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. _____)
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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 STOCKHOLDERS
to be held on July 18, 2006
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders 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 18, 2006 for the
following purposes:
1. To elect eleven directors of the Company for terms expiring at the
2007 Annual Meeting.
2. To approve an amendment of the 2000 Stock Option Plan.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The close of business on May 26, 2006 has been fixed as the record date for
the determination of stockholders 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, 2006
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 Stockholders to be Held
on July 18, 2006
PROXY STATEMENT
This Proxy Statement is furnished to stockholders 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 2006 Annual
Meeting of Stockholders (the "Annual Meeting") of the Company to be held on
Tuesday, July 18, 2006 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 stockholders on or about June 16, 2006.
The Board of Directors has fixed May 26, 2006 as the record date for the
determination of the stockholders entitled to notice of and to vote at the
Annual Meeting. On that day, there were outstanding 52,533,457 shares of Convera
Class A common stock and approximately 952 holders of record.
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. Stockholders 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 stockholder of record is entitled to one vote at the Annual Meeting
for each share of common stock held by such stockholder on the record date.
Stockholders do not have cumulative voting rights. Stockholders may vote their
shares by using the enclosed form of proxy for use at the Annual Meeting. The
proxy may be revoked by a stockholder at any time prior to the exercise thereof,
and any stockholder 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) and for the amendment to
the 2000 Stock Option Plan described in Item 2 herein.
Convera's Annual Report for the fiscal year ended January 31, 2006 is
enclosed with this Proxy Statement for each stockholder.
ITEM 1
ELECTION OF DIRECTORS
GENERAL
Eleven 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 70 Chairman
Patrick C. Condo 49 President, Chief Executive Officer and Director
Herbert A. Allen 66 Director
Herbert A. Allen III 38 Director
Stephen D. Greenberg 57 Director
Eli S. Jacobs 68 Director
Donald R. Keough 79 Director
Ajay Menon 44 Director
Sydney Pollack 71 Director
Carl J. Rickertsen 46 Director
Jeffrey White 58 Director
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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.
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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.
Ajay Menon has been a director of the Company since December 2005. Mr.
Menon has served as the Dean of the College of Business at Colorado State
University since July 2002. Mr. Menon, who has taught at the College of Business
at Colorado State University since 1991, served as the Associate Dean of
Academic and Executive Program for the three years preceding his appoint as
Dean. Mr. Menon received his bachelor's in chemistry from the University of
Bombay in India in 1982, his master's in business administration from the
University of Texas in 1986 and his doctorate in marketing from the University
of North Texas-Denton in 1991.
Sydney Pollack has been a director of the Company since December 2005. Mr.
Pollack is a film director, producer, and actor whose work over the past 30
years has earned 46 Academy Award nominations. He is the Chief Executive Officer
of Mirage Enterprises, a producer of films. He serves on the boards of KCET,
public broadcasting of Los Angeles, and the Motion Picture Television Fund. He
is a founding member of the Sundance Institute and the Chairman Emeritus of the
American Cinematheque.
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, United
Agri-Products, a distributor of farm products and Homeland Security Capital
Corporation, a consolidator in the homeland security industry.
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 eight meetings and acted by unanimous written
consent twice during the fiscal year ended January 31, 2006. 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 2006 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,
Ajay Menon, Sydney Pollack, Carl J. Rickertsen and Jeffrey White. As discussed
further below under "Controlled Company Exemption Election," the Board intends
to appoint two additional independent directors to the Board in order to have a
majority of independent Board members by July 1, 2006 as required by Nasdaq's
governance requirements.
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The Board of Directors has standing Audit, Compensation, Nominating,
Corporate Governance and Executive Committees. For additional information on the
Company's corporate governance, including the charters approved by the Board for
the Audit Committee, the Compensation Committee and the Nominating Committee and
the Code of Business Conduct and Ethics, please visit the Corporate Governance
area of the Company's website at www.convera.com.
The Audit Committee currently consists of Mr. Ajay Menon, Mr. Carl J.
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 ("SEC"). The purpose of the Audit Committee is to oversee the
accounting and financial reporting processes of the Company and audits of its
financial statements. The responsibilities of the Audit Committee include
appointing and providing the compensation of the independent accountants to
conduct the annual audit of our accounts, reviewing the scope and results of the
independent audits, reviewing and evaluating internal accounting policies, and
approving all professional services to be provided to the Company by its
independent accountants. The Audit Committee is governed by a written charter, a
copy of which is attached hereto as Exhibit A and is also available on the
Company's website at www.convera.com. The members of the Audit Committee during
fiscal year 2006 were Mr. Eli Jacobs, Mr. Carl J. Rickertsen and Mr. Jeffrey
White (Chairman). The Audit Committee met seven times during the fiscal year
ended January 31, 2006.
The Compensation Committee is currently composed of three directors, Mr.
Eli Jacobs (Chairman), Mr. Carl J. Rickertsen and Mr. Jeffrey White. The members
of the Compensation Committee are deemed independent under Nasdaq rules. The
Compensation 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 Committee is governed by a
written charter, a copy of which is available on the Company's website at
www.convera.com. The members of the Compensation Committee at January 31, 2006
were Mr. Herbert A. Allen (Chairman), Mr. Eli Jacobs and Mr. Carl J. Rickertsen.
The Compensation Committee met two times and acted by unanimous written consent
four times in fiscal year 2006.
The Nominating Committee is currently composed of two directors, Mr. Sydney
Pollack and Mr. Carl J. Rickertsen (Chairman). The member of the Nominating
Committee are 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 is
governed by a written charter, a copy of which is available on the Company's
website at www.convera.com. At January 31, 2006, the members of the Nominating
Committee were Mr. Herbert A. Allen III and Mr. Carl J. Rickertsen. The
Nominating Committee met two times in fiscal year 2006.
In May 2006, the Company's Board of Directors also formed a Corporate
Governance Committee, which is currently composed of four directors, Mr. Herbert
A. Allen III, Mr. Stephen D. Greenberg, Mr. Donald R. Keough (Chairman) and Mr.
Ronald J. Whittier. The purpose of the Corporate Governance Committee is to
review and assess the Company's Code of Ethics and Conduct and recommend
changes, if so warranted, develop and recommend to the Board additional
corporate governance principles applicable to the Company and provide oversight
with respect to corporate
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governance and ethical conduct. The Board intends to adopt a written charter for
the Governance Committee in the near future.
The Executive Committee is currently composed of four directors, Mr.
Herbert A. Allen (Chairman), Mr. Patrick C. Condo. Mr. Eli Jacobs and Mr. Ronald
J. Whittier. The Executive Committee has the authority to consider matters
arising between Board meetings and to make recommendations to the full Board.
The Executive Committee does not operate pursuant to a written charter.
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
Prior to the completion on July 1, 2005 of a private placement of the
Company's common stock, the Company had 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 was a "controlled company" as defined in the Nasdaq listing rules.
As such, the Company had 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. Following the completion of such private placement, the
beneficial ownership of Allen Holding Inc., Herbert A. Allen and certain
affiliates and related persons was reduced to less than 50% of the Company's
outstanding common stock. Pursuant to the phase-in rules of the Nasdaq National
Market, the Company is required to be in full compliance with the Nasdaq's
requirements for independent nomination and compensation committees and a
majority of independent board members by July 1, 2006, one year from the date it
ceased to be a controlled company. The Company has taken action to appoint
independent directors to its Compensation and Nominating Committees. In
addition, the Board intends to appoint two additional independent directors to
the Board in order to have a majority of independent Board members. The Company
expects to be in full compliance with Nasdaq's governance requirements by the
end of the Nasdaq phase-in period on July 1, 2006.
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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 2005 Annual Meeting.
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 SEC. 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 (the "Exchange Act") (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, "Stockholder
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
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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.
Board Nominees for the 2006 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 SEC 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 current members of the Compensation Committee are Mr. Eli Jacobs
(Chairman), Mr. Carl J. Rickertsen and Mr. Jeffrey White and the members of the
Compensation Committee at January 31, 2006 were Mr. Herbert A. Allen, Mr. Eli
Jacobs and Mr. Carl J Rickertsen. 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, 2005, 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 transactions described below.
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On July 1, 2005, the Company completed the sale of a total of 6,555,556
newly-issued shares of common stock in a private placement to accredited
investors. The Company sold 5,555,556 shares directly to the Legg Mason
Opportunity Trust, a series of Legg Mason Investment Trust, Inc., a registered
investment company, at a price of $4.50 per share. The other one million shares
were purchased by an affiliate of Herbert A. Allen, a significant stockholder
and director of Convera, at a price of $4.84 per share, which represented the
market price of the Company's common stock at the time of the sale. The sale
resulted in aggregate proceeds to the Company of $29.84 million. Allen & Company
LLC, an investment banking firm affiliated with certain of the Company's
directors, acted as placement agent for the private placement and received a 4%
placement agent commission of $1,000,000 on the $25 million of gross proceeds
received by the Company from the Legg Mason Opportunity Trust. Mr. Herbert A.
Allen III is President of Allen & Company LLC, Mr. Stephen D. Greenberg is a
Managing Director of Allen & Company LLC and Mr. Donald R. Keough is Chairman of
Allen & Company LLC. Mr. Herbert A. Allen is President, Chief Executive Officer,
Managing Director and a director of Allen & Company Incorporated, which is
affiliated with Allen & Company LLC.
On February 28, 2006, the Company completed a private placement of
5,103,333 newly-issued shares of common stock to several accredited investors,
including 300,000 shares acquired by certain investors advised by Ashford
Capital Management, Inc., a beneficial holder of more than 5% of the Company's
common stock. The shares were sold at a price of $7.50 per share. The private
placement resulted in gross proceeds of $38.275 million. Allen & Company LLC
acted as placement agent for the private placement and received a 4% placement
agent commission on the gross proceeds received by the Company.
During the fiscal year ended January 31, 2006, and for the prior two fiscal
years, the Company paid Mr. Ronald J. Whittier, Chairman of the Board of
Directors, a salary of $100,000 and provided Mr. Whittier with customary
employee benefits for his services to the Company.
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ITEM 2
AMENDMENT OF THE 2000 STOCK OPTION PLAN
GENERAL
The 2000 Stock Option Plan (the "Stock Option Plan") was adopted by the Board of
Directors and approved by the Company's stockholders in December 2000. The Stock
Option Plan authorizes the granting of stock options and other forms of
incentive compensation to purchase up to 11.25 million shares of Convera's
common stock in order to attract and retain competent, experienced and motivated
personnel. The Stock Option Plan gives all employees, including officers and
directors who are also employees, the opportunity to receive grants of incentive
stock options, also referred to as ISOs, nonqualified stock options, also
referred to as NQSOs, stock appreciation rights, stock purchase rights, deferred
stock, restricted stock and/or other stock-based awards. The Stock Option Plan
encourages participants to contribute to Convera's growth. This benefits Convera
stockholders because it aligns the participant's economic interests with Convera
stockholder interests.
The Board of Directors, at the recommendation of the Compensation Committee, has
amended the 2000 Stock Option Plan (the "Plan Amendment"), subject to
stockholder approval, primarily to increase the number of shares available under
the Stock Option Plan by 3.0 million shares to an aggregate of 14.25 million
shares. The Plan Amendment also amends certain other provisions as discussed
below. The Plan Amendment will become effective immediately if approved by
stockholders at the Annual Meeting. If the Plan Amendment is not approved at
this Annual Meeting, the Plan Amendment will not become effective and the Stock
Option Plan as it presently exists will continue in effect. The results of the
vote will not affect any awards outstanding under the Stock Option Plan as of
the date of this proxy statement. A copy of the Stock Option Plan, as amended
and restated to include the Plan Amendment, is attached to this proxy statement
as Exhibit B.
