SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
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[_]| | Preliminary Proxy Statement
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[X]|X| Definitive Proxy Statement
[_]|_| Definitive Additional Materials
[_]|_| Soliciting Material Pursuant to Rule 14a-12ss. 240.14a-12
GraphOn Corporation
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(Name of Registrant as Specified In Its Charter)
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GRAPHON CORPORATION
3130 Winkle Avenue
Santa Cruz, California 95065
NOTICE OF 2004 ANNUALSPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 30, 2004
To theBe Held On March 29, 2005
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
GraphOn Corporation:
NOTICE IS GIVEN that the 2004 annualCorporation, a Delaware corporation ("GraphOn"). The meeting of stockholders of GraphOn
Corporation will be
held on Tuesday, March 29, 2005 at 10:00 a.m., local time, at The Scottsdale
Marriott, at McDowell Mountain, 1670 N. Perimeter Drive, Scottsdale, Arizona on Thursday, December 30, 2004 at 2:00
p.m., local time,85260 for the following purposes:
I. To elect two directorspurpose of
considering and approving an amendment to Class IIGraphOn's Certificate of Incorporation
to increase the boardauthorized number of directorsshares of common stock from 45,000,000 to
serve
for a three-year term.
II. To ratify the selection of BDO Seidman, LLP195,000,000 shares, as our independent
auditors for the fiscal year ending December 31, 2004.
III. To transact suchwell as conducting any other business asthat may properly
come before the meeting.meeting or any adjournment thereof.
This item of business is more fully described in the Proxy Statement
accompanying this Notice.
The record date for the Special Meeting is February 22, 2005. Only
stockholders of record at the close of business on November 19, 2004
are entitled to notice of, and tothat date may vote at the
meeting or any adjournment thereof.
By Order of the Board of Directors
/s/ William Swain
-----------------WILLIAM SWAIN
William Swain, Secretary
Santa Cruz, California
November 19, 2004February 24, 2005
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You are cordially invited to attend the meeting in person. Whether or not you
planexpect to attend the meeting, please complete, date, sign and datereturn the
enclosed proxy whichas promptly as possible in order to ensure your representation at
the meeting. A return envelope (which is solicited by our board of directors, and promptly return itpostage prepaid if mailed in the pre-addressed envelope providedUnited
States) is enclosed for your convenience. Even if you have voted by proxy, you
may still vote in person if you attend the meeting. Please note, however, that
purpose. Any stockholder may revoke
hisif your shares are held of record by a broker, bank or her proxyother nominee and you
wish to vote at any time before the meeting, by giving written notice to such
effect, by submittingyou must obtain a subsequently dated proxy or by attending the meeting
and votingissued in person.your name from
that record holder.
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GRAPHON CORPORATION
3130 Winkle Avenue
Santa Cruz, California 95065
PROXY STATEMENT
INTRODUCTION
ThisFOR SPECIAL MEETING OF STOCKHOLDERS
March 29, 2005
QUESTIONS AND ANSWERS ABOUT THIS PROXY MATERIAL AND VOTING
Why am I receiving these materials?
We sent you this proxy statement and the enclosed proxy card because the
Board of Directors of GraphOn Corporation ("GraphOn") is being mailedsoliciting your proxy
to vote at the Special Meeting of Stockholders. You are invited to attend the
special meeting to vote on the proposal described in this proxy statement.
However, you do not need to attend the meeting to vote your shares. Instead, you
may simply complete, sign and return the enclosed proxy card.
We intend to mail this proxy statement and accompanying proxy card on or
about NovemberFebruary 24, 20042005 to all stockholders who held our common stockof record entitled to vote at the
special meeting.
Who can vote at the special meeting?
Only stockholders of record at the close of business on November 19,
2004 in connection with the solicitation by our board of directors of proxies
for the 2004 annual meeting of stockholdersFebruary 22, 2005
will be entitled to be heldvote at the Scottsdale
Marriott at McDowell Mountain, 1670 N. Perimeter Drive, Scottsdale, Arizona,special meeting. On this record date, there were
31,330,299 shares of common stock and 148,148 shares of Series A preferred
stock outstanding and entitled to vote.
Stockholder of Record: Shares Registered in Your Name
If on Thursday, December 30, 2004, at 2:00 p.m., local time.
Solicitation of Proxies
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Who is soliciting my voteFebruary 22, 2005, your shares were registered directly in your name
with our transfer agent, American Stock Transfer and how is the solicitation financed?
This proxy solicitation is being made by GraphOn Corporation. ProxiesTrust Company, then you are
being solicited by mail, and all expenses of preparing and soliciting such
proxies will be paid by us. We have also arranged for reimbursement of
brokerage houses, nominees, custodians and fiduciaries for the forwarding of
proxy materials to the beneficial owners of shares helda stockholder of record. ProxiesAs a stockholder of record, you may also be solicitedvote in person at
the meeting or vote by our directors, officers and employees, but such
persons willproxy. Whether or not be specifically compensated for such services.
When was the proxy statement mailed to stockholders?
This proxy statement was first mailed to stockholders on or about November
24, 2004.
Can I attend the meeting?
All persons or entities who held shares of our common stock on November 19,
2004 can attend the meeting. If your shares are held through a broker and you would likeplan to attend the meeting, please bringwe
urge you to fill out and return the enclosed proxy card to ensure your vote is
counted.
Beneficial Owner: Shares Registered in the Name of a copyBroker or Bank
If on February 22, 2005, your shares were not registered in your name, but
rather in an account at a brokerage firm, bank, dealer or other similar
organization, then you are the beneficial owner of shares held in "street name"
and these proxy materials are being forwarded to you by that organization. The
organization holding your brokerage
account statementis considered to be the stockholder of record
for purposes of voting at the special meeting. As a beneficial owner, you have
the right to direct your broker or an omnibus proxy (which can be obtained fromother agent on how to vote the shares in your
broker) and you will be permittedaccount. You are also invited to attend the special meeting. Issues Submitted for Voting
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On what issuesHowever, since you
are not the stockholder of record, you may not vote your shares in person at the
meeting unless you request and obtain a valid proxy from your broker or other
agent.
What am I voting?
o election of two directors to Class II of the board of directors to servevoting on?
There is only one matter scheduled for a three-year term;
o ratificationvote: the approval of a proposed
amendment to our Certificate of Incorporation to increase the selectionauthorized number
of BDO Seidman, LLP as our independent
auditors for the fiscal year ending December 31, 2004.
Our board does not now knowshares of any other matter that may be brought before
the meeting.
What if unanticipated business arises for vote at the meeting?
In the event that any other matter should come before the meeting, or any of
the director nominees should not be available for election, the persons named
as proxy will have authoritycommon stock from 45,000,000 to vote, in their discretion, all proxies not
marked to the contrary as they deem advisable.
Manner of Voting
- ----------------195,000,000 shares.
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How do I cast my vote?
SignFor each matter to be voted on, you may vote "For," "Against" or "Abstain"
from voting. The procedures for voting are fairly simple:
Stockholder of Record: Shares Registered in Your Name
If you are a stockholder of record, you may vote in person at the special
meeting or vote by proxy using the enclosed proxy card. Whether or not you plan
to attend the meeting, we urge you to vote by proxy to ensure your vote is
counted. You may still attend the meeting and vote in person if you have already
voted by proxy.
>> To vote in person, come to the special meeting and we will give you a ballot
when you arrive.
