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
Filed by the Registrant [X] Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Under Rule 14a-12
GraphOn Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date of its
filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
GRAPHON CORPORATION
105 Cochrane Circle, Suite L
Morgan Hill, California 95037
NOTICE OF 2003 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 30, 2003
To the Stockholders of GraphOn Corporation:
NOTICE IS GIVEN that the 2003 annual meeting of stockholders of GraphOn
Corporation will be held at The Hilton Hotel, 6001 La Madrona Drive, Scotts
Valley, California, 95066, on Tuesday, December 30, 2003 at the hour of 10:00
a.m., PST, for the following purposes:
I. To elect one director to Class I of the board of directors to serve
for a three-year term.
II. To amend our 1998 Stock Option/Stock Issuance Plan to increase the
number of shares of common stock available thereunder from 3,655,400
to 4,455,400.
III. To ratify the selection of BDO Seidman, LLP as our independent
auditors for the fiscal year ending December 31, 2003.
IV. To transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on November 11, 2003
are entitled to notice of, and to vote at, the meeting or any adjournment
thereof.
/s/ William Swain
----------------------
William Swain
Secretary
Morgan Hill, California
November 14, 2003
Whether or not you plan to attend the meeting, please sign and date the enclosed
proxy, which is solicited by our board of directors, and promptly return it in
the pre-addressed envelope provided for that purpose. Any stockholder may revoke
his or her proxy at any time before the meeting by giving written notice to such
effect, by submitting a subsequently dated proxy, or by attending the meeting
and voting in person.
GRAPHON CORPORATION
105 Cochrane Circle, Suite L
Morgan Hill, California 95037
PROXY STATEMENT
INTRODUCTION
This proxy statement is being mailed on or about November 14, 2003 to all
stockholders who held our common stock at the close of business on November 11,
2003 in connection with the solicitation by our board of directors of proxies
for the 2003 annual meeting of stockholders to be held at The Hilton Hotel, 6001
La Madrona Drive, Scotts Valley, California, 95066, on Tuesday, December 30,
2003, at 10:00 a.m., PST.
Solicitation of Proxies
Who is soliciting my vote and how is the solicitation financed?
This proxy solicitation is being made by GraphOn Corporation. Proxies 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 held of record. Proxies
may also be solicited by our directors, officers and employees, but such
persons will 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
14, 2003.
Can I attend the meeting?
All persons or entities who held shares of our common stock on November 11,
2003 can attend the meeting. If your shares are held through a broker and you
would like to attend the meeting, please bring a copy of your brokerage
account statement or an omnibus proxy (which can be obtained from your
broker) and you will be permitted to attend the meeting.
Issues Submitted for Voting
On what issues am I voting?
o election of one director to Class I of the board of directors to serve
for a three-year term;
o amend our 1998 Stock Option/Stock Issuance Plan to increase the number
of shares of common stock available thereunder from 3,655,400 to
4,455,400; and
o ratification of the selection of BDO Seidman, LLP as our independent
auditors for the fiscal year ending December 31, 2003.
Our board does not now know 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 the
director nominee should not be available for election, the persons named as
proxy will have authority to vote, in their discretion, all proxies not
marked to the contrary as they deem advisable.
Manner of Voting
How do I cast my vote?
Sign and date each proxy card you receive and return it in the prepaid
envelope. If you return your signed proxy card but do not mark the boxes
showing how you wish to vote, your shares will be voted FOR the election of
the director nominee as well as FOR each of the other two proposals.
What if my 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 revoke his or her proxy, whether (s)he votes by mail or
the Internet, at any time before the meeting, by written notice to such
effect received by us 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
How many shares can vote?
Only stockholders who owned our common stock as of November 11, 2003 can cast
votes on the proposals raised at this annual meeting. The total number of
shares of our common stock outstanding as of the November 11, 2003 record
date was 16,618,459. 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 November 11, 2003 will be available at
our offices, 105 Cochrane Circle, Suite L, Morgan Hill, California 95037, for
a period of ten days prior to the meeting and at the meeting itself, for
examination by any stockholder.