As of May 31, 2006, an aggregate of 15,291 shares of common stock remain
reserved for issuance for future awards under the Stock Option Plan. The Board
believes that the availability of an adequate number of shares in the share
reserve of the Stock Option Plan is an important factor in attracting,
motivating and retaining qualified employees and advisors essential to the
success of the Company. The Plan Amendment increases the shares reserve under
the Stock Option Plan by 3.0 million shares in contemplation of using these
shares to grant options over the next few years. In light of historical usage
and expected future grants, the Company expects that the increase will be
adequate to meet these foreseeable requirements.
The Plan Amendment also adds limits to annual grants so that grants under the
Stock Option Plan may qualify for a tax deduction notwithstanding the $1 million
deductibility cap under Section 162(m) of the Internal Revenue Code. Thus,
annual grants of stock options, stock appreciation rights and other stock awards
intended to qualify for the performance based exception under Section 162(m) may
not exceed 2 million shares per person. Annual cash awards intended to qualify
as performance based compensation under Section 162(m) may not exceed $3 million
per person.
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The Plan Amendment also provides performance standards so that compensation may
be granted which qualifies for the exception under Section 162(m) as performance
based compensation. To qualify as a performance based award (except in the case
of stock options or stock appreciation rights that otherwise qualify) the award
must be subject to a performance condition (i) that is established (A) at the
time an award is granted or (B) no later than the earlier of (1) 90 days after
the beginning of the period of service to which it relates, or (2) before the
elapse of 25% of the period of service to which it relates, (ii) that is
uncertain of achievement at the time it is established, and (iii) the
achievement of which is determinable by a third party with knowledge of the
relevant facts. Examples of measures that may be used include net order dollars,
net profit dollars, net profit growth, net revenue dollars, revenue growth,
individual performance, earnings per share, return on assets, return on equity,
and other financial objectives, objective customer satisfaction indicators and
efficiency measures, each with respect to the Company and/or an affiliate or
individual business unit.
The Plan Amendment also provides the plan administrator with greater discretion
over the types of consideration which may be accepted as payment for stock
options granted under the Stock Option Plan.
Future options and awards, if any, that will be made to eligible participants in
the Stock Option Plan are subject to the discretion of the Compensation
Committee and, therefore, are not determinable at this time.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE THE
AMENDMENT TO THE COMPANY'S 2000 STOCK OPTION PLAN.
VOTE REQUIRED
To be adopted, the stock option proposal must be approved by the affirmative
vote of the majority of the shares voting on the proposal present in person or
represented by proxy at the annual meeting. Any shares not voted (by abstention,
broker non-vote or otherwise) have no effect on such vote.
The following is a summary of the principal features of the Stock Option Plan
which will be in effect if the stock option proposal is approved and adopted by
the stockholders.
ELIGIBILITY
Under the Stock Option Plan, all employees, including officers and directors who
are also employees, are eligible to be granted incentive stock options under the
Stock Option Plan. Convera may grant non-qualified stock options under the Stock
Option Plan to employees or to other persons who perform substantial services
for or on behalf of Convera, including officers and directors. Option holders
may not transfer options, other than by will or the laws of descent and
distribution.
ADMINISTRATION
The Compensation Committee administers and interprets the Stock Option Plan,
except that if the members of Compensation Committee do not meet the
requirements set forth in the Stock Option Plan, the Plan may be administered by
the full Board of Directors. The Compensation Committee determines:
-11-
- the individuals who may receive grants under the Stock Option Plan;
- the exercise price and number of shares subject to each grant;
- the time or times during which all or a portion of each grant may be
exercised; and
- any other terms of each option.
The maximum term of options granted under the Stock Option Plan is ten years.
TERMS AND CONDITIONS OF OPTIONS
Under the Stock Option Plan, Convera may grant incentive stock options to
officers and key employees of Convera to purchase shares of the common stock at
a purchase price equal to the fair market value of the common stock on the date
of grant. Convera may also grant NQSOs. The Compensation Committee may, when and
to the extent it deems appropriate and with the consent of option holders,
substitute outstanding options with replacement options at a lower exercise
price. Options granted and outstanding under the Stock Option Plan vest over a
period of up to four years. The Stock Option Plan provides that the Board of
Convera may grant stock appreciation rights to option holders.
Upon termination of an employee for cause, that employee's stock options will
terminate. If the employee is involuntarily terminated without cause, his stock
options will be exercisable for three months following termination or until the
end of the option period, whichever is shorter. Upon the disability or
retirement of the employee, stock options will be exercisable within the lesser
of the remainder of the option period or one year from the date of disability or
retirement. Upon the death of an employee, stock options will be exercisable by
the deceased employee's representative within the lesser of the remainder of the
option period or one year from the date of the employee's death. Unless
otherwise determined by the Compensation Committee, only options which are
exercisable on the date of termination, death, disability or retirement may be
subsequently exercised. Options granted to non-employees including directors do
not terminate upon termination of such persons' relationship with Convera. Stock
options and stock appreciation rights may not be granted to the extent shares
subject to grants to any individual exceed 2 million shares. In the case of
other stock awards, if such awards are intended to qualify as performance based
compensation as defined under Section 162(m) of the Internal Revenue Code (as
further discussed below), they must satisfy the performance standards below and
annual awards to any individual may not exceed 2 million shares. Cash awards
must also meet the performance conditions below if they are intended to satisfy
Section 162(m) and if so intended are limited to $3 million per year per
individual.
To qualify as a performance based award (except in the case of stock options or
stock appreciation rights that otherwise qualify) the award must be subject to a
performance condition (i) that is established (A) at the time an award is
granted or (B) no later than the earlier of (1) 90 days after the beginning of
the period of service to which it relates, or (2) before the elapse of 25% of
the period of service to which it relates, (ii) that is uncertain of achievement
at the time it is established, and (iii) the achievement of which is
determinable by a third party with knowledge of the relevant facts. Examples of
measures that may be used include net order dollars, net profit dollars, net
profit growth, net revenue dollars, revenue growth, individual performance,
earnings per share, return on assets, return on equity,
-12-
and other financial objectives, objective customer satisfaction indicators and
efficiency measures, each with respect to the Company and/or an affiliate or
individual business unit.
STOCK APPRECIATION RIGHTS
The Stock Option Plan provides that the Compensation Committee may grant stock
appreciation rights in conjunction with all or part of an option granted under
the plan. Under a stock appreciation right, an option holder may surrender to
Convera all (or a portion) of an option in exchange for an amount equal to the
difference between (i) the fair market value, as of the date such option (or
such portion thereof) is surrendered, of the shares of Convera common stock
covered by such option (or such portion thereof), and (ii) the aggregate
exercise price of such option (or such portion thereof). The amount owed to a
holder may be paid in cash or shares of Convera common stock, at the discretion
of the Compensation Committee.
STOCK PURCHASE RIGHTS
The Stock Option Plan provides that the Compensation Committee may grant stock
purchase rights to eligible participants which shall enable these participants
to purchase Convera common stock, including deferred stock or restricted stock
referred to below, at:
- its fair market value on the date of the grant;
- 50% of its fair market value on the date of the grant;
- its book value on the date of the grant; or
- its par value on the date of the grant.
The Compensation Committee may impose deferral, forfeiture and other terms and
conditions on grants of stock purchase rights. These stock purchase rights are
not connected with any right under the Company's employee stock purchase plan.
DEFERRED STOCK, RESTRICTED STOCK, OTHER STOCK-BASED AWARDS
The Stock Option Plan provides that the Compensation Committee may grant
deferred stock, restricted stock and other stock-based awards to eligible
participants. Deferred stock gives a holder the right to receive stock at the
end of a specified deferral period determined by the Compensation Committee.
Restricted stock will be subject to restrictions, determined by the Compensation
Committee, on when a holder may sell, transfer, pledge or assign the stock.
Other stock-based awards are awards that are valued in whole or in part by
reference to, or are otherwise based on, Convera common stock.
AMENDMENTS
The Board of Convera may amend the Stock Option Plan, but no amendment shall be
made which would impair the rights of an option holder under a stock option
already granted, without the option holder's consent, or which, without the
approval of Convera's stockholders, would cause the Stock
-13-
Option Plan to no longer comply with Rule 16b-3 under the Exchange Act or any
successor rule or other regulatory requirements.
TERM OF PLAN
Unless sooner terminated by the Board of Convera, the Stock Option Plan will
terminate on December 21, 2010, the tenth anniversary of the date of stockholder
approval, but awards granted prior to the tenth anniversary may extend beyond
that date.
FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING DESCRIPTION OF FEDERAL INCOME TAX CONSEQUENCES ASSOCIATED WITH THE
STOCK OPTION PLAN IS BASED ON PROVISIONS OF THE TAX CODE AND ADMINISTRATIVE AND
JUDICIAL INTERPRETATIONS THEREOF AS OF THE DATE OF THIS PROXY STATEMENT. IT DOES
NOT DESCRIBE APPLICABLE STATE, LOCAL, OR FOREIGN TAX CONSIDERATIONS. THE
APPLICABLE RULES ARE COMPLEX AND MAY VARY WITH A PARTICIPANT'S INDIVIDUAL
CIRCUMSTANCES. THE FOLLOWING DESCRIPTION IS THUS NECESSARILY GENERAL AND DOES
NOT ADDRESS ALL OF THE POTENTIAL FEDERAL AND OTHER INCOME TAX CONSEQUENCES OF
THE STOCK OPTION PLAN.
Under the Stock Option Plan, Convera may grant non-qualified options and
incentive stock options and other stock-based rights. In general, under present
tax laws, an option holder will not be deemed to recognize any income for
federal income tax purposes at the time a stock option is granted, nor will
Convera be entitled to a tax deduction at that time. However, when a stock
option is exercised, the federal income tax consequences are summarized as
follows:
Incentive Stock Options
Award; Exercise; Alternative Minimum Tax. Options granted as Incentive Stock
Options under the Stock Option Plan are intended to qualify for special tax
status under Section 422 of the tax code. An optionee will not have taxable
income upon the award or exercise of an Incentive Stock Option. However, the
"option spread" (the amount by which the fair market value of the option shares
on the relevant measurement date exceeds the exercise price) is includable in
the optionee's "alternative minimum taxable income" in determining the
optionee's liability for the "alternative minimum tax." The option spread
generally is measured for this purpose on the day the option is exercised. (For
purposes of the alternative minimum tax, the fair market value of stock acquired
under an Incentive Stock Option is determined by ignoring any restriction which
by its terms may eventually lapse.)
In general, the alternative minimum tax for individuals is imposed at rates
slightly lower than ordinary income rates, but on a higher base, including, for
example, personal exemptions and all itemized deductions. The alternative
minimum tax is payable only to the extent that it exceeds an individual's
ordinary income tax. Whether or not an optionee will be subject to the
alternative minimum tax depends upon the optionee's particular circumstances.
Payment of alternative minimum tax does not increase the optionee's basis in the
option shares for determining gain or loss for purposes of regular income tax.
However, any alternative minimum tax paid as a result of the exercise of an
Incentive Stock Option is
-14-
generally creditable against regular tax liability in later years to the extent
the optionee's regular tax exceeds his or her alternative minimum tax in such
years.
Sale of Option Shares; Disqualifying Dispositions. An optionee will be entitled
to long-term capital gain or loss treatment upon sale, other than to Convera, of
Incentive Stock Option shares held longer than two years from the grant date and
longer than one year from the date the optionee receives the shares. If the
shares are sold or disposed of (including by gift, but not including certain
tax-free exchanges) before both of these holding periods have expired (a
"disqualifying disposition"), the option spread (or, if less, the amount of gain
on the sale) is taxable as ordinary income. For this purpose, the option spread
is measured at the exercise date. If gain on a disqualifying disposition exceeds
the amount treated as ordinary income, the excess is capital gain, which will be
long-term if the shares were held for more than one year. For this purpose, the
holding period for option shares generally commences on the option exercise
date.
