

                                Facsimile:    (831) 475-3017

                               Att:   Chief Financial Officer

 

and if to the Holder, to:

 

ipCapital Group, Inc.

                               400 Cornerstone Drive, Suite 325

                               Williston, Vermont  05495

                               Telephone:  (802) 872-3200

                                Facsimile:    (802) 288-9468

                               Att:  President

 

9. SUPPLEMENTS AND AMENDMENTS.  The Company may from time to time supplement or amend this Warrant in order to cure any ambiguity, to correct or supplement any provision contained herein which may be defective or inconsistent with any provision herein, provided, however, that the number of Warrant Shares subject to this Warrant, the Exercise Price and the Expiration Date may not be amended, and the right to exercise this Warrant may not be altered or waived, without the written consent of the Holder.

 

10. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.  This Warrant shall be governed by, and construed in accordance with, the internal laws of the State of New York, without reference to the choice of law provisions thereof.  The Company and, by accepting this Warrant, the Holder, each irrevocably submits to the exclusive jurisdiction of the courts of the State of New York located in New York County and the United States District Court for the Southern District of New York for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Warrant and the transactions contemplated hereby.  Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Warrant.  The Company and, by accepting this Warrant, the Holder, each irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court.  The Company and, by accepting this Warrant, the

 

 

  

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Holder, each irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.  EACH OF THE COMPANY AND, BY ITS ACCEPTANCE HEREOF, THE HOLDER HEREBY WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS WARRANT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

 

11. CONSTRUCTION; HEADINGS.  This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any person as the drafter hereof.  The headings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant.

 

12. DISPUTE RESOLUTION.  In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall submit the disputed determinations or arithmetic calculations via facsimile within two (2) Business Days of receipt of the Exercise Notice giving rise to such dispute, as the case may be, to the Holder.  If the Holder and the Company are unable to agree upon such determination or calculation of the Exercise Price or the Warrant Shares within three Business Days of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, within two (2) Business Days submit via facsimile (a) the disputed determination of the Exercise Price to an independent, reputable investment bank selected by the Company and approved by the Holder, which approval shall not be unreasonably withheld, or (b) the disputed arithmetic calculation of the Warrant Shares to the Company’s independent, outside accountant.  The Company shall cause the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than ten Business Days from the time it receives the disputed determinations or calculations.  The prevailing party in any dispute resolved pursuant to this Section 12 shall be entitled to the full amount of all reasonable expenses, including all costs and fees paid or incurred in good faith, in relation to the resolution of such dispute.  Such investment bank’s or accountant’s determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.

 

13. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.  The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual damages for any failure by the Company to comply with the terms of this Warrant.

 

14. TRANSFER.  Subject to applicable laws, this Warrant may not be offered for sale, sold, transferred or assigned without the consent of the Company, such consent not to be unreasonably withheld, conditioned or delayed.

 

15. CERTAIN DEFINITIONS.  For purposes of this Warrant, the following terms shall have the following meanings:

 

(a) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

 

(b) “Common Stock” means (i) the Company’s shares of Common Stock, par value $0.0001 per share, and (ii) any share capital into which such Common Stock shall have been changed or any share capital resulting from a reclassification of such Common Stock.

 

 

  

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(c)  “Expiration Date” means the fifth anniversary of the Exercisability Date or, if such date falls on a day other than a Trading Day or on which trading does not take place on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded (a “Holiday”), the next date that is not a Holiday.

 

(d) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.

 

(e) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.

 

(f) “Principal Market” means the Over-the-Counter Bulletin Board.

 

(g) “Trading Day” means any day on which the Common Stock are traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock are then traded; provided that “Trading Day” shall not include any day on which the Common Stock are scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock are suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time).

 

 

[Signature Page Follows]

 

 

  

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IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.

 

GRAPHON CORPORATION

 

 

By:  /s/ Robert Dilworth                                                      

                                                                                                                        Name: Robert Dilworth

                                                                                                                        Title: Chief Executive Officer

 

 

  

  

  

EXHIBIT A

 

 

EXERCISE NOTICE

 

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

 

GRAPHON CORPORATION

 

 

The undersigned holder hereby exercises the right to purchase _________________ of the shares of Common Stock (“Warrant Shares”) of GraphOn Corporation, a Delaware corporation (the “Company”), evidenced by the attached Warrant to Purchase Common Stock (the “Warrant”).  Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.