How many 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 11, 2003 constitutes a quorum and must be present at the
meeting, in person or by proxy, for the meeting to be held for the
transaction of business.
The Class I director will be elected by a plurality of the votes cast at the
meeting. To be adopted the proposals to amend our 1998 Stock Option/Stock
Issuance Plan and 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
effect as a vote AGAINST a proposal.
Stockholder Proposals for the 2004 Annual Meeting
When are stockholder proposals for the 2004 annual meeting due?
All stockholder proposals to be considered for inclusion in next year's proxy
statement must be submitted in writing to William Swain, our Secretary, at
our address prior to July 13, 2004.
PROPOSAL I
ELECTION OF DIRECTORS
The members of our board of directors are divided into three classes. The
members of one class are elected at each annual meeting of stockholders to hold
office for a three-year term and until successors of such class members have
been elected and qualified. The respective members of each class are set forth
below:
o Class I: Michael Volker (current nominee; term expires 2003)
o Class II: Robert Dilworth and August Klein (two persons; terms expire 2004)
o Class III: Gordon M. Watson (one person; term expires 2005)
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One director is to be elected at this meeting to serve for a term of three
years or until his respective successor is elected and qualified.
Nominee for Election at the 2003 Annual Meeting (to a three-year term expiring
in 2006)
The following sets forth information concerning the nominee:
Michael Volker, age 54, has served as one of our directors since July
2001. Mr. Volker has been, since 1996, Director of the Industry Liaison Office,
which has primary responsibility for the transfer of technology at Simon Fraser
University. 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 1991 to 1996, Mr. Volker was
Chief Executive Officer and Chairman of the Board of Directors of RDM
Corporation, a publicly-listed company Mr. Volker founded in 1987. 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 Advances Systems Institute, a hi-tech research
institute, and currently continues as a Trustee of BC as well a member of
various charitable and educational boards. Prior to 1988, Mr. Volker had been
active in various early stage businesses as a founder, investor, director and
officer. Mr. Volker holds a Master of Applied Science and a Professional
Engineer designation from the University of Waterloo.
Current Directors Whose Terms Expire in 2004 (Class II)
Robert Dilworth, age 61, 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 66, has served as one of our directors since August
1998. Mr. Klein has been, since 1995, the founder, and Chairman of the Board of
JSK Corporation. Mr. Klein was also Chief Executive Officer of JSK Corporation
from 1995 to 2002. 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's College.
Current Director Whose Term Expires in 2005 (Class III)
Gordon M. Watson, age 67, 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. Mr. Watson is also a director of DPAC Technologies.
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 2002, our board met a total of eight times. All of our then
directors attended all of the board and committee meetings during 2002, either
in person or by electronic means.
We have established an audit committee that recommends the selection of
the independent auditors, reviews our annual audited financial statements and
oversees our system of internal controls. The audit committee currently consists
of three directors: Messrs. Klein, Volker and Watson. The audit committee met
twice during 2002.
We have established a compensation committee that reviews and approves the
compensation and benefits for 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 currently consists of two directors: Messrs.
Dilworth and Klein. The compensation committee met twice during 2002.
We have not established a nominating committee. Nominees for election as
directors are selected by our board.
Compensation of Directors
During the year ended December 31, 2002, 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.
Board Recommendation
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEE TO
SERVE AS A CLASS I DIRECTOR.
PROPOSAL II
AMENDMENT OF OUR 1998 STOCK OPTION/STOCK ISSUANCE PLAN
Our 1998 Stock Option/Stock Issuance Plan (the 1998 plan) is intended to
promote our interests by providing eligible persons with the opportunity to
acquire a proprietary interest, or otherwise increase their proprietary
interest, in us, as an incentive for them to remain in our service. The 1998
plan was adopted by our board on June 23, 1998 and approved by our stockholders
on June 23, 1998. Pursuant to the current terms of the 1998 plan, 3,655,400
shares of common stock may be issued to our officers and other employees, our
5
non-employee board members and independent consultants in our service. However,
in no event may any one participant in the 1998 plan receive option grants or
direct stock issuances for more than 278,800 shares of common stock in the
aggregate per calendar year. Our stockholders are being asked to approve an
amendment to the 1998 plan to increase the number of shares of common stock
available thereunder from 3,655,400 to 4,455,400.