>> To vote using the proxy card, simply complete, sign and date eachthe enclosed
proxy card you receive and return it promptly in the prepaid
envelope.envelope provided. If you return
your signed proxy card to us before the annual meeting, we will vote your
shares as you direct.
Beneficial Owner: Shares Registered in the Name of Broker or Bank
If you are a beneficial owner of shares registered in the name of your
broker, bank or other agent, you should have received a proxy card and voting
instructions with these proxy materials from that organization rather than from
us. Simply complete and mail the proxy card to ensure that your vote is counted.
Alternatively, you may vote by telephone or over the Internet as instructed by
your broker or bank, if these options are offered by your broker or bank. To
vote in person at the special meeting, you must obtain a valid proxy from your
broker, bank or other agent. Follow the instructions from your broker or bank
included with these proxy materials or contact your broker or bank to request a
proxy form.
How many votes do I have?
You have one vote for each share of common stock you own as of February
22, 2005 and one thousand votes for each share of Series A preferred stock you
own as of February 22, 2005. For any other matter, you have one hundred votes
for each share of Series A preferred stock you own as of February 22, 2005.
What if I return a proxy card but do not mark the boxes
showing howmake a specific choice?
If you wish to vote,return a signed and dated proxy card without marking any voting
selection, your shares will be voted FOR"For" the electionamendment of our Certificate of
Incorporation. If any other matter is properly presented at the meeting, your
proxy (one of the director nominees as well as FOR the ratification of the selection of BDO
Seidman, LLP as our independent auditors for the fiscal year ending December
31, 2004.
What if myindividuals named on your proxy card) will vote your shares
are held through a bank or broker?
Stockholders who hold their shares through a bank or broker can also vote via
the Internet if this option is offered by the bank or broker.
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May I revoke my proxy?
Any stockholder may revokeusing his or her best judgment.
Who is paying for this proxy whether (s)he votessolicitation?
We will pay for the entire cost of soliciting proxies. In addition to
these mailed proxy materials, our directors and employees may also solicit
proxies in person, by mailtelephone or by other means of communication. Directors
and employees will not be paid any additional compensation for soliciting
proxies. We may also reimburse brokerage firms, banks and other agents for the
Internet,cost of forwarding proxy materials to beneficial owners.
What does it mean if I receive more than one proxy card?
If you receive more than one proxy card, your shares are registered in
more than one name or are registered in different accounts. Please complete,
sign and return each proxy card to ensure that all of your shares are voted.
Can I change my vote after submitting my proxy?
Yes. You can revoke your proxy at any time before the meeting, byfinal vote at the
meeting. If you are the record holder of your shares, you may revoke your proxy
in any one of three ways:
>> You may submit another properly completed proxy card with a later date.
4
>> You may send a written notice that you are revoking your proxy to such
effect received by usGraphOn's
Secretary at the address set forth above, attn: corporate
secretary, by delivery of a subsequently dated proxy, or by attending the
meeting and voting in person.
Who will count the votes?
Representatives of our transfer agent, American Stock Transfer & Trust
Company, will count the votes.
Is my vote confidential?
Proxy cards, ballots and voting tabulations that identify individual
stockholders are mailed or returned directly to the transfer company and are
handled in a manner that protects your voting privacy. Your vote will not be
disclosed except as needed to permit the transfer company to tabulate and
certify the vote and as required by law. Additionally, all comments written
on the proxy card or elsewhere will be forwarded to management. Your identity
will be kept confidential, unless you ask that your name be disclosed.
Votes Required
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How many shares can vote?
Only stockholders who owned our common stock as of November 19, 2004 (the
"record date") can cast votes on the proposals raised at this annual meeting.
The total number of shares of our common stock outstanding as of the record
date was 21,686,097. Our common stock is the only class of securities
entitled to vote, each share being entitled to one non-cumulative vote. A
list of stockholders of record as of the record date will be available at our
offices, 3130 Winkle Avenue, Santa Cruz, California, 95065, for a period of
ten days prior to95065.
>> You may attend the special meeting and vote in person. Simply attending the
meeting and at the meetingwill not, by itself, for examination by
any stockholder.
How manyrevoke your proxy.
If your shares are required for the adoption of a proposal?
A majority of the shares of our common stock outstanding and entitled to vote
as of November 19, 2004 constitutes a quorum and must be present at the
meeting, in personheld by your broker or by proxy, for the meeting to be held for the
transaction of business.
The Class II directors will be elected by a plurality of the votes cast at
the meeting. To be adopted the proposal to ratify the selection of BDO
Seidman, LLP as our independent auditors must receive the affirmative vote of
more than 50% of the shares voting on the matter.
If you submit a properly executed proxy card, even if you abstain from
voting, then you will be considered part of the quorum. Broker non-votes
(proxies received from brokers who, in the absence of specific voting
instructions from beneficial owners of shares held in brokerage name, have
declined to vote such shares) will be counted as part of the quorum. However,
broker non-votes will not be counted for purposes of determining whether a
proposal has been approved. Abstentions will be counted in the tabulation of
votes cast on each of the proposals presented. An abstention has the same
effectbank as a vote AGAINST a proposal.
Stockholder Proposals fornominee or agent, you should
follow the 2005 Annual Meeting
- -------------------------------------------------instructions provided by your broker or bank.
When are stockholder proposals due for the 2005next year's annual meeting due?
All stockholder proposals tomeeting?
To be considered for inclusion in next year's proxy statementmaterials, your
proposal must be submitted in writing to William Swain, our Secretary, at our
address, prior toby July 27, 2005. PROPOSAL I
ELECTION OF DIRECTORS
The membersIf you wish to submit a proposal that is not to be
included in next year's proxy materials or nominate a director, you must do so
by notifying our Secretary not fewer than 120 days prior to next year's annual
meeting. You are also advised to review our Bylaws, which contain additional
requirements about advance notice of stockholder proposals and director
nominations.
How are votes counted?
Votes will be counted by the inspector of election appointed for the
meeting, who will separately count "For," "Against" and "Abstain" votes and
broker non-votes. Abstentions and broker non-votes will be counted towards the
vote total for the proposal and will have the same effect as "Against" votes.
If your shares are held by your broker as your nominee (that is, in
"street name"), you will need to obtain a proxy form from the institution that
holds your shares and follow the instructions included on that form regarding
how to instruct your broker to vote your shares. If you do not give instructions
to your broker, your broker cannot vote your shares at the special meeting in
the absence of your voting instructions.
How many votes are needed to approve the proposal?
To be approved, the proposal to amend our Certificate of Incorporation to
increase the authorized number of shares of common stock from 45,000,000 to
195,000,000 shares, must receive a "For" vote from the majority of the voting
power of the outstanding shares either in person or by proxy. If you do not
vote, or "Abstain" from voting, it will have the same effect as an "Against"
vote. Broker non-votes will have the same effect as "Against" votes. In
connection with the private placement, Robert Dilworth, our Chairman and Chief
Executive Officer, William Swain, our Chief Financial Officer, and each member
of our board of directors has agreed to vote all shares of our capital stock
that he holds and that are divided into three classes. The
memberseligible to be voted at the special meeting in favor
of one class are elected at each annual meetingthe approval of the amendment to our Certificate of Incorporation set forth
in Proposal 1. As of February 2, 2005, the signatories to this voting agreement
held an aggregate of 327,780 shares of our common stock.
What is the quorum requirement?