Tax Consequences to Convera; Notice of Disqualifying Disposition. Convera
receives no income tax deduction upon award or exercise of an Incentive Stock
Option but is generally entitled to a deduction equal to the ordinary income
taxable to the optionee upon a disqualifying disposition. To enable Convera to
learn of a disqualifying disposition and ascertain the amount of the deduction
to which it is entitled, optionees are required to notify Convera in writing,
before the disqualifying disposition, of the intended date and terms of the
disposition and to comply with any other requirements that may be included in
the option agreement to ensure that Convera is able to secure any tax deduction
to which it is entitled. Convera may also give appropriate instructions, which
may take the form of legends on share certificates, to its stock transfer agent
to ensure that such requirements are satisfied before stock may be transferred.
Nonstatutory Options
Award; Exercise; Tax Consequences to Convera. An optionee is not taxed upon the
award of a Nonstatutory Option. Upon exercise of an option, the optionee will
have ordinary income measured by the option spread on the exercise date. The
optionee's tax basis in the shares will be their fair market value on the date
of exercise, and the holding period for purposes of determining whether capital
gain or loss upon sale is long- or short-term also will begin on that date. The
amount of ordinary income taxable to an optionee who was an employee at the time
of grant constitutes "supplemental wages" subject to withholding of income and
employment taxes by Convera, and Convera will generally receive a corresponding
income tax deduction.
Sale of Option Shares. Upon sale, other than to Convera, of shares acquired
under a Nonstatutory Option, an optionee generally will recognize capital gain
or loss to the extent of the difference between the sale price and the
optionee's tax basis in the shares, which will be long-term gain or loss if the
shares are held more than one year.
Section 162(m)
As described above, awards may qualify as "performance-based compensation" under
Section 162(m) of the Internal Revenue Code in order to preserve the Company's
federal income tax deductions with respect to annual compensation required to be
taken into account under Section 162(m) that is in excess
-15-
of $1 million and paid to one of our five most highly compensated executive
officers. To qualify, options and other awards must be granted by a committee
consisting solely of two or more "outside directors" (as defined under
applicable regulations) and satisfy the limit on the total number of shares that
may be awarded to any one participant during any calendar year. In addition, for
awards other than options to qualify, the grant, issuance, vesting or retention
of the award must be contingent upon satisfying one or more of the performance
criteria, as established and certified by a committee consisting solely of two
or more "outside directors."
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, Gastrock, and Polchin. There
are no family relationships between any of the executive officers of the
Company.
Name Age Position
- ---- --- --------
Patrick C. Condo 49 President and Chief Executive Officer
Kurt Gastrock 40 Executive Vice President and Chief Operating Officer
John R. Polchin 42 Executive Vice President, Chief Financial Officer,
Treasurer & Secretary
See the discussion included in the preceding section for the business
experience of Mr. Condo.
Kurt Gastrock joined the Company as Chief Operating Officer in November
2005. Mr. Gastrock has more than 15 years combined experience with Sprint
Corporation, a publicly traded wireless, wireline and data communications
provider. Most recently prior to joining the Company, Mr. Gastrock served as
Vice President and General Manager of Sprint Wireless Sites since 2003. Mr.
Gastrock also served in other management capacities at Sprint Corporation,
including Vice President of Sprint Hosting Solutions from 2002 to 2003 and Vice
President of Sprint E|Solutions from 2000 to 2002. Mr. Gastrock held various
other sales and operational positions within Sprint from 1989 to 1999. In
addition, Mr. Gastrock served as Vice President of Engineering of
USinternetworking, Inc., an application service provider, from 1999 to 2000.
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.
-16-
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, 2006 whose total salary and bonus exceeded
$100,000 in the 2006 fiscal year (the "Named Executive Officers"), as well as
the previous two fiscal years or from their respective start dates:
Long Term Compensation
-------------------------------------------------
Annual Compensation Awards
---------------------------------------------- ------------------------ Payouts
Other Restricted Securities
Annual Stock Underlying LTIP All Other
Name and Principal Fiscal Compensation Award(s) Options/ Payouts Compensation
Position Year Salary ($) Bonus ($) ($) ($) SARs (#) ($) ($)
- ------------------ ------ ---------- --------- ------------ ---------- ---------- ------- ------------
Patrick C. Condo 2006 480,000 183,350 -- -- -- -- --
President and Chief 2005 480,000 39,000 -- -- 750,000 -- --
Executive Officer 2004 480,000 50,000 -- 2,622,000(1) -- -- --
Kurt Gastrock 2006 68,269 43,750 -- 2,552,000(3) 500,000 -- --
Chief Operating
Officer (2)
John R. Polchin 2006 250,000 121,866 -- -- 100,000 -- --
Chief Financial 2005 187,500 40,000 30,000(5) -- 400,000 -- --
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 and will be subject to 18 months' additional vesting in the
event he resigns for good reason. See "Executive Compensation - Employment
Agreements and Other Arrangements."
(2) Mr. Gastrock joined the Company in November 2005.
(3) This amount represents a deferred stock award of 200,000 shares at a market
value of $12.76 per share on the date of grant. See "Executive Compensation
- Employment Agreements and Other Arrangements" for the vesting and other
terms of this award.
(4) Mr. Polchin joined the Company in May 2004.
(5) Represents the amount of a signing bonus paid upon joining the Company. See
"Executive Compensation - Employment Agreements and Other Arrangements."
-17-
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning options granted
during the fiscal year ended January 31, 2006 to the Named Executive Officers.
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS . VALUE AT ASSUMED
----------------------------------------------------- ANNUAL RATES OF
PERCENT OF TOTAL STOCK PRICE
OPTIONS/SARS APPRECIATION FOR
GRANTED TO EXERCISE OR OPTION TERM (1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED FISCAL YEAR(2) ($/SH) DATE 5% ($) 10% ($)
---- ------- ---------------- ----------- ---------- --------- ----------
Patrick C. Condo -- -- -- -- -- --
Kurt Gastrock 500,000 18% $12.76 11/9//2015 4,012,348 10,168,077
John R. Polchin 100,000 4% $ 4.70 6/25/2015 295,580 749,059
- ----------
(1) The 5% and 10% assumed annual rates of appreciation are mandated by rules
of the SEC 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, 2006. 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.
-18-
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
The following table sets forth, as of January 31, 2006, the number of
options and the value of exercised and unexercised options held by the Named
Executive Officers.
Number of Securities Value of Unexercised
Underlying Unexercised In-the Money
Options/SARS at Options/SARS at
Shares Fiscal Year-End (#) Fiscal Year-End ($)
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable (1)
---- ------------ ------------ ---------------------- ----------------------
Patrick C. Condo 100,000 $552,290 1,062,500/562,500 $3,300,000/$1,766,250
Kurt Gastrock -- -- 0/500,000 $0/$0
John R. Polchin 87,499 $616,930 62,501/350,000 $260,505/$1,420,500
- ----------
(1) The closing price of the Company's common stock on January 31, 2006, the
last trading day of the Company's fiscal year, was $7.85 per share.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth, as of January 31, 2006, information with
respect to the Company's equity compensation plans:
Number of Securities
Number of Securities Remaining Available for
to be Issued Upon Weighted-Average Future Issuance Under
Exercise of Exercise Price of Equity Compensation Plans
Outstanding Options, Outstanding Options, (excluding securities
Warrants and Rights Warrants and Rights (1) reflected in column (a))
Plan Category (a) (b) (c)
------------- -------------------- ----------------------- -------------------------
Equity compensation plans
approved by security holders:
1. Convera Stock Option Plan 9,695,022 $5.25 34,348
2. Convera Employee Stock
Purchase Plan -- -- 674,353
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.
-19-
EMPLOYMENT AGREEMENTS AND OTHER ARRANGEMENTS
On November 14, 2005, the Board of Directors of the Company approved a new
employment agreement for the Company's President and Chief Executive Officer,
Patrick C. Condo. Mr. Condo's employment agreement provides for an at-will
employment arrangement, under which his annual base salary is $480,000 and he is
eligible for a bonus of up to $200,000 per fiscal year based upon performance
targets to be established by the Company's Board of Directors. In addition, Mr.
Condo's employment agreement includes the following severance arrangements:
(a) If Mr. Condo's employment is terminated without cause or he
resigns for good reason (as such terms were defined by the Board), Mr.
Condo will be entitled to 18 months of salary continuance, 1.5 times his
target bonus for the year of termination, 18 months' accelerated vesting of
all options held by Mr. Condo and 18 months' medical benefits coverage
(either by reimbursement, continued coverage or replacement coverage)
(collectively, the "Severance Benefits"). In addition, the 600,000
restricted stock award made to Mr. Condo pursuant to an agreement dated May
20, 2003, as amended on May 18, 2004 (the "Restricted Stock Award"), which
otherwise vest on each consecutive one-year anniversary of the date of
grant, will vest in full upon termination without cause and will be subject
to 18 months' additional vesting in the event he resigns for good reason.
In order for Mr. Condo to receive the above benefits, he will be required
to release the Company from all claims and agree to an 18-month non-compete
and non-solicitation agreement.
(b) If Mr. Condo is terminated without cause or resigns for good
reason within 18 months following a change of control of the Company, he
will receive the same Severance Benefits described above. In addition, upon
a change of control of the Company, the unvested portion of the Restricted
Stock Award will vest in full.
In connection with Mr. Gastrock's appointment, the Company entered into an
at-will employment agreement with Mr. Gastrock, whereby Mr. Gastrock agreed to
act as the Company's Executive Vice President and Chief Operating Officer. Under
his agreement Mr. Gastrock's base salary is $300,000 and he is eligible for a
bonus of up to $175,000 per fiscal year to be paid quarterly, depending upon the
Company's actual performance compared to the Company's operating plan. Under his
agreement, Mr. Gastrock was guaranteed the quarterly bonus of $43,750 for the
fourth quarter of fiscal 2006. Upon joining the Company, Mr. Gastrock was
granted options to purchase 500,000 shares of the Company's common stock
pursuant to the Company's 2000 Stock Option Plan. Mr. Gastrock's options vest
12.5% every six months. In addition, Mr. Gastrock was granted 200,000 deferred
shares under the Company's 2000 Stock Option Plan (the "Deferred Shares"). The
Deferred Shares vest on the earlier to occur of (a) five years from the
beginning of Mr. Gastrock's employment provided he remains continuously employed
with the Company through such date and (b) the occurrence of a change in control
of the Company while he is employed by the Company followed (i) by continuous
employment by Mr. Gastrock at the Company or its successor for a period of 12
months or (ii) within 12 months by a termination of employment without cause or
a substantial diminution of his duties and/or responsibilities compared to his
duties and responsibilities immediately prior to the change of control. If Mr.
Gastrock's employment is terminated by the Company (other than for reasons set
forth in the agreement), (a) the Company shall pay Mr. Gastrock an amount equal
to one year of his then-current base salary and bonus paid out over the
Company's regular payroll schedule following the effective date of such
termination, as well as one year
-20-
of medical benefits coverage, (b) 20% of the Deferred Shares will vest for each
full year of continuous employment with the Company, and 5% for any full quarter
of continuous employment after the first full year of employment, if employment
is less than a full year thereafter and (c) Mr. Gastrock's stock options will
continue to vest according to their regular vesting schedule during the duration
of the severance period.
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 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.
-21-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 30, 2006, 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, 2006.