The shares of common stock reserved for issuance under the 1998 plan are
made available from authorized but unissued common stock or from shares of
common stock reacquired by us, including shares repurchased by us on the open
market. Should an option expire, terminate for any reason prior to exercise in
full or be cancelled by us in accordance with the provisions of the 1998 plan,
the shares subject to the portion of the option not so exercised will be
available for subsequent issuance under the 1998 plan. Unvested shares issued
under the 1998 plan and subsequently repurchased by us will be added back to the
share reserve and will accordingly be available for subsequent issuance under
the 1998 plan.
As of November 7, 2003, options for 2,038,968 shares of common stock were
outstanding under the 1998 plan, options for 323,904 shares of common stock had
been exercised and an additional 283,540 shares had been issued directly under
the stock issuance program. Without giving effect to the approval of the
proposed amendment to the 1998 plan, 1,008,988 shares of common stock remained
available for future issuance under the 1998 plan as of November 7, 2003.
Included in this amount are options for 508,210 shares of common stock that were
tendered for exchange by various employees, under the terms of our July 2003
Offer to Exchange. Pursuant to the terms of the Offer to Exchange, we are
scheduled to grant a like number of options to the respective employees in
January 2004.
Our compensation committee has exclusive authority to administer the 1998
plan with respect to option grants and stock issuances made to our executive
officers and non-employee board members. Administration of the 1998 plan with
respect to all other eligible individuals may, at our board's discretion, be
vested in our compensation committee or any secondary committee made up of one
or more board members, or our board may retain such administrative authority.
The term "plan administrator," as used in this description of the 1998 plan,
will mean either our board, the compensation committee or any secondary
committee, to the extent each such entity is acting in its capacity as
administrator of the 1998 plan.
The 1998 plan is divided into two separate components:
o the option grant program under which eligible individuals may, at the
discretion of the plan administrator, be granted options to purchase
shares of common stock at an exercise price not less than 85% of
their fair market value on the grant date; and
o the stock issuance program under which eligible individuals may, at
the discretion of the plan administrator, be issued shares of common
stock directly through the purchase of vested or unvested shares at a
price not less than 85% of their fair market value at the time of
issuance or as a fully-vested bonus for past services rendered to us.
The shares subject to each option granted under the option grant program
and unvested shares issued under the stock issuance program will vest in one or
more installments over the recipient's period of service with us. However, no
vesting schedule will be at a rate less than 20% per year, with the initial
vesting to occur no later than one year after the grant date of the option or
the issue date of the unvested shares. No granted option may have a term in
excess of ten years, and each granted option will be subject to earlier
termination within a designated period following the optionee's cessation of
service with us.
The exercise price may be paid in cash or, in some circumstances, (i) in
shares of common stock or (ii) for vested shares, through a same-day sale
program, pursuant to which a designated brokerage firm effects the immediate
sale of those shares and pays over to us, out of the sale proceeds available on
the settlement date, sufficient funds to cover the exercise price for the
purchased shares. In addition, the plan administrator may provide financing to
one or more participants in connection with the exercise of their outstanding
options or the purchase of their unvested shares by allowing such individuals to
deliver a full-recourse, interest-bearing promissory note in payment of the
exercise or purchase price and any associated withholding taxes incurred in
connection with such exercise or purchase.
The plan administrator has the authority to effect the cancellation of
outstanding options under the option grant program in return for the grant of
new options for the same or different number of option shares with an exercise
price per share based upon the fair market value of the common stock on the new
grant date.
6
Our board may amend or modify the 1998 plan at any time. The 1998 plan
will terminate on June 22, 2007, unless sooner terminated by our board or in
connection with an acquisition of us in which the 1998 plan is not assumed by
the acquiring entity.
Assuming approval of the proposed amendment to the 1998 plan and after
giving effect thereto, as of December 30, 2003 there would be 1,808,988 shares
of common stock available for issuance under the 1998 plan. Included in this
amount are options for 508,210 shares of common stock that were tendered for
exchange by various employees, under the terms of our July 2003 Offer to
Exchange. Pursuant to the terms of the Offer to Exchange, we are scheduled to
grant a like number of options to the respective employees in January 2004.