A quorum of stockholders is necessary to hold office for a three-year term and until successorsvalid meeting. A quorum
will be present if a majority of such class members have
been elected and qualified. The respective membersthe voting power of each classthe outstanding shares are
set forth
below:
o Class I: Michael Volker (term expires 2006)
o Class II: Robert Dilworth and August Klein (two persons; current
nominees, terms expire 2004)
o Class III: Gordon M. Watson (one person; term expires 2005)
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Two directors are to be elected at this meeting to serve for a term of
three years or until their respective successors are elected and qualified.
Nominees for Electionrepresented by stockholders present at the 2004 Annual Meeting (to a three-year term expiring
in 2007)
The following sets forth information concerning the nominees:
Robert Dilworth, age 62, has served as one of our directors since July
1998 and was appointed Chairman in December 1999. In January 2002, Mr. Dilworth
was appointed Interim Chief Executive Officer upon the termination, by mutual
agreement, of our former Chief Executive Officer, Walter Keller. From 1987 to
1998, he served as the Chief Executive Officer and Chairman of the Board of
Metricom, Inc., a leading provider of wireless data communication and network
solutions. Prior to joining Metricom, from 1985 to 1988, Mr. Dilworth served as
President of Zenith Data Systems Corporation, a microcomputer manufacturer.
Earlier positions included Chief Executive Officer and President of Morrow
Designs, Chief Executive Officer of Ultramagnetics, Group Marketing and Sales
Director of Varian Associates Instruments Group, Director of Minicomputer
Systems at Sperry Univac and Vice President of Finance and Administration at
Varian Data Machines. Mr. Dilworth is also a director of eOn Communications, Sky
Pipeline and Yummy Interactive. Mr. Dilworth previously served as director of
Mobility Electronics and Get2Chip.com, Inc.
August P. Klein, age 67, has served as one of our directors since August
1998. Mr. Klein has been, since 1995, the founder, Chief Executive Officer and
Chairman of the Board of JSK Corporation. From 1989 to 1993, Mr. Klein was
founder and Chief Executive Officer of Uniquest, Inc., an object-oriented
application software company. From 1984 to 1988, Mr. Klein served as Chief
Executive Officer of Masscomp, Inc., a developer of high performance real time
mission critical systems and UNIX-based applications. Mr. Klein has served as
Group Vice President, Serial Printers at Data Products Corporation and President
and Chief Executive Officer at Integral Data Systems, a manufacturer of personal
computer printers. From 1957 to 1982, he was General Manager of the Retail
Distribution Business Unit and Director of Systems Marketing at IBM. Mr. Klein
is a director of QuickSite Corporation and has served as a trustee of the
Computer Museum in Boston, Massachusetts since 1988. Mr. Klein holds a B.S. in
Mathematics from St. Vincent College.
Current Director Whose Term Expires in 2007 (Class I)
Michael Volker, age 56, has served as one of our directors since July
2001. Mr. Volker has been, since 1996, Director of Simon Fraser University's
Industry Liaison Office. From 1996 to 2001, Mr. Volker was Chairman of the
Vancouver Enterprise Forum, a non-profit organization dedicated to the
development of British Columbia's technology enterprises. From 1987 to 1996, Mr.
Volker was Chief Executive Officer and Chairman of the Board of Directors of RDM
Corporation, a publicly-listed company. RDM is a developer of specialized
hardware and software products for both Internet electronic commerce and paper
payment processing. From 1988 to 1992, Mr. Volker was Executive Director of BC
Advanced Systems Institute, a hi-tech research institute. Since 1982, Mr. Volker
has been active in various early stage businesses as a founder, investor,
director and officer. Mr. Volker, a registered professional engineer in the
Province of British Columbia, holds a Bachelor's and Master's degree from the
University of Waterloo.
Current Director Whose Term Expires in 2005 (Class III)
Gordon M. Watson, age 68, has served as one of our directors since April
2002. In 1997 Mr. Gordon founded Watson Consulting, LLC, a consulting company
for early stage technology companies, and has served as its President since its
inception. From 1996 to 1997 he served as Western Regional Director, Lotus
Consulting of Lotus Development Corporation. From 1988 to 1996, Mr. Watson held
various positions with Platinum Technology, Incorporated, most recently serving
as Vice President Business Development, Distributed Solutions. Earlier positions
include Senior Vice President of Sales for Local Data, Incorporated, President,
Troy Division, Data Card Corporation, and Vice President and General Manager,
Minicomputer Division, Computer Automation, Incorporated. Mr. Watson also held
various executive and director level positions with TRW, Incorporated, Varian
Data Machines, and Computer Usage Company. Mr. Watson holds a Bachelors of
Science degree in electrical engineering from the University of California at
Los Angeles and has taught at the University of California at Irvine. Mr. Watson
is also a director of DPAC Technologies, PATH Communications and SoftwarePROSe,
Inc.
4
Executive Officer that is not a Director
William Swain, age 62, has served as our Chief Financial Officer and
Secretary since March 2000. Mr. Swain was a consultant from August 1998 until
February 2000, working with entrepreneurs in the technology industry in
connection with the start-up and financing of new business opportunities. Mr.
Swain was Chief Financial Officer and Secretary of Metricom Inc., from January
1988 until June 1997, during which time he was instrumental in private
financings as well as Metricom's initial public offering and subsequent public
financing activities. He continued as Senior Vice President of Administration
with Metricom from June 1997 until July 1998. Prior to joining Metricom, Mr.
Swain held top financial positions with leading companies in the computer
industry, including Morrow Designs, Varian Associates and Univac. Mr. Swain
holds a Bachelors degree in Business Administration from California State
University of Los Angeles and is a Certified Public Accountant in the State of
California.
Executive officers are elected annually by our board to hold office until
the first meeting of the board following the next annual meeting of stockholders
and until their successors are chosen and qualified.
Board and Committee Meetings
During 2003, our board met a total of four times. All of our directors
attended all of the board and committee meetings during 2003, either in person or by electronic means. Our boardproxy. On the
record date, there were 31,330,299 shares of directors has established two committees;
an audit committeecommon stock and 148,148 shares
of Series A preferred stock outstanding and entitled to vote.
Your shares will be counted towards a compensation committee.
The dutiesquorum only if you submit a valid
proxy (or one is submitted on your behalf by your broker, bank or other nominee)
or if you vote in person at the meeting. Abstentions and responsibilitiesbroker non-votes will
be counted towards the quorum requirement. If there is no quorum, a majority of
the audit committee are described below
under "Report of Audit Committee." The audit committee, which is composed of
August P. Klein (committee chairman), Michael Volker and Gordon Watson, held
three meetings in 2003. The board of directors has determined that each membervotes present at the meeting may adjourn the meeting to another date.
How can I find out the results of the audit committee meetsvoting at the Nasdaq Marketplace Rule definition of
"independent" for audit committee purposes. The board of directors has also
determined that Mr. Klein meetsspecial meeting?
Preliminary voting results will be announced at the SEC definition of an "audit committee
financial expert."
The compensation committee reviews and approves the compensation and
benefits forspecial meeting. Final
voting results will be published in our executive officers, administers our stock plans and performs
other duties as may from time to time be determined by our board. The
compensation committee, which is composed of Robert Dilworth and August Klein,
held two meetings during 2003.