 

1.  Exercise Price.  The Holder intends that payment of the Exercise Price shall be made as a “Cash Exercise” with respect to [_________________] Warrant Shares; and shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of the Warrant.

 

2.  Delivery of Warrant Shares.  The Company shall deliver to the holder __________ Warrant Shares in accordance with the terms of the Warrant and, after delivery of such Warrant Shares, _____________ Warrant Shares remain subject to the Warrant.

 

 

Date: _______________ __, ______

 

 

________________________________

 

   Name of Registered Holder

 

 

By:  _____________________________

 

Name:

 

Title:

 

 

 

 

 

 

A-1

  

  

  

EXHIBIT B

 

 

ASSIGNMENT FORM

 

GRAPHON CORPORATION

 

(To assign the foregoing Warrant, execute this form and supply required information.  Do not use this form to purchase shares.)

 

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

Name:                                                                                     ____________________________

 

           (Please Print)

 

Address:                                                                           ____________________________

 

(Please Print)

 

Dated: _______________ __, ______

 

Holder’s Signature:                                           ________________________

 

Holder’s Address:                                ________________________

 

 

NOTE:  The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatever.  Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

 

 

B-1exhbt101.htm

Exhibit 10.1

 

ipCaptial Group Letterhead

October 11, 2011

Robert Dilworth

Chairman of the Board and Chief Executive Officer

GraphOn Corporation

5400 Soquel Avenue, Suite A-2

Santa Cruz, CA 95062

RE:  Engagement Letter for IP Strategy Execution

Dear Mr. Dilworth:

We understand that GraphOn Corporation (“GraphOn”) would like ipCapital Group, Inc. (“ipCG”) to assist in the execution of its IP strategy using our expert tools for invention, IP strengthening, and licensing.  We are delighted to be entering a long-term trusted advisor relationship with GraphOn that we believe will result in the creation of substantial business value.

This letter sets forth the terms of our proposed engagement and services ipCG will perform for GraphOn in the scope of work described below.  The scope of work is specifically designed to support execution of GraphOn’s IP strategy action items.

We will use GraphOn’s ipLandscape® frameworks as our guide for strategic invention activities that we expect will result in several dozen new patent applications filed over the course of approximately 12 months.  Our process will require close collaboration with GraphOn’s executive management, engineers, designers, and patent counsel in an efficient team-based approach.

If you have any questions or require additional information, please feel free to contact us at any time.  We are looking forward to working with you on this important effort.

  

  

  

SCOPE OF WORK

The table below summarizes the proposed scope of work for ipCG services required to assist in executing GraphOn’s IP strategy.  The work steps associated with each service are outlined in subsequent pages.

	
IP Strategy Action Items

	
ipCG Services

	
Initiation of Work

	
ipCG Cash Fee

	
Estimated GraphOn Resources Required

	  	
(see Detailed Work Steps section for more info.)

	
(to be confirmed based on mutually agreed upon work schedule)

	  	
(man-days; to be confirmed)

	
1. Systematically extract existing invention ideas across GraphOn's ipLandscape® framework #1 of 2

	
A. ipScan® (1-day)

	
Sept. 2011

	
$30,000

	
4

	
2. Systematically extract existing invention ideas and brainstorm new invention ideas across GraphOn's ipLandscape® framework #2 of 2

	
A. ipScan® (1-day)

	
Sept. 2011

	
$30,000

	
4

	
3. Conduct  expert invention session targeting the identified services opportunity areas on ipLandscape® framework #1 of 2

