<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 21, 2000
REGISTRATION NO. 333-50172
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------------
AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-------------------------------------
CONVERA CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
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DELAWARE 7372 54-1987541
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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1921 GALLOWS ROAD, SUITE 200, VIENNA, VIRGINIA 22182, (703) 761-3700
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
RONALD J. WHITTIER, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
1921 GALLOWS ROAD, SUITE 200, VIENNA, VIRGINIA 22182, (703) 761-3700
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
------------------------------------------
Copies to:
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ROBERT H. WERBEL KAREN BERTERO
HELLER EHRMAN WHITE & MCAULIFFE LLP GIBSON, DUNN & CRUTCHER LLP
711 FIFTH AVENUE 333 S. GRAND AVENUE
NEW YORK, NY 10022 LOS ANGELES, CA 90071
TELEPHONE: (212) 832-8300 TELEPHONE: (213) 229-7000
FACSIMILE: (212) 832-3353 FACSIMILE: (213) 229-7520
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are being offered
in connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. ()
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. () _______________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. () _____________
-----------------------------
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT OFFERING AGGREGATE AMOUNT OF
SECURITIES TO BE PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED (1) PER SHARE (2) PRICE (2) FEE (3)(4)
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Class A Common Stock, par
value $.01 per share 45,231,390 shares $44.095 $1,994,478,142 $526,542
===============================================================================================
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(1) Represents the maximum number of shares of Class A common stock, par value
$.01 per share, of Convera Corporation issuable in connection with the
combination contemplated by the combination and merger agreement. Includes
up to 14,778,694 shares of Class A common stock issuable upon the conversion
of Class B common stock and the exercise of Convera options that are
outstanding and unexercised at the effective time.
<PAGE> 2
(2) Estimated solely for the purpose of computing the amount of registration
fee pursuant to Rule 457(f)(1) under the Securities Act of 1933, as amended,
based on the average of the high and low prices for the common stock of
Excalibur Technologies Corporation on November 16, 2000 as reported on the
Nasdaq Stock Market.
(3) The registration fee for the securities registered hereby has been
calculated pursuant to Section 6(b) of the Securities Act, of the proposed
maximum aggregate offering price multiplied by .000264. A fee of $129,412
was paid on August 14, 2000 pursuant to rules 14a-6 and 0-11 promulgated
under the Exchange Act, in respect of the combination upon filing by
Excalibur Technologies Corporation of a preliminary proxy statement relating
thereto. Pursuant to Rule 457(b) promulgated under the Securities Act and
Section 14(g)(2) of the Exchange Act and Rule 0-11 promulgated thereunder,
the amount of such previously paid fee has been credited against the
registration fee payable in connection with this filing. Accordingly,
Convera will wire $397,130 to the Commission simultaneously with the filing
of this registration statement.
(4) Previously paid.
-------------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
===============================================================================
<PAGE> 3
EXCALIBUR TECHNOLOGIES CORPORATION
November 22, 2000
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders of
Excalibur Technologies Corporation to be held at The Sheraton New York Hotel &
Towers, located at 811 Seventh Avenue, New York, New York 10019, on Thursday,
December 21, 2000, at 10:00 a.m., local time.
At the Excalibur annual meeting, stockholders will be asked to approve and
adopt a combination transaction between Excalibur and Intel Corporation and a
related Agreement and Plan of Contribution and Merger dated as of April 30,
2000, as amended. Upon completion of the combination:
- Excalibur will become a wholly owned subsidiary of a new holding company,
Convera Corporation;
- Each outstanding share of Excalibur common stock will be converted into
one share of Convera Class A common stock, resulting in Excalibur
stockholders receiving approximately 15,530,875 shares, or 51%, of the
Convera Class A common stock in exchange for their Excalibur stock, which
represents 40% of the common stock of Convera, on a fully-diluted basis
after giving effect to the conversion of outstanding preferred stock and
exercise of assumed Excalibur options; and
- Intel Corporation will contribute to Convera its Interactive Media
Services division, intellectual property assets and other assets used by
that division, as well as approximately $155 million in cash, $150 million
of which will be paid at closing and the balance of which will be payable
in 2001 to fund retention bonuses to former Intel employees, in exchange
for approximately 14,921,821 shares, or 49%, of the Convera Class A common
stock and approximately 12,217,013 shares, or 100%, of the Convera Class B
non-voting common stock, which together represent a total of 60% of the
common stock of Convera, on a fully-diluted basis after giving effect to
the conversion of outstanding preferred stock and exercise of assumed
Excalibur options.
The board of directors of Excalibur has decided that the combination is fair
to and in the best interests of the Excalibur stockholders and unanimously
recommends that you vote "FOR" the combination at the annual meeting.
As part of the transaction with Intel, we are also asking you at the annual
meeting to approve the Convera 2000 Stock Option Plan in order to permit Convera
the opportunity to provide employees, consultants, advisors and non-employee
directors the opportunity to receive stock options and restricted stock.
Approval of this option plan is a condition to completing our combination with
the Interactive Media Services division of Intel. >We are also asking you to
approve an amendment to Excalibur's employee stock purchase plan. If the
stockholders approve this amendment, it will become effective whether or not the
combination is completed. We are also asking you to vote on two corporate
governance provisions of Convera's amended and restated certificate of
incorporation and bylaws.
In a related transaction for which we are not asking you to vote,
concurrently with the completion of the combination, we expect to complete two
transactions with an affiliate of the National Basketball Association, one of
which will result in the NBA receiving 10% of the common stock of Convera, after
giving effect to the combination and the conversion of outstanding preferred
stock. As described in the proxy statement/prospectus, this NBA agreement will
dilute the ownership interests of Intel and the Excalibur stockholders.
We have enclosed our proxy statement relating to the annual meeting, which
also constitutes Convera's prospectus covering the Convera shares offered to you
in exchange for your Excalibur shares and the Convera shares to be received by
Intel. The proxy statement/prospectus includes important information regarding
the proposed combination. Please read it carefully.
On behalf of the board of Excalibur, I thank you for your support and urge
you to vote for the approval of the combination.
Sincerely yours,
/s/ PATRICK C. CONDO
Patrick C. Condo
President and Chief Executive Officer
CONSIDER THE RISKS DESCRIBED ON PAGES 16 THROUGH 22 OF THIS DOCUMENT.
Neither the Securities and Exchange Commission nor any state securities
regulators have approved the stock to be issued under this document or
determined if this document is accurate or adequate. Any representation to the
contrary is a criminal offense.
This proxy statement/prospectus is dated November 22, 2000, and is first
being mailed to stockholders of Excalibur on November 22, 2000.
<PAGE> 4
EXCALIBUR TECHNOLOGIES CORPORATION
1921 GALLOWS ROAD, SUITE 200
VIENNA, VIRGINIA 22182
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 21, 2000
TO THE STOCKHOLDERS OF EXCALIBUR TECHNOLOGIES CORPORATION:
NOTICE IS HEREBY GIVEN that Excalibur Technologies Corporation will hold an
annual meeting of stockholders on Thursday, December 21, 2000, at The Sheraton
New York Hotel & Towers, 811 Seventh Avenue, New York, New York 10019, at
10:00 a.m., local time (including any adjournments or postponements thereof) for
the following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Contribution and Merger dated as of April 30, 2000,
as amended, by and among Excalibur, Intel Corporation, Convera Corporation,
a wholly owned subsidiary of Excalibur, and Excalibur Transitory, Inc., a
wholly owned subsidiary of Convera.
2. In connection with and as a condition to the combination
transaction with Intel, to consider and vote upon a proposal to approve the
Convera 2000 stock option plan.
3. In connection with the combination transaction, to approve two
corporate governance provisions of Convera's amended and restated
certificate of incorporation and bylaws. You may not vote for one of these
provisions and not the other. A vote for one provision will be considered a
vote for the other provision.
4. To elect ten members of the board of directors of Excalibur for
terms expiring at the completion of the combination or, if the combination
is not completed, at the 2001 annual meeting of Excalibur.
5. To approve an amendment to Excalibur's stock purchase plan.
6. To transact such other business as may properly come before the
annual meeting.
Only the holders of record of Excalibur common stock as of the close of
business on November 14, 2000 are entitled to notice of, and to vote at, the
annual meeting and at any adjournment or postponement thereof. As of the record
date there were 15,259,075 shares of common stock outstanding. A list of these
stockholders will be open to examination by any Excalibur stockholder at the
annual meeting and for a period of ten days prior to the date of the annual
meeting during ordinary business hours at Excalibur's headquarters, located at
1291 Gallows Road, Suite 200, Vienna, Virginia 22182.
If you attend the meeting, you may vote your shares in person, which will
revoke any previously executed proxy. FAILURE TO RETURN A PROPERLY EXECUTED
PROXY CARD OR TO VOTE AT THE ANNUAL MEETING WILL GENERALLY HAVE THE SAME EFFECT
AS A VOTE AGAINST THE COMBINATION.
By Order of the Board of Directors,
/s/ PATRICK C. CONDO
Patrick C. Condo
President and Chief Executive Officer
Vienna, Virginia
November 22, 2000
YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING, PLEASE COMPLETE, SIGN AND DATE YOUR PROXY CARD AND RETURN IT PROMPTLY
IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
<PAGE> 5
WHERE YOU CAN FIND MORE INFORMATION
Excalibur files annual, quarterly and special reports, proxy statements and
other information with the United States Securities and Exchange Commission. You
may read and copy any document filed by Excalibur at the SEC's public reference
facilities. Please call the SEC at 1-800-SEC-0330 for further information about
its public reference facilities. These SEC filings are also available to the
public at the SEC's web site at "www.sec.gov". Reports, proxy statements and
other information concerning Excalibur can also be inspected at the offices of
the Nasdaq Stock Exchange, 33 Whitehall Street, New York, New York 10004.
This proxy statement/prospectus incorporates documents by reference which
relate to Excalibur and which are not included in this proxy
statement/prospectus. The documents relating to Excalibur are available to any
person, including any beneficial owner to whom this proxy statement/prospectus
is delivered, on written or oral request, without charge, to Excalibur
Technologies Corporation, 1921 Gallows Road, Suite 200, Vienna, Virginia 22182
(telephone number (703) 761-3700), Attention: Chief Financial Officer. In order
to ensure timely delivery of the documents, any requests should be made by
December 8, 2000.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows Excalibur to "incorporate by reference" the information it
files with the SEC which means that Excalibur can disclose important information
to you by referring you to documents it has previously filed with the SEC. The
information incorporated by reference is considered to be a part of this proxy
statement/prospectus, and any later information that Excalibur files with the
SEC will automatically update and supersede this information. Excalibur
incorporates by reference the documents listed below, and any further filings
made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 until the offering of the securities is terminated. This
proxy statement/prospectus is part of a registration statement on Form S-4 filed
by Convera with the SEC (Registration No. 333-50172). The documents Excalibur is
incorporating by reference are:
1. Excalibur's Annual Report on Form 10-K, as amended by Excalibur's
Annual Report on Form 10-K/A, for the fiscal year ended January 31, 2000;
2. Excalibur's Quarterly Report on Form 10-Q for the quarter ended
April 30, 2000;
3. Excalibur's Quarterly Report on Form 10-Q, as amended by
Excalibur's Quarterly Report on Form 10-Q/A, for the quarter ended July 31,
2000;
4. Excalibur's Current Reports on Form 8-K dated April 30, 2000, July
19, 2000 and November 20, 2000; and
5. the description of Excalibur common stock in Excalibur's
Registration Statement filed pursuant to Section 12 of the Exchange Act,
and any amendment or report filed for the purpose of updating any such
description.
i
<PAGE> 6
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus contains and incorporates by reference
statements that constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. These forward-looking
statements include all statements regarding the intent, belief or current
expectations regarding the matters discussed or incorporated by reference in
this proxy statement/prospectus (including statements as to "beliefs,"
"expectations," "anticipations," "intentions" or similar words) and all
statements which are not statements of historical fact. Actual results,
performance or events may differ materially for a variety of reasons, including,
but not limited to, risks related to the realization of anticipated revenues,
profitability and synergies of the combination, trends affecting the growth of
Excalibur and other risks and uncertainties described in "Risk Factors" or in
the other SEC filings of Excalibur.
TRADEMARKS
This proxy statement/prospectus contains trademarks of Excalibur and may
contain trademarks of other parties.
ii
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TABLE OF CONTENTS
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WHERE YOU CAN FIND MORE INFORMATION......................... i
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. i
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS........... ii
TRADEMARKS.................................................. ii
QUESTIONS AND ANSWERS ABOUT THE COMBINATION................. 1
SUMMARY..................................................... 4
The Companies............................................. 4
The Annual Meeting........................................ 5
Our Recommendation to Excalibur Stockholders Concerning
the Combination........................................ 5
Record Date; Voting Power................................. 5
Votes Required for the Combination........................ 5
Share Ownership of Management and Certain Stockholders.... 5
The Contribution and Merger Agreement..................... 6
The Contributed Assets.................................... 6
What Excalibur Security Holders Will Receive in the
Combination............................................ 6
Ownership of Convera Following the Combination............ 6
Ownership of Convera Following Completion of the NBA
Transaction............................................ 7
Federal Income Tax Consequences........................... 8
Opinion of Excalibur's Financial Advisor.................. 8
Accounting Treatment...................................... 8
Listing of Excalibur Stock................................ 8
Conditions to the Closing of the Combination.............. 8
Circumstances Where the Parties can Terminate the
Contribution and Merger Agreement...................... 9
Termination Fee; Expenses................................. 10
No Appraisal Rights for Common Stock Holders.............. 10
Board of Directors and Management of Convera Following the
Combination............................................ 10
The Convera 2000 Stock Option Plan........................ 10
Interest of Certain Persons in the Combination............ 10
Election of the Board of Directors of Excalibur........... 10
Market Price Information.................................. 11
Summary Selected Consolidated Financial Data of
Excalibur.............................................. 12
Summary Selected Historical Financial Data of Intel's
Interactive Media Services Division.................... 13
Summary Selected Pro Forma Combined Financial
Information............................................ 14
Comparative Per Share Information......................... 15
RISK FACTORS................................................ 16
THE ANNUAL MEETING.......................................... 23
Time and Place............................................ 23
Matters to be Considered at the Annual Meeting............ 23
Record Date and Quorum.................................... 23
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Votes Required............................................ 23
Proxies................................................... 24
THE COMBINATION............................................. 26
Background of the Combination............................. 26
Our Reasons for the Combination; Recommendation of Our
Board.................................................. 30
Opinion of Excalibur's Financial Advisor.................. 33
Interests of Certain Persons in the Combination........... 38
United States Federal Income Tax Considerations........... 40
Accounting Treatment...................................... 41
Regulatory Approvals...................................... 41
Appraisal Rights.......................................... 41
DIRECTORS AND MANAGEMENT OF CONVERA FOLLOWING THE
COMBINATION............................................... 42
Directors................................................. 42
Committees of the Board of Directors...................... 42
Compensation of Directors................................. 42
Management and Executive Officers of Convera.............. 43
Executive Compensation.................................... 43
THE CONTRIBUTION AND MERGER AGREEMENT AND RELATED
AGREEMENTS................................................ 44
The Combination........................................... 44
The Contribution.......................................... 44
Conversion of Shares...................................... 45
Exchange of Stock Certificates............................ 45
Stock Options............................................. 46
Representations and Warranties............................ 46
Material Covenants........................................ 47
Conditions to Consummation of the Combination............. 54
Termination; Termination Fees and Expenses................ 55
Amendment................................................. 58
Voting Agreements......................................... 58
Registration Rights Agreement............................. 59
License Agreements........................................ 59
NBA Agreements............................................ 62
COMPARISON OF STOCKHOLDERS' RIGHTS.......................... 64
Authorized Capital Stock.................................. 64
Voting Rights............................................. 64
Allocation of Corporate Opportunities Between Convera and
Intel or the NBA and Other Matters Concerning Intel and
the NBA................................................ 64
Transactions Between Convera and Related Parties,
Including Intel and the NBA............................ 66
Number of Directors....................................... 67
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Voting by Directors....................................... 67
Quorum for Stockholders Meetings.......................... 67
Amendment of Certificate of Incorporation................. 67
Amendment of Bylaws....................................... 67
Nominations and Stockholder Business...................... 67
DESCRIPTION OF CONVERA CAPITAL STOCK FOLLOWING THE
COMBINATION............................................... 70
Authorized Capital Stock.................................. 70
Convera Common Stock...................................... 70
Convera Preferred Stock................................... 71
Transfer Agent and Registrar.............................. 71
Nasdaq Listing of the Class A Common Stock................ 71
BUSINESS OF INTEL'S INTERACTIVE MEDIA SERVICES DIVISION..... 72
Entertainment Content Services............................ 72
Enhanced Video Services................................... 73
Internet Security Services................................ 73
SELECTED FINANCIAL DATA OF INTEL'S INTERACTIVE MEDIA
SERVICES DIVISION......................................... 74
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION FOR INTEL'S INTERACTIVE MEDIA
SERVICES DIVISION......................................... 75
Overview.................................................. 75
Entertainment Content Services............................ 75
Enhanced Video Services................................... 75
Internet Security Services................................ 76
Results of Operations-Inception to December 26, 1998
Compared to Fiscal 1999................................ 77
Results of Operations-Nine Months Ended September 25, 1999
Compared to Nine Months Ended September 30, 2000....... 77
Liquidity and Capital Resources........................... 77
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION.......... 78
APPROVAL AND ADOPTION OF CONVERA'S 2000 STOCK OPTION PLAN... 85
Proposal.................................................. 85
Vote Required............................................. 85
Eligibility............................................... 86
Administration............................................ 86
Terms and Conditions of Options........................... 86
Stock Appreciation Rights................................. 86
Stock Purchase Rights..................................... 87
Deferred Stock; Restricted Stock; Other Stock-Based
Awards................................................. 87
Amendments................................................ 87
Effective Date............................................ 87
Term of Plan.............................................. 87
Federal Income Tax Consequences........................... 87
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APPROVAL OF TWO CORPORATE GOVERNANCE PROVISIONS OF CONVERA'S
CERTIFICATE OF INCORPORATION AND BYLAWS................... 90
Proposal.................................................. 90
Reasons for the Proposal.................................. 90
Vote Required............................................. 90
Quorum for Stockholders Meetings.......................... 90
Nomination and Stockholders Business...................... 90
Advantages and Disadvantages and Potential Anti-Takeover
Effects of the Convera Corporate Governance
Provisions............................................. 92
ELECTION OF EXCALIBUR DIRECTORS............................. 93
General................................................... 93
Information Concerning Excalibur Directors and Nominees... 93
Information Concerning the Excalibur Board of Directors
and Its Committees..................................... 94
APPROVAL OF THE AMENDMENT TO THE EXCALIBUR 1996 EMPLOYEE
STOCK PURCHASE PLAN....................................... 96
Proposal.................................................. 96
Vote Required............................................. 96
Description of the Excalibur Stock Purchase Plan.......... 96
EXECUTIVE COMPENSATION OF EXCALIBUR......................... 97
Identification of Excalibur Executive Officers and Key
Employees.............................................. 97
Summary Compensation Table................................ 98
Option Grants in Last Fiscal Year......................... 99
Aggregate Option Exercises in Last Fiscal Year and Fiscal
Year-End Values........................................ 99
Description of the Excalibur 1989 Incentive Plan.......... 99
Description of the Excalibur 1995 Stock Option Plan....... 100
Description of the Excalibur 1999 Stock Option Plan....... 100
Report of the Excalibur Compensation Committee............ 101
Compensation Committee Interlocks and Insider
Participation.......................................... 103
Employment Agreements..................................... 103
Performance Graph......................................... 104
Security Ownership of Certain Beneficial Owners and
Management of Excalibur................................ 105
Certain Relationships and Related Transactions............ 106
Beneficial Ownership Reporting Compliance................. 107
Stockholder Proposals to be Presented at Next Annual
Meeting................................................ 107
OTHER MATTERS............................................... 108
Excalibur's and Convera's Independent Auditors............ 108
Discretionary Authority................................... 109
LEGAL MATTERS............................................... 109
EXPERTS..................................................... 109
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APPENDIX A1 Agreement and Plan of Contribution and Merger dated as of
April 30, 2000, by and among Excalibur Technologies
Corporation, Intel Corporation, Convera Corporation, a
wholly owned subsidiary of Excalibur, and Excalibur
Transitory, Inc., a wholly owned subsidiary of Convera
APPENDIX A2 Amendment, dated August 14, 2000 to Agreement and Plan of
Contribution and Merger, dated April 30, 2000, by and among
Excalibur Technologies Corporation, Intel Corporation,
Convera Corporation, a wholly owned subsidiary of Excalibur,
and Excalibur Transitory, Inc., a wholly owned subsidiary of
Convera
APPENDIX B Opinion of Needham & Company, Inc.