We do not have a nominating committee as the board has determined, given
its relatively small size, to perform this function as a whole. We do not
currently have a charter or written policy with regard to the nomination
process. At this time, we do not have a formal policy with regard to the
consideration of any director candidates recommended by our stockholders because
historically we have not received recommendations from our shareholders.
Qualifications for consideration as a board nominee may vary according to
the particular areas of expertise being sought as a complement to the existing
board composition. However, in making its nominations, the board of directors
consider, among other things, an individual's business experience, industry
experience, breadth of knowledge about issues affecting our company, time
available for meetings and consultation regarding company matters and other
particular skills and experience possessed by the individual.
Code of Ethics
We have a code of ethics that applies to all of our employees, including
our chief executive officer, chief financial officer and controller. The code of
ethics was filed as an exhibit to ourquarterly report on Form 10-K10-Q for the
year ended
December 31, 2003.
Stockholder Communication withfirst quarter of 2005.
5
PROPOSAL 1
APPROVAL OF INCREASE IN NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board Members
We maintain contact information for stockholders, both telephone and
email, on our website (www.graphon.com) under the heading "Contact Us." By
following the Contact Us link, aof Directors is requesting stockholder will be given accessapproval of an amendment
to our telephoneRestated Certificate of Incorporation to increase our authorized number
and mailing address as well as a link for providing email
correspondenceof shares of common stock from 45,000,000 shares to Investor/Public Relations. Communications sent195,000,000 shares.
The additional common stock to Investor/Public Relations and specifically marked as a communication for our
board will be forwarded to the board or specific membersauthorized by adoption of the board as
directed inamendment
would have rights identical our currently outstanding common stock. Adoption of
the stockholder communication. In addition, communications received
via telephone or mail forproposed amendment would not affect the board are forwarded torights of the board by oneholders of our
officers.
5
Board Member Attendance at Annual Meetings
Our boardcurrently outstanding common stock, except for effects incidental to increasing
the number of directors does not have a formal policy regarding attendance
of directors at our annual stockholder meetings. Robert Dilworth attended our
2003 annual meeting of stockholders.
Compensation of Directors
During the year ended December 31, 2003, directors who were not otherwise
our employees were compensated at the rate of $1,000 for attendance at each
meeting of our board, $500 for attendance at each meeting of a board committee,
and a $1,500 quarterly retainer. Additionally, outside directors are granted
stock options periodically, typically on a yearly basis. In the aggregate, our
outside directors received options to purchase 120,000 shares of our common stock during 2003outstanding, such as dilution of the
earnings per share and voting rights of current holders of common stock. If the
amendment is adopted, it will become effective upon the acceptance for filing of
a Certificate of Amendment of our Restated Certificate of Incorporation by the
Secretary of State of the State of Delaware.
In February 2005, we issued and sold to certain individuals and entities,
in a private placement, 148,148 shares of Series A preferred stock at an average exercisea price
per share of $0.18 per share.
Board Recommendation
THE BOARD UNANIMOUSLY RECOMMENDS$27.00, warrants to acquire 14,815 shares of Series A VOTE FOR THE ELECTION OF THE NOMINEES
TO SERVE AS CLASS II DIRECTORS.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information for the fiscal years ended
December 31, 2003, 2002 and 2001, concerning compensation we paid to our Chief
Executive Officer. No other executive officer's total annual salary and bonus
exceeded $100,000 for the year ended December 31, 2003
Long-term Compensation
Annual Compensation Awards Payouts
- ------------------ ------ ---------- --------- -------- ------------- ----------- ----------- --------------
Name and Restricted Securities LTIP
Principal Other Stock Underlying Payouts All Other
Position Year Salary Bonus Annual Compensation Awards Options Compensation
- ------------------ ------ ---------- --------- -------- ------------- ----------- ----------- --------------
Robert Dilworth 2003 $129,000 - - - 40,000 - -
Chairman of the 2002 $256,000 - - - 100,000 - -
Board and Chief 2001 - - - - 60,000 - -
Executive Officer
(Interim) (1)
- ------------------ ------ ---------- --------- -------- ------------- ----------- ----------- --------------
(1) Mr. Dilworth began as Chief Executive Officer (Interim) during January
2002. As an interim Chief Executive Officer, Mr. Dilworth is compensated
as a consultant and not an employee. Consequently, he is eligible to
receive compensation for his services as a director.
Option Grants in Last Fiscal Year
The following table shows thepreferred
stock option grants made to the executive
officer named in the Summary Compensation Table during the 2003 fiscal year:
Per
Number of Shares of Percent of Total Share Potential Realizable Value at
Common Stock Options Granted to Exercise Assumed Annual Rates of Stock
Underlying Options Employees Price Expiration Appreciation for Option Term
Name Granted (1) In Fiscal Year (2) Date 5% 10%
- --------------- ------------------- ------------------ -------- ---------- ------------ ------------
Robert Dilworth 40,000 88.9% $ 0.18 05/05/13 $93,600 $122,400
- -------------
(1) Options were immediately exercisable upon issuance to the optionee.
6
(2) Options were granted at an exercise price equalof $27.00 per share, exercisable for five years, and
warrants to the fair market valueacquire 81,477 shares of our commonSeries B preferred stock as determined by the closing sales price reported on the
Over-the-Counter Bulletin Board on the date of grant.
Fiscal Year-End Option Values
The following table shows information with respect to unexercised stock
options held by the executive officer named in the Summary Compensation Table as
of December 31, 2003. No options held by such individual were exercised during
2003.
Number of Shares of Common Value of Unexercised
Stock Underlying Unexercised In-the-Money Options
Options at December 31, 2003 (1) at December 31, 2003 (2)
Name Exercisable Unexercisable Exercisable Unexercisable
- --------------- ----------- ------------- ----------- -------------
Robert Dilworth 400,000 - $ 8,000 -
- ---------------
(1) Shares issued upon exercise of the options are subject to our repurchase,
which right lapses in 33 equal monthly installments beginning three months
after the date of the grant.
(2) The value of the in-the-money options was calculated as the difference
between theat an exercise
price of $40.00 per share, exercisable for five years. Upon the options and $0.20, the fair market value
of our common stock as of December 31, 2003, multiplied by the number of
in-the-money options outstanding.
Compensation Committee Interlocks and Insider Participation
During the year ended December 31, 2003, the compensation committee was
comprised of Robert Dilworth, our Interim Chief Executive Officer and Chairmaneffectiveness of
the Board, and August Klein, a non-employee director.
Certain Relationships and Related Party Transactions
On January 29, 2004, we completed a private placementCertificate of our commonAmendment submitted at the Special Meeting for stockholder
approval, each share of Series A preferred stock and common stock purchase warrants in which Mr. Orin Hirschman purchased
3,043,478will automatically convert into
100 shares of our common stock and each warrant will automatically convert into
a warrant to purchase that number of shares of common stock equal to the number
of shares of preferred stock subject to the warrant multiplied by 100. As a
result, of the 150,000,000 additional shares of common stock proposed to be
authorized, upon the effectiveness of the Certificate of Amendment,
approximately 14,814,800 will be issued to the holders of outstanding shares of
Series A preferred stock upon the automatic conversion of such shares. In
addition, upon the effectiveness of the Certificate of Amendment, all
outstanding warrants to purchase 1,521,739shares of Series A preferred stock and Series B
preferred stock will be converted into warrants to purchase shares of common
stock. Approximately 9,629,000 of the newly authorized shares will be reserved
for issuance upon the exercise of such common stock warrants.