Amount and Nature Percent
of Beneficial of Class
Name and Address of Beneficial Owner Ownership (1) Owned
- ------------------------------------ ----------------- --------
Allen Holding Inc. 11,696,323(2) 22.3%
LMM LLC 5,555,556(3) 10.6%
Ashford Capital Management, Inc. 3,526,600(4) 6.7%
Susan K. Allen 3,170,369(5) 6.0%
Ronald J. Whittier 1,347,270(6) 2.5%
Herbert A. Allen 17,244,193(7) 32.9%
Herbert A. Allen III 605,787(8) 1.2%
Stephen D. Greenberg 85,000(9) *
Eli S. Jacobs 13,332(10) *
Donald R. Keough 684,166(11) 1.3%
Ajay Menon -- *
Sydney Pollack 57,000 *
Carl J. Rickertsen 67,498(12) *
Jeffrey White 60,831(13) *
Patrick C. Condo 1,395,853(14) 2.6%
Kurt Gastrock 62,500(15) *
John R. Polchin 62,499(16) *
All directors and executive officers
as a group (12 persons) 21,685,929(17) 39.6%
* Represents less than one percent of the outstanding common stock.
-22-
(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.
(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, 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 SEC on September 24, 2004. The address for AHI is 711
Fifth Avenue, NY, NY 10022.
(3) As reported in an Amendment No. 1 to Schedule 13G filed with the SEC by
LMM, LLC and Legg Mason Opportunity Trust on February 14, 2006. The address
for this holder is 100 Light Street, Baltimore, MD 21202.
(4) As reported in a Schedule 13G filed with the SEC by Ashford Capital
Management, Inc. on February 13, 2006. The address for this holder is P.O.
Box 4172, Wilmington, DE 19807.
(5) Does not include shares owned by AHI, ACI, Herbert A. Allen, Herbert A.
Allen III, Bruce Allen, 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). The address for Ms. Allen is 711 Fifth Avenue,
NY, NY 10022.
(6) Includes outstanding options to purchase 912,499 shares, which were
exercisable on or within 60 days of April 30, 2006.
(7) Includes the shares held directly by AHI, ACI and Allen SBH Investments LLC
("SBH"). Mr. Allen, a stockholder and the President and Chief Executive
Officer of AHI, the President and Chief Executive Officer of ACI and a
stockholder and the Managing Member, President and Chief Executive Officer
of SBH, may be deemed a beneficial owner of the shares held by AHI, ACI and
SBH. Mr. Allen disclaims beneficial ownership of the securities reported to
be held by AHI, ACI and SBH, 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, Donald R. Keough and
certain of their affiliates, who together with Mr. Allen, AHI, ACI and SBH
may be considered a "group," as such term is defined by Section 13(d).
(8) 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,
2006. 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, SBH,
Herbert A. Allen, Susan K. Allen, Bruce Allen, 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).
-23-
(9) Includes outstanding options to purchase 25,000 shares, which were
exercisable on or within 60 days of April 30, 2006. Does not include shares
owned by AHI, ACI, SBH, Herbert A. Allen, Herbert A. Allen III, Susan K.
Allen, Bruce Allen, Donald R. Keough and certain of their affiliates.
(10) Represents outstanding options to purchase 13,332 shares, which were
exercisable on or within 60 days of April 30, 2006.
(11) 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, 2006. 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, SBH, Herbert A. Allen, Herbert A. Allen
III, Susan K. Allen, Bruce Allen and certain of their affiliates, who
together with Mr. Keough may be considered a "group," as such term is
defined by Section 13(d).
(12) Includes outstanding options to purchase 47,498 shares, which were
exercisable on or within 60 days of April 30, 2006.
(13) Represents outstanding options to purchase 60,831 shares, which were
exercisable on or within 60 days of April 30, 2006.
(14) Includes outstanding options to purchase 1,085,950 shares, which were
exercisable on or within 60 days of April 30, 2006 and 101,325 shares of
common stock vesting within 60 days of April 30, 2006 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, 2006 and the
Company withheld 48,675 of the shares to fulfill Mr. Condo's tax obligation
with respect to the award.
(15) Includes outstanding options to purchase 62,500 shares, which were
exercisable on or within 60 days of April 30, 2006.
(16) Includes outstanding options to purchase 62,499 shares, which were
exercisable on or within 60 days of April 30, 2006.
(17) Includes outstanding options to purchase 2,345,109 shares, which were
exercisable on or within 60 days of April 30, 2006 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, 2006 (See footnote (12)). Also
includes the shares held by the entities described in footnotes (7), (8)
and (11) above deemed to be beneficially owned by Herbert A. Allen, Herbert
A. Allen III and Donald R. Keough, respectively.
-24-
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, 2006. 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:
- - integrates compensation programs which link compensation with the Company's
annual strategic planning and measurement processes;
- - 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 strategic and business objectives; and
- - 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 2006, executive
officer compensation included three components: (1) base salary, (2) an
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. In accordance with Nasdaq requirements, the independent directors
must approve such compensation. 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.
-25-
Incentive Bonus. The incentive bonus program provides for cash awards based
upon achievement of certain strategic and business goals established during the
year, the individual's level of responsibility and the individual's personal
performance. In fiscal year 2006, goals were established and incentive bonuses
were paid on a quarterly basis. For fiscal year 2007, other than for the first
quarter, the Company will be establishing annual goals. In fiscal year 2006,
under Convera's bonus plan, bonuses were paid based upon Convera attaining
certain strategic goals, which included indexing two billion and four billion
pages for the Company's Excalibur offering, launching Excalibur, entering into
contracts for the first government and commercial sale of Excalibur, attaining
expense targets at the Company's RetrievalWare and Excalibur operations and
hiring a Chief Operating Officer, as well as on each officer's individual
contribution to Convera's attainment of such goals. For fiscal year 2006, the
Chief Executive Officer earned 92% of his maximum annual bonus potential, the
Chief Operating Officer earned 100% of his maximum annual bonus potential and
the Chief Financial Officer earned 89% of his maximum annual bonus potential.
The payment to the Chief Operating Officer was remitted for the fourth quarter
of fiscal 2006 and was guaranteed pursuant to his employment agreement entered
into in connection with the commencement of his employment in November 2005.
Long-Term Incentive Award. For fiscal year 2006, long-term compensation for
the Chief Operating Officer and Chief Financial Officer consisted of stock
option grants to purchase 500,000 and 100,000 shares, respectively. The Chief
Operating Officer's grant was made in connection with the commencement of his
employment with the Company. The size of the grants was based on the
Compensation Committee's evaluation of the Company and individual performance
factors. The Chief Executive Officer did not receive any stock option grant in
fiscal year 2006.
Compensation of the Chief Executive Officer. Mr. Condo's annual base salary
for the fiscal year ended January 31, 2006 was $480,000. Mr. Condo's salary was
determined following discussions between Mr. Condo and the Compensation
Committee. As with each executive officer, Mr. Condo's entire bonus potential
for fiscal 2006 was based on the achievement of various strategic and corporate
goals as described above. Mr. Condo was paid a bonus of $183,350, which
represented approximately 92% of Mr. Condo's maximum annual bonus target for
fiscal 2006 established by the Compensation Committee.
This report is submitted by the members of the Fiscal Year 2006
Compensation Committee:
Herbert A. Allen (Chairman)
Eli Jacobs
Carl J. Rickertsen
-26-
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 SEC and Nasdaq. 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
registered public accountants 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 registered
public accounting firm, 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, 2006 for filing with the SEC. Each
year, the Audit Committee recommends to the Board of Directors the selection of
Convera's independent registered public accounting firm. The Audit Committee and
the Board of Directors have recommended the selection of Ernst & Young LLP as
the Company's independent registered public accounting firm for fiscal year
2007.
This report is submitted by the members of the Fiscal Year 2006 Audit
Committee.
Jeffrey White (Chairman)
Eli S. Jacobs
Carl J. Rickertsen
-27-
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND 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
registered public accounting firm for the fiscal year ending January 31, 2007.
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, 2006 and 2005.
2006 2005
-------- --------
Audit Fees(1) $759,021 $299,332
Audit-Related Fees(2) 18,430 30,951
Tax Fees(3) 1,500 30,500
Other Fees 0 0
-------- --------
Total $778,951 $360,783
-------- --------
- ----------
(1) Audit fees represent fees for professional services provided in connection
with the audit of the Company's financial statements, management's report
on internal control over financial reporting and the effectiveness of
internal control over financial reporting, 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 registered public accounting
firm 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.
-28-
PERFORMANCE GRAPH
The following graph is a comparison of the cumulative total return to
stockholders of the Company's common stock at January 31, 2006 since January 31,
2001 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, 2001 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.
COMPARISION OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG CONVERA CORPORATION, THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE S & P INFORMATION TECHNOLOGY INDEX
(GRAPH OMITTED)
* $100 invested on 1/31/01 in stock or index-including reinvestment of
dividends.
Fiscal year ending January 31.
Copyright (C) 2006, Standard & Poor's, a division of The McGraw-Hill Companies,
Inc. All rights reserved. www.researchdatagroup.com/S&P.htm
-29-
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, 2005 to January 31, 2006, all of
the Section 16(a) filing requirements applicable to its executive officers,
directors and ten percent stockholders were complied with on a timely basis
except for the following filings: (1) a Form 4 filing by John Polchin in
connection with a grant of stock options, and (2) a Form 4 filing by Patrick
Condo upon the vesting of a portion of a deferred share grant.
STOCKHOLDER 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, stockholder proposals
for such meeting must be received by the Company at its principal office no
later than January 31, 2007 and must satisfy the conditions established by the
SEC for stockholder proposals. If a stockholder 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
stockholder must give appropriate notice to the Company not later than April 14,
2007. As to all such matters which the Company does not have notice on or prior
to April 14, 2007, discretionary authority shall be granted to the persons
designated in the Company's proxy related to the 2007 Annual Meeting to vote on
such proposal.
-30-
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, 2006
-31-
EXHIBIT A
AUDIT COMMITTEE CHARTER
ADOPTED BY THE BOARD OF DIRECTORS OF CONVERA CORPORATION
I. PURPOSE
The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities by reviewing: the
financial reports and other financial information provided by the Company to any
governmental body or the public; the Company's systems of internal controls
regarding finance and accounting that management and the Board of Directors have
established; and the Company's auditing, accounting and financial reporting
processes generally. Consistent with this function, the Audit Committee will
encourage continuous improvement of the Company's financial reporting policies,
procedures and practices at all levels. It is understood, however, that
management is responsible for preparing the Company's financial statements and
ensuring that they are complete and accurate and prepared in accordance with
GAAP and the independent auditors are responsible for auditing those statements.
The Audit Committee's primary duties and responsibilities are to:
1. Serve as an independent and objective party to monitor the Company's
financial reporting process and internal control systems including antifraud
programs and controls, disclosure controls and compliance with ethical
standards.
2. Be directly responsible for the appointment and termination (subject, if
applicable, to shareholder ratification), compensation, and oversight of the
work of the independent auditors, including resolution of disagreements between
management and the auditor regarding financial reporting. The committee shall
pre-approve all audit and non-audit services provided by the independent
auditors and shall not engage the independent auditors to perform the specific
non-audit services proscribed by law or regulation.
3. Provide an open avenue of communication among the independent
accountants, financial and senior management and the Board of Directors.
II. COMPOSITION
The Audit Committee shall be comprised of three or more directors as
determined by the Board of Directors, each of whom shall be "independent," as
that term is defined in Section 10A(m) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and the Rules and Regulations (the
"Regulations") of the Securities and Exchange Commission, and shall otherwise
meet the applicable independence and financial literacy requirements of The
Nasdaq National Market. At least one member of the Committee shall be an "audit
committee financial expert", as that term is defined in the Regulations, and
shall have past employment experience in finance or accounting, requisite
professional certification in accounting, or any other comparable experience or
background which results in the individual's financial sophistication, including
being or having been a chief executive officer, chief financial officer or other
senior officer with financial oversight responsibilities.