APPENDIX C Convera 2000 Stock Option Plan
APPENDIX D Amended and Restated Certificate of Incorporation of
Convera, as Currently Proposed
APPENDIX E Bylaws of Convera, as Currently Proposed
APPENDIX F Amended and Restated Excalibur 1996 Employee Stock Purchase
Plan
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QUESTIONS AND ANSWERS ABOUT THE COMBINATION
Q: WHY IS EXCALIBUR EFFECTING THE COMBINATION?
A:The Excalibur board of directors unanimously approved the combination as fair
to and in the best interests of Excalibur and its stockholders. Our plan is
for Convera to build on Excalibur's and the Intel Interactive Media Services
division's current businesses by offering a media services solution that
enables content owners, such as entertainment companies and sports leagues, to
distribute their content securely over the Internet. We also believe that
Convera will benefit from several years of separate, but complementary efforts
by Intel and Excalibur to develop technologies and businesses capable of
exploiting the opportunity for Internet-based interactive media. Convera will
combine Excalibur's market leading content management technologies -- the
encoding, indexing, searching, retrieving and publishing of multimedia -- and
products able to organize and search all kinds of content, with Intel's
patented technology in content protection and content enrichment through video
and data integration and products and services that provide the infrastructure
required to deliver branded content securely over the Internet. We expect that
with these combined technologies, Convera will be able to provide a
business-to-business solution that customers need to encode, protect, organize
and deliver branded, high-value content on the Internet using new business
models such as subscription and pay-per-view. For a full discussion of
Excalibur's reasons for the combination, see pages 30 through 33.
Q: WHAT IS THE DIFFERENCE BETWEEN THE CONVERA CLASS A COMMON STOCK AND THE
CONVERA CLASS B COMMON STOCK TO BE ISSUED IN THE COMBINATION?
A:Convera's Class A common stock will carry one vote per share. Class B common
stock, which will be issued solely to Intel, will not have any voting rights,
but otherwise will be identical to the Class A common stock. The Class B
common stock may be converted, at Intel's election, into Class A common stock
on a one-for-one basis, but Intel will not be able to convert Class B common
stock into Class A common stock if, as a result of such conversion, Intel
would beneficially own 50% or more of the voting power of Convera.
Q: DOES INTEL HAVE AN OBLIGATION TO SUPPORT CONVERA AFTER THE COMBINATION?
A:After the combination, other than the payment to be made by Intel to Convera
to fund retention bonus payments to specified former Intel employees employed
by Convera on April 30, 2001, Intel will not be obligated to provide Convera
with any support, including without limitation, financial, technical,
marketing, human resources or intellectual property support.
Q: FOLLOWING THE COMBINATION, WILL INTEL BE ABLE TO USE THE INTELLECTUAL
PROPERTY THAT IT WILL TRANSFER TO CONVERA?
A:The contribution and merger agreement provides that Convera will enter into
two separate intellectual property agreements with Intel at the closing of the
combination. The IP license contribution agreement provides for a
non-exclusive license by Intel to Convera of specified intellectual property
related to the Interactive Media Services division, the ownership of which
will be retained by Intel. The transferred IP license agreement provides for a
license by Convera to Intel of specified intellectual property, the ownership
of which will be transferred to Convera as part of Intel's contribution of
assets upon the closing of the combination. Under both of these agreements,
Intel will be able to use the intellectual property that is licensed and/or
transferred to Convera. It is possible that Intel may use this intellectual
property in a way that competes with Convera's business. For a full discussion
of the intellectual property agreements, see pages 59 through 62.
Q: WILL INTEL HAVE ANY FIDUCIARY DUTIES TO CONVERA OR ITS STOCKHOLDERS IN
CONNECTION WITH SPECIFIED CORPORATE OPPORTUNITIES OR ANY BUSINESS RELATIONS
INTEL MAY HAVE WITH CONVERA FOLLOWING THE COMBINATION?
A:Under Convera's amended and restated certificate of incorporation which is
attached to this proxy statement/prospectus as Appendix D, Intel will not be
liable to Convera or its stockholders for breach of any fiduciary duty it
otherwise may have as a significant stockholder because Intel pursues
specified corporate opportunities otherwise available to both Convera and
Intel, in accordance with the amended and restated certificate of
incorporation, or takes any action, exercises any rights or withholds any
consent in connection with any transaction between Intel and Convera. For a
full discussion of Intel's rights and
1
<PAGE> 13
duties in connection with transactions between Intel and Convera; see
"Comparison of Stockholders' Rights" beginning on page 64.
Q: WHAT WILL HAPPEN TO OUTSTANDING EXCALIBUR OPTIONS?
A:Convera will assume the outstanding Excalibur stock option plans and the
outstanding options. Each Excalibur option will become an option to acquire
shares of Convera Class A common stock. The terms and conditions of the
replacement Convera option will be the same as the pre-existing Excalibur
option it replaces. The assumed options will be exercisable for the number of
shares of Convera Class A common stock equal to the number of shares that were
purchasable immediately prior to the closing of the combination. The exercise
price per share of each assumed option immediately after the combination will
be unchanged. Under the terms of Excalibur's 1989, 1995 and 1999 Stock Option
Plans, all unvested options under such plans other than those granted on April
28, 2000 will immediately vest upon completion of the combination, including
unvested options to acquire 348,627 shares owned by Excalibur's executive
officers.
Q: HOW DO THE PROPOSED NBA TRANSACTIONS RELATE TO THE COMBINATION?
A:In September 2000, Intel entered into a services agreement with the NBA for
the development and distribution of interactive NBA content, ultimately
including enhanced broadband programming and interactive game broadcasts. If
the combination is completed, the NBA services agreement will be assigned by
Intel to Convera concurrently with the completion of the combination. After
the assignment, Intel will no longer be a party to the NBA services agreement
and Convera will then be solely responsible under the services agreement with
the NBA. Also in September 2000, Convera entered into a contribution agreement
with the NBA whereby, concurrently with the closing of the combination, the
NBA will contribute specified assets to Convera in exchange for 10% of
Convera's outstanding stock (13.5% of the Class A common stock), after giving
effect to the combination and the conversion of preferred stock. The
transactions with the NBA are subject to the satisfaction of closing
conditions. See "The Contribution and Merger Agreement and Related
Agreements -- NBA Agreements" beginning on page 62.
Q: AM I BEING ASKED TO VOTE SEPARATELY ON THE NBA TRANSACTION?
A:No, neither the assignment of the NBA services agreement nor the issuance of
shares to the NBA requires stockholder approval and you are not being asked to
vote separately on the NBA transactions. Intel's services agreement with the
NBA will be assigned to Convera as one of the several customer contracts being
contributed by Intel to Convera under the contribution and merger agreement.
If the combination does not occur, the NBA services agreement will not be
assigned to Convera and neither Convera nor Excalibur will issue any shares to
the NBA under the contribution agreement.
Q: WHAT DO I NEED TO DO NOW?
A:Just indicate on your proxy card how you want to vote, sign the proxy card and
mail it in the enclosed return envelope as soon as possible, so that your
shares may be represented at the annual meeting of the Excalibur stockholders.
If you sign and send in your proxy card without marking a vote for or against,
your proxy will be counted as a vote in favor of the combination. If you do
not vote, or you abstain, it will have the effect of a vote against the
combination.
The annual meeting will take place on December 21, 2000. You may attend the
meeting and vote your shares in person, rather than signing and mailing your
proxy card. In addition, you may take back your proxy up to and including the
day of the annual meeting by following the directions on page 25 and either
change your vote or attend the meeting and vote in person.
Q: WHEN DO YOU EXPECT THE COMBINATION TO BE COMPLETED?
A:Excalibur, Intel and Convera are working toward completing the combination as
quickly as possible. We expect to complete the combination immediately
following the Excalibur annual meeting of stockholders, subject to
satisfaction or waiver of all other conditions to closing.
2
<PAGE> 14
Q: WHAT IS THE REQUIRED VOTE TO APPROVE THE COMBINATION?
A:Approval of the combination requires the affirmative vote of the holders of a
majority of the outstanding shares of Excalibur common stock. Holders of
approximately 31% of Excalibur's outstanding voting stock have agreed to vote
in favor of the combination.
Q: IF MY BROKER HOLDS MY SHARES IN "STREET NAME," WILL MY BROKER VOTE MY SHARES
FOR ME?
A:You should instruct your broker to vote your shares according to your
directions. Without instructions, your broker will not vote your shares on the
combination proposal, the Convera corporate governance proposal and the
Convera stock option plan proposal.
Q: IF I AM NOT GOING TO ATTEND THE ANNUAL MEETING, SHOULD I RETURN MY PROXY CARD
INSTEAD?
A:Yes. Please fill out your proxy card and mail it to us in the enclosed return
envelope as soon as possible. Returning your proxy card ensures that your
shares will be represented at the annual meeting.
Q: WHAT DO I DO IF I WANT TO CHANGE MY VOTE?
A:You should send in a later-dated, signed proxy card to Excalibur's corporate
secretary before the meeting or you should attend the meeting and vote in
person.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A:If you would like additional copies of this proxy statement/prospectus or if
you have questions, you can either contact us at Excalibur Technologies
Corporation, 1921 Gallows Road, Suite 200, Vienna, Virginia 22182, Attention:
Investor Relations or you can call DF King & Co., Inc., which Excalibur has
retained to assist in the solicitation of proxies, at (212) 269-5550.
3
<PAGE> 15
SUMMARY
This summary highlights selected information from this document and does
not contain all of the information that is important to you. To understand the
combination and the other proposals fully and for a more complete description of
the legal terms of the combination, you should read carefully this entire
document and the documents to which we have referred you. See "Where You Can
Find More Information" on page (i).
THE COMPANIES
EXCALIBUR TECHNOLOGIES CORPORATION
1921 Gallows Road, Suite 200
Vienna, Virginia 22182
(703) 761-3700
Excalibur designs, develops, markets and supports high-performance,
accurate, scalable and secure search-powered multimedia software solutions.
Excalibur offers a suite of intelligent search solutions for corporate
intranets, Internet e-commerce, online publishing, application service providers
and the original equipment manufacturer market that enables individuals to
quickly capture, analyze, index, catalog, access, navigate, retrieve, publish
and share relevant information residing on an enterprise's networks, intranets,
extranets and the Internet. Retrievable assets or data types include paper
documents, text, databases, word processing documents, PDF (Portable Document
Format) files, newsfeeds, groupware systems, e-mails, images, audio and video.
INTEL CORPORATION
2200 Mission College Boulevard,
Santa Clara, California 95052
(408) 765-8080
Intel, the world's largest semiconductor chip maker, supplies the computing
and communications industries with chips, boards, systems and software that are
integral in computers, servers, and networking and communications products.
These products are used by industry members to create advanced computing and
communications systems and are offered at various levels of integration.
Intel's Interactive Media Services, or IMS, division is comprised of three
separate business groups that were formally established between June and October
1998:
- the Entertainment Content Services group;
- the Enhanced Video Services group; and
- the Internet Security Services group.
The Interactive Media Services division provides solutions for content
customers and broadcast networks as they deliver digital content to end users
using the internet and emerging broadband environments, such as satellite,
cable, DSL (Digital Subscriber Line) and wireless. Services offered by the
Interactive Media Services division include digital video and data integration
services, security and content protection services, conditional access and
subscriber management services and scalable distribution management services.
CONVERA CORPORATION
1921 Gallows Road, Suite 200
Vienna, Virginia 22182
(703) 761-3700
Convera is a newly-formed, wholly-owned subsidiary of Excalibur. Convera
has had no operations to date. Convera's audited financial statements are
included in this proxy statement/prospectus beginning on page F-12. In the
combination, Excalibur will combine all of its business operations with Convera
and become a wholly-owned subsidiary of Convera, and Intel will contribute to
Convera its Interactive Media Services division, intellectual property assets
and other assets used by that division, as well as approximately $155
4
<PAGE> 16
million in cash, $150 million of which will be paid at closing and the balance
of which will be payable in 2001 to fund retention bonuses to specified former
Intel employees who become and remain employees of Convera.
EXCALIBUR TRANSITORY, INC.
1921 Gallows Road, Suite 200
Vienna, Virginia 22182
(703) 761-3700
Transitory is a wholly-owned subsidiary of Convera. In the combination,
Transitory will merge into Excalibur and cease to exist.
THE ANNUAL MEETING
The Excalibur annual meeting will be held at The Sheraton New York Hotel &
Towers, 811 Seventh Avenue, New York, New York 10019 on Thursday, December 21,
2000 at 10:00 a.m., local time. At the annual meeting, you will be asked to
approve and adopt the contribution and merger agreement and approve the
combination. In connection with the combination, you will also be asked to
approve the Convera 2000 stock option plan.
At the annual meeting, you will also be asked to vote on three other
proposals. You will be asked to elect ten members of the Excalibur board of
directors to serve until the completion of the combination or, if the
combination is not completed, until the 2001 annual meeting. You will also be
asked to approve two corporate governance provisions of Convera's amended and
restated certificate of incorporation and bylaws and an amendment to the
Excalibur stock purchase plan which will be assumed by Convera upon consummation
of the combination.
OUR RECOMMENDATION TO EXCALIBUR STOCKHOLDERS CONCERNING THE COMBINATION
The board of directors of Excalibur believes that the combination is fair
to you and in your best interests and unanimously recommends that you vote "for"
the proposal to approve and adopt the contribution and merger agreement and
approve the combination.
RECORD DATE; VOTING POWER
You are entitled to vote at the meeting if you owned shares of Excalibur
common stock as of the close of business on November 14, 2000, the record date
for the annual meeting.
On the record date, there were 15,259,075 shares of Excalibur common stock
allowed to vote at the annual meeting. Excalibur stockholders will have one vote
for each share of Excalibur common stock they owned at the record date.
VOTES REQUIRED FOR THE COMBINATION
Stockholders holding at least a majority of the shares of Excalibur common
stock outstanding on the record date must vote to approve and adopt the
contribution and merger agreement and approve the combination.
SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN STOCKHOLDERS
On the record date, Allen & Company Incorporated and the directors and
executive officers of Excalibur beneficially owned and were allowed to vote
4,672,660 shares of Excalibur common stock constituting approximately 31% of the
shares of Excalibur common stock outstanding on the record date.
Allen & Company Incorporated and each director and executive officer of
Excalibur, in their capacity as stockholders of Excalibur, have executed voting
agreements with Intel in which they have agreed to vote their Excalibur common
stock "for" adoption and approval of the contribution and merger agreement and
approval of the combination. Please refer to page 58 for more information on the
voting agreements.
5
<PAGE> 17
THE CONTRIBUTION AND MERGER AGREEMENT
The contribution and merger agreement, as amended, is summarized on pages
44 to 58 and attached as Appendix A to this document. We encourage you to read
the contribution and merger agreement. It is the legal document governing the
combination.
THE CONTRIBUTED ASSETS
Intel will contribute to Convera its Interactive Media Services division,
intellectual property assets and other assets used by that division, as well as
approximately $155 million in cash, $150 million of which will be paid at
closing and the balance of which will be payable in 2001 to fund retention
bonuses to former Intel employees. The contributed intellectual property assets
include:
- 14 patents and patent applications in the area of content security;
- source code components;
- non-exclusive licenses to additional source code components and other
Intel patents and patent applications;
- Intel's rights under contracts entered into by the Interactive Media
Services division, exclusive of certain cash payments or components of
equity received by the division under the contracts prior to the closing;
and
- technical employee resources in key areas, primarily in software and
engineering.
At closing, Convera will use approximately $7 million of the cash proceeds
to reimburse Intel for amounts advanced by Intel on Convera's behalf to fund
capital expenditures primarily relating ot the NBA services agreement and to
fund leasehold improvements to IMS' office facilities.
WHAT EXCALIBUR SECURITY HOLDERS WILL RECEIVE IN THE COMBINATION
You will receive one share of Convera Class A common stock for each share
of common stock of Excalibur. Also, while the contribution and merger agreement
provides that the holders of Excalibur preferred stock will receive one share of
Convera preferred stock for each share of preferred stock of Excalibur, the only
holder of Excalibur preferred stock has agreed to convert its Excalibur
preferred stock into Excalibur common stock prior to the closing of the
combination. Accordingly, Convera will have no outstanding preferred stock
immediately following the closing of the combination.
You should not send in your stock certificates until instructed to do so
after the combination is completed.
OWNERSHIP OF CONVERA FOLLOWING THE COMBINATION
In the combination, Intel will receive 49% of the Convera Class A common
stock and 100% of the Convera Class B non-voting common stock, which together
represent a total of 60% of the common stock of Convera, on a fully-diluted
basis after giving effect to the conversion of outstanding preferred stock and
exercise of assumed Excalibur options. Excalibur stockholders will receive 51%
of the Convera Class A common stock, which represents 40% of the common stock of
Convera on a fully diluted basis after giving effect to the conversion of
outstanding preferred stock and exercise of assumed Excalibur options. Because
the exact number of shares to be issued depends on the number of Excalibur
shares and options outstanding at closing, we will not be able to provide exact
share amounts until then. However, based on the shares of common stock
outstanding, the shares of preferred stock outstanding that are convertible into
common stock and the number of outstanding options, in each case as of November
14, 2000, we anticipate that Convera will have approximately 30,452,696 shares
of Class A common stock outstanding, 12,217,013 shares of Class B common stock
outstanding and options outstanding to purchase 2,561,681 shares of Class A
common stock immediately after the combination. Based on these amounts, and
after giving effect to the shares of Class A common stock issuable upon
conversion of Convera preferred stock and the exercise of Excalibur options
assumed by Convera, the following table sets forth information concerning the
number of shares of Convera
6
<PAGE> 18
Class A common stock and Class B common stock that will be beneficially owned by
Excalibur stockholders and Intel immediately following the closing of the
combination:
<TABLE>
<CAPTION>
NUMBER OF % OF NUMBER OF % OF NUMBER OF % OF
CLASS A SHARES CLASS A SHARES CLASS B SHARES CLASS B SHARES FULLY-DILUTED ALL COMMON
HOLDER (VOTING STOCK) (VOTING STOCK) (NON-VOTING STOCK) (NON-VOTING STOCK) SHARES(1) STOCK(1)
---------------------- -------------- -------------- ------------------ ------------------ ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Former Excalibur 15,530,875(2) 51% -- -- 18,092,556 40%
Stockholders and
Optionholders.......
Intel................. 14,921,821 49% 12,217,013 100% 27,138,834 60%
</TABLE>
------------------
(1) Assumes the conversion of all outstanding preferred stock and the exercise
of the Excalibur options assumed by Convera, but does not assume the
exercise of the approximately 8 million new options to be granted by Convera
following the closing of the combination.