If the Certificate of Amendment is not effective before July 1, 2005, the
holders of Series A preferred stock and Series B preferred stock will be
entitled to a 10% annual cumulative dividend that begins to accrue on such date.
In addition, one of our agreements with the private placement investors provides
that if we fail to use our best efforts to cause the Special Meeting of
Stockholders to take place within 90 days after the closing of the private
placement, we shall pay to the investors in the private placement a cash penalty
equal to 25% of the aggregate amount invested by each investor in the private
placement. If the meeting occurs as currently scheduled, no such penalty would
be payable.
In connection with the private placement, Messrs. Dilworth and Swain, as
well as each member of our board of directors, have agreed to vote all shares of
our capital stock that they hold and that are eligible to be voted at the
special meeting in favor of the approval of the amendment to our Certificate of
Incorporation set forth in this Proposal 1. As of February 2, 2005, the
signatories to this voting agreement held an aggregate of 327,780 shares of our
common stock.
In addition to the 31,330,299 shares of common stock (representingoutstanding on
February 22, 2005, the Board has reserved 6,042,900 shares for issuance upon
exercise of options, including options granted or to be granted under GraphOn's
stock option and stock purchase plans, and up to approximately 13,305,689
shares of common stock that may be issued upon exercise of warrants to purchase
our common stock.
Although at present our board of directors has no other plans to issue the
newly authorized shares of common stock, it desires to have the shares available
to provide additional flexibility to use its capital stock for business and
financial purposes in the aggregate 19.7%future. The additional shares may be used for various
purposes without further stockholder approval. These purposes may include:
raising capital; providing equity incentives to employees, officers or
directors; establishing strategic relationships with other companies; expanding
our business or product lines through the acquisition of other businesses or
products; and other purposes.
6
The additional shares of common stock that would become available for
issuance if the proposal is adopted could also be used by us to oppose a hostile
takeover attempt or to delay or prevent changes in control or management. For
example, without further stockholder approval, our board of directors could
adopt a "poison pill" that would, under certain circumstances related to an
acquisition of shares not approved by our board of directors, give certain
holders the right to acquire additional shares of common stock at a low price,
or our board of directors could strategically sell shares of common stock in a
private transaction to purchasers who would oppose a takeover or favor our
current board of directors. Although this proposal to increase the authorized
common stock has been prompted by business and financial considerations and not
by the threat of any hostile takeover attempt (nor is our board of directors
currently aware of any such attempts directed at us), nevertheless, stockholders
should be aware that approval of this proposal could facilitate future efforts
by us to deter or prevent changes in control, including transactions in which
our stockholders might otherwise receive a premium for their shares over then
current market prices.
The affirmative vote of the holders of a majority of the voting power of
the outstanding shares of common stock and preferred stock, voting together as a
single class, will be required to approve this amendment to our Restated
Certificate of November 19, 2004).Incorporation. As a condition ofresult, abstentions and broker non-votes will
have the sale, we
entered into an Investment Advisory Agreement with Mr. Hirschman, pursuant to
which we agreed that in the event we complete a transaction with a third party
introduced by Mr. Hirschman, we shall pay to Mr. Hirschman 5% of the value of
that transaction. The agreement expires on January 29, 2007.
REPORT OF AUDIT COMMITTEE
The audit committee operates under a written charter adopted by the board
of directors. The charter is attached to this proxy statementsame effect as Exhibit A. The
functions of the audit committee include the following:
o appointment of independent auditors, determination of their
compensation and oversight of their work;
o review the arrangements for and scope of the audit by
independent auditors;
o review the independence of the independent auditors;
o consider the adequacy and effectiveness of the accounting and
financial controls;
o pre-approve audit and non-audit services;
o establish procedures regarding complaints relating to
accounting, internal accounting controls, or auditing matters;
o review and approve any related party transactions; and
o discuss with management and the independent auditors our draft quarterly
interim and annual financial statements and key accounting and reporting
matters.
Management has the primary responsibility for the financial statements and
the reporting process, including the systems of internal controls, and the
independent auditors are responsible for auditing those financial statements in
7
accordance with generally accepted auditing standards and to issue a report
thereon. The committee's responsibility is to oversee the financial reporting
process on behalf of the board of directors and to report the result of their
activitiesnegative votes. With respect to the boardvote on this
Proposal 1, holders of directors.
In fulfilling its oversight responsibilities, the audit committee reviewed
the audited consolidated financial statements in the Annual Report on Form 10-K
with management, including a discussionSeries A preferred stock will have one thousand votes for
each share of both the quality and acceptability of
the accounting principles applied, the reasonableness of significant estimates
and judgments, critical accounting policies and accounting estimates resulting
from the application of these policies and the clarity of disclosures in the
financial statements. In addition, the audit committee discussed the rules under
The Sarbanes-Oxley Act of 2002 that pertain to the audit committee and the roles
and responsibilities of the audit committee members.
During the year ended December 31, 2003, GraphOn's independent certified
public accountants were BDO Seidman, LLP. BDO Seidman is responsible for
expressing an opinionSeries A preferred stock owned on the conformity of GraphOn's audited financial
statements with accounting principles generally accepted in the United States.
In addition to audit-related services, BDO Seidman also performed non-audit
related services that consisted primarily of tax services for GraphOn during
2003. The audit committee reviewed BDO Seidman's judgments of both the quality
and acceptability of the accounting principles applied by management and such
other matters that are required to be discussed with the audit committee under
audited standards generally accepted in the United States.
In overseeing the preparation of GraphOn's financial statements, the audit
committee met with both GraphOn's management and BDO Seidman, with and without
management being present, to review and discuss all financial statements prior
to their issuance and to discuss significant accounting issues. GraphOn's
management advised the audit committee that all financial statements were
prepared in accordance with accounting principles generally accepted in the
United States and that they complied with the rules of Sarbanes-Oxley. The audit
committee's review included discussions with BDO Seidman of matters required to
be discussed pursuant to Statement on Auditing Standards No. 61 (Communication
with Audit Committees) as well as matters relating to BDO Seidman's
independence, including the disclosures made to the audit committee as required
by the Independence Standards Board Standard No. 1 (Discussions with Audit
Committee).
On the basis of these reviews and discussions, the audit committee
recommended to the board of directors that it approve the inclusion of the
audited financial statements in GraphOn's Annual Report on Form 10-K for the
fiscal year ended December 31, 2003 for filing with the SEC.
The audit committee has also evaluated the performance of BDO Seidman,
including, among other things, the amount of fees paid to them for audit and
non-audit related services in 2003. Information related to BDO Seidman's fees
for 2003 is discussed below in the proxy statement under "Proposal II -
Ratification of Selection of Independent Auditors". Based on its evaluation, the
audit committee has selected BDO Seidman to serve as GraphOn's auditors for the
fiscal year ending December 31, 2004.
November 19, 2004 THE AUDIT COMMITTEE
August P. Klein, Chairman
Michael Volker
Gordon M. Watsonrecord date.
OUR BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 1.
7
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of November 19,
2004,February 3, 2005,
with respect to the beneficial ownership of shares of our common stock or
preferred stock held by: o(i) each director; o(ii) each person known by us to
beneficially own 5% or more of our common stock or preferred stock; o(iii) each
executive officer named in the Summary Compensation Table elsewherecontained in thisthe proxy
statement;statement for GraphOn's 2004 Annual Meeting of Stockholders; and o(iv) all
directors and executive officers as a group:group. Unless otherwise indicated, the
address for each stockholder is c/o GraphOn Corporation, 3130 Winkle Avenue,
Santa Cruz, California 95065.