The members and Chairman of the Audit Committee shall be elected by the
Board of Directors at the annual organizational meeting of the Board or until
their successors shall be duly elected and qualified.
III. MEETINGS
The Audit Committee shall meet at least four times annually, or more
frequently as determined by the Audit Committee. As part of its job to foster
open communication, the Audit Committee will, as determined by the Audit
Committee, meet periodically with management, the internal audit director (or
outside consultants until such time as the Company hires an internal audit
director) and the independent accountants in separate sessions to discuss any
matters that the Audit Committee or either of these groups believe should be
discussed privately.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties, the Audit Committee is expected
to consider the following actions in the oversight of the activities of the
Company related to internal control and financial reporting and compliance with
laws and regulations:
1. Internal Control
A. Evaluate whether management is setting the appropriate tone at the
top by communicating the importance of internal control and ensuring that all
individuals possess an understanding of their roles and responsibilities. In
connection with the foregoing, evaluate the Company's Antifraud Programs and
Controls which may include the following the elements:
1. Ensuring periodic fraud risk assessments are performed;
2. Creating an antifraud control environment;
3. Assisting in designing and implementing antifraud programs and
control activities;
4. Communicating and sharing information; and
5. Monitoring activities in concert with established procedures and
guidelines.
B. Focus on the extent to which independent accountants review
computer systems and applications, and the contingency plan for processing
financial information in the event of a systems breakdown.
C. Review management's assertion on its assessment of the
effectiveness of internal controls as of the end of the most recent fiscal year
and the independent auditors' report on management's assertions.
D. After such time as the Company hires an internal audit director,
review the scope and results of internal audits, review periodic reports on the
internal audit director's
2
significant recommendations to management and management's responses and
evaluate the performance of the internal audit director. In connection with the
foregoing, periodically review with the internal audit director any significant
difficulties, disagreements with management personnel or scope restrictions
encountered in the course of the functions work. Until such time as the Company
hires an internal audit director, the Audit Committee may review the scope and
results of reports and analyses with respect to internal control prepared by any
outside consultants engaged by the Company for such purposes.
E. Review and discuss earnings press releases, as well as financial
information and earnings guidance provided to analysts and rating agencies.
F. Request that the independent accountants keep the Audit Committee
informed about fraud, illegal acts, deficiencies in internal control and certain
other matters.
2. Financial Reporting
A. General
1. Discuss significant accounting and reporting issues.
2. Ask management and the independent accountants about significant
risks and exposures and the plan to minimize such risks.
B. Annual Financial Statements
1. Review with management and the independent auditors the financial
statements and disclosures to be included in the Company's Annual
Report on Form 10-K (or the annual report to shareholders if
distributed prior to the filing of Form 10-K), including their
judgment about the quality, not just the acceptability, of
accounting principles, the reasonableness of significant
judgments, and the clarity of the disclosures in the financial
statements.
2. Pay particular attention to complex and/or unusual transactions
such as revenue recognition for large contracts and restructuring
charges.
3. Focus on judgmental areas such as those involving valuation of
assets and liabilities, including, for example the accounting for
impairment of long lived assets, allowance for doubtful accounts
and other commitments and contingencies.
4. Instruct the independent accountant to report to the Audit
Committee on all critical accounting policies of the Company, all
alternative treatments of financial information within generally
accepted accounting principles that have been discussed with
management, ramifications of the use of such alternative
disclosures and treatments and the treatment preferred by the
auditors, and other material written communication between the
auditors and management.
3
5. Request that the independent accountants communicate any other
required matters to the Audit Committee, including disclosures
required under Independence Standards Board Standard No. 1 and
SAS 61.
C. Interim Financial Statements
1. Be briefed on how management prepares and reports quarterly
financial information, the extent to which independent
accountants review quarterly financial information and
whether that review is performed on a preissuance or
post-issuance basis.
2. Review the interim financial statements and disclosures with
management and the independent auditors prior to the filing
of the Company's Quarterly Report on Form 10-Q. The chair of
the committee may represent the entire committee for the
purposes of this review.
3. To gain insight into the interim financial statements and
disclosures, obtain explanations from management and from
the independent accountants on whether:
a. actual financial results for the quarter varied
significantly from budgeted or projected results;
b. changes in financial ratios and relationships in the
quarterly financial statements are consistent with
changes in the Company's operations;
c. generally accepted accounting principles have been
consistently applied;
d. there are any actual or proposed changes in accounting
or financial reporting practices;
e. there are any significant or unusual events or
transactions;
f. the Company's financial and operating controls are
functioning effectively;
g. the Company has complied with the terms of loan
agreements or security indentures; and
h. the interim financial statements contain adequate and
appropriate disclosures.
4. Instruct the independent accountant to report to the Audit
Committee on all critical accounting policies of the
Company, all alternative treatments of financial information
within generally accepted accounting principles that have
been discussed with management, ramifications of the use of
4
such alternative disclosures and treatments and the
treatment preferred by the auditors, and other material
written communication between the auditors and management.
5. Request that the independent accountants communicate any
other required matters to the Audit Committee.
3. External Audit and Non-Audit Services
A. Review the independent accountants' proposed audit scope and
approach.
B. Review and evaluate the performance of the independent accountants
and, if so determined by the Audit Committee, replace the independent
accountants.
C. Discuss and confirm the independence of the independent accountants
by discussing the non-audit services provided and the accountants' assertion of
their independence in accordance with professional standards.
D. Approve, in advance of their performance, all professional services
to be provided to the Company by its independent auditor, provided that the
Audit Committee shall not approve any non-audit services proscribed by Section
10A(g) of the Exchange Act in the absence of an applicable exemption. The Audit
Committee may delegate to a designated member or members of the Audit Committee
the authority to approve such services so long as any such approvals are
disclosed to the full Audit Committee at its next scheduled meeting.
4. Other Responsibilities
A. Discuss with the independent accountants their significant findings
and recommendations.
B. Review the policies and procedures in effect for considering
officer's expenses and perquisites.
C. If the Audit Committee shall determine it to be necessary, obtain
advice and assistance from internal legal or other advisors, institute special
investigations and, if appropriate, hire special counsel, advisors or experts to
assist.
D. Periodically discuss changes to and update the charter of the Audit
Committee, receiving approval of changes from the Board of Directors.
E. Regularly update the Board of Directors about Audit Committee
activities and make appropriate recommendations.
F. Maintain minutes or other records of meetings and activities of the
Audit Committee.
G. Establish a procedure for receipt, retention and treatment of any
complaints received by the Company about its accounting, internal accounting
controls or
5
auditing matters and for the confidential and anonymous submission by employees
of concerns regarding questionable accounting or auditing matters.
H. Prepare its report to be included in the Company's annual proxy
statement, as required by the Regulations.
I. Receive reports from the Company's attorneys of evidence of
material violations of securities laws or breaches of fiduciary duty.
V. AUTHORITY
By adopting this Charter, the Board of Directors delegates to the Audit
Committee full and exclusive authority to:
1. Perform each of the responsibilities of the Audit Committee described
above.
2. Appoint a chair of the Audit Committee, unless a chair is designated
by the Board. The chair may act on behalf of the Audit Committee on
all matters.
3. Cause the officers of the Company to provide such funding as the Audit
Committee shall determine to be appropriate for payment of
compensation to the Company's independent auditor and any legal
counsel or other advisers engaged by the Audit Committee.
6
EXHIBIT B
CONVERA CORPORATION
AMENDED AND RESTATED 2000 STOCK OPTION PLAN
----------
SECTION 1. PURPOSE; DEFINITIONS
The purpose of the Convera Corporation Amended and Restated 2000 Stock
Option Plan (the "Plan") is to enable Convera Corporation (the "Company") to
attract, retain and reward officers, directors and key employees of the Company
and its Subsidiaries and Affiliates and any other individual as determined by
the Committee who is responsible for or contributes to the management, growth
and/or profitability of the business of the Company and/or its Subsidiaries and
Affiliates, and strengthen the mutuality of interests between such persons and
the Company's stockholders, by offering such persons performance-based stock
incentives and/or other equity interests or equity-based incentives in the
Company, as well as performance-based incentives payable in cash.
For purposes of the Plan, the following terms shall be defined as set forth
below:
(a) "Affiliate" means a Parent or a Subsidiary.
(b) "Board" means the Board of Directors of the Company.
(c) "Book Value" means, as of any given date, on a per share basis (i) the
stockholders' Equity in the Company as of the end of the immediately preceding
fiscal year as reflected in the Company's consolidated balance sheet, subject to
such adjustments as the Committee shall specify at or after grant, divided by
(ii) the number of then outstanding shares of Stock as of such year-end date (as
adjusted by the Committee for subsequent events).
(d) "Code" means the Internal Revenue Code of 1986, as amended, and any
successor thereto.
(e) "Committee" means the committee of the Board consisting solely of two
or more persons who are (i) "nonemployee directors" within the meaning of Rule
16b-3 under the Exchange Act, or any successor rule or regulation and (ii)
"outside directors" within the meaning of Section 162(m) of the Code; provided
however, that clause (ii) shall apply only with respect to grants of Options
intended by the Committee to qualify as performance-based compensation within
the meaning of Section 162(m) of the Code, and the Regulations thereunder. If at
any time no Committee shall be in office, then the functions of the Committee
specified in the Plan shall be exercised by the Board.
(f) "Company" means Convera Corporation, a corporation organized under the
laws of the State of Delaware, or any successor corporation.
(g) "Deferred Stock" means an award made pursuant to Section 8 below of the
right to receive Stock at the end of a specified deferral period.
(h) "Disability" means disability as determined under procedures
established by the Committee for purposes of this Plan.
(i) "Fair Market Value" means, as of any given date, unless otherwise
determined by the Committee in good faith, the mean between the highest and
lowest quoted bid price, regular way, of the Stock on the NASDAQ System or, if
no such sale of Stock occurs on such date, the fair market value of the Stock as
determined by the Committee in good faith in accordance with Section 422 of the
Code.
(j) "Incentive Stock Option" means any Stock Option intended to be and
designated as an "Incentive Stock Option" within the meaning of Section 422 of
the Code.
(k) "Non-Employee Directors" shall have the meaning set forth in Rule 16b-3
as promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934 (the "Exchange Act"), or any successor definition adopted
by the Commission.
(l) "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
(m) "Optionee" means a person to whom a Stock Option has been granted under
the Plan.
(n) "Other Stock-Based Award" means an award under Section 10 below that is
valued in whole or in part by reference to, or is otherwise based on, Stock.
(o) "Parent" means any corporation, which is a parent corporation (within
the meaning of Section 424(e) of the Code) with respect to the Company.
(p) "Restricted Stock" means an award of shares of Stock that is subject to
restrictions under Section 7 below.
(q) "Stock" means the Class A Common Stock, $.01 par value per share, of
the Company.
(r) "Stock Appreciation Right" means the right pursuant to an award granted
under Section 6 below to surrender to the Company all (or a portion) of a Stock
Option in exchange for an amount equal to the difference between (i) the Fair
Market Value, as of the date such Stock Option (or such portion thereof) is
surrendered, of the shares of Stock covered by such Stock Option (or such
portion thereof), subject, where applicable, to the pricing provisions in
Section 6(b)(ii) and (ii) the aggregate exercise price of such Stock Option (or
such portion thereof).
(s) "Stock Option" or "Option" means any option to purchase shares of Stock
(including Restricted Stock and Deferred Stock, if the Committee so determines)
granted pursuant to Section 5 below.
(t) "Stock Purchase Right" means the right to purchase Stock pursuant to
Section 9.