Equity Compensation Plan Information. The following table sets
forth information related to all of our equity compensation
plans as of December 31, 2002:
Number of
Securities to be
Issued Upon Weighted Average Number of
Exercise of Exercise Price of Securities
Outstanding Outstanding Remaining
Options, Warrants Options, Warrants Available for
Plan Category and Rights and Rights Future Issuance
- ----------------------------- -------------------------- -------------------------- -------------------------
Equity compensation plans
approved by security
holders:
Stock option plans 2,557,508 $ 3.07 753,351
Employee stock (1) (1) (1)
purchase plan
- ----------------------------- -------------------------- -------------------------- -------------------------
Equity compensation plans
not approved by security
holders:
Stock option plan (2) 26,799 $ 1.52 373,201
- ----------------------------- -------------------------- -------------------------- -------------------------
Total 2,584,307 $ 3.05 1,126,552
- ----------------------------- -------------------------- -------------------------- -------------------------
<FN>
(1) Under terms of the employee stock purchase plan, employees who participate
in the plan are eligible to purchase shares of common stock. As of
December 31, 2002, 90,678 shares had been purchased through the plan, at
an average cost of $1.76 per share and 109,322 shares are available for
future purchase.
(2) On April 30, 2000 our board approved a supplemental stock option plan.
Participation in the supplemental plan is limited to those employees who
are, at the time of the option grant, neither officers nor directors. The
supplemental plan was initially authorized to issue options for up to
400,000 shares of common stock. The exercise price per share is subject to
the following provisions:
o The exercise price per share shall not be less than 85% of the fair
market value per share of common stock on the option grant date.
o If the person to whom the option is granted is a 10% shareholder,
then the exercise price per share shall not be less than 110% of the
fair market value per share of common stock on the option grant date.
All options granted are immediately exercisable by the optionee. The
options vest, ratably, over a 33-month period, however no options vest
until after three months from the date of the option grant. The exercise
price is immediately due upon exercise of the option. The supplemental
plan shall terminate no later than April 30, 2010.
</FN>
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Board Recommendation
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF OUR SHARES OF COMMON
STOCK PRESENT AND VOTING, IN PERSON OR BY PROXY, IS REQUIRED FOR APPROVAL OF
THIS PROPOSAL. OUR BOARD RECOMMENDS A VOTE FOR SUCH PROPOSAL.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information for the fiscal years ended
December 31, 2002, 2001, and 2000 concerning compensation we paid to our Chief
Executive Officer and our other executive officers whose total annual salary and
bonus exceeded $100,000 for the year ended December 31, 2002.
Annual Compensation | Long-term Compensation
-----------------------------------|-------------------------------------------------
| Awards Payouts
|---------------------- -----------
|Restricted Securities
Name and Other Annual | Stock Underlying LTIP All Other
Principal Position Year Salary Bonus Compensation | Awards Options Payouts Compensation
- ------------------ ------ ---------- --------- --------------|---------- ----------- ----------- --------------
Robert Dilworth 2002 $ 256,000 - - | - 100,000 - -
Chairman of the 2001 - - - | - 60,000 - -
Board and Chief 2000 - - - | - - - -
Executive Officer |
(Interim)(1) |
- ------------------ ------ ---------- --------- --------------|---------- ----------- ----------- --------------
William Swain 2002 $ 147,692 - - | - - - $ 2,000 (3)
Chief Financial 2001 $ 117,785 - - | - 135,000 - $ 1,000 (3)
Officer and 2000 $ 132,100 $ 28,715 - | - 245,000 - $ 1,000 (3)
Secretary (2) |
- ------------------ ------ ---------- --------- --------------|---------- ----------- ----------- --------------
<FN>
(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.
(2) Mr. Swain joined our company in March 2000.
(3) Company matching contribution to the 401(k) Plan.