8
Number ofBeneficial Ownership
-------------------------------------------------------------------------
Common Stock
Common Stock Preferred Stock Post-Conversion(2)
------------------------ ------------------------ ---------------------
Shares of CommonShares
Name and Address of Beneficially Percent of Beneficially Percent of
Beneficial Owner Stock Beneficially Owned (1) Class (%) Owned (1) Class (%) Percent of Class (%)
- ------------------------------------ --------------------------- ---------------------------------------- ------------ ---------- ------------ ---------- --------------------
Orin Hirschman (3)...... 4,565,217 13.90 45,552 27.89 18.54
6006 Berkeley Avenue
Baltimore, MD 21209
4,565,217 (2) 19.7%
Corel Corporation
1600 Carling Avenue
Ottawa, Ontario
K1Z 8R7, Canada 1,193,824 (3) 5.5%
Robert Dilworth 493,820 (4) 2.2%..... 693,820 2.17 - - 1.48
August P. Klein 285,760 (5) 1.3%..... 445,760 1.41 - - *
Michael Volker 200,700 (6)...... 366,200 1.16 - - *
Gordon Watson 120,000 (7)....... 280,000 * - - *
Ralph Wesinger (8)...... 4,830,207 15.41 - - 10.47
Crystal Bay Capital,LLC (9) 1,847,262 5.90 - - 4.00
60 Prospect Street
Woodside, CA 94062
IDT Capital, Inc. (10).. - - 55,555 33.33 11.57
520 Broad Street
Newark, NJ 07102
Ganot Corporation (11). - - 8,334 5.52 1.80
4000 Hollywood Blvd. #530
N Hollywood, FL 33021
Mazel D&K (12).......... - - 11,110 7.31 2.39
3666 Shannon Rd
Cleveland Hts., OH 44118
Hershel P. Berkowitz(13) 978,261 3.09 10,000 6.60 4.23
441 Yeshiva Lane, Apt. 1A
Baltimore, MD 21208
Jack M. Dodick (14)..... - - 8,845 5.85 1.90
535 Park Avenue
New York, NY 10021
Paul Packer (15)........ 1,043,478 3.29 27,778 17.65 8.06
60 Broad Street, 38th Floor
New York, NY 10004
Globis Capital Partners (15) 717,391 2.27 16,666 10.84 5.08
60 Broad Street, 38th Floor
New York, NY 10004
Anfel Trading Limited (16) - - 19,443 12.57 4.16
P.O. Box 3236
Ramat-Gan 52131, Israel
Griffin Securities Inc. (17) 93,750 * 22,222 14.29 5.14
17 State Street
New York, NY 10004
Cam Co (18)............. - - 13,888 9.09 2.98
466 Arbuckle Avenue
Cedarhurst, NY 11516
All current executive 2,382,780 7.14 - - 4.94
officers and directors
as a group (5 persons) 1,535,280 (8) 6.7%(19)
- ----------------------------------------------------------------------------------------------
*Denotes---------------------------
* Denotes less than 1%.
8
(1) As used in this table, beneficial ownership means the sole or shared power
to vote, or direct the voting of, a security, or the sole or shared power
to invest or dispose, or direct the investment or disposition, of a
security. Except as otherwise indicated, based on information provided by
the named individuals, all persons named herein have sole voting power and
investment power with respect to their respective shares of our common
stock, except to the extent that authority is shared by spouses under
applicable law, and record and beneficial ownership with respect to their
respective shares of our common stock. With respect to each stockholder,
any shares issuable upon exercise of all options and warrants held by such
stockholder that are currently exercisable or will become exercisable
within 60 days of November 19, 2004February 3, 2005 are deemed outstanding for computing
the percentage of the person holding such options, but are not deemed
outstanding for computing the percentage of any other person. Percentage
ownership of our common stock is based on 21,686,09731,332,247 shares of common
stock outstanding as of February 3, 2005. Percentage ownership of our
preferred stock is based on 148,148 shares of our Series A preferred stock
outstanding as of February 3, 2005. Upon the effectiveness of the
Certificate of Amendment that is the subject of Proposal 1, each share of
our Series A preferred stock will be converted into 100 shares of our
common stock and each warrant that is exercisable for shares of our Series
A or Series B preferred stock will be converted into a warrant exercisable
for that number of shares of our common stock equal to the number of
shares of Series A or Series B preferred stock subject to the warrant
multiplied by 100. The effects of the conversion of our preferred stock
into common stock are reflected in the "Common Stock Post-Conversion"
column of this table, but are not reflected in the "Common Stock" columns
of this table.
(2) Assumes the conversion of each share of our Series A preferred stock into
100 shares of our common stock and the conversion of each warrant that is
exercisable for shares of our Series A or Series B preferred stock into a
warrant exercisable for that number of shares of our common stock equal to
the number of shares of Series A or Series B preferred stock subject to
the warrant multiplied by 100. Percentage is based on 46,147,047 shares of
common stock outstanding as of November 19, 2004.
(2)post-conversion.
(3) Based on information contained in a Schedule 13D13D/A filed by Orin Hirschman
on February 10, 2004.17, 2005. Includes 1,521,739 shares of common stock issuable
upon the exercise of outstanding options.
(3) Based on information contained inwarrants. Also includes 30,368 shares of
Series A preferred stock held by AIGH Investment Partners, LLC ("AIGH")
and 15,184 shares of Series B preferred stock upon the exercise of a
Schedule 13D filedwarrant held by Corel Corporation
on June 26, 2000.AIGH. Mr. Hirschman is the managing member of AIGH and has
sole voting and dispositive power with respect to the shares held by AIGH.
(4) Includes 440,000640,000 shares of common stock issuable upon the exercise of
outstanding options.
(5) Includes 135,000295,000 shares of common stock issuable upon the exercise of
outstanding options.
(6) Includes 100,000260,000 shares of common stock issuable upon the exercise of
outstanding options.
(7) Includes 120,000280,000 shares of common stock issuable upon the exercise of
outstanding options.
(8) Based on information contained in a Schedule 13G filed by Mr. Wesinger
on February 10, 2005. Includes 1,215,0001,569,816 shares held in escrow pursuant
to the terms of an escrow agreement (the "NES Escrow Agreement") entered
into in connection with the acquisition by GraphOn of Network
Engineering Systems, Inc. ("NES"). For the duration of the escrow, Mr.
Wesinger has the right to vote, but not to dispose of, such shares.
Does not included 1,000,000 of common stock issuable upon the exercise
of an option, which is not exercisable within 60 days of February 3,
2005.
(9) Includes 185,625 shares held in escrow pursuant to the terms of the NES
Escrow Agreement. Nicholas Sprinkel is the managing member of Crystal Bay
Capital, LLC ("CBC") and has sole voting and dispositive power with
respect to the shares held by CBC. For the duration of the escrow, Mr.
Sprinkel has the right to vote, but not to dispose of, such shares.
(10) Based in part on information contained in a Schedule 13D filed by IDT
Capital, Inc. on February 15, 2005. Includes 18,518 shares of Series B
preferred stock issuable upon the exercise of a warrant. Howard Jonas
exercises sole voting and dispositive power with respect to the listed
shares.