	
B. Invention on Demand® (1-day)

	
Nov. 2011

	
$30,000

	
4

	
4. Conduct invent-around session to legally circumvent key third-party IP, such as published technical documents

	
C. ipNavigationSM (1-day)

	
Oct. 2011

	
$30,000

	
4

	
5. Define a going-forward foreign patent filing strategy to extend the portfolio to additional global markets

	
N/A; coordinate with Patent Counsel ; use input of ipAnalytics® report

	
Sept. 2011

	
N/A

	
1

	
6. Add additional dependent claims to new patent applications

	
N/A; coordinate with Patent Counsel

	
Ongoing

	
N/A

	
1

	
7. Present selected GraphOn IP as an IP sale or licensing opportunity

	
D. ipValue ModelSM and ipStorySM

	
Dec. 2011

	
$40,000

	
1

	
8. Establish an ongoing market technology analysis and reporting program

	
E. ipProcess EngineeringSM

	
Dec. 2011

	
$10,000

	
4

	
9. Conduct systematic expert invention sessions targeting key competitive market intersections on GraphOn’s ipLandscape® frameworks

	
B. Invention on Demand® (2-day)

	
Oct. 2011

	
$60,000

	
7

	
10. Conduct  expert invention session targeting hardware opportunity areas

	
B. Invention on Demand® (1-day)

	
Nov. 2011

	
$30,000

	
4

	
11. Conduct  expert invention session targeting "white space" areas on the ipLandscape® frameworks

	
B. Invention on Demand® (1-day)

	
Jan. 2012

	
$30,000

	
4

	
12. Conduct invent-around sessions to legally circumvent additional key third-party IP, such as existing patents

	
C. ipNavigationSM (2-day)

	
Feb. 2012

	
$60,000

	
7

	
13. Develop an IP marketing strategy for communicating the strength and value of GraphOn's IP portfolio and strategic program to the market

	
F. Marketing ipStrategy®

	
March 2012

	
$20,000

	
1

	
TOTALS

	  	  	
$370,000

	
46

  

2

  

DETAILED WORK STEPS FOR IPCG SERVICES INCLUDED IN SCOPE OF WORK

This section outlines the work steps associated with each of the services ipCG will provide to GraphOn.  The scope of work described in the table above shows how each of the following services will be deployed to address GraphOn’s specific IP strategy action items.  Note that the ipScan®, Invention on Demand®, and ipNavigationSM processes will each be deployed multiple times according to the proposed scope of work.

A. Systematic Invention Extraction Sessions (ipScan® Process)

ipCG will use its proprietary ipScan® process to systematically extract existing invention concepts from GraphOn’s team and then help to broaden them across multiple thinking axes to capture potential IP across GraphOn’s ipLandscape® frameworks.  This potential IP will be documented and categorized to build a thorough inventory that can be reviewed for further IP documentation, such as invention disclosures, patent applications, enabled publications, or documented trade secrets.  Typically, a full-day ipScan® workshop captures 50-100 concepts.

Specifically, ipCG will:

	
1.  

	
Schedule a conference call with GraphOn to confirm the objectives and focus areas for the session

	
2.  

	
Facilitate a 1-day ipScan® invention extraction session with GraphOn’s key inventive team onsite in Concord, NH; San Jose, CA; or at ipCG’s office in Williston, VT

	
3.  

	
Develop brief titles and abstracts for the invention ideas captured in the session, along with the relevant ipLandscape® categories

	
4.  

	
Schedule a conference call with GraphOn and Patent Counsel as required to review the results and prioritize top invention ideas for further IP documentation

B. Expert Inventing Sessions (Invention on Demand® Process)

ipCG’s Invention on Demand® (IOD®) process identifies problems and elements that accelerate and direct new invention using creativity tools.  ipCG will use its proprietary process to assist GraphOn in the discovery of new potential inventions that have possible technical operability in strategic areas defined by the IP strategy and other inputs.  This process will expand the inventory of GraphOn’s existing invention ideas extracted through the ipScan® process.

Specifically, ipCG will:

	
1.  

	
Schedule a conference call with GraphOn to confirm the objectives and focus areas for the session

	
2.  

	
Facilitate a 1-day or 2-day (see Scope of Work) Invention on Demand® session with GraphOn’s key inventive team onsite in Concord, NH; San Jose, CA; or at ipCG’s office in Williston, VT

  

3

  

	
3.  

