UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
[ X ] Filed by the Registrant
[ ] 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 Pursuant to ss.240.14a-12
CONVERA CORPORATION
(Name of Registrant as Specified In Its Charter)
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CONVERA CORPORATION
1921 Gallows Road, Suite 200
Vienna, Virginia 22182
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held on July 12, 2005
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Convera
Corporation, a Delaware corporation ("Convera" or the "Company"), will be held
at Convera's corporate headquarters, 1921 Gallows Road, Suite 200, Vienna,
Virginia 22182, at 10:00 a.m. local time, on Tuesday, July 12, 2005 for the
following purposes:
1. To elect ten directors of the Company for terms expiring at the 2006
Annual Meeting.
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The close of business on May 27, 2005 has been fixed as the record date for
the determination of shareholders entitled to notice of and to vote at the
meeting.
By Order of the Board of Directors,
John R. Polchin
Executive Vice President, Chief Financial
Officer, Treasurer & Secretary
Dated: May 31, 2005
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN,
DATE AND MAIL PROMPTLY THE ACCOMPANYING PROXY CARD IN THE ENCLOSED RETURN
ENVELOPE. THIS WILL ENSURE THE PRESENCE OF A QUORUM AT THE MEETING. IF YOU
ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH TO DO SO EVEN IF YOU HAVE
PREVIOUSLY SENT IN YOUR PROXY CARD
CONVERA CORPORATION
1921 Gallows Road, Suite 200
Vienna, Virginia 22182
Annual Meeting of Shareholders to be Held
on July 12, 2005
PROXY STATEMENT
This Proxy Statement is furnished to shareholders in connection with the
solicitation by the Board of Directors of Convera Corporation, a Delaware
corporation (the "Company" or "Convera"), of proxies for use at the 2005 Annual
Meeting of Shareholders (the "Annual Meeting") of the Company to be held on
Tuesday, July 12, 2005 at 10:00 a.m. local time, and at any adjournment thereof,
for the purposes set forth in the accompanying Notice of Meeting. The Annual
Meeting will be held at Convera Corporation's corporate headquarters located at
1921 Gallows Road, Suite 200, Vienna, Virginia 22182. The proxy solicitation
materials are being mailed to shareholders on or about June 13, 2005.
The Board of Directors has fixed May 27, 2005 as the record date for the
determination of the shareholders entitled to notice of and to vote at the
Annual Meeting. On that day, there were outstanding 38,810,382 shares of Convera
Class A common stock.
A majority of the outstanding shares of common stock entitled to vote at
the Annual Meeting must be present in person or by proxy in order for there to
be a quorum at the meeting. Shareholders of record who are present at the
meeting in person or by proxy and who abstain from voting, including brokers
holding customers' shares of record who cause abstentions to be recorded at the
meeting, will be included in the number of stockholders present at the meeting
for purposes of determining whether a quorum is present.
Each shareholder of record is entitled to one vote at the Annual Meeting
for each share of common stock held by such shareholder on the record date.
Shareholders do not have cumulative voting rights. Shareholders may vote their
shares by using the enclosed form of proxy for use at the Annual Meeting. The
proxy may be revoked by a shareholder at any time prior to the exercise thereof,
and any shareholder present at the Annual Meeting may revoke his proxy thereat
and vote in person if he or she so desires. When such proxy is properly executed
and returned, the shares it represents will be voted in accordance with any
instructions noted thereon. If no direction is indicated, all shares represented
by valid proxies received pursuant to this solicitation (and not revoked prior
to exercise) will be voted for the election of the nominees for directors named
in Item 1 herein (unless authority to vote is withheld).
Convera's Annual Report for the fiscal year ended January 31, 2005 is
enclosed with this Proxy Statement for each shareholder.
Item 1
ELECTION OF DIRECTORS
General
Ten individuals, all of whom are members of the present Board of Directors,
have been nominated for election as directors of the Company until the next
annual meeting and until their respective successors are elected and qualified.
The persons named in the proxy, who have been designated by the Company's
management, intend, unless otherwise instructed on the proxy card, to vote for
the election to the Board of Directors of the persons named below. If any
nominee should become unavailable to serve, the proxy may be voted for the
election of another person designated by the Board of Directors. The Board of
Directors has no reason to believe any of the persons named will be unable to
serve if elected. The affirmative vote of the holders of a plurality of the
shares of common stock voting at the Annual Meeting is necessary for the
election of directors. Any shares not voted (by abstention, broker non-vote, or
otherwise) have no impact on the vote. The Board of Directors recommends a vote
FOR the nominees listed below.
Information Concerning Directors and Nominees
Information regarding each nominee for director is set forth in the
following table.
Name Age Position
Ronald J. Whittier 69 Chairman
Patrick C. Condo 48 President, Chief Executive
Officer, and Director
Herbert A. Allen 65 Director
Herbert A. Allen III 37 Director
Stephen D. Greenberg 56 Director
Eli S. Jacobs 67 Director
Donald R. Keough 78 Director
William S. Reed 67 Director
Carl J. Rickertsen 45 Director
Jeffrey White 57 Director
2
Ronald J. Whittier has been Chairman of the Company since the effective
date of the business combination transaction (the "Combination") of the former
Excalibur Technologies Corporation ("Excalibur") and Intel Corporation's
("Intel") Interactive Media Services division which created the Company on
December 21, 2000 and was Chief Executive Officer from December 21, 2000 through
April 5, 2001. Mr. Whittier is a founder and Chairman of TechFutures, a
non-profit school, and has held that position since 1999. Mr. Whittier formerly
held the position of Senior Vice President of Intel and General Manager of
Intel's Interactive Media Services division from 1999 until December 21, 2000.
From 1995 to 1999, he was responsible for coordinating Intel's various
activities in content, applications and authoring tools. Prior to 1995, he held
various jobs at Intel, including manager of Intel Architecture Labs, Director of
Corporate Marketing and general manager of the Memory Products Division. Mr.
Whittier joined Intel in 1970.
Patrick C. Condo has been President and a director of the Company since the
effective date of the Combination on December 21, 2000 and was appointed to the
additional position of Chief Executive Officer on April 5, 2001. Mr. Condo was
formerly President and Chief Executive Officer of Excalibur since November 1995
and a director since January 1996, in each case through the effective date of
the Combination. Mr. Condo was President of Excalibur from May 1995 to November
1995. He became Executive Vice President of Excalibur in January 1995 after
serving as the Director of Business Development from November 1992.