(2) Assumes the conversion of all outstanding preferred stock because the sole
holder has agreed to convert the preferred stock prior to closing.
OWNERSHIP OF CONVERA FOLLOWING COMPLETION OF THE NBA TRANSACTIONS
At the closing of the combination, Intel will assign its rights and
obligations under the NBA services agreement to Convera. See "The Contribution
and Merger Agreement and Related Agreements -- NBA Agreements." Under the
contribution agreement with the NBA, the NBA agreed to contribute to Convera
specified NBA assets. As consideration for such contribution, the NBA will
receive shares of Class A common stock representing a 10% equity stake in
Convera (13.5% of the Class A common stock) after giving effect to the
combination and assuming the conversion of outstanding preferred stock. The
following table sets forth information concerning the number of shares of
Convera Class A common stock and Class B common stock that will be beneficially
owned by former Excalibur stockholders, Intel and the NBA immediately following
the closing of the NBA transactions (again based on Excalibur's outstanding
shares as of November 14, 2000);
<TABLE>
<CAPTION>
NUMBER OF % OF NUMBER OF % OF NUMBER OF % OF
CLASS A SHARES CLASS A SHARES CLASS B SHARES CLASS B SHARES FULLY-DILUTED ALL COMMON
HOLDER (VOTING STOCK) (VOTING STOCK) (NON-VOTING STOCK) (NON-VOTING STOCK) SHARES(1) STOCK(1)
---------------------- -------------- -------------- ------------------ ------------------ ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Former Excalibur 15,530,875(2) 44.1% -- -- 18,092,556 36.2%
Stockholders and
Optionholders.......
Intel(3).............. 14,921,821 42.4% 12,217,013 100% 27,138,834 54.3%
NBA................... 4,741,079 13.5% -- -- 4,741,079 9.5%(4)
</TABLE>
------------------
(1) Assumes the conversion of all outstanding preferred stock and the exercise
of the Excalibur options assumed by Convera, but does not assume the
exercise of the approximately 8 million new options to be granted by Convera
following the closing of the combination.
(2) Assumes the conversion of all outstanding preferred stock because the sole
holder has agreed to convert the preferred stock prior to closing.
(3) Intel may elect at any time to convert its non-voting Class B common stock
into voting Class A common stock as long as its voting shares do not exceed
49% of the total voting shares.
(4) The NBA would own 10% of all of the common stock assuming only the
conversion of the outstanding preferred stock, but not the exercise of any
Excalibur options assumed by Convera.
Upon consummation of the combination, Convera will grant approximately 8
million new options to Convera employees to purchase Class A shares. The new
options will be granted with an exercise price of $32.16 and, based upon the
$51.56 closing price of Excalibur's common stock on October 25, 2000, would
result in unearned compensation of approximately $155,200,000 being charged
against income over the four-year vesting period of the options. For further
information see "Unaudited Pro Forma Combined Financial Information" beginning
on page 78.
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<PAGE> 19
FEDERAL INCOME TAX CONSEQUENCES
The exchange of shares by you is intended to be tax-free to you for federal
income tax purposes. To review the tax consequences to you in greater detail,
see pages 40 through 41.
Tax matters are very complicated, and the tax consequences of the
combination to you will depend in part on the facts of your own situation. You
should consult your tax advisors for a full understanding of the tax
consequences of the combination to you.
OPINION OF EXCALIBUR'S FINANCIAL ADVISOR
Needham & Company, Inc. has delivered to the Excalibur board of directors
its written opinion stating that, as of the date of the opinion and based upon
and limited by matters stated in the opinion, the exchange ratios of one share
of Convera Class A common stock for each share of Excalibur common stock and one
share of Convera preferred stock for each share of Excalibur preferred stock
were fair, from a financial point of view, to the holders of Excalibur common
stock and Excalibur preferred stock, respectively. The full text of the written
opinion of Needham & Company, Inc. which states the assumptions made, matters
considered and limits on the review undertaken, is attached as Appendix B to
this proxy statement/prospectus. We urge Excalibur's stockholders to read the
opinion carefully.
ACCOUNTING TREATMENT
We intend to account for the combination under the purchase method of
accounting. For accounting purposes, Excalibur is treated as the acquirer of the
Interactive Media Services division of Intel. On the date of the completion of
the combination, we will record the tangible and identifiable intangible assets
of the Interactive Media Services division at their fair values. The purchase
price in excess of the fair value of the net assets of the Interactive Media
Services division will be recorded as goodwill. The purchase price was
determined based on the average market price of Excalibur's common stock before
and after the date the combination was announced plus the costs incurred to
execute the combination. See "Unaudited Pro Forma Combined Financial
Information" beginning on page 78 for additional information related to the
application of the purchase accounting method. We will include the results of
operations of the Interactive Media Services division in Convera's financial
statements from the date of the completion of the combination.
LISTING OF EXCALIBUR STOCK
The Convera Class A common stock to be issued in connection with the
combination will be approved for quotation on the Nasdaq National Market at the
time the combination takes effect.
CONDITIONS TO THE CLOSING OF THE COMBINATION
Excalibur and Intel will complete the combination only if we satisfy or (in
some cases) waive several conditions, including the following:
- the holders of at least a majority of the Excalibur common stock approve
the contribution and merger agreement and the combination;
- any governmental or regulatory requirements necessary to consummate the
combination are fulfilled;
- this proxy statement/prospectus is cleared by the SEC and the
registration statement, of which this proxy statement/prospectus is a
part, is effective under the Securities Act of 1933 and Convera has
received all required state securities laws authorizations;
- the shares of Convera Class A common stock to be issued in the
combination are approved for quotation on the Nasdaq National Market;
- the waiting period requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, applicable to the combination have
expired or been terminated;
- in connection with the compliance by Convera or Intel with any applicable
law or obtaining any necessary consent from a governmental agency,
neither Convera nor Intel shall be required to sell any
8
<PAGE> 20
assets or businesses, and Intel shall not be prohibited from owning any
material portion of Convera's stock, business or assets, and Convera
shall not be prohibited from owning any material portion of Excalibur's
business or assets or the assets contributed by Intel;
- Convera has adopted its 2000 stock option plan;
- Convera has granted options under its 2000 stock option plan to the Intel
employees and certain of our employees who become Convera employees, in
form and amount reasonably satisfactory to Intel and us;
- 70% of the employees of Intel named on a schedule to the contribution and
merger agreement and 50% of all other employees who are currently working
in Intel's Interactive Media Services division have indicated their
intent to become employed by Convera or shall have been temporarily
transferred, or seconded, to Convera by Intel, as long as, in any case,
at least 40% of these other IMS employees become employees of Convera;
- the representations and warranties of each party contained in the
contribution and merger agreement continue to be true and correct, and
each party has performed all of its obligations under the contribution
and merger agreement;
- no material adverse change has occurred on the businesses of Excalibur or
the assets to be contributed to Convera by Intel; and
- nothing has occurred, in the reasonable opinion of Intel, that would
create a significant risk that the combination would no longer be a
tax-free transaction.
CIRCUMSTANCES WHERE THE PARTIES CAN TERMINATE THE CONTRIBUTION AND MERGER
AGREEMENT
Excalibur and Intel can jointly agree to terminate the contribution and
merger agreement at any time without completing the combination. Either company
can terminate the contribution and merger agreement under various circumstances,
including if:
- a court or a governmental agency has taken a final action that prohibits
the combination from occurring;
- the other party fails to perform any material covenant or agreement or
there shall have been one or more breaches of the other party's
representations and warranties in the contribution and merger agreement
that together cause a material adverse effect;
- the other party has not met its closing conditions (and the terminating
party has not waived such conditions) by December 31, 2000; or
- Excalibur has convened the annual meeting and failed to acquire the
necessary approval of Excalibur stockholders.
Excalibur can terminate the contribution and merger agreement if:
- it receives a superior proposal for the acquisition of at least 20% of
the equity or assets of Excalibur by a third party and pays a termination
fee to Intel as set forth in the contribution and merger agreement; or
- there has been a material adverse effect on the assets to be contributed
to Convera by Intel.
Intel can terminate the contribution and merger agreement if:
- the Excalibur board of directors has recommended a proposal for the
acquisition of at least 20% of the equity or assets of Excalibur by a
third party to the Excalibur stockholders, in which case a termination
fee will be payable;
- the board of Excalibur has withdrawn or adversely modified its approval
of the combination, in which case a termination fee will be payable; or
- there has been a material adverse effect on Excalibur.
9
<PAGE> 21
TERMINATION FEE; EXPENSES
Excalibur will be required to pay Intel a termination fee of $20 million
and an additional $2.5 million as reimbursement for expenses, and Intel will be
required to pay to Excalibur $2.5 million as reimbursement for expenses upon the
occurrence of the events resulting in termination of the contribution and merger
agreement described in "The Contribution and Merger Agreement -- Termination;
Termination Fees and Expenses."
NO APPRAISAL RIGHTS FOR COMMON STOCK HOLDERS
Excalibur is incorporated under Delaware law. Under Delaware law,
stockholders of Excalibur common stock do not have rights to an appraisal of the
value of their shares of Excalibur common stock in connection with the
combination.
BOARD OF DIRECTORS AND MANAGEMENT OF CONVERA FOLLOWING THE COMBINATION
Ronald J. Whittier, a senior vice president of Intel, will become Convera's
chief executive officer and chairman of the board, and Patrick C. Condo,
president and chief executive officer of Excalibur, will become Convera's
president and chief operating officer.
The board of Convera will consist of seven members.
THE CONVERA 2000 STOCK OPTION PLAN
As part of the combination, the board of Excalibur and the board of Convera
approved the Convera 2000 stock option plan. The purpose of the stock option
plan is to encourage employees, consultants, advisors and directors to
contribute to the growth of Convera by giving them the opportunity to receive
grants of incentive stock options, nonqualified stock options and restricted
stock.
To comply with the requirements of the tax code, the public stockholders of
Convera must adopt and approve the stock option plan. Because the current
stockholders of Excalibur will be, along with Intel, the public stockholders of
Convera, we need your approval of the option plan. Approval by you of the option
plan is a condition to the completion of the combination. The Convera 2000 stock
option plan is attached as Appendix C to this proxy statement/prospectus.
The Excalibur board of directors recommend that you vote "for" the approval
and adoption of the Convera 2000 stock option plan.
INTERESTS OF CERTAIN PERSONS IN THE COMBINATION
When you consider our board of directors' recommendation that you vote in
favor of the combination, you should be aware that a number of our officers and
directors will be entitled to receive benefits if the combination occurs that
they will not be entitled to receive if the combination does not occur. Our
president and chief executive officer, Patrick C. Condo, who will become
Convera's president and chief operating officer will be entitled to specified
payments in the event his employment is terminated or he is removed from his
position with Convera within six months following a change of control of
Convera. In addition, a number of unvested stock options held by our executive
officers, Messrs. Condo, James Buchanan, Kamran Khan and David Nunnerly, will
vest immediately upon the completion of the combination. You can find further
information concerning these interests in "The Combination -- Interests of
Certain Persons in the Combination" beginning on page 38.
ELECTION OF THE BOARD OF DIRECTORS OF EXCALIBUR
You are also being asked to elect ten members of the board of Excalibur who
will serve until the completion of the combination or, if the combination is not
completed, until the 2001 annual meeting of Excalibur. The Excalibur board of
directors recommend that you vote "for" the directors named in this proxy
statement/prospectus.
10
<PAGE> 22
MARKET PRICE INFORMATION
Excalibur common stock is traded on the Nasdaq National Market under the
symbol "EXCA." On April 28, 2000, the last trading day before the parties
publicly announced the execution of the contribution and merger agreement, the
last reported sale price of Excalibur common stock was $35.50.
On November 20, 2000, two trading days before the date of this proxy
statement/prospectus, the last reported sale price of Excalibur common stock was
$31.375.
11
<PAGE> 23
SUMMARY SELECTED CONSOLIDATED FINANCIAL DATA OF EXCALIBUR
(DOLLARS IN THOUSANDS)
We are providing the following information to aid you in your analysis of
the financial aspects of the combination. Excalibur derived this information
from the audited financial statements for the fiscal years ended January 31,
1996 through January 31, 2000 and the unaudited financial statements for the six
months ended July 31, 1999 and 2000. This information is only a summary and you
should read it in conjunction with Excalibur's historical financial statements
(and related notes) and Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in the annual reports, quarterly
reports and other information on file with the Securities and Exchange
Commission. See "Where You Can Find More Information" and "Incorporation of
Certain Documents by Reference" on page (i).
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JANUARY 31, JULY 31,
----------------------------------------------- -------------------
1996 1997 1998 1999 2000 1999 2000
------- ------- ------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................... $18,675 $20,259 $22,417 $27,939 $37,934 $16,830 $20,758
Operating expenses................. 20,103 27,872 30,592 31,732 38,053 18,575 22,655
------- ------- ------- ------- ------- ------- -------
Operating loss..................... (1,428) (7,613) (8,175) (3,793) (119) (1,745) (1,897)
Net loss........................... (884) (7,173) (8,326) (3,854) (340) (2,092) (1,669)
Dividends on cumulative,
convertible preferred stock...... 14 14 14 14 14 7 7
------- ------- ------- ------- ------- ------- -------
Net loss applicable to common
stock............................ $ (898) $(7,187) $(8,340) $(3,868) $ (354) $(2,099) $(1,676)
======= ======= ======= ======= ======= ======= =======
Basic and diluted net loss per
common share..................... ($ 0.08) $ (0.58) $ (0.64) $ (0.29) $ (0.02) $ (0.15) $ (0.11)
======= ======= ======= ======= ======= ======= =======
Weighted average number of common
shares outstanding............... 11,496 12,351 12,934 13,526 14,282 14,141 14,815
BALANCE SHEET DATA:
(at end of period)(1)
Cash and cash equivalents.......... $ 2,903 $ 2,685 $ 4,939 $ 5,851 $10,884 $ 7,703 $11,695
Working capital.................... 12,973 14,566 9,748 8,006 19,349 13,066 21,418
Total assets....................... 23,046 26,147 20,045 19,712 30,687 23,550 32,544
Total shareholders' equity(2)...... 15,251 18,563 13,098 13,174 22,305 16,991 24,489
</TABLE>
---------------
(1) Excalibur had no significant long-term debt for any of the periods
presented.
(2) No dividends have been declared or paid on Excalibur's common stock.
12
<PAGE> 24
SUMMARY SELECTED HISTORICAL FINANCIAL DATA
OF INTEL'S INTERACTIVE MEDIA SERVICES DIVISION
(DOLLARS IN THOUSANDS)
We are providing the following information concerning Intel's Interactive
Media Services division to aid you in your analysis of the financial aspects of
the combination. Intel derived this information from the audited statements of
assets to be contributed and the related statements of net revenues and direct
expenses for its Interactive Media Services division for the fiscal year ended
December 25, 1999 and the period from inception to December 26, 1998, and the
unaudited financial statements for the nine months ended September 30, 2000 and
September 25, 1999. This information is only a summary and you should read it in
conjunction with Intel's Interactive Media Services division's Financial
Statements (and related notes) beginning on page F-1 and the Interactive Media
Services division Management's Discussion and Analysis of Financial Condition
and Results of Operations beginning on page 75.
<TABLE>
<CAPTION>
PERIOD FROM FOR THE NINE MONTHS ENDED
INCEPTION TO YEAR ENDED ----------------------------------------
DECEMBER 26, DECEMBER 25, SEPTEMBER 25, SEPTEMBER 30,
1998(1) 1999 1999 2000
------------ ------------ ------------------ ------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
STATEMENT OF NET REVENUES AND
DIRECT EXPENSES
Net revenues.................... $ 0 $ 1,568 $ 0 $ 1,866
Direct expenses................. $ 6,270 $ 8,121 $ 5,952 $ 12,912
Direct expenses in excess of net
revenues...................... $(6,270) $(6,553) $(5,952) $(11,046)
ASSETS TO BE CONTRIBUTED
At period end:(2)............... $ 88 $ (808) $ 243 $148,937
</TABLE>
---------------
(1) The Interactive Media Services Division is comprised of three separate but
related groups within Intel which were each formally established with
operations commencing between June 1998 and October 1998.
(2) Assets to be contributed at September 30, 2000 include the approximately
$150 million in cash to be contributed to Convera upon closing of the
combination pursuant to the terms of the contribution and merger agreement.
13
<PAGE> 25
SUMMARY SELECTED PRO FORMA COMBINED FINANCIAL INFORMATION
The following table contains selected unaudited pro forma combined
financial information for Excalibur and Intel's Interactive Media Services
division. The pro forma amounts included in the table below assume the
combination will be accounted for as a purchase where Excalibur is considered
the accounting acquiror. This information is only a summary and should be read
together with the unaudited pro forma combined financial statements and
accompanying notes contained elsewhere in this proxy statement/prospectus
beginning on page 78. The following table should also be read in conjunction
with the historical consolidated financial statements of Excalibur contained in
the annual reports, quarterly reports and other information on file with the
Securities and Exchange Commission and the historical financial statements of
the Interactive Media Services division prepared for and included elsewhere in
this proxy statement/prospectus beginning on page F-1.
These pro forma amounts are not necessarily indicative of the results of
operations of the combined company that would have actually occurred had we
completed the combination on February 1, 1999 or of the financial condition of
the combined company had we completed the combination on July 31, 2000 or of the
future results of operations or financial condition of the combined company. Pro
forma net loss applicable to common stock is presented before non-recurring
charges of $800,000 for acquired in-process research and development.
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR FOR THE SIX MONTHS
ENDED ENDED
JANUARY 31, 2000 JULY 31, 2000
------------------- --------------------
<S> <C> <C>
PRO FORMA COMBINED
STATEMENT OF OPERATIONS DATA:
Revenues.................................................... $ 39,502,000 $ 22,624,000
Net loss applicable to common stock before non-recurring $(209,841,000) $ (109,338,000)
items directly attributable to the combination............
Basic and diluted net loss per common share................. $ (4.55) $ (2.34)
Weighted average number of common shares outstanding........ 46,107,000 46,640,000
PRO FORMA COMBINED
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents................................... $ 161,695,000
Working capital............................................. 167,517,000
Total assets................................................ 1,197,516,000
Total shareholders' equity.................................. 1,188,261,000
</TABLE>
14
<PAGE> 26
COMPARATIVE PER SHARE INFORMATION
The following table sets forth the historical net loss and book value per
share of Excalibur in comparison with the unaudited pro forma combined net loss
and book value per share after giving effect to the combination of Excalibur and
Intel's Interactive Media Services division. There is no historical or
equivalent information presented for the Interactive Media Services division,
since it is a division of Intel and does not compute per share information. You
should read this information in conjunction with the selected historical audited
and unaudited financial information of Excalibur included elsewhere in this
document and incorporated in this document by reference, and the historical
audited and unaudited financial information of Intel's Interactive Media
Services division included elsewhere in this document. The pro forma combined
per share information is derived from, and should be read in conjunction with,
the unaudited pro forma combined financial statements and related notes included
elsewhere in this document beginning on page 78. The unaudited pro forma
combined per share information does not purport to represent what the actual
results of operations of the combined company would have been had the
combination been completed on February 1, 1999 or of the financial condition of
the combined company had we completed the combination on July 31, 2000.
<TABLE>
<CAPTION>
AS OF AND FOR THE AS OF AND FOR THE
YEAR ENDED SIX-MONTHS ENDED
JANUARY 31, 2000 JULY 31, 2000
----------------- -----------------
<S> <C> <C>
EXCALIBUR -- HISTORICAL
Basic and diluted net loss per common share............ $(0.02) $(0.11)
Dividends per common share(1).......................... -- --
Book value per common share............................ $ 1.50 $ 1.61
UNAUDITED PRO FORMA COMBINED
Basic and diluted net loss per common share, excluding
non-recurring items(2)............................... $(4.55) $(2.34)
Dividends per common share(1).......................... -- --
Book value per common share............................ N/A $25.33
</TABLE>
---------------
(1) Excalibur has never declared or paid cash dividends on its common stock.