	
Develop brief titles and abstracts for the invention ideas captured in the session, along with the relevant ipLandscape® categories

	
4.  

	
Schedule a conference call with GraphOn and Patent Counsel as required to review the results and prioritize top invention ideas for further IP documentation

C. Systematic Invent-Around Sessions (ipNavigationSM Process)

ipCG will use its proprietary ipNavigationSM invent-around process to attempt to legally circumvent key third party IP, such as published technical documents and existing patents. This process results in a thorough inventory of invention concepts that can be reviewed for further IP documentation, such as invention disclosures, patent applications, enabled publications, or documented trade secrets.  Typically, a full-day ipNavigationSM session workshop captures 50-100 concepts.

Specifically, ipCG will:

	
1.  

	
Schedule a conference call with GraphOn to confirm the objectives and focus areas for the session

	
2.  

	
Review the subject IP documents to be targeted in the session (license agreement or patent applications)

	
3.  

	
Facilitate a 1-day or 2-day (see Scope of Work) ipNavigationSM invent-around session with GraphOn’s key inventive team onsite in Concord, NH; San Jose, CA; or at ipCG’s office in Williston, VT

	
4.  

	
Develop brief titles and abstracts for the invention ideas captured in the session, along with the relevant ipLandscape® categories

	
5.  

	
Schedule a conference call with GraphOn and Patent Counsel as required to review the results and prioritize top invention ideas for further IP documentation

D. Develop a Business Opportunity Presentation with Estimated Value of Selected GraphOn IP to a Potential Buyer/Licensee (ipValue ModelSM and ipStorySM Processes)

ipCG will develop a formal business opportunity presentation and valuation to use in a meeting with  a specific target company to explore a win-win IP sale or licensing arrangement involving selected GraphOn IP.  The objective is to generate additional revenue from an IP sale or licensing deal that GraphOn can use to help fund other strategic initiatives, investor returns, etc.

Specifically, ipCG will:

	
1.  

	
Schedule a 1 to 2-hour conference call with GraphOn to confirm the IP to be presented to a defined target company and discuss the specific value proposition of each piece of IP in a high-priority field of use

	
2.  

	
Use our ipValue ModelSM process to develop a targeted IP valuation to inform a potential term sheet with the defined company in a high-priority field of use

  

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3.  

	
Use our ipStorySM process to develop a targeted business opportunity presentation suitable for use in an introductory meeting with the defined company to explore a win-win IP licensing or sale deal

Generally, the ipValue ModelSM and ipStorySM presentation can be efficiently adapted to different target companies and/or fields of use with nominal additional effort.  Should the need arise, ipCG may assist GraphOn with further work on the deliverables under mutually agreed upon terms to be defined at a later date based on the specific business circumstances.

Note: GraphOn may elect to engage the services of the ipCapital Capital Licensing Company LLC (“ipCLC”) under a separate brokerage agreement to facilitate meetings and support IP-based transaction negotiations with VirnetX, using the results of ipCG’s consulting work product as a key input.

E. Develop an Ongoing Market Technology Analysis and Reporting (ipProcess EngineeringSM)

ipCG will facilitate the development of an ongoing market technology analysis and reporting program.  The objective is to define an efficient process for analyzing and reporting on key competitive, technology, and IP trends in the market to inform GraphOn’s strategic planning. Once the process is defined and set up, GraphOn will be responsible for managing the program on a regular basis, including working with internal staff and/or external experts as needed to carry out analyses and reporting.

Specifically, ipCG will:

	
1.  

	
Work with GraphOn to create a list of key companies to monitor on an ongoing basis, using market, technology, and IP information

	
2.  

	
Prioritize the list of companies based on a defined set of business criteria (e.g., revenue, market share, etc.)

	
3.  

	
Use the resulting list of companies to perform a web search to identify specific products that should be monitored (contemplating a web search of up to 25 companies and their relevant products)

	
4.  