Herbert A. Allen has been a director of the Company since the effective
date of the Combination on December 21, 2000 and was a director of Excalibur
since June 2000. He has been President, Chief Executive Officer, Managing
Director and a director of Allen & Company Incorporated, a privately-held
investment firm, for more than the past five years. He is a member of the Board
of Directors of The Coca-Cola Company. He is the father of Herbert A. Allen III.
Herbert A. Allen III has been a director of the Company since January 2002.
He has been President of Allen & Company LLC, an investment banking firm and
broker-dealer affiliated with Allen & Company Incorporated, since September
2002. Prior to that, he was a Vice-President and later an Executive Vice
President and a Managing Director of Allen & Company Incorporated since 1993.
Prior to 1993, Mr. Allen was employed by T. Rowe Price, an investment management
firm, and Botts & Company Limited, a funds management and investment company. He
is the son of Herbert A. Allen.
Stephen D. Greenberg has been a director of the Company since August 2001.
He has been a Managing Director of Allen & Company LLC since September 2002 and
a Managing Director of Allen & Company Incorporated from January 2002 through
August 2002. Prior to that, he served as Chairman of Fusient Media Ventures,
Inc., a company focused on investing in and building branded media and sports
properties, since 2000. Mr. Greenberg was a private investor from 1998 to 1999.
From 1994 to 1998, Mr. Greenberg was President of Classic Sports Network, a
cable sports network. He is a member of the Board of Directors of The Topps
Company, Inc., a sports cards and confectionery products company.
Eli S. Jacobs has been a director of the Company since February 2002. He
has been a private investor for more than the past five years.
3
Donald R. Keough has been a director of the Company since January 2002. He
was Chairman of Excalibur from June 1996 until the Combination. Since 1993, Mr.
Keough has been Chairman of DMK International, an investment company, and of
Allen & Company Incorporated. Mr. Keough has also been Chairman of Allen &
Company LLC since September 2002. Mr. Keough also serves on the Board of
Directors of Berkshire Hathaway Inc., The Coca-Cola Company and InterActiveCorp.
William S. Reed has been a director of the Company since February 2002. He
has been self-employed as a management consultant since June 2002. Prior to
that, Mr. Reed was Vice President of Finance & Administration of Wellesley
College since 1990.
Carl J. Rickertsen has been a director of the Company since April 2003.
Since January 2004, Mr. Rickertsen has been a Managing Partner at Pine Creek
Partners, an investment firm. From 1994 to 2003, Mr. Rickertsen was Chief
Operating Officer of Thayer Capital, an investment firm. He also serves on the
Board of Directors of MicroStrategy Incorporated, a software company, and United
Agri-Products, a distributor of farm products.
Jeffrey White has been a director of the Company since May 2003. Since
February 2003, Mr. White has been President of Fare Play, Inc., a consulting
company to major league baseball teams. He was self-employed as a consultant
from April 2002 until February 2003. From 1991 through 2002, Mr. White served as
Senior Vice President and Chief Financial Officer for Major League Baseball,
Office of the Commissioner.
Information Concerning the Board of Directors and Its Committees
The Board of Directors held nine meetings during the fiscal year ended
January 31, 2005. Each incumbent director attended more than 75% of the
aggregate number of meetings of the Board of Directors and appropriate
committees held during fiscal year 2005 since his election.
The Board has determined that the following directors are "independent"
under the current rules of the Nasdaq Stock Market ("Nasdaq"): Eli S. Jacobs,
Carl J. Rickertsen and Jeffrey White. The Board of Directors has standing Audit,
Compensation and Nominating Committees.
The Board of Directors has established a number of committees. The Audit
Committee met four times during the fiscal year ended January 31, 2005. The
Audit Committee consists of Mr. Eli Jacobs, Mr. Carl Rickertsen and Mr. Jeffrey
White (Chairman). The Board has determined that all members of the audit
committee are independent directors under Nasdaq rules and each of them is able
to read and understand fundamental financial statements. The Board has
determined that Mr. White qualifies as an "audit committee financial expert" as
defined by the rules of the Securities and Exchange Commission. Information
regarding the functions performed by the Audit Committee is set forth in the
"Report of the Audit Committee," included in this proxy statement. The Audit
Committee is governed by a written charter, a copy of which is incorporated by
reference to the Company's 2003 proxy statement filed May 28, 2003.
The Compensation and Stock Option Administration Committee (the
"Compensation Committee"), is composed of two directors, Mr. Herbert A. Allen
(Chairman) and Mr. Stephen D.
4
Greenberg. The members of the Compensation Committee are not deemed independent
under Nasdaq rules. The Compensation and Stock Option Administration Committee
administers management compensation and makes recommendations in that regard to
the Board of Directors and administers the Company's stock option plans. The
Compensation and Stock Option Administration Committee acted by unanimous
written consent on one occasion in fiscal year 2005.
The Nominating Committee is composed solely of Herbert A. Allen III. Mr.
Allen III is not deemed independent under Nasdaq rules. The Nominating
Committee's responsibilities include recommending to the Board of Directors
nominees for possible election to the Board of Directors. The Nominating
Committee has not adopted a formal charter for the committee.
Each non-employee director is paid $4,000 for attending each meeting of the
Board of Directors or its committees at which there is a quorum, whether in
person or by telephone, up to a maximum of $20,000 per fiscal year. In addition,
all directors are eligible for reimbursement of their expenses in attending
meetings of the Board of Directors or its committees. Further, each non-employee
director is granted options to purchase 25,000 shares of Convera common stock
upon becoming a director. Such options vest in six semi-annual installments over
three years and have a term of ten years.
Controlled Company Exemption Election
The Company has determined that due to the beneficial ownership by Allen
Holding Inc., Herbert A. Allen and certain affiliates and related persons of
greater than 50% of the outstanding Company's common stock, the Company is a
"controlled company" as defined in the Nasdaq listing rules. As such, the
Company has elected to be exempted from the Nasdaq requirements that the Board
of Directors have a majority of independent directors and that the Company have
nominating and compensation committees composed entirely of independent
directors.