Convera's dividend policy will be set by its board of directors, but we do
not anticipate that Convera will pay any cash dividends on its common stock
in the foreseeable future.
(2) Unaudited pro forma combined basic and diluted net loss per common share is
presented before non-recurring charges of $800,000 for acquired in-process
research and development. The per share amount of the acquired in-process
research and development is $(0.02) for the year ended January 31, 2000 and
the six months ended July 31, 2000.
15
<PAGE> 27
RISK FACTORS
We urge you to carefully consider these risk factors together with all of
the other information included in this proxy statement/prospectus and the
information incorporated in this proxy statement/prospectus by reference before
voting on the combination proposal.
RISKS RELATING TO THE COMBINATION
OUR INABILITY TO SUCCESSFULLY INTEGRATE OUR OPERATIONS MAY AFFECT OUR ABILITY TO
REALIZE THE ANTICIPATED BENEFITS OF THE COMBINATION.
The success of the combination will depend on our ability to unite our
business strategies and technologies with those of Intel's Interactive Media
Services division. The difficulties of combining the Excalibur operations with
those of the Interactive Media Services division include the necessity of
coordinating geographically separated organizations and integrating personnel
with diverse business backgrounds. The combining of management from Excalibur
and the Interactive Media Services division will result in changes affecting all
employees and operations. Differences in management approach and corporate
culture may strain employee relations. The process of integrating operations
could cause an interruption of, or loss of momentum in, the activities of the
combined businesses and the loss of key personnel. The diversion of management's
attention and any delays or difficulties encountered in connection with the
combination and the integration of the two operations could have an adverse
effect on the business, results of operations, financial condition or prospects
of the combined businesses after the combination.
Among the factors considered by the Excalibur board of directors in
connection with its approval of the contribution and merger agreement were the
perceived opportunities for Convera to have the capabilities, resources and
technology to become a leader in the interactive media services market. We
cannot give any assurance that we will realize the anticipated benefits of our
combination.
THE TERMINATION FEE AND VOTING AGREEMENTS MAY DETER THIRD PARTIES FROM MAKING
BIDS TO ACQUIRE EXCALIBUR WHICH MAY BE MORE BENEFICIAL TO YOU.
The existence of the termination fee in the contribution and merger
agreement between Excalibur and Intel and the voting agreements obtained by
Intel from Excalibur stockholders holding approximately 31% of the outstanding
stock may make it more difficult for a third party to acquire Excalibur and
therefore may deter third parties from making competing bids for our company.
Excalibur is required to pay Intel a termination fee of $20 million and/or to
reimburse Intel for up to $2.5 million of out-of-pocket fees and expenses upon
termination of the contribution and merger agreement in connection with
specified types of transactions or proposed transactions with third parties.
Together, the maximum amount that Excalibur may be required to pay Intel is
$22.5 million.
FOLLOWING THE COMBINATION, INTEL MAY BE ABLE TO INFLUENCE DECISIONS SUBMITTED TO
CONVERA STOCKHOLDERS FOR APPROVAL.
Following the combination, and the expected consummation of the NBA
agreements, Intel will own approximately 42.4% of the Convera Class A common
stock and 100% of the Convera Class B non-voting common stock, which together
represent a total of 54.3% of the common stock of Convera, on a fully-diluted
basis after giving effect to the conversion of outstanding preferred stock and
exercise of assumed Excalibur options. If the combination occurs but the NBA
agreements are not consummated, Intel will own approximately 49% of the Class A
common stock, increasing its percentage ownership of Convera common stock (on
the same fully-diluted basis) to 60%. The Class B common stock may be converted,
at Intel's election, into Class A common stock on a one-for-one basis, but Intel
will not be able to convert Class B common stock into Class A common stock if,
as a result of such conversion, Intel would beneficially own 50% or more of the
voting power of Convera. As a result of Intel's ownership interest, Intel will
be able to influence the outcome of matters requiring a stockholder vote,
including offers to acquire Excalibur and elections of directors. Intel may have
interests which are different than the interests of other Convera stockholders.
16
<PAGE> 28
THE AUDITED AND UNAUDITED FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION
FOR INTEL'S INTERACTIVE MEDIA SERVICES DIVISION INCLUDED IN THIS PROXY
STATEMENT/PROSPECTUS DO NOT NECESSARILY REFLECT THE NET REVENUES AND EXPENSES
THAT WOULD HAVE RESULTED IF THE DIVISION HAD OPERATED AS AN UNAFFILIATED
INDEPENDENT ENTITY.
The three groups comprising Intel's Interactive Media Services division
were formally established and commenced operations between June 1998 and October
1998. These groups were not and are not separate legal entities or segments of
Intel and did not and do not operate as discrete operating units. As a result,
separate financial statements have not been maintained for the operations to be
contributed to Convera. The financial statements and information of the IMS
division included in this document have been prepared from the historical
accounting records of Intel and do not purport to reflect the assets to be
contributed, and the net revenues and direct expenses that would have resulted
if IMS had operated as an unaffiliated independent company. Therefore, these
financial statements do not include many finance, selling and general and
administrative expenses that an independent business would have incurred.
Management believes that there is adequate established infrastructure to support
the incremental activity of IMS following the closing of the combination. For
further information, please see "Management's Discussion and Analysis of
Financial Condition and Results of Operation for Intel's Interactive Media
Services Division" beginning on page 75 and the Interactive Media Services
division financial statements and related notes beginning on page F-1.
INTEL IS A SEPARATE ENTITY; INTEL WILL NOT BE OBLIGATED TO SUPPORT CONVERA AND
WILL BE ABLE TO PURSUE CORPORATE OPPORTUNITIES IN CONFLICT WITH CONVERA.
After the combination, other than the payment to be made by Intel to
Convera to fund retention bonus payments to former Intel employees employed by
Convera on April 30, 2001, Intel will not be obligated to provide financial,
technical, marketing, human resources, intellectual property or other support to
Convera. In the event that we need any such services or resources, we cannot
assure you that Intel will provide any such services or resources.
In addition, Convera's amended and restated certificate of incorporation
provides that Intel has the right to do each of the following:
- engage in the same or similar business activities or lines of business as
Convera;
- compete against Convera;
- do business with any potential or actual competitor, customer or supplier
of Convera; and
- employ or otherwise engage any officer or employee of Convera.
Convera's amended and restated certificate of incorporation also provides
that if Intel acquires knowledge of a potential transaction or other matter that
may be a corporate opportunity or otherwise of interest to Intel and Convera,
Intel has no duty to communicate or present the corporate opportunity to Convera
and shall not be liable to Convera or its stockholders for breach of any
fiduciary duty as a stockholder of Convera by reason of the fact that Intel
pursues or acquires the corporate opportunity for itself, directs the corporate
opportunity to another person, or does not present the corporate opportunity to
Convera. Other procedures apply with respect to individuals who will be
affiliated, as directors, officers or employees, of both Intel and Convera.
These provisions, together with the specific rights of Intel above, do not
prohibit Intel from competing with Convera. Intel has significantly greater
resources than we do and competition with Intel may adversely and materially
affect our business and operating results. Further, Convera's amended and
restated certificate of incorporation provides that Intel shall not be liable to
Convera or its stockholders for breach of any fiduciary duty it may have by
reason of the fact that Intel takes any action or exercises any rights or gives
or withholds any consent in connection with any transaction between Intel and
Convera, which transaction will require approval in accordance with the Delaware
General Corporation Law and Convera's amended and restated certificate of
incorporation.
See "Comparison of Stockholders' Rights -- Allocation of Corporate
Opportunities Between Intel or the NBA and Convera and Other Matters Concerning
Intel and the NBA" beginning on page 64 and "-- Transactions Between Convera and
Related Parties, Including Intel and the NBA" beginning on page 66.
17
<PAGE> 29
EXECUTIVE OFFICERS AND DIRECTORS WHO ARE ASKING YOU TO APPROVE THE COMBINATION
HAVE POTENTIAL CONFLICTS OF INTEREST BECAUSE THEY WILL RECEIVE ADDITIONAL
BENEFITS IN THE COMBINATION.
Stockholders should be aware of a potential conflict of interest and the
benefits available to executive officers and directors when considering the
decision of the Excalibur board of directors to approve the combination. As
discussed under "The Combination -- Interests of Certain Persons in the
Combination," beginning on page 38 a number of executive officers and directors
of Excalibur will be executive officers and directors of Convera following the
combination and will derive economic benefits that are different from, or in
addition to, your interests as stockholders.
RISKS RELATING TO OUR BUSINESS
WE HAVE HAD A HISTORY OF OPERATING LOSSES AND MAY INCUR FUTURE LOSSES.
We believe that our future profitability will depend on our ability to
effectively market existing and newly-developed software products through a
balanced multi-channel distribution network. We cannot assure you that our costs
to develop, introduce and promote enhanced or new products will not exceed our
expectations, or that these products will generate revenues sufficient to offset
these expenses. We have operated at a loss for each of the past three fiscal
years. These losses reflect our expenditures associated with building a sales
and marketing organization to sell new software products and further developing
software products during these years. We plan to continue to invest in these
programs and, accordingly, we cannot assure you that our operating losses will
not continue in the future.
WE EXPERIENCE QUARTERLY FLUCTUATIONS IN OUR OPERATING RESULTS, WHICH MAY
ADVERSELY AFFECT OUR STOCK PRICE.
Our quarterly operating results have varied substantially in the past and
are likely to vary substantially from quarter to quarter in the future, due to a
variety of factors including the following:
- seasonality of individual customer buying patterns;
- the size and timing of individual transactions;
- the delay or deferral of customer implementations;
- the budget cycles of our customers;
- the timing of new software introductions and software enhancements by us
and our competitors; and
- the mix of sales by products.
In particular, our period-to-period operating results have historically
been significantly dependent upon the timing of the closing of significant
license agreements. Because purchasing our products often requires significant
capital investment, our customers may defer or decide not to make their
purchases. This means our sales can involve long sales cycles of six months or
more. We have generally recorded a significant portion of our total quarterly
license fee revenues in the third month of a quarter, with a concentration of
these revenues occurring in the last half of that third month. This is in part
because our customers tend to make significant capital expenditures at the end
of a fiscal quarter. We expect these revenue patterns to continue.
Despite these uncertainties in our revenue patterns, our operating expenses
are based upon anticipated revenue levels and are incurred on an approximately
ratable basis throughout a quarter. As a result, if expected revenues are
deferred or otherwise not realized in a quarter for any reason, our business,
operating results and financial condition would be materially adversely
affected. Moreover, such factors could cause our operating results in a given
quarter to be below the expectations of public market analysts and investors. In
either case, the price of our common stock could be materially adversely
affected.
BECAUSE OF THE TECHNICAL NATURE OF OUR BUSINESS, OUR INTELLECTUAL PROPERTY IS
EXTREMELY IMPORTANT TO OUR BUSINESS, AND ADVERSE CHANGES TO OUR INTELLECTUAL
PROPERTY WOULD HARM OUR COMPETITIVE POSITION.
18
<PAGE> 30
We believe that our success depends, in part, on our ability to protect our
proprietary rights and technology, including the intellectual property rights to
be contributed by Intel upon completion of the combination. Historically, we
have not had any patents and have relied primarily on a combination of
copyright, trademark and trade secret laws, employee confidentiality and
invention assignment agreements, distribution and OEM software protection
agreements and other methods to safeguard our technology and software products.
We have one pending patent application, and if the combination is completed, we
will acquire rights to several issued and pending patents, as well as
non-exclusive licenses to other intellectual property. Some of these contributed
assets are the subject of prior licenses to others. We face risks associated
with our intellectual property, including the following:
- pending patent applications may not be issued;
- intellectual property laws may not protect our intellectual property
rights;
- third parties may challenge, invalidate, or circumvent any patent issued
to us;
- rights granted under patents issued to us may not provide competitive
advantages to us;
- unauthorized parties may attempt to obtain and use information that we
regard as proprietary despite our efforts to protect our proprietary
rights;
- others may independently develop similar technology or design around any
patents issued to us; and
- effective protection of intellectual property rights may be limited or
unavailable in some foreign countries in which we operate.
If we fail to meaningfully protect our intellectual property, our business
and financial results could be materially and adversely affected.
OUR OPERATIONS COULD INFRINGE ON THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS.
We cannot assure you that a third party will not assert that our technology
violates its intellectual property rights. Particular aspects of our technology
could be found to infringe on the intellectual property rights of others. Other
companies may hold or obtain patents on inventions or may otherwise claim
proprietary rights to technology necessary to our business. We cannot predict
the extent to which we may be required to seek licenses or alter our products so
that they no longer infringe the rights of others. We cannot guarantee that the
terms of any licenses we may be required to seek will be reasonable. Similarly,
changing our products or processes to avoid infringing the rights of others may
be costly or impractical or could detract from the value of our products.
WE ARE IN AN EXTREMELY COMPETITIVE MARKET, AND IF WE FAIL TO COMPETE EFFECTIVELY
OR RESPOND TO RAPID TECHNOLOGICAL CHANGE, OUR REVENUES AND MARKET SHARE WILL BE
ADVERSELY AFFECTED.
Our business environment, and the computer software industry in general,
are characterized by intense competition, rapid technological changes, changes
in customer requirements and emerging new market segments. Our competitors
include many companies which are larger and more established and have
substantially more resources than we do. Current and potential competitors have
established or may establish cooperative relationships among themselves or with
third parties to increase the ability of their products to address the needs of
the markets served by us. Accordingly, it is possible that new competitors or
alliances among competitors may emerge and rapidly acquire significant market
share. Increased competition may result in price reductions, reduced gross
margins and loss of market share, any of which could have a material adverse
effect on our business, financial condition or results of operations.
In addition, our continued success will be dependent upon our ability to
continue to enhance our existing software and services offerings, develop and
introduce, in a timely manner, new software products incorporating technological
advances and respond to customer requirements. Our present or future competitors
may be able to develop products comparable or superior to those offered by us,
offer lower price products or adapt more quickly than we do to new technologies
or evolving customer requirements. We can make no assurance
19
<PAGE> 31
that we will be successful in developing and marketing new products or
enhancements to our existing products on a timely basis or that any new or
enhanced products will adequately address the changing needs of the marketplace.
If we are unsuccessful in this regard, our business and operating results could
be adversely affected.
WE DESIGN OUR PRODUCTS TO WORK WITH VARIOUS SYSTEMS, AND CHANGES TO SUCH SYSTEMS
MAY RENDER OUR PRODUCTS INCOMPATIBLE WITH THESE SYSTEMS.
Our ability to sell our products depends on the compatibility of our
products with other software and hardware products. These products may change or
new products may appear that are incompatible with our products. If we fail to
adapt our products to remain compatible with other vendors' software and
hardware products or fail to adapt our products as quickly as our competitors,
we may be unable to sell our products.
IF WE ARE UNABLE TO MANAGE OUR GROWTH SUCCESSFULLY, IT MAY DIVERT OUR RESOURCES
AND HARM OUR OPERATING RESULTS.
Our future operating results will be affected by our ability to expand our
product distribution channels and to manage our expected growth. Our future
results may also be impacted by our ability to execute future acquisitions and
integrate the operations of acquired companies with ours. Any further growth is
likely to continue to place, a significant strain on our managerial,
operational, financial and other resources. This growth will require us to
implement additional management information systems, to further develop our
operating, administrative, financial and accounting systems and controls and to
maintain close coordination among our research and development, accounting,
finance, sales and marketing and customer service and support departments. In
addition, we may be required to add and retain additional personnel to
adequately support our growth. If we cannot effectively manage our expanding
operations, we may not be able to continue to grow, or we may grow at a slower
pace. Our failure to successfully manage growth and to develop financial
controls and accounting and operating systems or to add and retain personnel
that adequately support our growth would harm our business and financial
results.
WE DEPEND ON OUR KEY PERSONNEL AND MAY HAVE DIFFICULTY ATTRACTING AND RETAINING
SKILLED EMPLOYEES.
Our success depends to a significant degree upon the continued
contributions of our key management, marketing, technical and operational
personnel, and, after the combination, will depend on the contributions of the
employees of Intel's Interactive Media Services division as well. The
contribution and merger agreement provides that either party may terminate the
agreement if a significant number of employees of the other party do not agree
to work for Convera. However, this closing condition does not mean that any
existing employees of Excalibur or employees of the Interactive Media Services
division must remain in the employ of Convera for any particular period of time
after closing. There can be no guarantee that any such employees will remain
employees of Convera. In addition, we generally do not utilize employment
agreements for our key employees. The loss of the services of one or more key
employees could have a material adverse effect on our operating results. We also
believe our future success will depend in large part upon our ability to attract
and retain additional highly skilled management, technical, marketing, product
development, operational personnel and consultants. Competition for such
personnel, particularly software developers, professional service consultants
and other technical personnel, is intense, and pay scales in the software
industry have significantly increased. There can be no assurance that we will be
successful in attracting and retaining such personnel.
WE MAY NEED ADDITIONAL CAPITAL IN THE FUTURE AND IT MAY NOT BE AVAILABLE ON
ACCEPTABLE TERMS, OR AT ALL.
If we consummate the combination, we expect the approximately $155 million
which Intel will contribute and our current cash and cash equivalents will be
sufficient to meet our working capital and capital expenditure requirements for
the foreseeable future. However, after that time, we may need to raise
additional funds for the following purposes:
- to fund our operations;
- to fund any growth we experience;
20
<PAGE> 32
- to enhance and/or expand the range of services we offer;
- to increase our promotional and marketing activities; or
- to respond to competitive pressures and/or perceived opportunities, such
as investment, acquisition and international expansion activities.
At closing, Convera will use approximately $7 million of the cash proceeds
to reimburse Intel for amounts advanced by Intel on Convera's behalf to fund
capital expenditures primarily relating ot the NBA services agreement and to
fund leasehold improvements to IMS' office facilities.
Notwithstanding these possible needs, Convera has agreed in the
contribution and merger agreement that it will not incur indebtedness in excess
of $500,000,000 during the 12 months following the closing of the combination.
In addition, Intel will not be obligated to provide additional capital or other
financial support and other financing may not be available on terms favorable to
us, or at all. If a need for indebtedness in excess of the $500,000,000 maximum
arises during the first 12 months, or if otherwise adequate funds are not
available when required or on acceptable terms, our business and financial
results could suffer.
WE ARE DEPENDENT ON INTERNATIONAL SALES, WHICH EXPOSE US TO FOREIGN POLITICAL
AND ECONOMIC RISKS THAT COULD IMPEDE OUR PLANS FOR INTERNATIONAL EXPANSION AND
GROWTH.
A material portion of our revenues is derived from international sales and
we plan to continue to seek opportunities to expand our international operations
and sales. Our international operations expose us to a variety of risks that
could seriously impede our financial condition and growth. These risks include
the followings:
- political, social and economic instability;
- trade restrictions and changes in tariffs;
- import and export license requirements and restrictions;
- fluctuations in currency exchange rates; and
- uncertainty of the effective protection of our intellectual property
rights in some foreign countries.
If any of these risks described above materialize, our international sales
could decrease and our foreign operations could suffer.
WE MAY BE SUBJECT TO LIMITATIONS IN THE USE OF NET OPERATING LOSS CARRYFORWARDS.
As of January 31, 2000, we had net operating loss carryforwards of
approximately $64.7 million. The deferred tax assets representing the benefits
of these carryforwards have been offset completely by a valuation allowance due
to our lack of an earnings history. Our accumulated deficit at January 31, 2000
was $56.1 million. The realization of the benefits of these carryforwards
depends on sufficient taxable income in future years. The proposed combination
would result in an "ownership change" that would limit our use of these losses
under the tax code. Lack of future earnings or a further future change in our
ownership could adversely affect our ability to utilize these carryforwards.