	
Document a basic business process for analyzing key companies, and work with GraphOn to identify internal staff and/or external technical expert(s) who will be responsible for performing these activities on an ongoing basis

F. Develop an IP Marketing Communication Strategy for GraphOn’s IP (Marketing ipStrategy®)

ipCG will help GraphOn define an IP marketing strategy to communicate the strength and value of GraphOn's IP portfolio and strategic program to the market.  The objective is to raise awareness among customers, competitors, and investors that GraphOn is an innovation and IP leader in cloud computing, remote access, and collaboration technology.  ipCG can facilitate the development of an IP marketing strategy for GraphOn based on previous work (e.g., ipLandscape®, ipAnalytics® findings, etc.) and new invention and IP activities.  The IP marketing strategy may include: IP story presentation template for analysts, series of news releases linked to invention and IP milestones, insertion of IP-supported value propositions in general product sales and marketing materials, etc.

  

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Specifically, ipCG will:

	
1.  

	
Facilitate a 2 to 3-hour conference call with GraphOn’s executive management and key inventive team to define IP marketing goals and supporting tactics

	
2.  

	
Document the results in a brief summary presentation, and if applicable, an IP story presentation template tailored to the financial markets, plus up to three draft press releases

	
3.  

	
Schedule a conference call with GraphOn to review the results and confirm an execution plan for the IP marketing strategy, including timelines and owners

DELIVERABLES

	
Services

	
Deliverables

	
A. Systematic Invention Extraction Sessions (ipScan® Process)

	
ipCG will develop a single unified Excel worksheet to document titles, brief abstracts, ipLandscape® categorization, and tracking data for the invention ideas captured in the ipScan®, Invention on Demand®, and ipNavigationSM sessions.   ipCG will add new “invention records” to build the Excel worksheet as the sessions are completed.

	
B. Expert Inventing Sessions (Invention on Demand® Process)

	
C. Systematic Invent-Around Sessions (ipNavigationSM Process)

	
D. Develop a Business Opportunity Presentation with Estimated Value of Selected GraphOn IP to a Potential Buyer/Licensee (ipValue ModelSM and ipStorySM Processes)

	
The work products of this effort include: (1) targeted executive-level presentation of approximately 15-20 slides; and (2) detailed Excel file containing the IP valuation with documented assumptions and references to third-party research.

	
E. Develop an Ongoing Market Technology Analysis and Reporting Process (ipProcess EngineeringSM)

	
The work product of this effort is a brief presentation summarizing a recommended analysis and reporting process along with first-pass list of high-priority companies and specific products to monitor.

	
F. Develop an IP Marketing Communication Strategy for GraphOn’s IP (Marketing ipStrategy®)

	
The work product of this effort is a brief presentation summarizing a recommended IP market strategy, and if applicable, an IP story presentation template tailored to the financial markets, plus up to three draft press releases.

COLLABORATION WITH GRAPHON AND PATENT COUNSEL

ipCG will work closely with GraphOn to execute the proposed scope of work.  GraphOn’s involvement will include participation in invention sessions, follow-up calls, and other meetings as required to review ipCG’s work products and make final decisions regarding IP development.  We have provided first-pass estimates of GraphOn resources required (total man-days) for all steps in the Scope of Work.

ipCG’s Scope of Work does not include drafting invention disclosures or prosecuting patent applications.  ipCG does not practice law.  We will collaborate closely with GraphOn’s Patent Counsel to review our work products and transfer the information (e.g., invention abstracts generated by the ipScan®, Invention on Demand®, and ipNavigationSM invention processes) to Counsel and/or other designated IP documenters for inclusion in detailed invention disclosures and patent applications as required.

  

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However, should GraphOn need further assistance from ipCG to facilitate the documentation of invention disclosures, we can explore such an arrangement in a separate or expanded engagement.  For example, we could write full detailed invention disclosures (8-10 page documents, plus figures) at $4,000 per disclosure.  In this scenario, Patent Counsel would perform final editing to the disclosures we produce to create patent specifications, add claims, and file and prosecute patent applications.  Or, we could work on an hourly basis to assist Patent Counsel as needed to help accelerate patent filing activities; for example, develop expanded invention abstracts (1-2 page documents) and figures, facilitate invention interviews, etc.