Communication with Directors
Stockholders who wish to communicate with the entire Board, the
non-management Directors as a group or the Chairs of any of the Board committees
may do so telephonically by calling (877) 888-0002 or by mail c/o Corporate
Secretary, Convera Corporation, 1921 Gallows Road, Suite 200, Vienna, Virginia
22181. Communications are initially routed to the Chairman of the Audit
Committee and outside counsel and, thereafter, are distributed to the Board, or
to any individual Director or Directors as appropriate, depending on the facts
and circumstances outlined in the communication. In that regard, the Board of
Directors has requested that certain items that are unrelated to the duties and
responsibilities of the Board should be excluded, such as spam, job inquiries,
business solicitations or product inquiries. In addition, material that is
unduly hostile, threatening, illegal or similarly unsuitable will be excluded,
with the provision that any communication that is filtered out must be made
available to any Director upon request.
The Company has a policy of encouraging directors to attend the annual
stockholder meetings but such attendance is not required. Two of our directors
attended the 2004 Annual Meeting.
5
Director Nomination
Criteria for Board Membership. In selecting candidates for appointment or
re-election to the Board, the Nominating Committee considers the appropriate
balance of experience, skills and characteristics required of the Board of
Directors, and seeks to insure that members of the Company's Audit Committee
meet the financial literacy and sophistication requirements under the Nasdaq
rules and at least one of them qualifies as an "audit committee financial
expert" under the rules of the Securities and Exchange Commission. Nominees for
Director are selected on the basis of their depth and breadth of experience,
integrity, ability to make independent analytical inquiries, understanding of
the Company's business environment, and willingness to devote adequate time to
Board duties.
Stockholder Nominees. The Nominating Committee will consider written
proposals from stockholders for nominees for Director. Any such nominations
should be submitted to the Nominating Committee c/o the Secretary of the Company
and should include the following information: (a) all information relating to
such nominee that is required to be disclosed pursuant to Regulation 14A under
the Securities Exchange Act of 1934 (including such person's written consent to
being named in the proxy statement as a nominee and to serving as a Director if
elected); (b) the names and addresses of the stockholders making the nomination
and the number of shares of the Company's common stock which are owned
beneficially and of record by such stockholders; and (c) appropriate
biographical information and a statement as to the qualification of the nominee,
and should be submitted in the time frame described in the Bylaws of the Company
and under the caption, "Shareholder Proposals To Be Presented at Next Annual
Meeting" below.
Process for Identifying and Evaluating Nominees. The Nominating Committee
believes the Company is well-served by its current Directors. In the ordinary
course, absent special circumstances or a material change in the criteria for
Board membership, the Nominating Committee will renominate incumbent Directors
who continue to be qualified for Board service and are willing to continue as
Directors. If an incumbent Director is not standing for re-election, or if a
vacancy on the Board occurs between annual stockholder meetings, the Nominating
Committee will seek out potential candidates for Board appointment who meet the
criteria for selection as a nominee and have the specific qualities or skills
being sought. Director candidates will be selected based on input from members
of the Board, senior management of the company and, if the Nominating Committee
deems appropriate, a third-party search firm. The Nominating Committee will
evaluate each candidate's qualifications and check relevant references; in
addition, such candidates will be interviewed by the Nominating Committee.
Candidates meriting serious consideration will meet with all members of the
Board. Based on this input, the Nominating Committee will evaluate which of the
prospective candidates is qualified to serve as a Director and whether the
committee should recommend to the Board that this candidate be appointed to fill
a current vacancy on the Board, or presented for the approval of the
stockholders, as appropriate.
The Company has never received a proposal from a stockholder to nominate a
Director. Although the Nominating Committee has not adopted a formal policy with
respect to stockholder nominees, the committee expects that the evaluation
process for a stockholder nominee would be similar to the process outlined
above.
6
Board Nominees for the 2005 Annual Meeting. Each of the nominees listed in
this Proxy Statement are current Directors standing for re-election.
Code of Business Conduct and Ethics
The Company has adopted a written code of conduct and ethics (the "Code")
which is applicable to all of the Company's officers, directors and employees,
including the Company's Chief Executive Officer and Chief Financial Officer
(collectively, the "Senior Officers"). In accordance with the rules and
regulations of the Securities and Exchange Commission and the rules of Nasdaq, a
copy of the Code has been posted on the Company's website at
http://www.convera.com. The Company intends to disclose any changes in or
waivers from the Code applicable to any Senior Officers on its website or by
filing a Form 8-K.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee are Mr. Herbert A. Allen, and Mr.
Stephen D. Greenberg. None of the Compensation Committee members is an officer
or employee of the Company or its subsidiaries. No member of the Compensation
Committee or executive officer of the Company has a relationship that would
constitute an interlocking relationship with executive officers or directors of
another entity.
Certain Relationships and Related Transactions
Since February 1, 2004, there has not been, nor is there currently planned,
any transaction or series of similar transactions to which we were or are a
party in which the amount involved exceeds $60,000 and in which any director,
executive officer or holder of more than 5% of our capital stock or any member
of such person's immediate family had or will have a direct or indirect material
interest other than agreements which are described under the caption "Executive
Compensation" and the transaction described below.
On September 16, 2004, the Company completed a private placement of
3,433,333 newly-issued shares of common stock to several investors. The shares
were priced on September 7, 2004 at $3.00 per share, representing a premium to
the $2.80 closing market price on such date. The private placement resulted in
gross proceeds of $10.3 million. The following directors, holders of more than
5% of the Company's capital stock and members of such persons' immediate family
purchased shares of common stock in the private placement in the amounts shown
below:
Name Shares
Allen & Company Incorporated 500,000
Allen & Company LLC 66,667
Herbert A. Allen 700,000
Susan K. Allen 700,000
Bruce Allen 700,000
Donald Keough 83,333
Keough Partners L.P. 83,333
Ronald J. Whittier 333,333
7
EXECUTIVE COMPENSATION
Executive Officers of the Registrant
The Board of Directors appoints the executive officers of the Company to
serve until their successors have been duly appointed and qualified. The
following information indicates the position, age and business experience of the
current Convera executive officers, Messrs. Condo, Samowich, and Polchin. There
are no family relationships between any of the executive officers of the
Company.
Name Age Position
Patrick C. Condo 48 President and Chief Executive Officer
Steven M. Samowich 54 Executive Vice President and Chief Operating Officer
John R. Polchin 41 Executive Vice President, Chief Financial Officer,
Treasurer & Secretary
See the discussion included in the preceding section for the business
experience of Mr. Condo.
Steven M. Samowich joined the Company as Executive Vice President and Chief
Operating Officer in May 2004. Prior to joining Convera, he was Vice President
of the Government Business Unit at Open Text Corporation, a software company,
from 2002. Prior to that, Mr. Samowich was President, Chief Executive Officer
and a member of the board of directors at Infodata Systems, an information
technology professional services and systems integration firm from 1998.