OUR STOCK PRICE MAY FLUCTUATE WHICH MAY MAKE IT DIFFICULT TO RESELL YOUR SHARES
WHEN YOU WANT TO OR AT PRICES YOU FIND ATTRACTIVE.
The market price of our common stock has been highly volatile. This
volatility may adversely effect the price of our common stock and, after the
combination, the common stock of Convera. You may not be able to resell your
shares of common stock following periods of volatility because of the market's
adverse reaction to
21
<PAGE> 33
this volatility. We anticipate that this volatility, which frequently affects
the stock of software companies, will continue. Factors that could cause such
volatility include:
- quarterly variations in our operating results;
- actual or anticipated announcements of technical innovations or new
product developments by us or our competitors;
- changes in analysts' estimates of our financial performance;
- general conditions in our industry; and
- worldwide economic and financial conditions.
On occasion, the equity markets, and in particular the markets for software
companies, have experienced significant price and volume fluctuations. These
fluctuations have affected the market price for many companies' securities even
though the fluctuations are often unrelated to the companies' operating
performance.
CONVERA'S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE
LAW CONTAIN PROVISIONS THAT COULD DISCOURAGE A THIRD PARTY FROM ACQUIRING
CONVERA AND CONSEQUENTLY DECREASE THE MARKET VALUE OF YOUR INVESTMENT.
Some provisions of Convera's amended and restated certificate of
incorporation and bylaws and of Delaware law could delay or prevent a change of
control or changes in Convera's management that a stockholder might consider
favorable. Also, Convera's amended and restated certificate of incorporation and
bylaws differ from Excalibur's certificate of incorporation and bylaws in ways
that could make a change of control of Convera more difficult than a change in
control of Excalibur. Specifically, Convera requires a higher percentage of
shares in order to constitute a quorum and hold a valid meeting. Excalibur's
certificate of incorporation provides that the presence of at least one-third of
the shares entitled to vote at a stockholders' meeting will constitute a quorum
for the transaction of business at the meeting. However, Convera's amended and
restated certificate of incorporation provides that the presence of at least a
majority of the shares entitled to vote at a stockholders' meeting will
constitute a quorum for the transaction of business at the meeting.
Further, Excalibur's certificate of incorporation and bylaws do not contain
specific provisions relating to the nomination of directors or other stockholder
business for annual or special meetings of stockholders. However, Convera's
amended and restated certificate of incorporation and bylaws do provide
procedures which stockholders must follow to present matters at future annual
and special meetings of stockholders.
Any delay or prevention of a change of control or change in management
could cause the market price of Convera's common stock to decline. At the annual
meeting, you will be asked to approve the provisions of Convera's amended and
restated certificate of incorporation and bylaws concerning the requirements for
a quorum and the procedures for presenting matters at stockholder meetings. For
more information, see "Approval of Two Corporate Governance Provisions of
Convera's Certificate of Incorporation and Bylaws" beginning on page 90.
"Comparison of Stockholders' Rights," beginning on page 64 and "Description of
Convera Capital Stock Following the Combination" beginning on page 70.
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THE ANNUAL MEETING
This proxy statement/prospectus is furnished in connection with the
solicitation of proxies from the holders of Excalibur common stock to be voted
at the annual meeting of stockholders of Excalibur.
TIME AND PLACE
The annual meeting will be held at The Sheraton New York Hotel & Towers
located at 811 Seventh Avenue, New York, New York 10019 on Thursday, December
21, 2000, starting at 10:00 a.m., local time.
This proxy statement/prospectus and the accompanying forms of proxies are
first being mailed to the Excalibur stockholders on or about November 22, 2000.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
At the annual meeting, stockholders of Excalibur will be asked to consider
and vote upon:
1) a proposal to approve and adopt the contribution and merger
agreement, as amended, and to approve the combination;
2) in connection with and as a condition to the combination, a
proposal to adopt the Convera 2000 stock option plan;
3) in connection with a proposal to approve two corporate governance
provisions of Convera's amended and restated certificate of incorporation
and by laws;
4) the election of ten members of the board of Excalibur for terms
expiring at the completion of the combination or, if the combination is not
completed, until the 2001 annual meeting of Excalibur;
5) a proposal to amend Excalibur's stock purchase plan; and
6) such other matters as may be properly brought before the annual
meeting or any adjournment thereof.
RECORD DATE AND QUORUM
The board of Excalibur has fixed the close of business on November 14, 2000
as the record date. Only record holders of shares of Excalibur common stock on
the record date are entitled to notice of and to vote at the annual meeting, and
any adjournments or postponements thereof. On the record date, there were
15,259,075 shares of Excalibur common stock outstanding and entitled to vote at
the annual meeting held by approximately 1,040 stockholders of record.
At the annual meeting:
- each holder of record on the record date is entitled one vote per share
of common stock, either in person or by proxy, on each proposal properly
submitted to a vote; and
- the presence, in person or by proxy, of the holders of one-third of the
outstanding shares of Excalibur common stock entitled to vote is
necessary to constitute a quorum.
VOTES REQUIRED
Under Delaware law:
- adoption and approval of the combination, the contribution and merger
agreement and the Convera corporate governance proposal require the
affirmative vote, in person or by proxy, of the holders of at least a
majority of the shares of Excalibur common stock outstanding. A failure
to vote or abstention will have the same legal effect as a vote by an
Excalibur stockholder against approval and adoption of the contribution
and merger agreement, against the combination and against the Convera
corporate governance proposal.
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- adoption and approval of the Convera stock option plan require the
affirmative vote of a majority of the shares present in person or
represented by proxy at the annual meeting and entitled to vote;
- election of the ten members of the board of Excalibur requires the
affirmative vote of a plurality of the of the shares present in person or
represented by proxy at the annual meeting and entitled to vote; and
- approval of the amendment to the Excalibur stock purchase plan requires
the affirmative vote of a majority of the shares present in person or
represented by proxy at the annual meeting and entitled to vote.
Voting Agreements. As of the record date, Allen & Company Incorporated and
each of the directors and executive officers of Excalibur together beneficially
owned 4,672,660 shares of Excalibur common stock, or approximately 31% of the
outstanding shares of Excalibur common stock on the record date. These
stockholders of Excalibur have entered into voting agreements in which they have
agreed, among other things, to vote all of their shares of Excalibur common
stock in favor of the combination. See "The Contribution and Merger Agreement
and Related Agreements -- Voting Agreements" on page 58.
PROXIES
- Completed Proxies. If you sign, complete and return a proxy, and we
receive the proxy prior to or at the annual meeting, your proxy will be
voted as you instructed.
- Proxies with No Instructions. If you sign and return a proxy but you do
not provide instructions as to your vote, your proxy will be voted for
the combination, the Convera stock option plan, the Convera corporate
governance proposal, the Excalibur stock purchase plan proposal and the
election of the ten members of the board of Excalibur.
- Proxies Marked Abstain -- The Combination Proposal and the Convera
Corporate Governance Proposal. If you execute and return a proxy marked
ABSTAIN, your proxy will count for purposes of determining whether there
is a quorum and for purposes of determining the voting power and number
of shares entitled to vote at the annual meeting, but your proxy will not
be voted. Since, under Delaware law, approval of the combination proposal
and the Convera corporate governance proposal requires the affirmative
vote of a majority of the shares outstanding, proxies marked ABSTAIN will
have the effect of a vote against the combination proposal and the
Convera corporate governance proposal.
- Broker Non-Votes -- The Combination Proposal and the Convera Corporate
Governance Proposal. Nasdaq broker-dealer rules generally preclude
brokers and nominees from exercising their voting discretion. Absent
specific instructions from the beneficial owner of shares, these rules do
not give them the power to vote on the combination proposal or the
Convera corporate governance proposal. We will count shares as
represented by broker non-votes for purposes of determining whether there
is a quorum at the annual meeting, but we will not count broker non-votes
as shares present at the annual meeting and entitled to vote on the
combination proposal. Broker non-votes will have the same effect as a
proxy marked ABSTAIN and will have the effect of a vote against the
combination proposal and the Convera corporate governance proposal.
- Proxies Marked Abstain -- The Convera Stock Option Plan Proposal, the
Excalibur Stock Purchase Plan Proposal and the Proposal to Elect
Directors. Under Delaware law, approval of the Convera stock option plan
proposal and approval of the Excalibur stock purchase plan proposal each
requires the affirmative vote of a majority of the shares present in
person or represented by proxy at the special meeting and entitled to
vote, and the proposal to elect members of the board of Excalibur
requires the affirmative vote of a plurality of the shares present in
person or represented by proxy at the annual meeting and entitled to
vote. Accordingly, proxies marked ABSTAIN are considered present and
entitled to vote and will have the effect of a vote against the Convera
stock option plan proposal and the Excalibur stock purchase plan proposal
but will have no effect on the proposal to elect directors.
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- Broker Non-Votes -- The Convera Stock Option Plan Proposal, the Excalibur
Stock Purchase Plan Proposal and the Proposal to Elect Directors. Absent
specific instructions from the beneficial owner of shares, the Nasdaq
broker-dealer rules do not give brokers and nominees the power to vote on
the Convera stock option plan proposal, but they do have the power to
vote on the Excalibur stock purchase plan proposal and the proposal to
elect directors. To the extent we receive broker non-votes on these
proposals, we will count the shares as represented by broker non-votes
for purposes of determining whether there is a quorum at the annual
meeting, but we will not count broker non-votes as shares present at the
meeting and entitled to vote on the proposal. Therefore, these shares
will have no effect on the Convera stock option plan proposal, the
Excalibur stock purchase plan proposal and the proposal to elect
directors.
- Other Business. We are not aware of any business for consideration at
the annual meeting other than as described in this proxy
statement/prospectus. However, if matters are properly brought before the
annual meeting or any adjournments or postponements, then the people
appointed as proxies will have the discretion to vote or act thereon
according to their best judgment.
- Adjournments. Adjournments may be made for the purpose of, among other
things, soliciting additional proxies. Any adjournment may be made from
time to time by approval of the holders of shares representing a majority
of the votes present in person or by proxy at the annual meeting, whether
or not a quorum exists, without further notice other than by announcement
made at the annual meeting. We do not currently intend to seek an
adjournment of the annual meeting.
- Revocation. You may revoke your proxy at any time prior to its use. In
order to revoke your proxy, you must deliver to James Buchanan, Secretary
of Excalibur, a signed notice of revocation or you must deliver a
later-dated proxy changing your vote. In addition, you may choose to
attend the annual meeting and vote in person. Please realize that simply
attending the meeting will not in itself constitute the revocation of
your proxy.
- Confidentiality of Proxies. It is our policy to keep confidential proxy
cards, ballots and voting tabulations that identify individual
stockholders. Realize that disclosure may be required by law and in other
limited circumstances.
- Costs of Solicitation. We will pay the costs associated with soliciting
proxies from our stockholders. In addition to solicitation by mail, we
retained DF King & Co, Inc. to aid in the solicitation of proxies for a
fee of $7,000 plus expenses. In order to ensure sufficient representation
at our meetings, we may request by telephone or telegram the return of
your proxy card. Please assist us by promptly returning your proxy card
without delay.
The matters to be considered at the annual meeting are of great importance
to the stockholders of Excalibur. Accordingly, you are urged to read and
carefully consider the information presented in this proxy statement/prospectus,
and to complete, date, sign and promptly return the enclosed proxy in the
enclosed postage-paid envelope.
YOU SHOULD NOT SEND ANY STOCK CERTIFICATES WITH YOUR PROXY CARDS. WE WILL
MAIL YOU A SEPARATE TRANSMITTAL FORM WITH INSTRUCTIONS FOR THE SURRENDER OF YOUR
CERTIFICATES AS SOON AS PRACTICABLE AFTER THE CONSUMMATION OF THE COMBINATION.
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THE COMBINATION
BACKGROUND OF THE COMBINATION
In August 1999, our senior management discussed with our board the
possibility of focusing our strategic direction and organizing our operations
around our text and video content management product lines. Our management and
board of directors believed that creating a distinct identity for the video
product line could enhance stockholder value. This discussion centered around
the following factors:
- text and video businesses serve different markets,
- a combined multi-media product was assumed to be at least two years away
from large market acceptance,
- the text business required direct sales to end-users while video was
moving to an application service provider market; and
- the text and video business each had its own distinct competitors.
Further, our board and management noted that the text business was
profitable, while the video business was incurring losses and needed additional
capital to fund sales, marketing and branding activities.
In November 1999, our board authorized the regrouping of our company into
two business units. On November 17, 1999, we announced:
- that in response to market opportunities, we aligned our operations more
specifically along the text and video product lines and related markets;
- the formation of the Excalibur Applications Group which develops,
markets, sells and services the Excalibur RetrievalWare suite of products
and licenses products to end-users through a combination of direct and
indirect sales channels; and
- the formation of the Excalibur Media Services Group which develops,
markets and sells the Screening Room product line and concentrates on
opportunities with application service providers hosting Screening Room.
Our board and senior management agreed at this time that we would consider
strategic alternatives, including specifically equity arrangements with
strategic partners, to fund the sales, marketing and branding activities for the
Excalibur Media Services Group.
In November and December 1999, Patrick C. Condo, our President and Chief
Executive Officer, and James H. Buchanan, our Chief Financial Officer, as well
as other members of our senior management held discussions with representatives
of Intel, including Chris Lawless, Senior Product Manager for an Intel division,
Gary Mittelstaedt, Corporate Business Development Manager for an Intel division,
and Ken Rhodes, Intel's Director, Enhanced Video Services unit, to explore
potential opportunities for Excalibur to provide the encoding, indexing and
retrieval technology for a new service to be offered by Intel's Internet Media
Services division. The initial opportunity discussed with Intel was an OEM
license of Excalibur's technology to Intel. In December 1999, Excalibur and
Intel executed a mutual confidentiality agreement in connection with these
discussions.
On January 17, 2000, Messrs. Condo and Buchanan participated on a
conference call with Messrs. Lawless and Mittelstaedt, as well as Jim Kiles, an
executive with Intel's Corporate Business Development, in which the parties
continued their discussions concerning the OEM license. The teleconference also
included discussions about a possible equity investment by Intel in Excalibur in
conjunction with the OEM license. Intel's representatives also indicated that
Excalibur's products could be of broader interest to Intel and extend beyond
Intel's Internet Media Services division. The parties also met in Portland,
Oregon on January 20, 2000, at which meeting they reviewed a first draft of an
OEM license agreement. At this meeting and at a meeting in Vienna, Virginia on
February 8, 2000, the parties continued their discussions concerning the
possibility of an equity investment by Intel. Intel's representatives mentioned
that the Internet Media
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Services division was inclined to consider alternatives to a transaction with
Excalibur but that there were opportunities within Intel for a broader
application of Excalibur's products to Intel's other operations, including
Intel's Internet Security Services, Enhanced Video Services and Entertainment
Content Services business units. These three business units comprise Intel's
Interactive Media Services division.
In addition to our discussions with Intel, during December 1999 and the
first quarter of 2000, we engaged in preliminary discussions with several
leading public technology companies to explore whether there were other
strategic alternatives to enhance stockholder value. We entered into
confidentiality agreements and Excalibur's senior management held preliminary
discussions of varying depths with these parties. None of these other parties
commenced formal due diligence investigations of Excalibur, nor did Excalibur
and any of these other parties advance discussions to the point where a specific
proposal was made containing the structure and terms of a potential transaction
with Excalibur. During this period, Excalibur's management felt that, among the
opportunities available to them, a relationship with Intel would best promote
Excalibur's products and services.
On February 15, 2000, Messrs. Condo and Buchanan and Ronald J. Whittier,
Intel's Senior Vice President and General Manager of Intel Content Services, and
Mr. Kiles met at Intel's headquarters in Santa Clara, California. At this
meeting, Intel's representatives explained that Intel was considering plans to
spin out certain businesses to form a company in the interactive media services
area. The parties discussed the concept of merging one or more of these
businesses with Excalibur to create a company with broad technical capabilities
in the interactive media market segment. The parties agreed to exchange more
information and consider the possibility of some type of business combination in
more detail.
From February 23, 2000 through March 7, 2000, members of senior management
of Excalibur and Intel held further discussions in person and by teleconference.
During this period, Excalibur's management also briefed the executive committee
of the Excalibur board of directors of the status and nature of the discussions
with Intel. Intel's representatives explained that Intel had a strong interest
in working with Excalibur to create an interactive media services solution. The
possibilities discussed ranged from a straight OEM arrangement coupled with an
equity investment to the acquisition of Excalibur by Intel where Intel would
integrate Excalibur's technology with Intel's Internet Security Services,
Enhanced Video Services and Entertainment Content Services business units and
consider a spin-out of the new company at a later date. The parties discussed
various proposals in which Excalibur's stockholders would receive cash and an
equity interest in a combined entity in exchange for their Excalibur shares, but
the parties did not reach an understanding on proposed terms or structure.
During this period, the parties discussed their belief that the time to market
for the interactive media service business was a factor in successful
commercialization and that the parties would need to take this into account in
structuring a transaction. After further discussion, the parties concluded that
a combination of Excalibur and the three Interactive Media Services business
units would provide the fastest way to market for the proposed interactive media
products and services. Intel's management proposed a combination in which Intel
would contribute its Interactive Media Services division and cash in exchange
for 60% of the new company.
On March 10, 2000, Messrs. Condo and Buchanan, Herbert A. Allen, the
President of Allen & Company Incorporated, a significant stockholder of
Excalibur, and Excalibur's outside counsel met with Intel senior management,
including Messrs. Whittier and Kiles, in Santa Clara, California. Intel's
management explained the proposed deal structure and provided more information
about the Internet Security Services, Entertainment Content Services and the
Enhanced Video Services business units they proposed to include in the
combination. Intel provided financial information concerning these business
units, a presentation of current customers and potential market segments, a
review of the technologies developed by these business units and an overview of
the employees associated with the business units. The parties discussed the
perceived time to market advantage this proposed deal structure could be
expected to provide over an acquisition of Excalibur by Intel. The parties
acknowledged the delay in rolling-out the new products and services which would
be caused by the time required to complete an acquisition of Excalibur by Intel,
the required integration of Excalibur's operations with Intel's businesses and
subsequent spinout of the combined entity and that the projected timetable made
an acquisition of Excalibur by Intel less attractive. In addition, the parties
expressed their beliefs that a combination in which the new entity would be an
independent public company, rather than a
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wholly-owned subsidiary or division of a much larger entity such as Intel, would
provide the combined company with a greater ability to focus all of its energies
and resources on its new product and service development efforts and to target
its sales and marketing capabilities. In addition, Intel expressed the belief
that a contribution would be preferable because the IMS division's business
would be more strategically aligned with Excalibur's business than with Intel's
core activities of making semiconductor chips. The parties concluded that the
interactive media service capabilities could likely be offered commercially
earlier under a structure in which Intel contributed its Interactive Media
Services division to Excalibur. The parties also discussed a proposal suggested
by Excalibur's representatives of offering Excalibur's stockholders a put option
by which, for a limited time, Excalibur stockholders could put their shares in
the combined company to Intel at a price to be agreed upon.