2
(u) "Subsidiary" means any corporation that is a subsidiary corporation
(within the meaning of Section 424(f) of the Code) with respect to the Company.
(v) "Ten-Percent Stockholder" means an eligible Plan participant, who, at
the time an Incentive Stock Option is to be granted to him or her, owns (within
the meaning of Section 422(b)(6) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company, or of a Parent or a Subsidiary.
In addition, the term "Cause" shall have the meaning set forth in Section
5(h) below.
SECTION 2. ADMINISTRATION
The Plan shall be administered by the Committee. The functions of the
Committee specified in the Plan shall be exercised by the Board, if and to the
extent that no Committee exists which has the authority to so administer the
Plan.
The Committee shall have full authority to grant, pursuant to the terms of
the Plan, to officers, directors and other key employees and any other
individual as determined by the Committee who is responsible for or contributes
to the management, growth and/or profitability of the business of the Company
and/or its Subsidiaries and Affiliates eligible under Section 4: (i) Stock
Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock, (iv) Deferred
Stock, (v) Stock Purchase Rights and/or (vi) Other Stock-Based Awards. In
particular, the Committee shall have the authority:
(a) to select the officers, directors and other key employees of the
Company and its Subsidiaries and Affiliates and any other individual as
determined by the Committee who is responsible for or contributes to the
management, growth and/or profitability of the business of the Company and/or
its Subsidiaries and Affiliates to whom Stock Options, Stock Appreciation
Rights, Restricted Stock, Deferred Stock, Stock Purchase Rights and/or Other
Stock-Based Awards may from time to time be granted hereunder;
(b) to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock,
Deferred Stock, Stock Purchase Rights and/or Other Stock-Based Awards, or any
combination thereof, are to be granted hereunder to one or more eligible
officers, directors, employees and any other individual as determined by the
Committee who is responsible for or contributes to the management, growth and/or
profitability of the business of the Company and/or its Subsidiaries and
Affiliates;
(c) to determine the number of shares to be covered by each such award
granted hereunder;
(d) to determine the terms and conditions, not inconsistent with the terms
of the Plan, of any award granted hereunder (including, but not limited to, the
share price and any restriction or limitation, or any vesting acceleration or
waiver of forfeiture restrictions regarding any Stock Option or other award
and/or the shares of Stock relating thereto, based in each case on such factors
as the Committee shall determine, in its sole discretion);
3
(e) to determine whether and under what circumstances a Stock Option may be
settled in cash, Restricted Stock and/or Deferred Stock under Section 5(j) or
(k), as applicable, instead of Stock;
(f) to determine whether, to what extent and under what circumstances
grants and/or other awards under the Plan and/or other cash awards made by the
Company are to be made, and operate, on a tandem basis vis-a-vis other awards
under the Plan and/or cash awards made outside of the Plan, or on an additive
basis;
(g) to determine whether, to what extent and under what circumstances Stock
and other amounts payable with respect to an award under this Plan shall be
deferred either automatically or at the election of the participant (including
providing for and determining the amount (if any) of any deemed earnings on any
deferred amount during any deferral period);
(h) to determine the terms and restrictions applicable to Stock Purchase
Rights and the Stock purchased by exercising such Rights; and
(i) to grant with the consent of the optionee, in substitution for
outstanding Stock Options, replacement Stock Options, which may be at a lower
exercise price, provided that, in the case of Incentive Stock Options, at an
exercise price less than the Fair Market Value of the Stock at the time of
replacement.
The Committee shall have the authority to adopt, alter and repeal such
rules, guidelines and practices governing the Plan as it shall, from time to
time, deem advisable; to interpret the terms and provisions of the Plan and any
award issued under the Plan (and any agreements relating thereto); and to
otherwise supervise the administration of the Plan.
All decisions made by the Committee pursuant to the provisions of the Plan
shall be made in the Committee's sole discretion and shall be final and binding
on all persons, including the Company and Plan participants.
SECTION 3. STOCK SUBJECT TO PLAN, LIMITS
(a) General. The total number of shares of Stock reserved and available for
distribution under the Plan shall be 14,250,000 shares. Such shares may consist,
in whole or in part, of authorized and unissued shares or treasury shares.
Subject to Section 6(b)(iv) below, if any shares of Stock that have been
optioned cease to be subject to a Stock Option, or if any such shares of Stock
that are subject to any Restricted Stock or Deferred Stock award, Stock Purchase
Right or Other Stock-Based Award granted hereunder are forfeited or any such
award otherwise terminates, without a payment being made to the participant in
the form of Stock, such shares shall again be available for distribution in
connection with future awards under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, spin-offs, spin-outs or other
change in corporate structure affecting the Stock, such substitution or
adjustment shall be made in the aggregate number of shares reserved for issuance
under the Plan, in the number and option price of shares subject to outstanding
Options granted under the Plan, in the number and purchase price of shares
subject to outstanding Stock Purchase Rights under the Plan, and in the number
of shares subject to other
4
outstanding awards granted under the Plan as may be determined to be appropriate
by the Committee, in its sole discretion, provided that the number of shares
subject to any award shall always be a whole number. Such adjusted option price
shall also be used to determine the amount payable by the Company upon the
exercise of any Stock Appreciation Right associated with any Stock Option.
Any such adjustment in the Stock or securities subject to outstanding
Incentive Stock Options (including any adjustments in the purchase price) shall
be made in such manner as not to constitute a modification as defined by Section
424(h)(3) of the Code and only to the extent otherwise permitted by Sections 422
and 424 of the Code.
(b) Section 162(m). Awards under this Plan are eligible for qualification
as performance based compensation within the meaning of Code Section 162(m), if
that is the intent at the time of grant. In the case of Stock Options and Stock
Appreciation Rights, in addition to the other requirements of Section 162(m),
the annual limit of shares of Stock subject to such awards shall not exceed 2
million shares to any individual. In the case of other awards of Stock or cash
which are intended to qualify as performance based compensation under Section
162(m), such awards must meet the conditions in the following paragraph and such
annual awards to any individual may not exceed 2 million shares in the case of
awards in Stock or $3 million in the case of awards in cash.
(c) To qualify as a performance based award (except in the case of Stock
Options or Stock Appreciation Rights that otherwise qualify) the award must be
subject to a performance condition (i) that is established (A) at the time an
award is granted or (B) no later than the earlier of (1) 90 days after the
beginning of the period of service to which it relates, or (2) before the elapse
of 25% of the period of service to which it relates, (ii) that is uncertain of
achievement at the time it is established, and (iii) the achievement of which is
determinable by a third party with knowledge of the relevant facts. Examples of
measures that may be used include net order dollars, net profit dollars, net
profit growth, net revenue dollars, revenue growth, individual performance,
earnings per share, return on assets, return on equity, and other financial
objectives, objective customer satisfaction indicators and efficiency measures,
each with respect to the Company and/or an Affiliate or individual business
unit.
SECTION 4. ELIGIBILITY
Officers, directors and key employees of the Company and its Subsidiaries
and Affiliates and any other individual as determined by the Committee who are
responsible for or contribute to the management, growth and/or profitability of
the business of the Company and/or its Subsidiaries and Affiliates are eligible
to be granted awards under the Plan.
SECTION 5. STOCK OPTIONS
Stock Options may be granted alone, in addition to or in tandem with other
awards granted under the Plan and/or cash awards made outside of the Plan. Any
Stock Option granted under the Plan shall be in such form as the Committee may
from time to time approve.
Stock Options granted under the Plan may be of two types: (i) Incentive
Stock Options and (ii) Non-Qualified Stock Options.
5
The Committee shall have the authority to grant to any optionee Incentive
Stock Options, Non-Qualified Stock options, or both types of Stock Options (in
each case with or without Stock Appreciation Rights).
Options granted under the Plan shall be subject to the following terms and
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable:
(a) Option Price. The option price per share of Stock purchasable under an
Incentive Stock Option shall be determined by the Committee at the time of grant
but shall (i) except as provided in clause (ii) of this Section 5(a), be not
less than 100% of the Fair Market Value of the Stock at the time of grant and
(ii) with respect to any Incentive Stock Option granted to a Ten-Percent
Stockholder, not less than 110% of the Fair Market Value of the Stock at the
time of the grant. Non-Qualified Stock Options may, in the discretion of the
Committee, may be granted at a price per share less than the Fair Market Value
of the Stock at the time of grant.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Stock Option shall be exercisable more than ten years after
the date the option is granted (five years in the case of an Incentive Stock
Option granted to a Ten-Percent Stockholder).
(c) Exercisability. Stock Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by the
Committee at or after grant. If the Committee provides, in its sole discretion,
that any Stock Option is exercisable only in installments, the Committee may
waive such installment exercise provisions at any time at or after grant in
whole or in part, based on such factors as the Committee shall determine, in its
sole discretion.
(d) Method of Exercise. Subject to whatever installment exercise provisions
apply under Section 5(c), Stock Options may be exercised in whole or in part at
any time during the option period by giving written notice of exercise to the
Company specifying the number of shares to be purchased. Such notice shall be
accompanied by payment, if any, in full of the purchase price, by such manner as
the Committee may accept. As determined by the Committee, in its sole
discretion, at or after grant, payment in full or in part may be made in the
form of check, Stock, including any cashless method approved by the Committee,
in the case of the exercise of a Non-Qualified Stock Option, Restricted Stock or
Deferred Stock subject to an award hereunder (based, in each case, on the Fair
Market Value of the Stock on the date the option is exercised, as determined by
the Committee), or any other legally permissible method.
No shares of Stock shall be issued until full payment therefor has
been made. An optionee shall generally have the rights to dividends or other
rights of a shareholder with respect to shares subject to the Stock Option when
the optionee has given written notice of exercise, has paid in full for such
shares, and if requested, has given the representation described in Section
13(a).
(e) Non-Transferability of Options. No Stock Option shall be transferable
by the optionee otherwise than by will or by the laws of descent and
distribution, and all Stock Options shall be exercisable, during the optionee's
lifetime, only by the optionee.
6
(f) Termination by Death. Subject to Section 5(j), if an optionee's
employment by the Company or any Subsidiary or Affiliate terminates by reason of
death, any Stock Option held by such optionee may thereafter be exercised, to
the extent such option was exercisable at the time of death or on such
accelerated basis as the Committee may determine at or after grant (or as may be
determined in accordance with procedures established by the Committee), by the
legal representative of the estate or by the legatee of the optionee under the
will of the optionee, for a period of one year (or such other period as the
Committee may specify at grant) from the date of such death or until the
expiration of the stated term of such Stock Option, whichever period is the
shorter.
(g) Termination by Reason of Disability. Subject to Section 5(j), if an
optionee's employment by the Company and any Subsidiary or Affiliate terminates
by reason of Disability, any Stock Option held by such optionee may thereafter
be exercised by the optionee, to the extent it was exercisable at the time of
termination or on such accelerated basis as the Committee may determine at or
after grant (or as may be determined in accordance with procedures established
by the Committee), for a period of one year (or such other period as the
Committee may specify at grant) from the date of such termination of employment
or until the expiration of the stated term of such Stock Option, whichever
period is the shorter, provided, however, that, if the optionee dies within such
one-year period (or such other period as the Committee shall specify at grant),
any unexercised Stock Option held by such optionee shall thereafter be
exercisable to the extent to which it was exercisable at the time of death for a
period of one year from the date of such death or until the expiration of the
stated term of such Stock Option, whichever period is the shorter. In the event
of termination of employment by reason of Disability, if an Incentive Stock
Option is exercised after the expiration of the exercise periods that apply for
purposes of Section 422 of the Code, such Stock Option will thereafter be
treated as a Non-Qualified Stock Option.