John R. Polchin joined the Company as Executive Vice President, Chief
Financial Officer, Treasurer and Secretary in May 2004. Prior to joining
Convera, he was Vice President, Chief Financial Officer and Treasurer of
InteliData Technologies Corporation, a provider of online banking software
solutions and services from 2002. Previous to that, he was Chief Financial
Officer at Orblynx, Incorporated, a global Internet infrastructure company, from
2000. From 1996 to 2000, Mr. Polchin held the positions of Executive Vice
President, Chief Financial Officer and Vice President and Treasurer at e.spire
Communications, a publicly traded telecommunications and Internet concern.
8
Summary Compensation Table
The following table presents information concerning the compensation of the
Company's Chief Executive Officer and the executive officers who served during
the fiscal year ended January 31, 2005 whose total salary and bonus exceeded
$100,000 in the 2005 fiscal year (the "Named Executive Officers"), as well as
the previous two fiscal years or from their respective start dates:
Long Term Compensation
Annual Compensation Awards Payouts
Other Securities
Annual Underlying
Compen- Restricted Stock
Compen- Stock Options LTIP All
Name and Principal Fiscal sation Award(s) SARS Payouts Other
Position Year Salary ($) Bonus ($) ($) ($) (#) ($) (4)
($)
Patrick C. Condo 2005 480,000 39,000 -- 750,000 -- --
President and Chief 2004 480,000 50,000 -- 2,622,000(1) -- -- --
Executive Officer 2003 380,000 45,000 -- -- -- -- --
Steven M. Samowich 2005 182,852 90,000 100,000(3) -- 300,000 -- --
Chief Operating
Officer (2)
John R. Polchin 2005 187,500 40,000 30,000(3) -- 400,000 -- --
Chief Financial
Officer, Treasurer
& Secretary (4)
____________________________
(1) This amount represents a deferred stock award of 600,000 shares at a market value of $4.37 per share on
the date of grant. Under the amended deferred share agreement, 150,000 of these shares vest on each
consecutive one-year anniversary of the grant date as long as Mr. Condo's continues his employment,
except that the shares shall vest earlier upon a termination without cause, Mr. Condo's death or
disability or a change in control of the Company.
(2) Mr. Samowich joined the Company in May 2004.
(3) Represents the amount of a signing bonus paid upon joining the Company. See "Executive Compensation -
Employment Agreements and Other Arrangements."
(4) Mr. Polchin joined the Company in May 2004.
9
Option Grants in Last Fiscal Year
The following table sets forth certain information concerning options
granted during the fiscal year ended January 31, 2005 to the Named Executive
Officers.
Potential realizable value
at assumed annual rates of
stock price appreciation for
option term (1)
Individual Grants
---------------------------------------------------------------
Percent of total
options/SARs Exercise or
granted to base price
Options employees in ($/Sh) Expiration date
Name Granted fiscal year(2) 5% ($) 10% ($)
Patrick C. Condo 750,000(3) 19% $4.71 11/30/2014 2,221,570 5,629,895
Steven M. Samowich 300,000 8% $2.75 5/7/2014 566,005 1,434,368
John R. Polchin 300,000 8% $3.00 5/1/2014 296,209 750,653
100,000 2% $4.71 11/30/2014 519,027 1,315,316
__________________
(1) The 5% and 10% assumed annual rates of appreciation are mandated by rules of the Securities and Exchange
Commission and do not reflect estimates or projections of future Common Stock prices. There can be no assurance
that the amounts reflected in this table will be achieved.
(2) This percentage is based on the total number of options granted to the Company's employees during the fiscal year
ended January 31, 2005. All options granted to the Named Executive Officers vest in eight equal annual
installments every six months following the date of grant. In addition, the options contain certain provisions
which provide for accelerated vesting of all or a portion of the options following a change in control of the
Company.
(3) The vesting of Mr. Condo's options was also subject to the satisfaction of certain performance-based criteria
which were met on February 1, 2005.
10
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Values
The following table sets forth, as of January 31, 2005, the number of options and the value of exercised
and unexercised options held by the Named Executive Officers.
- --------------------------- ---------------- ------------------ ------------------ ------------------------------
Number of
Securities
Underlying
Unexercised
Options/SARS at Value of Unexercised
Fiscal Year-End In-the Money
(#) Options/SARS at
Shares Exercisable/ Fiscal Year-End ($)
Acquired on Value Unexercisable Exercisable/
Name Exercise (#) Realized ($) Unexercisable (1)
- --------------------------- ---------------- ------------------ ------------------ ------------------------------
- --------------------------- ---------------- ------------------ ------------------------ --------------------------------
- --------------------------- ---------------- ------------------ ------------------------ --------------------------------
- --------------------------- ---------------- ------------------ ------------------------ --------------------------------
Patrick C. Condo 75,000 $5,750 1,012,500/812,500 $203,625/$53,125
Steven M. Samowich -- -- 37,500/262,500 $74,962/$524,738
John R. Polchin -- -- 37,500/362,500 $65,625/$463,375
- --------------------------- ---------------- ------------------ ------------------------ --------------------------------
(1) The closing price of the Company's common stock on January 31, 2005, the last trading day of the
Company's fiscal year, was $4.75 per share.
Equity Compensation Plan Information
The following table sets forth, as of January 31, 2005, information with respect to the Company's equity
compensation plans:
Number of Weighted-Average Number of Securities
Securities to be Remaining Available for
Issued Upon Exercise Exercise Price of Future Issuance Under
of Outstanding Outstanding Options, Equity Compensation Plans
Options, Warrants and Warrants and Rights (excluding securities
Rights (1) reflected in column (a))
Plan Category (a) (b) (c)
Equity compensation plans approved
by security holders:
1. Convera Stock Option Plan 10,424,826 $4.55 2,380,747
2. Convera Employee Stock
Purchase Plan - - 726,408
Equity compensation plans not
approved by security holders: None Not Applicable Not Applicable
(1) For purposes of calculating the weighted-average exercise price, deferred shares have been excluded because
there is no exercise price.