On a series of conference calls from March 13, 2000 to March 15, 2000,
Excalibur's and Intel's senior management held further discussions regarding
various matters relating to the proposed combination, including the valuation of
Intel's assets to be contributed to the new company, the structure of the
proposed put option and management of the new company. Intel's representatives
expressed concern with a put option. The parties reached a preliminary
understanding that the board of directors of the new company should be comprised
initially of seven directors: two designated by Intel, one representing the
Excalibur stockholders, two from the management of the new company and two
outside directors. These conversations also led the parties to recommend that
Mr. Whittier would be proposed as chairman and chief executive officer of the
new company and that Mr. Condo would be proposed as its president and chief
operating officer. The parties also discussed the need for Intel to contribute a
substantial amount of cash to fund the new company. On March 14, 2000, Intel's
management proposed that Intel contribute the Interactive Media Services
division and related assets and $100 million in cash for an ownership stake of
62.5% in the new company. Excalibur's management agreed to review the proposal
and respond. On March 15, 2000, Excalibur's management proposed that Intel
contribute $150 million at closing plus the Interactive Media Services division
and related assets for a 60% ownership stake in the new company. Intel's
representatives indicated that the counterproposal was tentatively acceptable,
subject to negotiation of other deal terms and documentation, provided that the
put option proposal be excluded from the transaction.
From March 20, 2000 through March 22, 2000, members of Excalibur's and
Intel's senior management met in Santa Clara, California to review numerous
structural issues, including structures which would allow for a tax free
reorganization within the meaning of the federal tax code. The parties also
discussed a proposed transaction schedule, including the due diligence process
each party would require to review the proposed transaction, and the expected
business model the new company would pursue.
On March 30, 2000 and March 31, 2000, members of senior management of
Excalibur and Intel, together with Excalibur's outside counsel, Heller Ehrman
White & McAuliffe LLP, and Intel's outside counsel, Gibson Dunn & Crutcher LLP,
met in Santa Clara, California and by teleconference. Among the matters
discussed were tax and accounting issues in connection with the proposed
transaction, plans for product and service offerings in the new company and
sales and marketing structures for the new company. At these meetings, the
parties discussed possible structures for the combination, including the
contribution of assets and cash by Intel to a newly formed holding company and
Excalibur becoming a subsidiary of the holding company by way of a merger with
an indirect wholly-owned subsidiary.
On March 31, 2000, the Excalibur board of directors held a telephonic board
meeting to consider the potential combination transaction with Intel. Mr. Condo
made a presentation to the board regarding the business rationale for the
transaction, the proposed strategy for the combined company and a description of
the products and services which the combined company would be expected to offer.
Mr. Buchanan and Excalibur's outside counsel reviewed for the board the proposed
structure of the combination, including the tax, accounting and legal
implications. Also at this meeting, the Excalibur board appointed a special
committee of non-management directors comprised of John G. McMillian, Harry S.
Payne and John S. Hendricks to consider the proposed transaction with Intel and
make a recommendation to the full board. Mr. McMillian was appointed chairman of
the special committee. By unanimous written consent, the board later added an
additional non-management director, Philip J. O'Reilly, to the special
committee. The special
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committee retained the law firm of Proskauer Rose LLP to advise the special
committee with respect to the proposed combination.
On April 12, 2000, the special committee met and appointed a sub-committee
of Messrs. McMillian, O'Reilly and Payne to interview and appoint a financial
advisor. After contacting several investment banks and reviewing the proposals
and discussing the qualifications of two firms, the special committee selected
Needham & Company, Inc. to act as financial advisor to the special committee and
the board in connection with its consideration and evaluation of the proposed
combination.
Over the first three weeks of April 2000, members of Intel's legal and
finance department and its outside legal counsel performed their due diligence
investigation of Excalibur. During this time, members of Excalibur's finance
department and Excalibur's outside legal counsel also performed their due
diligence investigation of Intel's business units proposed to be contributed in
the combination, and Needham & Company began its analysis. During this period,
members of Excalibur's finance department and representatives of Excalibur's
independent auditors had discussions with members of Intel's finance staff
regarding financial accounting matters related to the proposed combination.
On April 21, 2000, Intel delivered initial drafts of the contribution and
merger agreement and related agreements to Excalibur. From April 21, 2000 to
April 30, 2000, Excalibur, Intel and their respective legal advisors negotiated
the terms of the definitive agreements. The special committee and Proskauer Rose
also reviewed the drafts of the contribution and merger agreement and related
documents and conveyed their comments to Excalibur's legal counsel. During this
time, the parties discussed various issues related to the proposed combination,
including the exact nature of the assets to be contributed or licensed by Intel
to the combined company, and the amount of, and terms and conditions upon which
Intel would be entitled to receive, a termination fee. As part of these
discussions, the parties agreed that Intel's 60% of the total equity of the
combined company would take into account all of Excalibur's stock options
outstanding at the time of the combination.
On April 27, 2000, the special committee of the Excalibur board held a
meeting in New York to review and discuss with its legal and financial advisors
the proposed terms of the contribution and merger agreement and related
documents. Mr. Condo presented to the special committee the history of the
discussions with Intel, including alternatives which were considered, and the
expected benefits of the proposed combination. Needham & Company reviewed with
the special committee its financial analyses with respect to the proposed
combination. The special committee, together with Proskauer Rose, then discussed
their remaining comments on the contribution and merger agreement. After
discussing these issues, the special committee approved the proposed
combination, subject to the resolution of the remaining issues on the
transaction agreements. Proskauer Rose then conveyed the special committee's
remaining comments to Excalibur's legal counsel.
On April 28, 2000, the special committee met again, and Proskauer Rose
reported on the resolution of the remaining issues on the transaction
agreements. The special committee was satisfied with the resolution of these
issues and confirmed its approval of the combination. Immediately thereafter,
the full board of directors of Excalibur held a special meeting at which the
members of the special committee of the board, together with its outside legal
counsel, reported to the full board that it recommended approval of the
combination. Excalibur's legal advisors made a preliminary presentation of the
principal terms of the proposed agreement with Intel, as well as legal analyses
of the proposed transaction. In anticipation of the meeting, each board member
was provided with, among other information, the most current draft of the
contribution and merger agreement as well as financial analyses prepared by
Needham & Company. Representatives of Needham & Company also presented their
financial analyses and delivered their oral opinion that, as of that date, the
exchange ratios of one share of Convera Class A common stock for each share of
Excalibur common stock and one share of Convera preferred stock for each share
of Excalibur preferred stock were fair, from a financial point of view, to the
holders of Excalibur common stock and Excalibur preferred stock, respectively.
These exchange ratios will result in the holders of Excalibur common stock
receiving, at the completion of the combination, 40% of the equity of Convera on
a fully diluted basis after giving effect to the conversion of preferred stock
and the exercise of assumed Excalibur options.
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At this meeting, the board also discussed the condition in the contribution
and merger agreement that Convera grant options to purchase Convera Class A
shares to employees of Intel and certain employees of Excalibur who would become
employees of Convera following the closing of the combination. Mr. Buchanan
advised the board members that the exact number of options to be granted could
not yet be determined because it depended on a variety of factors, including the
number and mix of employees who would eventually join Convera. Mr. Buchanan also
informed the board that the grant of options would result in a compensation
expense if the fair market value of Convera's stock on the grant date exceeded
the option exercise price and that the expense would be recognized ratably over
the vesting period of the options. The board members agreed that the grant of
options was necessary to encourage Intel employees to become employees of
Convera and in order to retain and incentivize Convera employees, especially for
a technology company in an industry where the competition for talent was fierce.
The board determined that, notwithstanding the potential for recognizing a
compensation expense and its effect on Convera's future earnings, the future
prospects of Convera were heavily dependent on the abilities of its employees
and the proposed grant of Convera options was critical to ensuring the continued
efforts of these employees. Following a presentation by Mr. Condo regarding the
strategy and proposed business plan for the combined company, the board
adjourned their meeting to the following day to allow them to reflect on the
matters presented at the board meeting. Following the adjourned meeting,
representatives of Excalibur and Intel and their respective legal counsel
continued their negotiations in order to finalize the terms of the definitive
combination agreements.
The negotiation of the contribution and merger agreement and related
documents continued through the morning of April 29, 2000. On that date, at the
reconvened special meeting of the Excalibur board, Excalibur management updated
the board on the status and terms of the proposed transaction with Intel.
Excalibur's legal advisors also reviewed the substantially final terms of the
contribution and merger agreement, including the changes made to the agreement
from the draft given to the board for the April 28, 2000 meeting. After
discussion, the board unanimously determined that the contribution and merger
agreement and the combination with Intel are advisable and in the best interests
of Excalibur's stockholders and the board approved the contribution and merger
agreement. The board authorized Messrs. Condo and Buchanan, together with
Excalibur's outside counsel, to negotiate any final changes to the definitive
transaction agreements consistent with the terms of the transaction approved by
the board. The board also unanimously resolved to recommend that Excalibur's
stockholders vote to adopt the contribution and merger agreement.
Following the completion of final changes to the contribution and merger
agreement, the related agreements and disclosure schedules, representatives of
Excalibur and Intel executed the contribution and merger agreement on April 30,
2000. In addition, Allen & Company Incorporated and each director and executive
officer of Excalibur executed voting agreements with Intel pursuant to which
they agreed, among other things, to vote in favor of the contribution and merger
agreement. As of the record date, stockholders who have executed voting
agreements with Intel owned approximately 31% of Excalibur's outstanding common
stock. On the morning of May 1, 2000, Excalibur and Intel issued a joint press
release announcing the combination.
OUR REASONS FOR THE COMBINATION; RECOMMENDATION OF OUR BOARD
We believe that Convera will allow us to build on our current business by
being among the first to offer a media services solution that enables content
owners, such as entertainment companies and sports leagues, to distribute their
content securely over the Internet. We believe that the technologies of Convera
will permit it to consolidate and rapidly bring to market a solution that
benefits from separate, but complementary, efforts by Intel and Excalibur to
develop technologies capable of exploiting the opportunity for internet-based
interactive media. For Excalibur's part, these efforts have focused on content
management -- the encoding, indexing, searching, retrieving and publishing of
multimedia -- and have resulted in products able to organize and search all
kinds of content. Intel's efforts have focused on content protection and content
enrichment through video and data integration and have resulted in products and
services that provide the infrastructure required to deliver branded content
over the internet. The technologies and capabilities provided by each company
are compatible and represent a significant dollar investment in research and
development. As a unified offering, our business plan is to provide a solution
customers need to encode, protect, organize and
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<PAGE> 42
deliver branded, high-value content on the internet using new business models
such as subscription and pay-per-view.
We have considered the current market environment in which the creators and
owners of branded content, such as sporting events and highlights, movies and
music, lack the effective means to distribute their programming in a secure,
compelling, and profitable way over the internet. To our knowledge, no one
company currently exists with all the technologies and capabilities to enable
branded, valuable content to be delivered to subscribers over the internet. We
believe that this transaction represents an opportunity for Excalibur to
transition branded content owners to digital media delivery and to take
advantage of a growing number of broadband connected homes. Convera will also
allow these customers to deliver their content in a form that allows consumers
to interact with the material in new ways. Convera will combine Excalibur's
content management technologies with Intel's expertise and patented technology
in content protection. We believe that these complementary technologies -- one
to produce valuable asset data bases, and the other to allow secure distribution
of the valuable assets -- combined in a single end-to-end solution will enable
content owners to create new internet business models such as pay-per-view and
subscription. As a result, consumers will have access to a new class of branded
interactive media, including some content not previously generally available on
the internet such as old newsreels, films, sports highlights and television
programs.
Our mission with this transaction is to position Convera as a leading
supplier of interactive media services to the internet economy. Our strategy is
to provide a business-to-business solution that allows content owners a new and
exciting way to enable end-users to interact with their valuable content. We
will continue to serve Excalibur's customer base and believe that the
combination will make available new products and services that will be
advantageous to our current customers.
Our board of directors, in reaching its decision on the combination,
consulted with its financial and legal advisors and its senior management,
reviewed a significant amount of information and considered a number of factors.
The most relevant information reviewed and factors considered are set forth
below:
- the reasons described above under "-- Our Reasons for the Combination"
and the risks described under "Risk Factors" beginning on page 16;
- the strategic fit between Excalibur and Intel's Interactive Media
Services division, and the belief that Convera has the potential to
enhance stockholder value as a leading company in the interactive media
services market that is well positioned to attract branded media content
customers;
- the current industry, economic and market conditions and trends,
including the absence of any other single company in the market which
currently combines the technologies, human resources and other
capabilities to act as a single source to allow customers of valuable
content to distribute their content over the internet in a secure and
profitable manner;
- the opportunity for the Excalibur stockholders to participate in a
larger, more diverse company;
- the corporate governance for Convera, including, initially,
representation of Excalibur and Intel designees on Convera's board of
directors, as well as the fact that Patrick C. Condo, our president and
chief executive officer, will initially serve as president and chief
operating officer of Convera;
- information concerning the financial performance, business operations,
and asset quality of Excalibur and Intel's Interactive Media Services
division, including the Excalibur board's observation that Excalibur's
video business was incurring losses and needed additional capital to fund
sales, marketing and branding activities and the board's belief that the
quality of the technology assets and technical personnel and the amount
of cash to be contributed by Intel satisfied these needs;
- Intel's contributions of assets and intellectual property to Convera,
including the existing operations of the Interactive Media Services
division with its base of customers, 14 patents and patent applications
in the area of content security, source code, non-exclusive licenses to
additional source code components and other Intel patents and patent
applications, and a cash contribution at closing to the combined company
of $150 million;
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- the talented pool of personnel from Intel to which Convera would offer
employment, including Ronald J. Whittier, the current senior vice
president and general manager of Intel Content Services, who has agreed
to take the helm as chairman and chief executive officer of Convera, and
the 60 or more engineers and other professionals who currently comprise
the Interactive Media Services division and who have been offered
employment with the combined company subject to completion of the
combination;
- the ability to successfully integrate Excalibur and Intel's Interactive
Media Services division, including the risks associated with the
integration;
- the oral opinion of Needham & Company as of April 28, 2000, subsequently
confirmed in writing as of June 30, 2000, that, as of the opinions' dates
and subject to the assumptions and limitations set forth in the opinions,
the exchange ratios of one share of Convera Class A common stock for each
share of Excalibur common stock and one share of Convera preferred stock
for each share of Excalibur preferred stock were fair, from a financial
point of view, to the holders of Excalibur common stock and Excalibur
preferred stock, respectively, and the financial presentation made by
Needham & Company to our board of directors on April 28, 2000;
- the strategic and financial alternatives available to Excalibur,
including contacts and preliminary discussions Excalibur's management had
with third parties regarding possible investments in or business
combinations with Excalibur;
- the likely impact of the combination on the employees of Excalibur and
Intel's Interactive Media Services division, including the fact that the
combination would permit our employees to have continued employment and
greater career opportunities within a larger combined entity;
- the expected effect of the combination on our relationships with
customers and potential customers, including the expectation that Convera
would be able to offer existing customers a much broader range of
products and services and would be well-positioned to attract significant
new customers, such as branded media companies, which seek interactive
means of distributing their content;
- the ability to consummate the combination, including the conditions to
the combination requiring the receipt of necessary regulatory approvals
in accordance with the terms of the contribution and merger agreement;
- the effects of the condition in the contribution and merger agreement
that Convera grant options to purchase Convera Class A shares to
employees of Intel and certain employees of Excalibur who would become
Convera employees, including the positive effects of the options in
attracting, retaining and incentivizing employees and the negative
effects on Convera's future earnings if the option grants result in
Convera recognizing a compensation expense;
- the interests of officers and directors of each company in the
combination, as described under "The Combination -- Interests of Certain
Persons in the Combination" beginning on page 38;
- the terms of the contribution and merger agreement, including the fact
that Excalibur is permitted to terminate the contribution and merger
agreement upon receipt of a superior acquisition proposal, subject to the
payment of specified termination fees, and the impact that the
termination fees may have on potential third-party acquirers; and
- the qualification of the combination as a tax-free transaction for United
States federal income tax purposes.
The foregoing discussion of the information and factors considered by our
board of directors is not intended to be exhaustive. In view of the wide variety
of the material factors considered in connection with their respective
evaluations of the combination and the complexity of these matters, our board of
directors did not find it practicable to, and did not, quantify or otherwise
attempt to assign any relative weight to the various factors considered. In
addition, our board of directors did not undertake to make any specific
determination as to whether any particular factor, or any aspect of any
particular factor, was favorable or unfavorable to our
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board of directors' ultimate determination, but rather our board of directors
conducted an overall analysis of the factors described above, including
discussions with and questioning of our respective management and legal and
financial advisors. In considering the factors described above, individual
members of our boards of directors may have given different weight to different
factors.
There can be no assurance that any of the potential opportunities
considered by our boards of directors will be achieved through consummation of
the combination. See "Risk Factors" beginning on page 16.
Recommendation of the Board of Directors of Excalibur
Excalibur's board of directors unanimously recommends that Excalibur
stockholders vote "for" approval and adoption of the contribution and merger
agreement, as amended, and approval of the combination.
OPINION OF EXCALIBUR'S FINANCIAL ADVISOR
Pursuant to an engagement letter dated April 7, 2000, Excalibur retained
Needham & Company, Inc. to furnish financial advisory and investment banking
services with respect to the proposed combination and to render an opinion as to
the fairness, from a financial point of view, of the exchange ratios of Convera
common stock and preferred stock for Excalibur common stock and preferred stock
in the proposed combination. The combination exchange ratios were determined
through arm's length negotiations between Excalibur and Intel and not by Needham
& Company.
At a meeting of the Excalibur board of directors on April 28, 2000, Needham
& Company delivered its oral opinion (subsequently confirmed in writing) that,
as of that date and based upon and subject to the assumptions and other matters
described in the written Needham & Company opinion, the proposed exchange ratio
of one share of Convera common stock per share of Excalibur common stock, and
the proposed exchange ratio of one share of Convera convertible preferred stock
per share of Excalibur convertible preferred stock, are fair to the holders of
Excalibur common stock and Excalibur preferred stock, respectively, in each case
from a financial point of view. Subsequent to April 28, 2000 and at the request
of Excalibur, Needham & Company reviewed the final terms of the combination,
including the final form of the contribution and merger agreement, and
additional financial information provided by management of Intel's Interactive
Media Services, or IMS, division about that division. Based on all of the
analysis conducted by Needham & Company, on June 30, 2000, Needham & Company
delivered a written opinion that, as of that date and based upon and subject to
the assumptions and other matters described in the written Needham & Company
opinion, the proposed exchange ratio of one share of Convera common stock per
share of Excalibur common stock, and the proposed exchange ratio of one share of
Convera convertible preferred stock per share of Excalibur convertible preferred
stock, are fair to the holders of Excalibur common stock and Excalibur preferred
stock, respectively, in each case from a financial point of view. The Needham &
Company opinion is addressed to the Excalibur board, is directed only to the
financial terms of the contribution and merger agreement, and does not
constitute a recommendation to any Excalibur stockholder as to how such
stockholder should vote at the Excalibur annual meeting.
The complete text of the Needham & Company opinion, which sets forth the
assumptions made, matters considered, limitations on and scope of the review
undertaken by Needham & Company, is attached to this proxy statement/prospectus
as Appendix B. Excalibur stockholders are urged to read the Needham & Company
opinion carefully.
In arriving at its opinion, Needham & Company, among other things:
- reviewed the contribution and merger agreement;
- reviewed certain publicly available information concerning Excalibur and
IMS and certain other information concerning Excalibur and IMS furnished
to it by Excalibur and Intel;
- reviewed the historical stock prices and trading volumes of Excalibur
common stock;
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<PAGE> 45
- held discussions with members of senior management of Excalibur and
Intel's IMS division concerning the current and future business prospects
of Excalibur and IMS and the joint prospects of the combined businesses,
including synergies that may be achieved by the combined businesses;
- reviewed certain financial forecasts and estimates prepared by the
respective managements of Excalibur and IMS;
- compared certain publicly available financial data of companies whose
securities are traded in the public markets and that Needham & Company
deemed relevant to similar data for Excalibur and IMS;
- reviewed the financial terms of certain other business combinations that
Needham & Company deemed generally relevant; and
- performed and/or considered such other studies, analyses, inquiries and
investigations as Needham & Company deemed appropriate.