(11) Includes 2,778 shares of Series B preferred stock issuable upon the
exercise of a warrant. Sisel Klurman exercises sole voting and dispositive
power with respect to the listed shares.
9
(12) Includes 3,703 shares of Series B preferred stock issuable upon the
exercise of a warrant. Reuven Dessler and Jack Koval exercise shared
voting and dispositive power with respect to the listed shares.
(13) Based in part on information contained in a Schedule 13G/A filed by Mr.
Berkowitz on February 17, 2005.Includes 326,087 shares of common stock
issuable upon the exercise of a warrant and 3,333 shares of Series B
preferred stock issuable upon the exercise of a warrant.
(14) Includes 2,948 shares of Series B preferred stock issuable upon the
exercise of a warrant.
(15) Mr. Packer is the Managing Member of Globis Capital Partners ("Globis")
and is the Managing Member of the general partner of the manager of Globis
Overseas Fund, Ltd. ("Globis Overseas"). Mr. Packer exercises sole voting
and dispositive power with respect to the shares beneficially owned by
Globis and Globis Overseas. Mr. Packer's beneficial ownership figures
include 5,555 shares of Series B preferred stock issuable upon the
exercise of a warrant held by Globis, 1,852 shares of Series B preferred
stock issuable upon the exercise of a warrant held by Globis Overseas,
11,111 shares of Series A preferred stock held by Globis and 3,704 shares
of Series A preferred stock held by Globis Overseas.
(16) Includes 12,962 shares of Series B preferred stock issuable upon the
exercise of a warrant. Tzvi Levy exercises sole voting and dispositive
power with respect to the listed shares.
(17) Includes 187,500 shares of common stock issuable upon the exercise of
warrants, 14,815 shares of Series A preferred stock issuable upon the
exercise of warrants and 7,407 shares of Series B preferred stock issuable
upon the exercise of warrants. Mr. Adrian Stecyk, the Chief Executive
Officer of Griffin Securities, exercises voting and investment power over
the shares held by this entity. Mr. Stecyk disclaims beneficial ownership
of the shares, except to the extent of his pecuniary interest therein.
(18) Includes 4,629 shares of Series B preferred stock issuable upon the
exercise of a warrant. Charles Alpert exercises sole voting and
dispositive power with respect to the listed shares.
(19) Includes 2,055,000 shares of common stock issuable upon the exercise of
outstanding options.
Compliance with Section 16(a) of Securities Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires our officers
and directors, as well as those persons who own more than 10% of our common
stock, to file reports of ownership and changes in ownership with the SEC. These
persons are required by10
HOUSEHOLDING OF PROXY MATERIALS
The SEC rule to furnish us with copies of all Section 16(a)
forms they file.
Based solely on our review of the copies of such forms, or written
representations from certain reporting persons that no such forms were required,
we believe that during the year ended December 31, 2003, all filing requirements
applicable to our officers, directors and greater than 10% owners of our common
stock were complied with.
9
PROPOSAL II
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
Our audit committee has selected BDO Seidman, LLP to audit our accounts
for the fiscal year ending December 31, 2004. Such firm, which has served as our
independent auditors since 1998, has reported to us that none of its members has
any direct financial interest or material indirect financial interest in our
company.
A representative of BDO Seidman, LLP is expected to attend the annual
meeting and will be afforded the opportunity to make a statement and/or respond
to appropriate questions from stockholders.
Fees for professional services provided by BDO Seidman, LLP in each of the
last two fiscal years, in each of the following categories are as follows:
Category 2003 2002
-------- ----------- -----------
Audit fees $ 105,000 $ 103,000
Audit -related fees - 4,700
Tax fees 25,500 12,800
Other fees - -
----------- ----------
Totals $ 130,500 $ 120,500
=========== ===========
Fees for audit services include fees associated with our annual audit, the
annual statutory audit of our former UK subsidiary, the reviews of our quarterly
reports on Form 10-Q, and assistance with and review of documents filed with the
Securities and Exchange Commission. Audit-related fees were incurred for
consultations regarding revenue recognition rules and interpretations as they
related to the financial reporting of certain transactions. Tax fees included
tax compliance and tax consultations.
The audit committee has adopted a policyrules that requires advance approval of
all audit, audit-related, tax servicespermit companies and other services performed by our
independent auditor. The policy providesintermediaries (e.g.,
brokers) to satisfy the delivery requirements for pre-approval by the audit committee
of specifically defined auditproxy statements and non-audit services. Unless the specific
service has been previously pre-approvedannual
reports with respect to that year,two or more stockholders sharing the audit
committee must approve the permitted service before the independent auditor is
engaged to perform it.
Board Recommendation
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF THE SELECTION
OF BDO SEIDMAN, LLP AS OUR INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING
DECEMBER 31, 2004.
ACCOMPANYING INFORMATION
Accompanying thissame address by
delivering a single proxy statement addressed to those stockholders. This
process, which is commonly referred to as "householding," potentially means
extra convenience for stockholders and cost savings for companies.
This year, a copynumber of brokers with account holders who are GraphOn
stockholders will be "householding" our proxy materials. A single proxy
statement will be delivered to multiple stockholders sharing an address unless
contrary instructions have been received from the affected stockholders. Once
you have received notice from your broker that they will be "householding"
communications to your address, "householding" will continue until you are
notified otherwise or until you revoke your consent. If, at any time, you no
longer wish to participate in "householding" and would prefer to receive a
separate proxy statement and annual report, on Form
10-Kplease notify your broker, direct
your written request to stockholders forWilliam Swain, our fiscal year ended December 31, 2003. Such annual
report includesSecretary, at our audited financial statements for the three fiscal years
ended December 31, 2003. No part of such annual report shall be regarded as
proxy-soliciting materialaddress or as a communication by means of which any
solicitation is being or is to be made.
10
EXHIBIT A
AUDIT COMMITTEE CHARTER
Organization. This charter governs the operationscontact
William Swain at (800) 472-7466. Stockholders who currently receive multiple
copies of the Audit Committee
(the "Committee")proxy statement at their address and would like to request
"householding" of GraphOn Corporation (the "Company").their communications should contact their broker.
11
OTHER MATTERS
The Committee shall
review and reassess the charter at least annually and recommend any changes to
the charter to the full Board of Directors knows of no other matters that will be presented
for consideration at the Annual Meeting. If any other matters are properly
brought before the meeting, it is the intention of the Company (the "Board"). The
Committee shall be comprisedpersons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
By Order of at least three directors determined by the Board
to meet the independence and financial literacy requirements of The Nasdaq Stock
Market, Inc. and applicable federal law. Appointment to the Committee, including
the designation of the Chair of the Committee and designation of any Committee
members as "audit committee financial experts," shall be made on an annual basis
by the full Board.
Statement of Policy. The Committee's purpose is to represent and provide
assistance to the Board of Directors
in fulfilling its oversight responsibility
to the stockholders, potential stockholders, the investment community and others
of the Company's accounting and financial reporting processes and the audits of
the Company's financial statements. In so doing, it is the responsibility of the
Committee to maintain free and open communication between the Committee, the
auditors and management of the Company. In discharging its oversight role, the
Committee is empowered to investigate any matter brought to its attention with
full access to all books, records, facilities and personnel of the Company. The
Committee shall have the authority to engage independent legal, accounting and
other advisers, as it determines necessary to carry out its duties. The
Committee shall have sole authority to approve related fees and retention terms
of such advisers.