11
Employment Agreements and Other Arrangements
In May 1998, Mr. Condo entered into an agreement with Excalibur under which
Mr. Condo would be paid an amount equal to twelve months of base salary plus
bonus compensation and continuation of his employee benefits for one year in the
event Mr. Condo's employment was terminated or he was removed from his position
as chief executive officer within six months following certain "change of
control" events relating to Excalibur. Such arrangement was approved by the full
Board of Directors. In connection with the formation of Convera, Mr. Condo
waived all rights to these payments to which he would have been entitled as a
result of the Combination. He simultaneously entered into an agreement with
Convera under which Mr. Condo will be paid an amount equal to twelve months of
base salary plus bonus compensation and continuation of his employee benefits
for one year in the event Mr. Condo's employment is terminated or he is removed
from his position as President of Convera within six months following change of
control events relating to Convera. For fiscal 2005, Mr. Condo's annual salary
and bonus amounted to $519,000.
In addition, pursuant to a Deferred Stock Agreement dated as of May 20,
2003, as amended on May 18, 2004, the Board of Directors awarded Mr. Condo
600,000 deferred shares of the Company's common stock under the Company's 2000
Stock Option Plan. Under such amended agreement, 150,000 shares of common stock
vest on each consecutive one-year anniversary of the date of grant as long as
Mr. Condo remains continuously employed with the Company through such vesting
date. Notwithstanding such vesting schedule, all of the deferred shares will
vest on the earlier occurrence of Mr. Condo's termination of employment without
cause, death or disability or a change of control of the Company.
In April 2004, the Company entered into an at-will employment agreement
with Steven M. Samowich, whereby Mr. Samowich agreed to act as the Company's
Chief Operating Officer. Under his agreement Mr. Samowich's base salary is
$250,000 and he is eligible for a bonus of up to $225,000 per fiscal year,
depending upon the Company's actual performance compared to the Company's
operating plan. In the first year of employment, Samowich is guaranteed a bonus
of at least $90,000. Upon joining the Company, Mr. Samowich was paid a sign-on
bonus of $100,000 and was granted options to purchase 300,000 shares of the
Company's common stock pursuant to the Company's 2000 Stock Option Plan. Mr.
Samowich's options vest 12.5% every six months and such vesting accelerates upon
a change of control event affecting the Company. If Mr. Samowich's employment is
terminated by the Company (other than for reasons set forth in the agreement),
the Company shall pay Mr. Samowich an amount equal to one year of his
then-current base salary paid out over the Company's regular payroll schedule
following the effective date of his release.
In April 2004, the Company entered into an at-will employment agreement
with John R. Polchin, whereby Mr. Polchin agreed to act as the Company's
Executive Vice President, Chief Financial Officer and Treasurer. Under his
agreement, Mr. Polchin's base salary is $250,000 and he is eligible for a bonus
of up to $150,000 per fiscal year, depending upon the Company's actual
performance compared to the Company's operating plan. Upon joining the Company,
Mr. Polchin was paid a sign-on bonus of $30,000 and was granted options to
purchase 300,000 shares of the Company's common stock pursuant to the Company's
2000 Stock Option Plan. Mr. Polchin's options vest 12.5% every six months and
such vesting accelerates upon a change of control event affecting the Company.
If Mr. Polchin's employment is terminated by the Company (other than for reasons
set forth in the agreement) or by Mr. Polchin (in
12
circumstances where he is entitled to do so under the agreement), the Company
shall pay Mr. Polchin any unpaid base salary, unreimbursed business expenses and
accrued vacation through the termination date, as well as a lump sum amount
equal to any bonus earned but not paid and one year of his then-current base
salary.
13
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of April 30, 2005, information
concerning the ownership of all classes of common stock of the Company of (i)
all persons known to the Company to beneficially own 5% or more of the Company's
common stock, (ii) each director of the Company, (iii) the Named Executive
Officers and (iv) all directors and executive officers of the Company as a
group. Share ownership includes shares issuable upon exercise of outstanding
options that are exercisable within 60 days of April 30, 2005.
Amount and Nature Percent
Name and Address of Beneficial of Class
of Beneficial Owner Ownership (1) Owned
Allen Holding Inc. 11,696,323 (2) 30.2%
711 Fifth Avenue
New York, NY 10022
Susan K. Allen 3,170,369 (3) 8.2%
711 Fifth Avenue
New York, NY 10022
Ronald J. Whittier 1,338,937 (4) 3.4%
Herbert A. Allen 16,244,193 (5) 42.0%
Herbert A. Allen III 475,787 (6) 1.2%
Stephen D. Greenberg 85,000 (7) *
Eli S. Jacobs 34,166 (8) *
Donald R. Keough 684,166 (9) 1.8%
William S. Reed 25,000 (10) *
Carl J. Rickertsen 45,832 (11) *
Jeffrey White 32,498 (12) *
Patrick C. Condo 1,365,700 (13) 3.4%
Steven M. Samowich 75,000 (14) *
John R. Polchin 87,499 (15) *
All directors and executive officers 20,493,778 (16) 49.8%
as a group (12 persons)
* Represents less than one percent of the outstanding common stock.
(1) To the Company's knowledge, each person or entity listed has sole
voting and investment power as to the shares indicated, except as
described below.
14
(2) Includes shares owned by Allen & Company Incorporated ("ACI"), a
wholly-owned subsidiary of Allen Holding Inc. ("AHI"). Does not
include any shares held directly by Herbert A. Allen, Herbert A. Allen
III, Susan K. Allen, Bruce Allen, Stephen D. Greenberg, Donald R.
Keough and certain of their affiliates, who together with AHI and ACI
may be considered a "group," as such term is defined by Section 13(d)
of the Securities Exchange Act of 1934 ("Section 13(d)"), and as
disclosed in the Amendment No. 3 on Schedule 13D filed by such parties
with the Securities and Exchange Commission on September 24, 2004.
(3) Does not include shares owned by AHI, ACI, Herbert A. Allen, Herbert
A. Allen III, Bruce Allen, Stephen D. Greenberg, Donald R. Keough and
certain of their affiliates, who together with Ms. Allen may be
considered a "group," as such term is defined by Section 13(d).
(4) Includes outstanding options to purchase 904,166 shares, which were
exercisable on or within 60 days of April 30, 2005.
(5) Includes the shares held directly by AHI and by ACI. Mr. Allen, a
stockholder and the President and Chief Executive Officer of AHI and
the President and Chief Executive Officer of ACI, may be deemed a
beneficial owner of the shares held by AHI and ACI. Mr. Allen
disclaims beneficial ownership of the securities reported to be held
by AHI and ACI, except to the extent of his pecuniary interest
therein. Also includes 25,000 shares underlying outstanding stock
options exercisable within 60 days held by Mr. Allen. Does not include
shares owned by Herbert A. Allen III, Susan K. Allen, Bruce Allen,
Stephen D. Greenberg, Donald R. Keough and certain of their
affiliates, who together with Mr. Allen, AHI and ACI may be considered
a "group," as such term is defined by Section 13(d).