Needham & Company assumed and relied upon, without independent
verification, the accuracy and completeness of the information reviewed by or
discussed with it for purposes of rendering its opinion. Needham & Company
assumed that the financial forecasts provided to Needham & Company by
Excalibur's and IMS' managements and information relating to the joint prospects
of the combined businesses were reasonably prepared on bases reflecting the best
currently available estimates and judgments of these managements, at the time of
preparation, of Excalibur's and IMS' and the combined businesses' future
operating and financial performance. Needham & Company relied on estimates of
Excalibur's management of the synergies that may be achieved as a result of the
proposed combination. Needham & Company did not assume any responsibility for or
make or obtain any independent evaluation, appraisal or physical inspection of
the assets or liabilities of Excalibur or the assets of Intel to be contributed
to Convera. The Needham & Company opinion states that it was based on economic,
monetary and market conditions existing as of its date. Needham & Company
expressed no opinion as to what the value of Convera common stock or preferred
stock will be when issued to the stockholders of Excalibur pursuant to the
combination or the prices at which Convera or Excalibur stock will actually
trade at any time. In addition, Needham & Company was not asked to consider, and
the Needham & Company opinion does not address:
- Excalibur's underlying business decision to engage in the combination,
- the relative merits of the combination as compared to any alternative
business strategies that might exist for Excalibur, or
- the effect of any other transaction in which Excalibur might engage.
No limitations were imposed by Excalibur on Needham & Company with respect
to the investigations made or procedures followed by Needham & Company in
rendering its opinion.
Based on this information, Needham & Company performed a variety of
financial analyses of the combination and the exchange ratios. The following
paragraphs summarize the material financial analyses performed by Needham &
Company in arriving at its opinion.
Contribution Analysis. Needham & Company reviewed and analyzed the pro
forma contribution of each of Excalibur and IMS to pro forma combined balance
sheet information as of April 30, 2000 and to pro forma projected operating
results provided by Excalibur's management for the fiscal years ending January
31, 2001 and 2002. Needham & Company reviewed, among other things, the pro forma
contributions to revenues, net income, assets and stockholders' equity. This
analysis indicated that Excalibur would have contributed:
- 54.4% of estimated fiscal 2001 pro forma combined revenues,
- 49.6% of estimated fiscal 2002 pro forma combined revenues,
- 16% of the pro forma combined total assets, and
- 13% of the pro forma combined stockholders' equity.
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An analysis of Excalibur's contribution to fiscal 2002 net income and
earnings before interest and taxes was not meaningful due to the projected pro
forma positive earnings before interest and taxes and net income of Excalibur
and the projected loss before interest and taxes and projected net loss of IMS
for that year. An analysis of Excalibur's contribution to fiscal 2001 earnings
was also not meaningful due to the projected losses before interest and net
losses of Excalibur and IMS for that year. Based on the terms of the
contribution and merger agreement, Excalibur's stockholders will own 40% of
Convera common stock after the combination on a fully-diluted basis after giving
effect to the conversion of outstanding preferred stock and the exercise of
assumed Excalibur options. The results of the contribution analysis are not
necessarily indicative of the contributions that the respective businesses may
have in the future.
Accretion/Dilution Analysis. Needham & Company reviewed various pro forma
financial impacts of the combination (assuming that it had closed on October 31,
2000, the end of the third quarter of Excalibur's fiscal year ending January 31,
2001) on the holders of Excalibur common stock based on the proposed combination
consideration and Excalibur's and IMS' respective managements' projected
financial results, and projected cost savings resulting from the combination.
Based upon these projections and assumptions, Needham & Company noted that the
combination would result in dilution of the projected earnings per share of
Excalibur common stock for the fiscal years ending January 31, 2001 and 2002.
The actual operating or financial results achieved by the combined entity may
vary from projected results, and these variations may be material.
Selected Transaction Analysis. Needham & Company also analyzed publicly
available financial information for 15 selected mergers and acquisitions of
companies in the technology sector that represent transactions since June 1,
1998. In examining the selected merger and acquisition transactions, Needham &
Company analyzed:
- the enterprise value (market value plus debt less cash) as a multiple of
net sales for the last twelve months, commonly referred to as "LTM
sales";
- the enterprise value as a multiple of net sales for the last full quarter
before the transaction, annualized, commonly referred to as "LQA sales";
- the enterprise value as a multiple of net sales projected for the next
twelve months, commonly referred to as "forward twelve months sales";
- the enterprise value as a multiple of earnings before interest and taxes
for the last twelve months;
- the enterprise value as a multiple of earnings before interest, taxes,
depreciation and amortization for the last twelve months; and
- market value as a multiple of net income for the last twelve months.
In some cases, complete financial data was not publicly available for the
selected merger and acquisition transactions, and only partial information was
used in those instances.
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The transactions analyzed by Needham & Company were:
<TABLE>
<CAPTION>
ACQUIRER TARGET
-------- ------
<S> <C>
NBC, Inc. (NBC Multimedia Division) Snap! LLC
America Online, Inc. Netscape Communications Corporation
At Home Corporation Excite, Inc.
Yahoo! Inc. GeoCities
Vulcan Ventures Incorporated Go2Net, Inc.
Yahoo! Inc. broadcast.com inc.
NBC, Inc. Xoom.com, Inc.
CMGI, Inc. AltaVista, Shopping.com, Zip2
Walt Disney Company Infoseek Corporation
DoubleClick Inc. NetGravity, Inc.
At Home Corporation iMALL, Inc.
Razorfish, Inc. International Integration Incorporated
Akamai Technologies, Inc. INTERVU Inc.
VeriSign, Inc. Network Solutions, Inc.
QUALCOMM Incorporated NetZero, Inc.
</TABLE>
The following table sets forth information concerning the multiples of
enterprise value to forward twelve months sales and LQA sales for the selected
merger and acquisition transactions and the range of implied valuations of IMS
implied by those multiples. Needham & Company calculated the implied values for
IMS by multiplying IMS' forward twelve month sales, derived from the financial
estimates for IMS provided by IMS management, and LQA sales by the multiples
shown for the selected transactions. Needham & Company noted that the market
value of the Excalibur shares to be issued to IMS, based on the closing price of
Excalibur common stock the trading day prior to announcement of the proposed
combination, was $912.4 million. Needham & Company further noted that the
enterprise value for IMS, taking into account the $150.0 million in cash to be
contributed by Intel, was $762.4 million. An analysis based on IMS' LTM earnings
was not meaningful due to IMS' indication that it incurred losses for that
period.
<TABLE>
<CAPTION>
HIGH MEAN MEDIAN LOW
-------- -------- -------- ------
<S> <C> <C> <C> <C>
Selected transactions enterprise value to forward
twelve months sales multiples................... 106.6x 39.0x 25.3x 5.4x
Implied IMS value (millions)...................... $4,740.6 $1,736.1 $1,127.1 $240.9
</TABLE>
<TABLE>
<CAPTION>
HIGH MEAN MEDIAN LOW
-------- -------- -------- ------
<S> <C> <C> <C> <C>
Selected transactions enterprise value to LQA
sales multiples................................. 541.0x 97.6x 46.7x 6.3x
Implied IMS value (millions)...................... $2,164.2 $ 390.5 $ 186.9 $ 25.3
</TABLE>
No company, transaction or business used as a comparison in the "Selected
Transaction Analysis" is identical to Excalibur, IMS or the proposed
combination. Accordingly, these analyses are not simply mathematical; rather,
they involve complex considerations and judgments concerning differences in the
financial and operating characteristics and other factors that could affect the
acquisition, public trading or other values of the selected transactions and the
companies involved in them or the transaction to which they are being compared.
Discounted Cash Flow Analysis.
Needham & Company also analyzed IMS based on an unlevered discounted cash
flow analysis of the estimated performance of IMS. For this purpose, Needham &
Company used estimated financial statements for IMS for fiscal years 2001
through 2002 provided by Excalibur's management. The discounted cash flow
analysis determined the estimated unlevered after-tax cash flows to be generated
over the period commencing with the beginning of fiscal 2001 and then added a
terminal value based upon a range of revenue multiples for the three business
units of IMS: Entertainment Content Services, Enhanced Video Services and
Internet Security Services. These multiples ranged from 5.5x to 7.5x revenues
for the Entertainment Content Services unit, 19.0x to 21.0x revenues for the
Enhanced Video Services unit, and 21.0x to 23.0x revenues for the Internet
Security Services unit.
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The unlevered after-tax cash flows and terminal values for IMS were
discounted using a range of discount rates (representing the opportunity cost of
capital, determined by applying the capital asset pricing model) of 15% to 25%
for IMS' three business units. The present value of unlevered cash flows of IMS
was negative due to the operating losses estimated by Excalibur's management to
occur through fiscal 2002. Accordingly, the terminal value (based upon the
terminal year's projected revenues) represented more than 100% of the present
value of the IMS equity determined by the discounted cash flow analysis. Needham
& Company also added cash of $150 million, which Intel has agreed to contribute
to Convera at closing under the contribution and merger agreement, in the equity
value of IMS for purposes of the analysis. The discounted cash flow analysis
resulted in a range of discounted cash flow values for IMS from $777.5 million
to $964.3 million. As discussed above, the market value of the Excalibur shares
to be issued to IMS, based on the closing price of Excalibur common stock on the
trading day prior to announcement of the proposed combination, was $912.4
million.
Other Analyses. In rendering its opinion, Needham & Company considered
certain other analyses, including, among other things, a history of trading
prices and volumes for Excalibur, and an analysis of the stock price performance
and certain financial and operating data of a broad group of companies in the
industry. Needham & Company noted that, in the months leading up to the
announcement of the Intel agreement, Excalibur's common stock had outperformed
the Nasdaq index and several companies in its industry sector, and had reached
its 52-week high during the 45 days immediately preceding the announcement.
Needham & Company used the analysis of other companies to provide reference data
for its analyses of Excalibur and IMS. The reference data, which included
financial data and ratios of the other companies, was used by Needham & Company
in its determination to use revenue multiples rather than earnings per share
multiples in its selected transaction and discounted cash flow analyses
described above, due to the lack of profitability of the IMS business units and
many of the other companies. Needham & Company also used the analysis of other
companies to provide guidance in determining the revenue multiples used in the
discounted cash flow analysis of the three business units of IMS. Needham &
Company reviewed the range of revenue multiples of companies that were deemed
generally comparable to each of the IMS business units and, after taking into
consideration differences in the financial and operating characteristics of
those companies, determined the ranges of revenue multiples used in the
discounted cash flow analysis. No company or business is identical to IMS or its
business units and, accordingly, Needham & Company's analyses are not simply
mathematical; rather, they involve complex considerations and judgments
concerning numerous factors that could affect the companies and valuations in
its analyses.
The summary set forth above does not purport to be a complete description
of the analyses performed by Needham & Company in connection with the rendering
of the Needham & Company opinion. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant quantitative and
qualitative methods of financial analyses and the application of those methods
to the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Accordingly, Needham & Company believes that
its analyses must be considered as a whole and that considering any portions of
such analyses and of the factors considered, without considering all analyses
and factors, could create a misleading or incomplete view of the process
underlying its opinion. In its analyses, Needham & Company made various
assumptions with respect to industry performance, general business and economic
and other matters, many of which are beyond the control of Excalibur or Intel.
Any estimates contained in these analyses are not necessarily indicative of
actual values or predictive of future results or values, which may be
significantly more or less favorable. Additionally, analyses relating to the
values of businesses or assets do not purport to be appraisals or necessarily
reflect the prices at which businesses or assets may actually be sold.
Accordingly, these analyses and estimates are inherently subject to substantial
uncertainty. The Needham & Company opinion and Needham & Company's related
analyses were only one of many factors considered by Excalibur's board of
directors in its evaluation of the proposed combination and should not be viewed
as determinative of the views of Excalibur's board of directors or management
with respect to the proposed combination or the consideration to be received by
Excalibur stockholders the proposed combination.
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Under the terms of the Needham & Company engagement letter, Excalibur has
paid or agreed to pay Needham & Company fees for rendering the Needham & Company
opinion and for financial advisory services of $400,000. None of Needham &
Company's fees are contingent on consummation of the combination. Excalibur has
also agreed to reimburse Needham & Company for certain of its reasonable
out-of-pocket expenses and to indemnify it against certain liabilities relating
to or arising out of services performed by Needham & Company as financial
advisor to Excalibur.
Needham & Company is a nationally recognized investment banking firm. As
part of its investment banking services, Needham & Company is frequently engaged
in the evaluation of businesses and their securities in connection with mergers
and acquisitions, negotiated underwritings, secondary distributions of
securities, private placements and other purposes. Needham & Company was
retained by the Excalibur board of directors to act as Excalibur's financial
advisor in connection with the combination based on Needham & Company's
experience as a financial advisor in mergers and acquisitions as well as Needham
& Company's familiarity with the technology sector. In the normal course of its
business, Needham & Company may actively trade the equity securities of
Excalibur or Intel for its own account or for the account of its customers and,
therefore, may at any time hold a long or short position in such securities.
Needham & Company has had no other investment banking relationship with
Excalibur or Intel during the past two years.
INTERESTS OF CERTAIN PERSONS IN THE COMBINATION
Patrick C. Condo Employment Agreement
In May 1998, Patrick C. Condo entered into an agreement with Excalibur
under which Mr. Condo would be paid an amount equal to twelve months of base
salary plus bonus compensation and continuation of his employee benefits for one
year in the event Mr. Condo's employment is terminated or he is removed from his
position as chief executive officer within six months following change of
control events relating to Excalibur. In connection with the combination, Mr.
Condo waived all rights to this payment that he would have been entitled to as a
result of the combination. Simultaneously, he entered into an agreement with
Convera under which Mr. Condo will be paid an amount equal to twelve months of
base salary plus bonus compensation and continuation of his employee benefits
for one year in the event Mr. Condo's employment is terminated or he is removed
from his position as president of Convera within six months following change of
control events relating to Convera.
Options of Excalibur Officers and Directors
In consideration for services rendered by the following executive officers
of Excalibur in structuring and negotiating the combination transaction with
Intel, on April 28, 2000, the compensation committee of Excalibur's board of
directors granted:
- Mr. Condo options to purchase 100,000 shares of Excalibur common stock;
- Mr. Buchanan options to purchase 100,000 shares of Excalibur common
stock;
- Kamran Khan, a senior vice president of Excalibur, options to purchase
50,000 shares of Excalibur common stock; and
- David Nunnerley, a senior vice president of Excalibur, options to
purchase 50,000 shares of Excalibur common stock.
All of these stock options were granted under Excalibur's 1999 Stock Option
Plan, have an exercise price of $33.75 per share and vest in equal 25%
increments every six months through April 28, 2002.
Upon the closing of the combination, each option to purchase Excalibur
common stock under one of Excalibur's stock option plans will become an option
to acquire Convera Class A common stock. Other than the acceleration of vesting
of options granted under these plans described below, the terms and conditions
of the replacement Convera option will be the same as the pre-existing Excalibur
option it replaces. Except for the options granted on April 28, 2000 to Messrs.
Condo, Buchanan, Khan and Nunnerly, pursuant to the terms of Excalibur's 1989
Stock Option Plan, 1995 Stock Option Plan and 1999 Stock Option Plan, all
options to
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purchase shares of Excalibur common stock that were granted under these plans,
including those owned by Excalibur executive officers, and not previously vested
will vest immediately upon completion of the combination. The replacement
Convera option will be for the number of shares of Convera Class A common stock
equal to the number of shares that were purchasable immediately prior to the
closing of the combination. The exercise price per share of each option after
the combination will be unchanged. The April 28, 2000 options will not
accelerate upon the consummation of the combination. As of August 8, 2000,
Excalibur's executive officers, Messrs. Condo, Buchanan, Khan and Nunnerly,
owned unvested options to acquire 190,625, 54,375, 42,877 and 60,750 shares,
respectively, which would vest upon the completion of the combination. The
following table provides information concerning these unvested options for
Messrs. Condo, Buchanan, Khan and Nunnerly. All of these options vest in equal
12.5% increments every six months.
<TABLE>
<CAPTION>
NUMBER OF
UNVESTED OPTIONS DATE OF GRANT
---------------- -------------
<S> <C> <C>
Mr. Condo................................................... 37,500 8/14/97
153,125 12/17/99
Mr. Buchanan................................................ 18,750 8/14/97
5,000 9/1/98
30,625 12/17/99
Mr. Khan.................................................... 1,875 12/17/96
3,126 5/8/97
6,000 1/2/98
3,125 9/1/98
11,251 4/14/99
17,500 12/17/99
Mr. Nunnerly................................................ 1,250 8/9/96
3,125 1/8/97
4,500 1/2/98
9,375 9/1/98
7,500 4/14/99
35,000 12/17/99
</TABLE>
Incentive Bonus for Intel Employees Who Will Become Convera Employees
Excalibur, Convera and Transitory will not be obligated to close the
combination unless at least 70% of the IMS employees specified in the
contribution and merger agreement and at least 50% of the remaining IMS
employees (there are approximately 62 of these remaining employees) have
indicated their intent to become employed by Convera or been temporarily
transferred, or seconded, to Convera in order to assist with the transition of
Intel's Interactive Media Services division to Convera. For a full discussion of
the secondment of Intel employees to Convera, see page 53. Intel employees who
agree to become employed by Convera would be required to forfeit some benefits
currently provided by Intel, including unvested Intel stock options. Intel has
discussed Convera employment with a number of these employees, and Intel and
Excalibur have agreed that, in order to entice these employees to agree to
employment with Convera, Intel and Convera would offer these employees financial
incentives. Excalibur and Intel have agreed that each of these employees who
becomes employed by Convera and remains employed by Convera or its subsidiaries
on September 30, 2002 will be entitled to receive from Convera a payment payable
on or promptly after September 30, 2002 to the extent that the aggregate
built-in gain as of September 30, 2002 attributable to the Convera stock options
granted to each of these employees on the closing date of the combination does
not equal or exceed the aggregate built-in gain attributable to Intel stock
options that, by their terms, vest in 2002 through 2005 and that these employees
will be required to forfeit upon becoming a Convera employee. No former Intel
employee expected to be an executive officer or director of Convera is entitled
to receive this bonus payment.
For purposes of calculating this bonus payment, the built-in gain
attributable to the Convera stock options granted at closing, for each share of
stock subject to an option, will be equal to the positive difference,
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<PAGE> 51
if any, between (i) the average of the closing prices of the Convera Class A
common stock as reported by Nasdaq (or any other national securities exchange on
which the Convera Class A common stock is then traded) for the five trading days
immediately prior to and including September 30, 2002 and (ii) the per share
exercise price of the Convera stock options. The built-in gain attributable to
these employees' forfeited Intel stock options is equal to the positive
difference, if any, between (i) $61.50, representing the approximate fair market
value of the Intel stock underlying these options in May 2000 when this bonus
arrangement was established, and (ii) the per share exercise price of the
forfeited Intel stock options. The amount of Convera's payment will equal the
excess, if any, of the built-in gain for the forfeited Intel stock options over
the built-in gain for the Convera stock options. The maximum aggregate amount of
the built-in gain for the forfeited Intel stock options which Convera could be
required to pay to these employees assuming there is no built-in gain
attributable to the Convera stock options to be granted at closing is equal to
approximately $5.6 million. If the market price of the Convera shares is at
least $47.16 per share at September 30, 2002, then Convera will not be required
to pay any amounts to the former Intel employees under this bonus arrangement,
based on the fact that the built-in gain attributable to the Convera stock
options will be at least equivalent to the built-in gain on the forfeited Intel
stock options.