</FN>
8
Option Grants in Last Fiscal Year
The following table shows the stock option grants made to the executive
officers named in the Summary Compensation Table elsewhere in this proxy
statement during the 2002 fiscal year:
Potential Realizable
Value at Assumed
Percent of Total Annual Rates of
Number of Shares of Options Granted to Per Share Stock Appreciation
Common Stock Underlying Employees Exercise Expiration for Option Term
Name Options Granted (1) In Fiscal Year Price (2) Date 5% 10%
- --------------- ----------------------- ------------------ --------- ---------- ---------------------
Robert Dilworth 100,000 10.5% $ 0.25 03/05/12 $ 327,549 $ 431,639
William Swain - - - - - -
- -------------
<FN>
(1) Options are immediately exercisable upon issuance to the optionee.
(2) Options were granted at an exercise price equal to the fair market value of
our common stock, as determined by the closing sales price reported on The
Nasdaq Stock Market on the date of grant.
</FN>
Fiscal Year-End Option Values
The following table shows information with respect to unexercised stock
options held by the executive officers named in the Summary Compensation Table
as of December 31, 2002. No options held by such individuals were exercised
during 2002.
Number of Shares of Common Value of Unexercised
Stock Underlying Unexercised In-the-Money Options
Options at December 31, 2002 (1) at December 31, 2002 (2)
----------------------------------- ----------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- --------------- ------------ ------------- ----------- -------------
Robert Dilworth 360,000 -- -- --
William Swain 380,000 -- -- --
- --------------
<FN>
(1) Shares issued upon exercise of the options are subject to GraphOn's
repurchase, which right lapses in 33 equal monthly installments beginning
three months after the date of the grant.
(2) The per share exercise price of each of the unexercised stock options set
forth in the table above exceeded $0.13, the fair market value of a share of
GraphOn's common stock as of December 31, 2002.
</FN>
Compensation Committee Interlocks and Insider Participation
During the year ended December 31, 2002, the compensation committee was
comprised of Robert Dilworth, our Interim Chief Executive Officer and Chairman
of the Board, and August Klein, a non-employee director.
REPORT OF AUDIT COMMITTEE
This report is submitted by the audit committee of the board of directors.
The audit committee is currently comprised of Messrs. Klein, Volker and Watson,
all of whom are non-employee directors of the Company and, aside from being a
director of the Company, each is otherwise independent of the Company as defined
by the SEC. The audit committee operates under a written charter adopted by the
Board of Directors.
The audit committee oversees the Company's financial reporting process on
behalf of the Board of Directors. Management has the primary responsibility for
the financial statements and the reporting process, including compliance with
accounting principles generally accepted in the United States and the legal
requirements of the Sarbanes-Oxley Act of 2002. 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 discussion of both the quality and acceptability of the accounting
principles applied, the reasonableness of significant estimates and judgments,
9
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
Sarbanes-Oxley that pertain to the audit committee and the roles and
responsibilities of the audit committee members.
During the year ended December 31, 2002, the Company's independent
certified public accountants were BDO Seidman, LLP. BDO Seidman is responsible
for expressing an opinion on the conformity of the Company'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 the Company during
2002. 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 the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2002 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 2002. Information related to BDO Seidman's fees
for 2002 is discussed below in the proxy statement under "Proposal III -
Ratification of Selection of Independent Auditors". Based on its evaluation, the
audit committee has recommended that the Company retain BDO Seidman to serve as
the Company's auditors for the fiscal year ended December 31, 2003.
THE AUDIT COMMITTEE
November 6, 2003
August P. Klein, Chairman
Michael Volker
Gordon M. Watson
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information, as of November 7,
2003, based upon information obtained from the persons named below, with respect
to the beneficial ownership of shares of our common stock held by:
o each director;
o each person known by us to beneficially own 5% or more of our
common stock;
o each executive officer named in the Summary Compensation Table
elsewhere in this proxy statement; and
o all directors and executive officers as a group:
Unless otherwise indicated, the address for each stockholder is c/o
GraphOn Corporation, 105 Cochrane Circle, Suite L, Morgan Hill, California
95037.