Responsibilities and Processes. The primary responsibility of the
Committee is to oversee the Company's financial reporting process on behalf of
the Board and report the results of its activities to the Board. Management is
responsible for preparing the Company's financial statements, and the
independent auditors are responsible for auditing those financial statements.
The Committee, in carrying out its responsibilities, believes its policies and
procedures should remain flexible, in order to best react to changing conditions
and circumstances. The Committee should take the appropriate actions to set the
overall corporate "tone" for quality financial reporting, sound business risk
practices, and ethical behavior.
The following shall be the principal recurring processes of the Committee
in carrying out its oversight responsibilities. The processes are set forth as a
guide with the understanding that the Committee may supplement them as
appropriate.
o The Committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately
accountable to the Board and the Committee, as representatives of the
Company's stockholders.
o The Committee shall be directly responsible for the appointment,
compensation, retention and oversight of the work of the independent
auditors (including resolution of disagreements between management and the
independent auditors regarding financial reporting). The independent
auditors shall report directly to the Committee.
o The Committee shall ensure receipt from the independent auditors of a
formal written statement delineating all relationships between such
independent auditors and the Company or any other relationships that may
adversely affect their independence, and, based on such review, shall
assess their independence consistent with Independence Standards Board 1.
The Committee shall actively engage in a dialogue with the independent
auditors with respect to any disclosed relationships or services that may
impact their objectivity and independence and take, or recommend that the
Board take, appropriate action to oversee the independence of the
independent auditors.
o Annually, the Committee will review the experience and qualifications of
the key members of the independent auditors and the independent auditors'
quality control procedures.
A-1/S/ WILLIAM SWAIN
William Swain, Secretary
February 24, 2005
o The Committee shall review and pre-approve all audit services and all
permissible non-audit services. The Committee may delegate the authority
to grant pre-approvals to one or more designated members of the Committee
with any such pre-approval reported to the Committee at its next regularly
scheduled meeting.
o The Committee shall establish procedures for the receipt, retention and
treatment of complaints received by the Company regarding accounting,
internal accounting controls, or auditing matters, and the confidential,
anonymous submission by employees of concerns regarding questionable
accounting or auditing matters.
o The Committee shall discuss with the auditors the overall scope and plans
for their audits including the adequacy of staffing and compensation.
Also, the Committee shall discuss with management and the auditors the
adequacy and effectiveness of the accounting and financial controls,
including the Company's system to monitor and manage business risk, and
legal and ethical compliance programs. Further, the Committee shall meet
separately with the auditors, with and without management present, to
discuss the results of their examinations and any report prepared by the
auditors and delivered to the Committee.
o The Committee shall review and discuss with management and the independent
auditors (a) any material financial or non-financial arrangements of the
Company that do not appear on the financial statements of the Company,
and (b) any transaction with parties related to the Company.
o The Committee shall review the interim financial statements with
management and the independent auditors prior to the filing of the
Company's Quarterly Reports on Form 10-Q. Also, the Committee shall
discuss the results of the quarterly review and any other matters
required to be communicated to the Committee by the independent auditors
under generally accepted auditing standards.
o The Committee shall review with management and the independent auditors
the financial statements to be included in the Company's Annual Report on
Form 10-K (or the annual report to stockholders if distributed prior to
the filing of the Form 10-K), including their judgment about the quality,
not just acceptability, of accounting principles, the reasonableness of
significant judgments, and the clarity of the disclosures in the financial
statements. Also, the Committee shall discuss the results of the annual
audit and any other matters required to be communicated to the Committee
by the independent auditors under generally accepted auditing standards.
A-2
PROXY
GRAPHON CORPORATION
3130 Winkle Avenue
Santa Cruz, California 95065
This Proxy is Solicited on Behalf of the Board of Directors.PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF STOCHOLDERS
TO BE HELD ON MARCH 29, 2005
The undersigned hereby appoints Robert Dilworth and William Swain, as
Proxies, each with the power to appoint his substitute, and hereby authorizes
each of them, as attorneys and proxies of the undersigned, with full power of
substitution, to represent and vote as designated on the reverse side hereof,
all the shares of Common Stockstock of GraphOn Corporation (the "Company") held of
record bythat the
undersigned on November 19, 2004,may be entitled to vote at the AnnualSpecial Meeting of Stockholders of
GraphOn Corporation to be held at 3130 Winkle Avenue, Santa Cruz, California on
December 30, 2004 orTuesday, March 29, 2005 at 9:00 a.m. local time, and at any adjournment thereof.
This Proxy, when properly executed, will be voted in the manner directed byand all
postponements, continuations and adjournments thereof, with all powers that the
undersigned stockholder. If no direction is made,would possess if personally present, upon and in respect of the
following matters and in accordance with the following instructions, with
discretionary authority as to any and all other matters that may properly come
before the meeting.
[X] Please mark votes as in this proxy will be voted FOR
Proposals I and II.
(Continued and to be signed on the reverse side)
Annual Meeting of Stockholders
GRAPHON CORPORATION
December 30, 2004
Please date, sign and mail your proxy card in the envelope provided as soon as
possible
THE BOARD OF DIRECTORSexample.
MANAGEMENT RECOMMENDS A VOTE "FOR" PROPOSALS I AND II.
PLEASE SIGN, DATE AND RETURN PROMPTLYPROPOSAL 1.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR PROPOSAL
1, AS MORE SPECIFICALLY DESCRIBED IN THE ENCLOSED ENVELOPE. PLEASE MARK
YOUR VOTEPROXY STATEMENT. IF SPECIFIC
INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN BLUE OR BLACK INK AS SHOWN HERE [X]
I. Election of Directors: The nominees for the Board of Directors are listed
below.
NOMINEES:
[ ] FOR ALL NOMINEES [ ] Robert Dilworth
[ ] August Klein
[ ] WITHHOLD AUTHORITY
FOR ALL NOMINEES
[ ] FOR ALL EXCEPT
(See instructions below)
INSTRUCTIONS: To withhold authority to vote for any individual nominee(s),
mark "FOR ALL EXCEPT" and fill in the circle next to each
nominee you wish to withhold, as shown here: [X]ACCORDANCE THEREWITH.
FOR AGAINST ABSTAIN
II.1. To ratify the selection of BDO Seidman,approve an amendment to GraphOn's Certificate [ ] [ ] [ ]
LLP asof Incorporation to increase the Company's independent
auditors for the fiscal year ending
December 31, 2004.
III. To transact such other business as may properly come before the
meeting.
To change the address on your account, please check the box at right [ ]authorized number
of shares of common stock from 45,000,000
to 195,000,000 shares.
Please vote, date and indicate your new addresspromptly return
this proxy in the space provided above. Please note that
changes toenclosed return
envelope which is postage prepaid if
mailed in the registered name(s) on the account may not be submitted via this
method.
Signature of Stockholder _________________________ Date: ____________
Signature of Stockholder _________________________ Date: ____________
Note:United States.
Please sign exactly as your name appears
hereon. If stock is registered in the
names of two or names appear on this Proxy. When
shares are held jointly,more persons, each holder should
sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as such.Executors, administrators,
trustees, guardians and attorneys-in-fact
should add their titles. If the signer is a
corporation, please signgive full corporate
name byand have a duly authorized officer
giving full title as such. Ifsign, stating that if signer is a
partnership, please sign in partnership
name by authorized person.
Signature: Date:
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Signature: Date:
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