(6) Includes 383,820 shares owned by HAGC Partners L.P. and 66,667 shares
owned by Allen & Company LLC, as to which Mr. Herbert A. Allen III
shares voting and disposition authority. Also includes outstanding
options to purchase 25,000 shares, which were exercisable on or within
60 days of April 30, 2005. Mr. Allen disclaims beneficial ownership of
the shares held by HAGC Partners L.P. and Allen & Company LLC, except
to the extent of his pecuniary interest therein. Does not include
shares owned by AHI, ACI, Herbert A. Allen, Susan K. Allen, Bruce
Allen, Stephen D. Greenberg, Donald R. Keough and certain of their
affiliates, who together with Mr. Herbert A. Allen III may be
considered a "group," as such term is defined by Section 13(d).
(7) Includes outstanding options to purchase 25,000 shares, which were
exercisable on or within 60 days of April 30, 2005. Does not include
shares owned by AHI, ACI, Herbert A. Allen, Herbert A. Allen III,
Susan K. Allen, Bruce Allen, Donald R. Keough and certain of their
affiliates, who together with Mr. Greenberg may be considered a
"group," as such term is defined by Section 13(d).
(8) Represents outstanding options to purchase 34,166 shares, which were
exercisable on or within 60 days of April 30, 2005.
(9) Includes 257,000 shares held by a family trust and 113,333 shares held
by Keough Partners L.P., as to which Mr. Keough shares voting and
disposition authority, and outstanding options to purchase 25,000
shares, which were exercisable on or within 60 days of April 30, 2005.
Mr. Keough disclaims beneficial ownership of the securities held by
the family trust and Keough Partners L.P., entities established for
the benefit of his family. Does not include shares owned by AHI, ACI,
Herbert A. Allen, Herbert A. Allen III, Susan K. Allen, Bruce Allen,
Stephen D. Greenberg and certain of their affiliates, who together
with Mr. Keough may be considered a "group," as such term is defined
by Section 13(d).
15
(10) Represents outstanding options to purchase 25,000 shares, which
were exercisable on or within 60 days of April 30, 2005.
(11) Includes outstanding options to purchase 25,832 shares, which
were exercisable on or within 60 days of April 30, 2005.
(12) Represents outstanding options to purchase 34,298 shares, which
were exercisable on or within 60 days of April 30, 2005.
(13) Includes outstanding options to purchase 1,157,122 shares, which
were exercisable on or within 60 days of April 30, 2005 and
101,325 shares of common stock vesting within 60 days of April
30, 2005 pursuant to Mr. Condo's deferred stock agreement. In
accordance with the terms of the deferred stock agreement,
150,000 shares vested on May 20, 2005 and the Company withheld
48,675 of the shares to fulfill Mr. Condo's tax obligation with
respect to the award.
(14) Includes outstanding options to purchase 75,000 shares, which
were exercisable on or within 60 days of April 30, 2005.
(15) Includes outstanding options to purchase 87,499 shares, which
were exercisable on or within 60 days of April 30, 2005.
(16) Includes outstanding options to purchase 2,441,283 shares, which
were exercisable on or within 60 days of April 30, 2005 and
101,325 shares of common stock constituting a portion of a grant
of deferred shares to Mr. Condo which vest within 60 days of
April 30, 2005 (See footnote (13)). Also includes the shares held
by the entities described in footnotes (5), (6) and (9) above
deemed to be beneficially owned by Herbert A. Allen, Herbert A.
Allen III and Donald R. Keough, respectively.
16
Report of the Compensation Committee
The following is the report of the Compensation Committee of the Board of
Directors of Convera, describing the compensation policies and rationale
applicable to Convera's executive officers with respect to the compensation paid
to such executive officers for the fiscal year ended January 31, 2005. The
Compensation Committee of the Board of Directors is composed entirely of
directors who have never been employees of the Company. As members of the
Compensation Committee, it is our duty to set compensation policies applicable
to Convera's executive officers and to evaluate the performance of Convera's
executive officers. The Compensation Committee is responsible for setting and
administering the policies and programs that govern annual compensation and
long-term incentives. The foundation of the executive compensation program is
based on principles designed to align compensation with the Company's business
strategy, values and management initiatives. The program:
o integrates compensation programs which link compensation with the
Company's annual strategic planning and measurement processes;
o supports a performance-oriented environment that rewards actual
performance that is related to both strategic goals that cannot
be measured by traditional accounting tools and performance of
the Company as compared to that of the Company's annual financial
objectives; and
o helps attract and retain key executives who are critical to the
long-term success of the Company.
In order to further these objectives, for fiscal year 2005, executive
officer compensation included three components: (1) base salary (2) an annual
incentive bonus and (3) a long-term incentive award for the Company's three
executive officers. The compensation policy of Convera is that a substantial
portion of the annual compensation of each executive officer should relate to
and be contingent upon the performance of Convera, as well as the individual
contribution of each executive officer. In addition, the Compensation Committee
believes that the total compensation package must be competitive with other
companies in the industry to ensure that Convera can continue to attract, retain
and motivate key executives who are critical to the long-term success of
Convera. The Compensation Committee does not employ outside consultants or
utilize specific compensation surveys in evaluating competing company
compensation policies or financial performance. Instead, the Compensation
Committee members rely on their own experience and knowledge of Convera and its
industry, as well as that of management and other board members, in evaluating
such factors.
Base Salary. The Compensation Committee determines the salary ranges for
each of the executive officer positions based upon the scope, level, and
strategic impact of the position, and on the historical pay levels of the
particular executive officers, as well as information they may have for
similarly positioned executive officers in comparable companies. Annual salary
adjustments recognize sustained individual performance by the executive, with
overall salary increase funding levels sensitive to both the individual's and
the Company's performance. The Compensation Committee presents the salary
recommendations for the Company's executive officers to the Board of Directors
for approval. These salary recommendations are based on the executive's
contribution to the Company, experience and expertise. There are no individual
performance matrices or pre-established weightings given to each factor.