(h) Other Termination. Unless otherwise determined by the Committee (or
pursuant to procedures established by the Committee) at or after grant, if an
optionee's employment by the Company or any Subsidiary or Affiliate terminates
for any reason other than death or Disability, the Stock Option shall thereupon
terminate, except that such Stock Option may be exercised, to the extent
otherwise then exercisable, for the lesser of three months or the balance of
such Stock Option's term if the optionee is involuntarily terminated by the
Company or any Subsidiary or Affiliate without Cause. For purposes of this Plan,
"Cause" means a felony conviction of an optionee or the failure of an optionee
to contest prosecution for a felony, or an optionee's willful misconduct or
dishonesty, any of which is directly and materially harmful to the business or
reputation of the Company or any Subsidiary or Affiliate.
(i) Incentive Stock Options. Anything in the Plan to the contrary
notwithstanding, no term of this Plan relating to Incentive Stock Options shall
be interpreted, amended or altered, nor shall any discretion or authority
granted under the Plan be so exercised, so as to disqualify the Plan under
Section 422 of the Code, or, without the consent of the optionee(s) affected, to
disqualify any Incentive Stock Option under such Section 422.
To the extent that the aggregate Fair Market Value (determined as of the
date of grant) of Stock for which Incentive Stock Options are exercisable for
the first time by any Optionee
7
during any calendar year (under all plans of the Company and its Subsidiaries)
exceeds $100,000, such excess Incentive Stock Options shall be treated as
Nonqualified Stock Options.
(j) Buyout Provisions. The Committee may at any time offer to buy out for a
payment in cash, Stock, Deferred Stock or Restricted Stock an option previously
granted, based on such terms and conditions as the Committee shall establish and
communicate to the optionee at the time that such offer is made.
(k) Settlement Provisions. If the option agreement so provides at grant or
is amended after grant and prior to exercise to so provide (with the optionee's
consent), the Committee may require that all or part of the shares to be issued
with respect to the spread value of an exercised Option take the form of
Deferred or Restricted Stock, which shall be valued on the date of exercise on
the basis of the Fair Market Value (as determined by the Committee) of such
Deferred or Restricted Stock determined without regard to the deferral
limitations and/or forfeiture restrictions involved.
SECTION 6. STOCK APPRECIATION RIGHTS
(a) Grant and Exercise. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan. In the
case of a Non-Qualified Stock Option, such rights may be granted either at or
after the time of the grant of such Stock Option. In the case of an Incentive
Stock Option, such rights may be granted only at the time of the grant of such
Stock Option.
A Stock Appreciation Right or applicable portion thereof granted with
respect to a given Stock Option shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option, subject to such
provisions as the Committee may specify at grant where a Stock Appreciation
Right is granted with respect to less than the full number of shares covered by
a related Stock Option.
A Stock Appreciation Right may be exercised by an optionee, subject to
Section 6(b), in accordance with the procedures established by the Committee for
such purpose. Upon such exercise, the optionee shall be entitled to receive an
amount determined in the manner prescribed in Section 6(b). Stock Options
relating to exercised Stock Appreciation Rights shall no longer be exercisable
to the extent that the related Stock Appreciation Rights have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject to
such terms and conditions, not inconsistent with the provisions of the Plan, as
shall be determined from time to time by the Committee, including the following:
(i) Stock Appreciation Rights shall be exercisable only at such time
or times and to the extent that the Stock Options to which they relate shall be
exercisable in accordance with the provisions of Section 5 and this Section 6 of
the Plan; provided, however, that any Stock Appreciation Right granted to an
optionee subject to Section 16(b) of the Exchange Act subsequent to the grant of
the related Stock Option shall not be exercisable during the first six months of
its term, except that this special limitation shall not apply in the event of
death or Disability of the optionee prior to the expiration of the six-month
period. The exercise of Stock
8
Appreciation Rights held by optionees who are subject to Section 16(b) of the
Exchange Act shall comply with Rule 16b-3 thereunder, to the extent applicable.
(ii) Upon the exercise of a Stock Appreciation Right, an optionee
shall be entitled to receive an amount in cash and/or shares of Stock equal in
value to the excess of the Fair Market Value of one share of Stock over the
option price per share specified in the related Stock Option multiplied by the
number of shares in respect of which the Stock Appreciation Right shall have
been exercised, with the Committee having the right to determine the form of
payment. When payment is to be made in shares, the number of shares to be paid
shall be calculated on the basis of the Fair Market Value of the shares on the
date of exercise. When payment is to be made in cash, such amount shall be
calculated on the basis of the average of the highest and lowest quoted bid
price, of the Stock on the NASDAQ System during the applicable period referred
to in Rule 16b-3(e) under the Exchange Act.
(iii) Stock Appreciation Rights shall be transferable only when and to
the extent that the underlying Stock Option would be transferable under Section
5(e).
(iv) Upon the exercise of a Stock Appreciation Right, the Stock Option
or part thereof to which such Stock Appreciation Right is related shall be
deemed to have been exercised for the purpose of the limitation set forth in
Section 3 on the number of shares of Stock to be issued under the Plan, but only
to the extent of the number of shares issued under the Stock Appreciation Right
at the time of exercise based on the value of the Stock Appreciation Right at
such time.
SECTION 7. RESTRICTED STOCK
(a) Administration. Shares of Restricted Stock may be issued either alone,
in addition to or in tandem with other awards granted under the Plan and/or cash
awards made outside the Plan. The Committee shall determine the eligible persons
to whom, and the time or times at which, grants of Restricted Stock will be
made, the number of shares to be awarded, the price (if any) to be paid by the
recipient of Restricted Stock (subject to Section 7(b)), the time or times
within which such awards may be subject to forfeiture, and all other terms and
conditions of the awards.
The Committee may condition the grant of Restricted Stock upon the
attainment of specified performance goals or such other factors as the Committee
may determine, in its sole discretion.
The provisions of Restricted Stock awards need not be the same with respect
to each recipient.
(b) Awards and Certificates. The prospective recipient of a Restricted
Stock award shall not have any rights with respect to such award, unless and
until such recipient has executed an agreement evidencing the award and has
delivered a fully executed copy thereof to the Company, and has otherwise
complied with the applicable terms and conditions of such award.
(i) The purchase price for shares of Restricted Stock may be equal to
or less than their par value and may be zero.
9
(ii) Awards of Restricted Stock must be accepted within a period of 60
days (or such shorter period as the committee may specify at grant) after the
award date, by executing a Restricted Stock Award Agreement and paying whatever
price (if any) is required under Section 7(b)(i).
(iii) Each participant receiving a Restricted Stock award shall be
issued a stock certificate in respect of such shares of Restricted Stock. Such
certificate shall be registered in the name of such participant, and shall bear
an appropriate legend referring to the terms, conditions, and restrictions
applicable to such award.
(iv) The Committee shall require that the stock certificates
evidencing such shares be held in custody by the Company until the restrictions
thereon shall have lapsed, and that, as a condition of any Restricted Stock
award, the participant shall have delivered a stock power, endorsed in blank,
relating to the Stock covered by such award.
(c) Restrictions and Conditions. The shares of Restricted Stock awarded
pursuant to this Section 7 shall be subject to the following restrictions and
conditions:
(i) Subject to the provisions of this Plan and the award agreement,
during a period set by the Committee commencing with the date of such award (the
"Restricted Period"), the participant shall not be permitted to sell, transfer,
pledge or assign shares of Restricted Stock awarded under the Plan. Within these
limits, the Committee, in its sole discretion, may provide for the lapse of such
restrictions in installments and may accelerate or waive such restriction in
whole or in part, based on service, performance and/or such other factors or
criteria as the Committee may determine, in its sole discretion.
(ii) Except as provided in this paragraph (ii) and Section 7(c)(i),
the participant shall have, with respect to the shares of Restricted Stock, all
of the rights of a stockholder of the Company, including the right to vote the
shares and the right to receive any cash dividends. The Committee, in its sole
discretion, as determined at the time of award, may permit or require the
payment of cash dividends to be deferred and, if the Committee so determines,
reinvested, subject to Section 14(e), in additional Restricted Stock, to the
extent shares are available under Section 3, or otherwise reinvested. Pursuant
to Section 3 above, Stock dividends issued with respect to Restricted Stock
shall be treated as additional shares of Restricted Stock that are subject to
the same restrictions and other terms and conditions that apply to the shares
with respect to which such dividends are issued.
(iii) Subject to the applicable provisions of the award agreement and
this Section 7, upon termination of a participant's employment with the Company
or any Subsidiary or Affiliate for any reason during the Restriction Period, all
shares still subject to restriction will vest or be forfeited, in accordance
with the terms and conditions established by the Committee at or after grant.
(iv) If and when the Restricted Period expires without a prior
forfeiture of the Restricted Stock subject to such Restricted Periods,
certificates for an appropriate number of unrestricted shares shall be delivered
to the participant promptly.
10
(d) Minimum Value Provisions. In order to better ensure that award payments
actually reflect the performance of the Company and service of the participant,
the Committee may provide, in its sole discretion, for a tandem
performance-based or other award designed to guarantee a minimum value, payable
in cash or Stock to the recipient of a Restricted Stock award, subject to such
performance, future service deferral and other terms and conditions as may be
specified by the Committee.
SECTION 8. DEFERRED STOCK
(a) Administration. Deferred Stock may be awarded either alone, in addition
to or in tandem with other awards granted under the Plan and/or cash awards made
outside of the Plan. The Committee shall determine the eligible persons to whom
and the time or times at which Deferred Stock shall be awarded, the number of
shares of Deferred Stock to be awarded to any person, the duration of period
(the "Deferral Period") during which, and the conditions under which, receipt of
the Stock will be deferred, and the other terms and conditions of the award in
addition to those set forth in Section 8(b).
The Committee may condition the grant of Deferred Stock upon the
attainment of specified performance goals or such other factors or criteria as
the Committee shall determine, in its sole discretion.
The provisions of Deferred Stock awards need not be the same with
respect to each recipient.
(b) Terms and Conditions. The shares of Deferred Stock awarded pursuant to
this Section 8 shall be subject to the following terms and conditions:
(i) Subject to the provisions of this Plan and the award agreement
referred to in Section 8(b)(vi) below, Deferred Stock awards may not be sold,
assigned, transferred, pledged or otherwise encumbered during the Deferral
Period. At the expiration of the Deferral Period (or the Elective Deferral
Period referred to in Section 8(b)(v), where applicable), share certificates
shall be delivered to the participant, or his legal representative, in a number
equal to the shares covered by the Deferred Stock award.
(ii) Unless otherwise determined by the Committee at grant, amounts
equal to any dividends declared during the Deferral Period with respect to the
number of shares covered by a Deferred Stock award shall be paid to the
participant currently, or deferred and deemed to be reinvested in additional
Deferred Stock, or otherwise reinvested, all as determined at or after the time
of the award by the Committee, in its sole discretion.
(iii) Subject to the provision of the award agreement and this Section
8, upon termination of a participant's employment with the Company or Subsidiary
or Affiliate for any reason during the Deferral Period for a given award, the
Deferred Stock in question will vest or be forfeited, in accordance with the
terms and conditions established by the Committee at or after grant.
(iv) Based on service, performance and/or such other factors or
criteria as the Committee may determine, the Committee may, at or after grant,
accelerate the vesting of all or
11
any part of any Deferred Stock award and/or waive the deferral limitations for
all or any part of such award.
(v) A participant may elect to further defer receipt of an award (or
an installment of an award) for a specified period or until a specified event
(the "Elective Deferral Period"), subject in each case to the Committee's
approval and to such terms as are determined by the Committee, all in its sole
discretion. Subject to any exceptions adopted by the Committee, such election
must generally be made at least one year prior to completion of the Deferral
Period for such Deferred Stock award (or such installment).
(vi) Each award shall be confirmed by, and subject to the terms of, a
Deferred Stock agreement executed by the Company and the participant.