Under the scope of this engagement, ipCG will perform the services below entitled “Professional Services and Fees” (hereinafter referred to as “Services”) in accordance with the following terms and conditions:

1.           Professional Services and Fees.  The total cash fee for the Services described in this engagement letter is $370,000.  In addition to the cash fees, GraphOn will issue to ipCG options or warrants to purchase 400,000 shares of GraphOn stock according to the terms and conditions defined in a separate Stock Option Agreement executed or intended to be executed by ipCG and GraphOn simultaneously herewith.

Should GraphOn request additional meetings, reports, analyses, or services outside the scope of the Services, the scope of such services and fees will be mutually agreed upon in writing between ipCG and GraphOn.

2.           Timing & Delivery.  Work can begin upon acceptance of the terms in this engagement letter.  ipCG and GraphOn shall mutually agree upon a project schedule.

3.           Resources.  Jed Cahill will serve as Senior Manager, overseeing the Services with GraphOn and providing guidance and support within the scope of the project.  Robert McDonald, Managing Director and President, will serve as Partner overseeing internal project management and related operations.  Additional company resources will be utilized as required. ipCG will work in a close, collaborative manner with GraphOn to execute the Services.  Because of the highly interactive nature of this work, the availability of GraphOn’s management and key technical personnel will be critical to the completion of the project.  GraphOn agrees to provide ipCG with its full assistance and cooperation including, but not limited to, providing all information as may be necessary or reasonable for ipCG to discharge its duties under this engagement letter and making the appropriate GraphOn personnel available to enable ipCG to obtain such GraphOn information.

4.           Compensation.  The aggregate cash fee, assuming all Services are performed as specified under the Scope of Work, is $370,000.00 (“Contract Total”).  GraphOn agrees to pay ipCG $30,000 upon execution of this engagement letter to initiate the first Service.  GraphOn agrees to pay the fee associated with each subsequent Service at initiation if GraphOn elects in its sole discretion to utilize such Service.  These prepayments will be applied to the final invoice(s).  GraphOn agrees to pay the balance of the Contract Total within ten (10) days from date of the invoice for Services, together with all reasonable out of pocket expenses estimated at 15% - 20% of fees.  Any single expense item that exceeds $1,000 must be pre-approved by GraphOn.  Services that extend longer than one month will be billed monthly, based on the estimated percentage completed.  GraphOn shall pay all charges and fees in U.S. Dollars.  Additionally, GraphOn agrees to pay any legal and/or travel expenses incurred by ipCG in relation to GraphOn (e.g., depositions, other legal proceedings, etc.).

  

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5.           Late Payment/Interest.  If payment in full is not received within 10 days from the invoice due date, as defined in mutually signed agreement(s), GraphOn is subject to interest fees, along with costs of collection incurred by ipCG, including but not limited to, collection agency fees and reasonable attorney’s fees (whether or not suit is brought to affect such collection). The interest fees will be calculated per day of actual delay, from the due date of invoice, and based on the maximum rate of interest or fee allowed by law.

6.           Confidential Nature.  ipCG and GraphOn agree that the terms and conditions of the Mutual Non-Disclosure Agreement executed or intended to be executed by ipCG and GraphOn simultaneously herewith (“NDA”), shall govern and control the manner in which Confidential Information (defined below) is protected.  The term Confidential Information shall have the meaning set forth in the NDA.

7.           Independent Contractor.  The parties are and shall be independent contractors to one another, and nothing herein shall be deemed to cause these services to create an agency, partnership, or joint venture between the parties.  Further, nothing in this engagement letter shall be interpreted or construed as creating or establishing the relationship of employer and employee between GraphOn and either ipCG or any employee of ipCG.