17
Annual Incentive Bonus. The annual incentive bonus program provides for
cash awards based upon achievement of certain corporate and business goals set
at the beginning of the year, the individual's level of responsibility and the
individual's personal performance. Under Convera's bonus plan, bonuses are paid
based upon Convera attaining certain sales, profitability and strategic goals
and on each officer's individual contribution to Convera's attainment of such
goals. For fiscal year 2005, 50% of each executive officer's potential bonus was
based on the achievement of corporate revenue goals and 50% was based on the
achievement of corporate profitability goals. The percentage of bonus received
does not directly correspond to the percentage of the revenue target achieved.
For example, Convera must meet at least 90% of the revenue target for the
officers to receive any of their revenue bonus, and the bonus percentage
received scales upward depending on the percentage of the revenue target
attained. The Chief Executive Officer, the Chief Operating Officer and the Chief
Financial Officer were eligible to receive a maximum of 100% of the bonus
potential. There is a similar scale for corporate profitability. The revenue and
corporate profitability targets are derived from the annual operating budget
that is approved by the full Board of Directors. For fiscal year 2005, the Chief
Executive Officer earned 20% of his original, maximum annual bonus potential.
The Chief Operating Officer earned 40% of his original, maximum annual bonus
potential. The Chief Financial Officer earned 27% of his original, maximum
annual bonus potential. The payments for fiscal 2005 represented partial
achievement of the objectives for the first quarter of fiscal 2005 for the Chief
Executive Officer. Payments to the Chief Operating Officer were remitted for the
second and third quarters of fiscal 2005 and totaled $36,000, while the
remaining $54,000 was earned per his at-will employment agreement. Payments to
the Chief Financial were remitted for the attainment of fourth quarter
objectives for fiscal 2005.
Long-Term Incentive Award. For fiscal year 2005, long-term compensation for
the Chief Executive Officer, Chief Operating Officer and Chief Financial Officer
consisted of stock option grants to purchase 750,000, 300,000 and 400,000
shares, respectively. The size of the grants was based on the Compensation
Committee's evaluation of the Company and individual performance factors.
Compensation of the Chief Executive Officer. Mr. Condo's annual base salary
for the fiscal year ended January 31, 2005 was $480,000. Mr. Condo's salary was
determined following discussions between Mr. Condo and the Compensation
Committee. As with each executive officer, 50% of Mr. Condo's quarterly
potential bonus for fiscal 2005 was based on the achievement of corporate
revenue goals and 50% was based on the achievement of corporate profitability
goals. Mr. Condo was paid a bonus of $39,000 for the achievement of certain
first quarter fiscal year 2005 goals; Mr. Condo's bonus amount represented
approximately 20% of the maximum annual bonus target for fiscal 2005 established
by the Compensation Committee and reflected Convera's ability to meet a portion,
but not all, of its revenue and net income targets. Mr. Condo was also awarded
an option to purchase 750,000 shares of common stock subject to the satisfaction
of certain performance criteria relating to the Company's new web indexing
initiative. Such performance criteria were subsequently satisfied on February 1,
2005. All of the foregoing actions of the Compensation Committee were ratified
by the non-interested members of the Board of Directors.
This report is submitted by the members of the Fiscal Year 2005
Compensation Committee:
Mr. Herbert A. Allen (Chairman)
Mr. Stephen D. Greenberg
18
Report of the Audit Committee
The Audit Committee of the Board of Directors is comprised of three
independent directors under the applicable rules of the Securities and Exchange
Commission and Nasdaq, Messrs. Jacobs, Rickertsen, and White. 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 the systems of internal controls.
In fulfilling its oversight responsibilities, the Audit Committee reviewed with
management the audited financial statements in the Annual Report, including a
discussion of the quality, not just the acceptability, of the accounting
principles, the reasonableness of significant judgments, and the clarity of
disclosures in the financial statements.
The Audit Committee reviewed with Ernst & Young LLP, the independent
auditors who are responsible for expressing an opinion on the conformity of
those audited financial statements with generally accepted accounting
principles, their judgments as to the quality, not just the acceptability, of
the Company's accounting principles and such other matters as are required to be
discussed with the Audit Committee under generally accepted auditing standards
including Statement on Auditing Standards No. 61 (Communications with Audit
Committees). In addition, the Audit Committee has discussed with Ernst & Young
LLP the auditors' independence from management and the Company including the
matters in the written disclosures required by Independence Standards Board No.
1 (Independence Discussions with Audit Committees) and considered the
compatibility of nonaudit services with the auditors' independence.
The Audit Committee discussed with Ernst & Young LLP the overall scope and
plans for the audit. The Audit Committee meets with the independent auditors,
with and without management present, to discuss the results of their
examination, their evaluation of the Company's internal controls, and the
overall quality of the Company's financial reporting.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors (and the Board of Directors has
approved) that the audited financial statements be included in the Annual Report
on Form 10-K for the year ended January 31, 2005 for filing with the SEC. Each
year, the Audit Committee recommends to the Board of Directors the selection of
Convera's independent auditors. The Audit Committee and the Board of Directors
have recommended the selection of Ernst & Young LLP as the Company's independent
auditors for fiscal year 2006.
This report is submitted by the members of the Fiscal Year 2005 Audit
Committee.
Mr. Jeffrey White (Chairman)
Mr. Eli S. Jacobs
Mr. Carl J. Rickertsen
19
Independent Auditor Fees
On the recommendation of the Audit Committee of the Board of Directors, the
Board of Directors has selected Ernst & Young LLP as the Company's independent
auditors for the fiscal year ending January 31, 2006. Representatives of Ernst &
Young are expected to be present at the Annual Meeting to respond to appropriate
questions and to make a statement if they so desire.
The following table shows the fees paid or accrued by the Company for the
audit and other services provided by Ernst & Young LLP for the fiscal years
ended January 31, 2005 and 2004.
2005 2004
Audit Fees(1) $299,332 $ 662,225
Audit-Related Fees(2) 30,951 16,700
Tax Fees(3) 30,500 49,480
Other Fees 0 0
_________ ________
Total $360,783 $ 728,405
_____________________
(1) Audit fees represent fees for professional services provided in
connection with the audit of the Company's financial statements
and review of the Company's quarterly financial statements and
audit services provided in connection with other statutory or
regulatory filings.
(2) Audit-related fees generally include fees for audits of the
Company's benefit plans, accounting advisory fees related to
transactions impacting the Company's financial statements and
auditor consents required to be included in certain filings with
the SEC.
(3) Tax fees principally included tax advisory fees and tax
compliance fees.