(c) Minimum Value Provisions. In order to better ensure that award payments
actually reflect the performance of the Company and service of the participant,
the Committee may provide, in its sole discretion, for a tandem
performance-based or other award designed to guarantee a minimum value, payable
in cash or Stock to the recipient of a deferred stock award, subject to such
performance, future service, deferral and other terms and conditions as may be
specified by the Committee.
SECTION 9. STOCK PURCHASE RIGHTS
(a) Awards and Administration. Subject to Section 3 above, the Committee
may grant eligible participants Stock Purchase Rights which shall enable such
participants to purchase Stock (including Deferred Stock and Restricted Stock):
(i) at its Fair Market Value on the date of grant;
(ii) at 50% of such Fair Market Value on such date;
(iii) at an amount equal to Book Value on such date; or
(iv) at an amount equal to the par value of such Stock on such date.
The Committee shall also impose such deferral, forfeiture and/or other
terms and conditions as it shall determine, in its sole discretion, on such
Stock Purchase Rights or the exercise thereof.
The terms of Stock Purchase Rights awards need not be the same with
respect to each participant.
Each Stock Purchase Right award shall be confirmed by, and be subject
to the terms of, a Stock Purchase Rights Agreement.
(b) Exercisability. Stock Purchase Rights shall generally be exercisable
for such period after grant as is determined by the Committee not to exceed 30
days. However, the Committee may provide, in its sole discretion, that the Stock
Purchase Rights of persons potentially subject to Section 16(b) of the Exchange
Act shall not become exercisable until six
12
months and one day after the grant date, and shall then be exercisable for ten
trading days at the purchase price specified by the Committee in accordance with
Section 9(a).
SECTION 10. OTHER STOCK-BASED AWARDS
(a) Administration. Other awards of Stock and other awards that are valued
in whole or in part by reference to, or are otherwise based on, Stock ("Other
Stock-Based Awards"), including, without limitation, performance shares,
convertible preferred stock, convertible debentures, exchangeable securities and
Stock awards or options valued by reference to Book Value or subsidiary
performance, may be granted either alone or in addition to or in tandem with
Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock or
Stock Purchase Rights granted under the Plan and/or cash awards made outside of
the Plan.
Subject to the provision of the Plan, the Committee shall have
authority to determine the persons to whom and the time or times at which such
awards shall be made, the number of shares of Stock to be awarded pursuant to
such awards, and all other conditions of the awards. The Committee may also
provide for the grant of Stock upon the completion of a specified performance
period.
The provisions of Other Stock-Based Awards need not be the same with
respect to each recipient.
(b) Terms and Conditions. Other Stock-Based Awards made pursuant to this
Section 10 shall be subject to the following terms and conditions:
(i) Subject to the provision of the Plan and the award agreement
referred to in Section 10(b)(v) below, shares subject to awards made under this
Section 10 may not be sold, assigned, transferred, pledged or otherwise
encumbered prior to the date on which the shares are issued, or, if later, the
date on which any applicable restriction, performance or deferral period lapses.
(ii) Subject to the provisions of the Plan and the award agreement and
unless otherwise determined by the Committee at grant, the recipient of an award
under this Section 10 shall be entitled to receive, currently or on a deferred
basis, interest or dividends or interest or dividend equivalents with respect to
the number of shares covered by the award, as determined at the time of the
award by the Committee, in its sole discretion, and the Committee may provide
that such amounts (if any) shall be deemed to have been reinvested in additional
Stock or otherwise reinvested.
(iii) Any award under this Section 10 and any Stock covered by any
such award shall vest or be forfeited to the extent so provided in the award
agreement, as determined by the Committee, in its sole discretion.
(iv) In the event of the participant's retirement, Disability or
death, or in cases of special circumstances, the Committee may, in its sole
discretion, waive in whole or in part any or all of the remaining limitations
imposed hereunder (if any) with respect to any or all of an award under this
Section 10.
13
(v) Each award under this Section 10 shall be confirmed by, and
subject to the terms of, an agreement or other instrument by the Company and by
the participant.
(vi) Stock (including securities convertible into Stock) issued on a
bonus basis under this Section 10 may be issued for no cash consideration. Stock
(including securities convertible into Stock) purchased pursuant to a purchase
right awarded under this Section 10 shall be priced at least 50% of the Fair
Market Value of the Stock on the date of grant.
SECTION 11. AMENDMENT AND TERMINATION
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made which would impair the rights of an
optionee or participant under a Stock Option, Stock Appreciation Right,
Restricted or Deferred Stock award, Stock Purchase Right or Other Stock-Based
Award theretofore granted, without the optionee's or participant's consent, or
which, without the approval of the Company's stockholders, would cause the Plan
to no longer comply with Rule 16b-3 under the Exchange Act or any successor rule
or other regulatory requirements.
The Committee may amend the terms of any Stock Option or other award
theretofore granted, prospectively or retroactively, but, subject to Section 3
above, no such amendment shall impair the rights of any holder without the
holder's consent.
Subject to the above provisions, the Board shall have broad authority to
amend the Plan to take into account changes in applicable securities and tax
laws and accounting rules.
SECTION 12. UNFUNDED STATUS OF PLAN
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Stock or payments in lieu of or with respect to awards
hereunder, provided, however, that, unless the Committee otherwise determines
with the consent of the affected participant, the existence of such trusts or
other arrangements is consistent with the "unfunded" status of the Plan.
SECTION 13. GENERAL PROVISIONS
(a) The Committee may require each person purchasing shares pursuant to a
Stock Option or other award under the Plan to represent and to agree with the
Company in writing that the optionee or participant is acquiring the shares
without a view to distribution thereof. The certificates for such shares may
include any legend which the Committee deems appropriate to reflect any
restrictions on transfer.
All certificates for shares of Stock or other securities delivered
under the Plan shall be subject to such stock-transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations,
and other requirements of the Securities and Exchange
14
Commission, any stock exchange upon which the Stock is then listed, and any
applicable Federal or state securities law, and the Committee may cause a legend
or legends to be put on any such certificates to make appropriate reference to
such restrictions.
(b) Nothing contained in the Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to stockholder approval
if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases.
(c) The adoption of the Plan shall not confer upon any employee of the
Company or any Subsidiary or Affiliate any right to continued employment with
the Company or a Subsidiary or Affiliate, as the case may be, nor shall it
interfere in any way with the right of the Company or a Subsidiary or Affiliate
to terminate the employment of any of its employees at any time.
(d) The Company shall have the right to deduct from any distribution of
cash to any Optionee, an amount equal to the federal, state and local income and
employment taxes and other amounts as may be required by law to be withheld (the
"Withholding Taxes") with respect to any Option. If an Optionee is entitled to
receive Stock upon exercise of a Stock Option, the Optionee shall pay the
Withholding Taxes to the Company prior to the issuance of such Stock. In
satisfaction of the Withholding Taxes, the Optionee may make a written election
(the "Tax Election"), which may be accepted or rejected in the discretion of the
Committee, to have withheld a portion of the Stock issuable to him or her upon
exercise of the Stock Option having an aggregate Fair Market Value, on the date
preceding the date of exercise, equal to the Withholding Taxes, provided that in
respect of an Optionee who may be subject to liability under Section 16(b) of
the Exchange Act either (i) (A) the Optionee makes the Tax Election at least six
(6) months after the date the Stock Option was granted, (B) the Stock Option is
exercised during the ten day period beginning on the third business day and
ending on the twelfth business day following the release for publication of the
Company's quarterly or annual statements of earnings (a "Window Period") and (C)
the Tax Election is made during the Window Period in which the Stock Option is
exercised or prior to such Window Period and subsequent to the immediately
preceding Window Period or (ii) (A) the Tax Election is made at least six months
prior to the date the Stock Option is exercised and (B) the Tax Election is
irrevocable with respect to the exercise of all Options which are exercised
prior to the expiration of six months following an election to revoke the Tax
Election. Notwithstanding the foregoing, the Committee may, by the adoption of
rules or otherwise, (i) modify the provisions in the preceding sentence or
impose such other restrictions or limitations on Tax Elections as may be
necessary to ensure that the Tax Elections will be exempt transactions under
Section 16(b) of the Exchange Act, and (ii) permit Tax Elections to be made at
such other times and subject to such other conditions as the Committee
determines will constitute exempt transactions under Section 16(b) of the
Exchange Act.
If an Optionee makes a disposition, within the meaning of Section
424(c) of the Code and regulations promulgated thereunder, of any share or
shares of Stock issued to such Optionee pursuant to the exercise of an Incentive
Stock Option within the two-year period commencing on the day after the date of
transfer of such share or shares of Stock to the Optionee pursuant to such
exercise, the Optionee shall, if required by the Committee, within ten (10) days
15
of such disposition, notify the Company thereof, by delivery of written notice
to the Company at its principal executive office, and immediately deliver to the
Company the amount of Withholding Taxes.
(e) The actual or deemed reinvestment of dividends or dividend equivalents
in additional Restricted Stock (or in Deferred Stock or other types of Plan
awards) at the time of any dividend payment shall be permissible only if
sufficient shares of Stock are available under Section 3 for such reinvestment
(taking into account then outstanding Stock Options, Stock Purchase Rights and
other Plan awards).
(f) The Plan and all awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Delaware.
SECTION 14. EFFECTIVE DATE OF PLAN
The Plan shall be effective as of December 21, 2000, subject to the
approval of the Plan by a majority of the holders of the Stock. Any grants made
under the Plan prior to such approval shall be effective when made (unless
otherwise specified by the Committee at the time of grant), but shall be
conditioned on, and subject to, such approval of the Plan by such shareholders.
SECTION 15. TERM OF PLAN
No Stock Option, Stock Appreciation Right, Restricted Stock award, Deferred
Stock award, Stock Purchase Right or Other Stock-Based Award shall be granted
pursuant to the Plan on or after the tenth anniversary of the date of
stockholder approval, but awards granted prior to such tenth anniversary may
extend beyond that date.
16
PROXY CONVERA CORPORATION PROXY PROXY
1921 GALLOWS ROAD, SUITE 200
VIENNA, VIRGINIA 22182
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
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 Stockholders 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 18, 2006 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 Stockholders dated
May 31, 2006 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 votes FOR Item I and FOR Item 2 on the
reverse side.
(Continued and to be signed on the reverse side)
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR
VOTE IN BLUE OR BLACK INK AS SHOW HERE [X]
1. Election of the following eleven (11) nominees to serve as directors until
the next Annual Meeting of Stockholders and until their successors are elected
and qualified.
Nominees:
[__] FOR ALL NOMINEES Ronald J. Whittier (__)
Herbert A. Allen (__)
[__] WITHHOLD AUTHORITY Herbert A. Allen III (__)
FOR ALL NOMINEES Patrick C. Condo (__)
Stephen D. Greenberg (__)
[__] FOR ALL EXCEPT Eli S. Jacobs (__)
(See instructions below) Donald R. Keough (__)
Ajay Menon (__)
Sydney Pollack (__)
Carl J. Rickertsen (__)
Jeffrey White (__)
INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark
"FOR ALL EXCEPT" and fill in the circle next to each nominee you wish to
withhold, as shown here.(X)
2. Proposal to approve an amendment to the 2000 Stock Option Plan.
[__] FOR
[__] AGAINST
[__] ABSTAIN
3. In their discretion, to vote upon such other matters as may properly come
before the meeting.
To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that changes
to the registered name(s) on the account may not be submitted via this method.
[__]
Signature of Stockholder Date:
------------ ----------------------------------
Signature of Stockholder Date:
------------ ----------------------------------
Note: Please sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as such. If
the signer is a corporation, please sign full corporate name by duly authorized
officer, giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.