EFFECTIVE AUGUST 23RD, 2004
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 3, 2004
GraphOn Corporation
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(Exact name of registrant as specified in its charter)
Delaware 0-21683 13-3899021
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(State or other (Commission (IRS Employer
jurisdiction of incorporation) File Number) Identification No.)
3130 Winkle Avenue, Santa Cruz, CA 95065
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (800) 472-7466
N/A
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(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
On December 3, 2004, GraphOn Corporation (the "Company") entered into an
Agreement and Plan of Merger and Reorganization (the "Reorganization Agreement")
with Network Engineering Software, Inc., a California corporation ("NES"),
pursuant to which the Company has agreed to acquire NES in exchange for
10,000,000 shares of the Company's common stock and the payment of certain
outstanding liabilities of NES aggregating approximately $900,000. Although no
assurance can be given, the closing is expected to occur prior to the end of the
year.
The Reorganization Agreement provides for the merger of a wholly-owned
subsidiary of the Company into NES, with NES as the surviving corporation (the
"Merger"). The surviving corporation of the Merger will then merge with and into
a limited liability company that is wholly owned by the Company, with the LLC as
the surviving entity. At the effective time of and as a result of the Merger,
(i) NES would become a wholly-owned subsidiary of the Company and (ii) each
share of NES common stock would be converted into shares of the Company's common
stock, at an exchange ratio determined pursuant to a formula set forth in the
Reorganization Agreement, plus cash in lieu of any fractional shares. The shares
of the Company's common stock to be issued in connection with the Merger will be
issued in reliance upon the exemption from registration contained in Regulation
D, Rule 506 of the Securities Act of 1933, as amended. The Company determined
that this exemption was available because of the nature and limited number of
NES shareholders. In making this determination the Company relied in part upon
representations made by each NES shareholder. The shareholders of NES will have
the right to require the Company to register the shares received in connection
with the Merger.
The Company and NES have made customary representations, warranties and
covenants in the Reorganization Agreement, and the NES shareholders will
indemnify the Company for breaches of and inaccuracies in such representations,
warranties and covenants, up to specified limitations. This indemnification
obligation is secured by an escrow of certain of the shares of the Company's
common stock to be issued in the Merger. The consummation of the Merger is
subject to various terms and conditions, including the approval of the NES
shareholders, settlement of certain NES legal proceedings and disputes and
completion of a $3.2 million equity financing. The Reorganization Agreement
contains certain termination rights for both the Company and NES.
In connection with the execution of the Reorganization Agreement, the
Company has entered into voting agreements with two shareholders of NES pursuant
to which such persons have agreed to vote their respective NES shares in favor
of the transaction, subject to the terms and conditions of the voting
agreements.
In the event of the consummation of the Merger, the President and majority
shareholder of NES (the "Shareholder"), would enter into an employment
arrangement with the Company. In addition, on October 6, 2004 the Company loaned
$350,000 to the Shareholder pursuant to a promissory note ("Note") executed by
the Shareholder. Interest accrues at the rate of 3.62% per year over the
five-year term of the Note. The Shareholder's obligation to repay the Company is
secured by certain of the Shareholder's shares of NES common stock (which will
be converted into shares of the Company's stock in connection with the Merger).
A copy of the Reorganization Agreement is included herein as Exhibit 2.1
and is incorporated herein by reference. The foregoing description of the
Reorganization Agreement is qualified in its entirety by reference to the full
text of the Reorganization Agreement.
A copy of the Company's press release dated December 6, 2004 announcing
the execution of the Reorganization Agreement is attached hereto as Exhibit 99.1
and is incorporated herein by reference.
Item 3.02 Unregistered Sales of Equity Securities.
The information contained in Item 1.01 above is incorporated into this
Item 3.02 by reference.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits
Exhibit No. Exhibit Title
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2.1 Agreement and Plan of Merger and Reorganization dated
December 3, 2004, by and among the Company, GraphOn Via Sub
III Inc., GraphOn NES Sub, LLC, NES and Ralph Wesinger (1)
99.1 Press Release issued December 6, 2004
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(1) Schedules omitted from Exhibit C to the Reorganization Agreement pursuant to
Section (2) of Item 601 of Regulation S-K. The Company hereby undertakes to
provide the Commission with copies of such omitted schedules upon request.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GRAPHON CORPORATION
(Registrant)
Date: December 9, 2004 By: /s/ William Swain
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(Signature)
William Swain
Chief Financial Officer