10
Number of Shares of Common
Name and Address Beneficial Owner Stock Beneficially Owned (1) Percent of Class
- ------------------------------------ ---------------------------- ----------------
Corel Corporation
1600 Carling Avenue
Ottawa, Ontario
K1Z 8R7, Canada 1,193,824 (2) 7.2%
Robert Dilworth 413,820 (3) 2.4%
August P. Klein 183,260 (4) 1.1%
Michael Volker 110,700 (5) *
William Swain 391,000 (6) 2.3%
Gordon Watson 40,000 (7) *
All current executive officers
and directors as a group
(5 persons) 1,138,780 (8) 6.5%
- ---------------------------------------------------------------------------------------------
<FN>
*Denotes less than 1%.
(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, 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 7, 2003 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 16,629,387 shares of our common
stock outstanding as of November 7, 2003.
(2) Based on information contained in a Schedule 13D filed by Corel Corporation
on June 26, 2000.
(3) Includes 360,000 shares of common stock issuable upon the exercise of
outstanding options.
(4) Includes 32,500 shares of common stock issuable upon exercise of outstanding
options.
(5) Includes 10,000 shares of common stock issuable upon exercise of outstanding
options.
(6) Includes 380,000 shares of common stock issuable upon exercise of
outstanding options.
(7) Reflects 40,000 shares of common stock issuable upon exercise of outstanding
options.
(8) Includes 822,500 shares of common stock issuable upon exercise of
outstanding options.
</FN>
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 by 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, 2002, all filing requirements
applicable to our officers, directors and greater than 10% owners of our common
stock were complied with.
PROPOSAL III
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
Our board has selected BDO Seidman, LLP to audit its accounts for the
fiscal year ending December 31, 2003. 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.
11
Unless instructed to the contrary, the persons named in the enclosed proxy
intend to vote the same in favor of the ratification of BDO Seidman, LLP as our
independent auditors.
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 billed by BDO Seidman, LLP for fiscal 2002:
Audit Fees:.................................................................. $ 98,700
Financial Information System Design and Implementation Fees:................. $ -
All other fees: (1).......................................................... $ 17,000
----------
$ 115,700
------------
<FN>
(1) Included in "All other fees" are fees for consultation on accounting
and financial reporting matters and tax services.
</FN>
Board Recommendation
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF BDO SEIDMAN,
LLP AS OUR INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2003.
ACCOMPANYING INFORMATION
Accompanying this proxy statement is a copy of our annual report to
stockholders for our fiscal year ended December 31, 2002. Such annual report
includes our audited financial statements for the three fiscal years ended
December 31, 2002. No part of such annual report shall be regarded as
proxy-soliciting material or as a communication by means of which any
solicitation is being or is to be made.
12
GRAPHON CORPORATION
105 Cochrane Circle, Suite L
Morgan Hill, California 95037
This Proxy is Solicited on Behalf of the Board of Directors.
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 to represent and vote, as designated on the reverse side hereof,
all the shares of Common Stock of GraphOn Corporation (the "Company") held of
record by the undersigned on November 7, 2003, at the Annual Meeting of
Stockholders to be held on December 30, 2003 or any adjournment thereof.
This Proxy, when properly executed, will be voted in the manner directed by the
undersigned stockholder. If no direction is made, this proxy will be voted FOR
Proposals I, II and III.
(Continued and to be signed on the reverse side)
Annual Meeting of Stockholders
GRAPHON CORPORATION
December 30, 2003
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK
YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X].
FOR WITHHELD
Nominee From Nominee
I. Election of Director [ ] [ ] Nominee: Michael Volker
FOR AGAINST ABSTAIN
II. To amend our 1998 Stock Option/Stock [ ] [ ] [ ]
Issuance Plan to increase the number
of Shares of common stock available
thereunder From 3,655,400 to 4,455,400.
III. To ratify the selection of BDO Seidman, [ ] [ ] [ ]
LLP as the Company's independent
auditors for the fiscal year ended
December 31, 2003.
IV. To transact such other business as may properly come before the
meeting.
Please mark, sign, date and return the proxy card promptly using the
enclosed envelope.
Signature(s) __________________________ __________________________________
SIGNATURE IF HELD JOINTLY
Dated: ____________, 2003
Note: Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by the President or other authorized officer. If a
partnership, please sign in partnership name by an authorized person.