8.           Warranty.  The services are warranted to conform substantially to the services described in Section 1 entitled “Professional Services and Fees.” As the exclusive remedy for any breach of this warranty, ipCG shall reperform Services at no cost to GraphOn necessary to remedy or avoid any condition that results in the services not performing as warranted above. This warranty is conditioned upon receipt by ipCG of GraphOn’s written notice of all claimed breaches within sixty (60) days of the date of delivery of the services.  GRAPHON ACKNOWLEDGES THAT NO EXPRESS WARRANTIES HAVE BEEN MADE BY IPCG EXCEPT FOR THE LIMITED WARRANTY MADE IN THIS PARAGRAPH.  THIS LIMITED WARRANTY AND THE ASSOCIATED LIMITED REMEDY IS PROVIDED BY IPCG IN LIEU OF ALL OTHER WARRANTIES AND REMEDIES RELATED TO PERFORMANCE OF THE SERVICES.  IPCG DISCLAIMS ALL IMPLIED WARRANTIES, INCLUDING IMPLIED WARRANTIES OF TITLE, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

9.            EXCEPT IN THE EVENT OF IPCG’S NEGLIGENCE, WILLFUL MISCONDUCT, OR FRAUD, GRAPHON AGREES THAT IPCG’S AGGREGATE MONETARY LIABILITY FOR ALL CAUSES (REGARDLESS OF THE FORM OF ACTION) UNDER OR RELATING TO THIS AGREEMENT, WHETHER PRIOR OR SUBSEQUENT TO ITS EXECUTION OR TERMINATION, SHALL IN NO EVENT EXCEED THE TOTAL OF ALL AMOUNTS PAID TO IPCG BY GRAPHON FOR THE SERVICES GIVING RISE TO SUCH LIABILITY.  EXCEPT IN THE EVENT OF IPCG’S NEGLIGENCE, WILLFUL MISCONDUCT, OR FRAUD, GRAPHON WILL INDEMNIFY AND HOLD HARMLESS IPCG AND ITS PERSONNEL FROM ANY CLAIMS, LIABILITIES, COSTS, AND EXPENSES THAT ARISES, FOR ANY REASON, RELATED TO THE DELIVERY OF THE SERVICES PURSUANT TO THIS AGREEMENT.

10.           Taxes.   All charges for the sale or delivery of services purchased or licensed pursuant to this engagement letter, unless otherwise noted, are exclusive of applicable taxes. Excluding taxes on ipCG’s income, GraphOn agrees to pay any current or future applicable tax which ipCG may be required to pay or collect and which is imposed on the sale or delivery or services purchased or licensed in this engagement letter. Such taxes may include, but are not limited to, state and local privilege, excise, sales, services, withholding, and use.  GraphOn’s obligation to pay taxes includes any interest.  To the extent

  

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ipCG has not collected and remitted any applicable tax for GraphOn in reliance upon an erroneous representation of GraphOn as to its tax status, GraphOn’s obligation to pay taxes shall include any penalties imposed by any taxing authorities.

11.  Governing Law.  This engagement letter shall be construed in accordance with and governed for all purposes by the law of the State of Delaware, without regard to its principles regarding conflicts of law.  The parties hereto consent to the exclusive jurisdiction of U.S. District Courts sitting in the state of Delaware.

12.           Entire Agreement.  This engagement letter and the NDA reflect the entire agreement between ipCG and GraphOn related to the Services described in this letter.  It replaces and supersedes any previous proposals, correspondence, and understandings, whether written or oral.  The agreements of ipCG and GraphOn contained in this letter shall survive the completion of the Services or termination of this letter.  In the event of any inconsistency between the NDA and this letter, the terms of the NDA will govern unless this letter specifically references a paragraph of the NDA and expressly states that such paragraph is intended to be amended by this engagement letter.  Subject to the preceding sentence, any terms or conditions in this engagement letter which conflict with NDA shall have no force or effect.

  

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Please confirm your agreement with the foregoing by signing a copy of this letter and returning it to ipCG.  We are pleased to have this opportunity to be of service to you.

 

 

Very truly yours,

ipCapital Group, Inc.

	
 

By: /s/ Robert McDonald

	
 

Name:  Robert McDonald

	
 

Title:  President

	
 

Date: October 11, 2011

GraphOn agrees to, accepts, and acknowledges the foregoing terms and conditions pursuant to which ipCapital Group, Inc. will provide services to GraphOn.

	
 

By: /s/ Robert Dilworth

	
 

Name:  Robert Dilworth

	
 

Title:  Chief Executive Officer

	
 

Date:  October 11, 2011

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