The Audit Committee has concluded that the provision of non-audit services
listed above is compatible with maintaining the independence of Ernst & Young
LLP. The Audit Committee has delegated to the Chair of the Audit Committee the
authority to pre-approve audit-related and non-audit services not prohibited by
law to be performed by the Company's independent auditors and associated fees,
provided that the Chair shall report any decision to pre-approve such
audit-related or non-audit services and fees to the full Audit Committee at its
next regular meeting.
20
Performance Graph
The following graph is a comparison of the cumulative total return to
shareholders of the Company's common stock at January 31, 2005 since January 31,
2000 to the cumulative total return over such period of (i) the NASDAQ Stock
Market-U.S., and (ii) the Standard & Poor's Information Technology Index,
assuming an investment in each of $100 on January 31, 2000 and the reinvestment
of dividends. The information contained in the Performance Graph shall not be
deemed to be "soliciting material" or to be "filed" with the SEC, nor shall such
information be incorporated by reference into any future filing under the
Securities Act or the Exchange Act, except to the extent that the Company
specifically incorporates it by reference into such filing.
[GRAPHIC
OMITTED][GRAPHIC OMITTED]
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 and regulations of the
SEC thereunder require the Company's executive officers and directors, and
persons who own more than ten percent of a registered class of the Company's
equity securities, to file reports of initial ownership and changes in ownership
with the SEC. Based solely on its review of copies of such forms received by the
Company, or on written representations from certain reporting persons that no
other reports were required for such persons, the Company believes that during
or with respect to the period from February 1, 2004 to January 31, 2005, all of
the Section 16(a) filing requirements applicable to its executive officers,
directors and ten percent shareholders were complied with on a timely basis
except for the following filings: (1) a Form 4 filing by each of Jeffrey White,
Eli Jacobs, Steven Samowich and John Polchin in connection with grants of stock
options, (2) two Form 4 filings by Carl Rickertsen in connection with two grants
of stock options, (3) a Form 4 filing by each of Patrick Condo and James
Buchanan, the Company's former Chief Operating Officer, in connection with
grants of deferred stock and (4) a Form 3 filing by Steven Samowich upon
becoming the Company's Chief Operating Officer.
21
Shareholder Proposals To Be Presented At Next Annual Meeting
In order to be considered for inclusion in the proxy materials to be
distributed in connection with next year's Annual Meeting, shareholder proposals
for such meeting must be received by the Company at its principal office no
later than January 31, 2006 and must satisfy the conditions established by the
SEC for shareholder proposals. If a shareholder intends to submit a proposal at
next year's Annual Meeting, which proposal is not intended to be included in the
Company's proxy statement and form of proxy relating to that meeting, the
shareholder must give appropriate notice to the Company not later than April 14,
2006. As to all such matters which the Company does not have notice on or prior
to April 14, 2006, discretionary authority shall be granted to the persons
designated in the Company's proxy related to the 2006 Annual Meeting to vote on
such proposal.
22
OTHER MATTERS
Expenses of Solicitation
The accompanying proxy is solicited by and on behalf of the Board of
Directors of the Company, and the entire cost of such solicitation will be borne
by the Company. Proxies may also be solicited by directors, officers and
employees of the Company, without additional compensation, by personal
interview, telephone and facsimile. Arrangements will be made with brokerage
houses and other custodians, nominees and fiduciaries for the forwarding of
solicitation material and annual reports to the beneficial owners of stock held
of record by such persons, and the Company will reimburse them for reasonable
out-of-pocket and clerical expenses incurred by them in connection therewith.
Discretionary Authority
The Annual Meeting is called for the specific purposes set forth in the
Notice of Meeting and discussed above, and also for the purpose of transacting
such other business as may properly come before the Annual Meeting. At the date
of this Proxy Statement, the Company does not expect that any other matters will
be submitted for consideration at the Annual Meeting other than those
specifically referred to above. If any other matters properly come before the
Annual Meeting, the proxy holders will be entitled to exercise discretionary
authority to the extent permitted by applicable law.
By Order of the Board of Directors,
John R. Polchin
Executive Vice President, Chief Financial Officer, Treasurer
& Secretary
Dated: May 31, 2005
23
PROXY CONVERA CORPORATION PROXY PROXY
1921 GALLOWS ROAD, SUITE 200
VIENNA, VIRGINIA 22182
The undersigned holder of Common Stock of Convera Corporation (the
"Company") hereby constitutes and appoints Patrick C. Condo and John R. Polchin
and each of them, attorneys and proxies with full power of substitution to each,
for and in the name of the undersigned to vote the shares of Common Stock of the
Company, which the undersigned would be entitled to vote if personally present
at the Annual Meeting of Shareholders of the Company to be held at the Company's
corporate headquarters located at 1921 Gallows Road, Suite 200, Vienna, Virginia
22181 on Tuesday, July 12, 2005 at 10:00 a.m., local time, or at any and all
adjournments thereof, on all matters as may properly come before the meeting.
The undersigned hereby revokes any and all proxies heretofore given with respect
to such meetings.
Each of such attorneys and proxies present at the meeting shall and may
exercise the powers granted hereunder.
Receipt is acknowledged of the Notice of Annual Meeting of Shareholders
dated May 31, 2005 and the Proxy Statement accompanying said notice.
Said attorneys are hereby instructed to vote as specified below. IF NO
SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR ITEM 1 BELOW.
1. Election of the following ten (10) nominees to serve as directors until
the next Annual Meeting of Shareholders and until their successors are elected
and qualified.
Nominees: Ronald J. Whittier Herbert A. Allen Herbert A. Allen III Patrick C. Condo
Stephen D. Greenberg Eli S. Jacobs Donald R. Keough William S. Reed
Carl J. Rickertsen Jeffrey White
_________________________________________
____ FOR ALL NOMINEES ____ WITHHOLD AUTHORITY FOR ALL NOMINEES TO WITHHOLD
AUTHORITY FOR
ANY INDIVIDUAL
NOMINEE, WRITE
THAT NOMINEE'S
NAME IN THE
SPACE PROVIDED
ABOVE.
2. In their discretion, to vote upon such other matters as may properly come
before the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Dated: , 2005
-----------------------
-----------------------------
Signature
--------------------------------------------
Signature(s) if held jointly
Please sign your name as it appears hereon. In the case of joint owners or
tenants in common, each should sign. If signing as a trustee, guardian or in any
other representative capacity or on behalf of a corporation or partnership,
please indicate your title.