In addition to the potential payment related to the excess built-in gain
described in the preceding paragraphs, Intel has agreed to make payments
concurrent with the closing of the combination to these employees and to make an
additional capital contribution to fund retention bonuses to specified former
Intel employees that remain employed by Convera on April 30, 2001. The retention
bonus amount will be determined based upon the intrinsic value of unvested Intel
stock options forfeited that would have vested in calendar year 2001 for those
former Intel employees that become employees of Convera. The intrinsic value
will be determined based on the Intel stock price for the five days prior to the
closing of the combination. Intel will pay to Convera the aggregate amount
required to fund retention bonuses in amounts previously agreed by Convera and
Intel. Intel will make these payments within five days of receiving written
confirmation from Convera of those former Intel employees that remain employed
by Convera on April 30, 2001. Convera will pay those retained employees within
five days of receiving the retention bonus funds from Intel.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion, expressing the opinion of Heller Ehrman
White & McAuliffe LLP, of the material federal income tax consequences of the
combination that are applicable to Excalibur and the Excalibur stockholders.
This discussion is based on existing provisions of the tax code, existing
Treasury regulations thereunder and current administrative rulings and court
decisions, all of which are subject to change. Any such change, which may or may
not be retroactive, could alter the tax consequences to Excalibur or the
Excalibur stockholders as described herein. This discussion is based in part on
representations made by Excalibur and Convera as to certain matters, and the
conclusions in this discussion could change if such representations are
inaccurate. The parties will not request a ruling from the Internal Revenue
Service in connection with the combination.
Excalibur stockholders should be aware that this discussion does not deal
with all federal income tax considerations that may be relevant to particular
Excalibur stockholders in light of their particular circumstances, such as
stockholders who are dealers in securities, who are subject to the alternative
minimum tax provisions of the tax code, who are foreign persons or entities, who
do not hold their Excalibur stock as capital assets, or who acquired their
shares in connection with stock options or in other compensatory transactions.
In addition, the following discussion does not address the tax consequences of
the combination under foreign, state or local tax laws, the tax consequences of
transactions effectuated prior or subsequent to, or concurrently with, the
combination (whether or not any such transactions are undertaken in connection
with the combination), including without limitation any transaction in which
shares of Excalibur stock are acquired, or the tax consequences of the
assumption by Convera of outstanding options and subscriptions to acquire
Excalibur stock. ACCORDINGLY, EXCALIBUR STOCKHOLDERS ARE URGED TO CONSULT THEIR
OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES OF THE COMBINATION,
INCLUDING THE APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO
THEM OF THE COMBINATION.
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In the opinion of Heller Ehrman White & McAuliffe LLP, special tax counsel
to Excalibur:
- No gain or loss will be recognized by holders of Excalibur common stock
solely upon their receipt in the combination of Convera stock in exchange
therefor.
- The aggregate tax basis of the Convera stock received by Excalibur
stockholders in the combination will be the same as the aggregate tax
basis of the Excalibur stock surrendered in exchange therefor.
- The holding period of the Convera stock received by each Excalibur
stockholder in the combination will include the period for which the
Excalibur stock surrendered in exchange therefor was considered to be
held, provided that the stock so surrendered is held as a capital asset
at the time of the combination.
Tax Implications to Excalibur. Excalibur will not recognize any gain or
loss for federal income tax purposes as a result of the combination.
Reporting Requirements. Each stockholder receiving Convera common stock as
a result of the combination will be required to retain records and file with the
stockholder's federal income tax return a statement containing facts relating to
the combination.
ACCOUNTING TREATMENT
We intend to account for the combination under the purchase method of
accounting. For accounting purposes, Excalibur is treated as the acquirer of the
Interactive Media Services division of Intel. On the date of the completion of
the combination, we will record the tangible and identifiable intangible assets
of the Interactive Media Services division at their fair values. The purchase
price in excess of the fair value of the net assets of the Interactive Media
Services division will be recorded as goodwill. The purchase price was
determined based on the average market price of Excalibur's common stock before
and after the date the combination was announced plus the costs incurred to
execute the combination. See "Unaudited Pro Forma Combined Financial
Information" beginning on page 78 for additional information related to the
application of the purchase accounting method. We will include the results of
operations of the Interactive Media Services division in Convera's financial
statements from the date of the completion of the combination.
REGULATORY APPROVALS
Intel and Herbert A. Allen, a director of Excalibur and president of Allen
& Company Incorporated, a significant stockholder of Excalibur, are required to
make filings with or obtain pre-combination approvals from United States
regulatory authorities in connection with the combination. Intel's and Mr.
Allen's separate notifications and reports were submitted for filing with the
Federal Trade Commission and the Department of Justice by August 3, 2000, and
the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, expired on September 2, 2000.
APPRAISAL RIGHTS
The holders of Excalibur common stock are not entitled to appraisal rights
in connection with the approval and adoption of the combination proposal.
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DIRECTORS AND MANAGEMENT OF CONVERA FOLLOWING THE COMBINATION
DIRECTORS
The Convera bylaws address the number and classification of the Convera
board of directors. The Convera bylaws provide that the board of directors will
consist of seven persons.
Excalibur and Intel have agreed that six of the members of the Convera
board of directors will be:
Herbert A. Allen, 59 years old, has been President, Chief Executive Officer
and Managing Director of Allen & Company Incorporated, a privately held
investment banking firm, for more than the past five years.
Andrew D. Bryant, 49 years old, has been Senior Vice President and Chief
Financial and Enterprise Services Officer of Intel since December 1999. Prior to
that, Mr. Bryant was Senior Vice President and Chief Financial Officer of Intel
from January 1999 to December 1999 and Vice President and Chief Financial
Officer of Intel from 1994 to January 1999.
Patrick C. Condo, 43 years old, has been President and Chief Executive
Officer of Excalibur since November 1995, and a Director in January 1996. Mr.
Condo was President from May 1995 to November 1995. He became Executive Vice
President in January 1995 after serving as the Director of Business Development
from November 1992. From October 1987 to November 1992, Mr. Condo held several
manager level positions for Digital Equipment Corporation's Image, Video and
Voice Business Unit and Software Business Group in New Hampshire.
Gerhard H. Parker, 56 years old, has been Executive Vice President and
General Manager, New Business Group of Intel, since 1998. Prior to that, Dr.
Parker was Executive Vice President and General Manager, Technology and
Manufacturing Group of Intel, from 1996 to 1998 and Senior Vice President and
General Manager, Technology and Manufacturing Group of Intel, from 1992 to 1996.
David J. Stern, 58 years old, has been the Commissioner of the National
Basketball Association for more than the past five years.
Ronald J. Whittier, 64 years old, has been Senior Vice President and
General Manager of Intel's Interactive Media Services division since 1999. 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.
Excalibur and Intel will agree upon one additional member of the board of
directors of Convera who is unaffiliated with Intel prior to the completion of
the combination.
COMMITTEES OF THE BOARD OF DIRECTORS
Convera expects to appoint the following committees of its board of
directors prior to the completion of the combination: executive committee, audit
committee, compensation committee and nominating committee.
COMPENSATION OF DIRECTORS
Directors who are employees of Convera will not receive any compensation
for service on the Convera board. We have not yet determined the specific terms
of the compensation to be paid to non-employee directors of Convera.
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MANAGEMENT AND EXECUTIVE OFFICERS OF CONVERA
In addition to Ronald Whittier and Patrick Condo, we expect the senior
management team and executive officers of Convera to include the following
individual:
James Buchanan, age 44, Chief Financial Officer. Mr. Buchanan joined
Excalibur as Chief Financial Officer in September 1995. Mr. Buchanan was elected
Secretary and Treasurer of Excalibur on November 17, 1995. From March 1991 to
August 1995, Mr. Buchanan was Vice President, Controller and Treasurer of Legent
Corporation, a software development company. Prior to that, he held several
financial management positions with Norfolk Southern Corporation and PepsiCo.
Mr. Buchanan is a certified public accountant.
Convera expects to appoint the other members of the senior management team
and executive officers prior to the completion of the combination.
EXECUTIVE COMPENSATION
The Convera board will rely on its compensation committee, composed of
non-employee directors, to recommend the form and amount of compensation to be
paid to Convera's executive officers.
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THE CONTRIBUTION AND MERGER AGREEMENT AND RELATED AGREEMENTS
The following summarizes the material terms of the contribution and merger
agreement, a copy of which we have attached as Appendix A to this proxy
statement/prospectus and is incorporated herein by reference. We urge you to
read the contribution and merger agreement for a more complete description of
the terms and conditions of the combination.
THE COMBINATION
Following stockholder approval and the satisfaction of the other conditions
to the combination, Excalibur will become a wholly-owned subsidiary of Convera.
Current Excalibur stockholders will become holders of Convera Class A common
stock and preferred stock and own, in the aggregate, approximately 51% of the
Class A common stock and 40% of the common stock of Convera, on a fully diluted
basis after giving effect to the conversion of outstanding preferred stock and
the exercise of assumed Excalibur options.
As described in "Summary -- Ownership of Convera Following the Completion
of the Combination" and "The Contribution and Merger Agreement and Related
Agreements -- NBA Agreements", Intel will assign to Convera concurrently with
the closing the services agreement it entered into with the NBA in September
2000. The transaction with the NBA is subject to the satisfaction of closing
conditions. If this transaction is completed, Convera and the NBA will develop
interactive NBA content for distribution by the NBA, ultimately including
enhanced broadband programming and interactive game broadcasts. In addition, in
consideration for the NBA's contribution of assets to Convera under a separate
contribution agreement, the NBA will receive shares of Class A common stock
representing a 10% equity stake in Convera (13.5% of the Class A common stock)
after giving effect to the combination and assuming the exercise of outstanding
preferred stock.
On the date the combination closes, Excalibur will file a certificate of
merger and articles of merger with the Secretary of State of Delaware. See
"-- Conditions to Consummation of the Combination" beginning on page 54.
THE CONTRIBUTION
On the date of the closing of the combination, Intel will contribute to
Convera its Interactive Media Services division, intellectual property assets
and other assets used by that division, as well as approximately $155 million in
cash, $150 million of which will be paid at closing and the balance of which
will be payable in 2001 to fund retention bonuses to specified former Intel
employees, in exchange for 49% of the Convera Class A common stock and 100% of
the Convera Class B non-voting common stock, which together represent a total of
60% of the common stock of Convera, on a fully diluted basis after giving effect
to the conversion of outstanding preferred stock and the exercise of assumed
Excalibur options.
In the combination, Intel will contribute to Convera its Interactive Media
Services division and related intellectual property (generally under
non-exclusive licenses) and other assets. A complete listing of the assets to be
contributed is set forth on Exhibit A to the contribution and merger agreement.
These assets include:
- a collection of software tools and know-how for creating or integrating a
digital rights enforcement software system, manipulating and integrating
video content and data, or protecting data streams such as during
internet delivery of protected music downloads;
- 14 patents and patent applications in the area of tamper resistant
software and content security, including various methods of enabling
tamper resistance;
- source code components, including portions of custom developed software,
or modules, which are used in current applications, or can be used or
reused in other customized applications, such as providing an attendee at
a sports event the ability to use a computer built into the seat-back
directly in front of the attendee, to watch a customized replay, or order
food, drinks or merchandise for delivery in the sports event venue;
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- Intel's rights and obligations under the contracts that have been entered
into by the Interactive Media Services division, exclusive of certain
cash payments or payments of equity which have already been earned by the
IMS division, prior to the time of the close of the Convera transaction;
and
- the collective expertise of the software and engineering personnel who
developed the IMS division's tamper resistance software technology, the
majority of whom will be transferring from Intel to Convera upon the
closing of the combination.
Convera intends to use the $150 million to be received at closing from time
to time for working capital, including payroll, capital expenditures,
procurement of services and other general corporate purposes. The mission of
Convera is to be a leading supplier of interactive media services to the
internet economy. We believe the cash received at closing will enhance Convera's
ability to invest in additional research and development necessary to provide a
business-to-business solution that allows content owners to provide new ways for
end-users to interact with their content. Initially, we expect capital
expenditures will primarily relate to the implementation of the requirements of
the NBA services agreement and any similar future contracts. Management does not
currently have further information concerning the exact timing or the expected
amount of additional capital expenditures, but management does not expect the
initial capital requirements to be substantial in relation to the total cash
contribution. We also believe the cash received at closing will provide the
necessary resources to fund sales and marketing initiatives to promote Convera.
At closing, Convera will use approximately $7 million of the cash proceeds to
reimburse Intel for amounts advanced by Intel on Convera's behalf to fund
capital expenditures primarily relating to the NBA services agreement and to
fund leasehold improvements to IMS' office facilities. Pending Convera's use of
the proceeds and determinations as to when such proceeds will be used, subject
to the approval of Convera's board of directors, Convera intends to invest the
funds in low-risk investments, such as United States treasury obligations or
other government-backed securities.
CONVERSION OF SHARES
- Each share of Excalibur common stock will be converted into one share of
Convera Class A common stock.
- Each share of Excalibur preferred stock will be converted into one share
of Convera preferred stock.
EXCHANGE OF STOCK CERTIFICATES
After the closing of the combination, an exchange agent will mail you a
letter of transmittal and instructions for exchanging your Excalibur stock
certificates for your shares of Convera stock. Upon surrender of a stock
certificate to the exchange agent, together with the executed letter of
transmittal, you will be entitled to receive shares of Convera stock. The
surrendered Excalibur stock certificates will promptly be canceled.
No Further Ownership Rights in Excalibur Common Stock. All shares of
Convera common stock issued in exchange for certificates of Excalibur common
stock will be considered to have been exchanged in full payment for your shares.
After the closing of the combination, the transfer agent will not register
transfers of shares that were outstanding prior to the closing. If shares of
Excalibur common stock are presented to Excalibur after the combination for any
reason, the certificates will be canceled and exchanged for shares of Convera.
No Liability. Excalibur, Intel, Convera and the exchange agent will not be
liable to any Excalibur stockholder for any shares of Convera common stock
delivered to a public official pursuant to abandoned property, escheat or
similar laws.
Lost Certificates. If your stock certificates of Excalibur are lost,
stolen, or destroyed prior to the closing of the combination, you must submit an
affidavit of that fact to the exchange agent. Also, if required by Convera, or
the exchange agent, you must post a bond in a reasonable amount as determined by
Convera as indemnity against any potential claim regarding the lost
certificates. In exchange for lost, stolen or destroyed stock certificates,
after you have made the affidavit and, if required by Convera or the exchange
agent, posted the bond, the exchange agent will issue to you shares of Convera
stock.
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STOCK OPTIONS
After the closing of the combination, each option to purchase Excalibur
common stock under one of Excalibur's stock option plans will become an option
to acquire Convera Class A common stock. The terms and conditions of the
replacement Convera option will be the same as the pre-existing Excalibur option
it replaces. The assumed option will be exercisable for the number of shares of
Convera Class A common stock equal to the number of shares that were purchasable
immediately prior to the closing of the combination. The exercise price per
share of each assumed option after the combination will be unchanged.
Convera will reserve for issuance a sufficient number of shares of Convera
Class A common stock for delivery under the Convera stock option plan. As soon
as practicable after the closing of the combination, Convera will file a
registration statement on Form S-8 for the shares of Convera Class A common
stock subject to the assumed options and will use reasonable efforts to maintain
the effectiveness of that registration statement for as long as the assumed
options remain outstanding.
REPRESENTATIONS AND WARRANTIES
The contribution and merger agreement contains representations and
warranties made by Excalibur and Intel. These are assumptions upon which each
company relied when agreeing to the combination. These representations and
warranties deal with issues such as:
- the organization, valid existence and good standing of Intel and
Excalibur and their subsidiaries, and similar corporate matters;
- the capital structure of Excalibur, Convera and Transitory;
- the authorization, execution, delivery and enforceability of the
contribution and merger agreement;
- the consummation of the transactions contemplated by the contribution and
merger agreement and related matters;
- the conflicts under charters or bylaws;
- the required consents or approvals of the combination;
- the violations of any instruments or law;
- the documents and financial statements filed by Excalibur with the
Securities and Exchange Commission and the accuracy of information
contained in them;
- the filing of the necessary proxy statements and registration statements
by Excalibur;
- the absence of defaults;
- the absence of undisclosed liabilities for Excalibur;
- the absence of material adverse events or changes to Excalibur or the
assets to be contributed by Intel;
- taxes and tax returns of Excalibur;
- intellectual property;
- litigation;
- environmental matters and hazardous materials of Excalibur;
- employee benefit plans of Excalibur;
- compliance with laws;
- the accuracy of information supplied by Excalibur and Intel in connection
with this proxy statement/prospectus;
- labor matters of Excalibur;
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- insurance of Excalibur;
- no unlawful business practices of Excalibur;
- product warranties;
- suppliers and customers;
- vote required of Excalibur stockholders;
- opinions of the financial advisor for Excalibur;
- broker's fees; and
- the inapplicability to the combination of anti-takeover provisions of
Delaware law.
MATERIAL COVENANTS
The contribution and merger agreement includes a number of covenants, most
of which provide parameters within which Excalibur will operate its business and
Intel will conduct its business related to the assets it will contribute to
Convera until the combination closes.
Conduct of Business of Excalibur
From the date of the contribution and merger agreement until the closing of
the combination Excalibur will:
- continue to operate its business according to its customary course of
business; and
- use reasonable efforts to preserve its business organization, management
team and business relationships.
Additional Covenants
The contribution and merger agreement also provides that, from the date of
the contribution and merger agreement until the closing of the combination,
Excalibur will not, without the prior written consent of Intel:
- amend its certificate of incorporation or bylaws;
- issue or sell any stock or securities convertible into shares of its
stock, or any subscriptions, rights, warrants or options, subject to some
exceptions;
- except as required under Excalibur's certificate of designation for its
outstanding preferred stock, declare or pay dividends on or make
distributions on any of its stock or make other changes in its
capitalization;
- adopt a plan of liquidation, dissolution or merger other than the
combination;
- alter the structure of any subsidiary;
- incur any long-term or short-term debt or issue any debt securities other
than borrowings under existing lines of credit in the ordinary course of
business;
- enter into or terminate any compensation or benefit plan;
- increase the compensation or fringe benefits of officers or employees,
other than increases to non-officer employees consistent with past
practices and intended to incentivize employees;
- grant any severance pay or termination pay to any officer, director,
employee or consultant subject to those exceptions specified in section
5.1 of the contribution and merger agreement;
- accelerate the vesting of any stock option as a result of the combination
or any other change of control event affecting Excalibur or otherwise;
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- sell, lease, license or otherwise dispose of material assets outside the
ordinary course of business;
- make any material change in its accounting policies;
- revalue in any material respect any of its assets, including the writing
down of inventory or writing-off notes or accounts receivable other than
in the ordinary course of business consistent with past practice or as
required by generally accepting accounting principles;
- make any material acquisitions;
- enter into or amend any agreement or contract that would be material to
Excalibur and its subsidiaries taken as a whole;
- authorize or make capital expenditures in excess of $250,000 individually
or $1 million in the aggregate;
- make or rescind any material tax elections, settle any tax claims, fail
to file any tax returns or fail to pay any taxes or other material debts;
- settle any litigation that relates to the combination, that would require
payment over $250,000, that would be otherwise material to Excalibur or
that relates to any intellectual property;
- take any action that would alter the tax treatment of the combination; or
- take, or agree in writing to take, any of the actions described above.
The contribution and merger agreement also provides that, from the date of
the contribution and merger agreement until the closing of the combination,
Intel will not, without the prior written consent of Excalibur:
- mortgage or pledge any material asset included in the contributed assets
or create a material lien on these assets;
- sell, lease, license or otherwise dispose of a material portion of the
contributed assets outside the ordinary course of business;
- make any material change in its accounting policies used by any business
unit or division that comprises a part of the contributed assets;
- revalue in any material respect any of the contributed assets, including
the writing down of inventory or writing-off notes or accounts receivable
other than in the ordinary course of business consistent with past
practice or as required by generally accepting accounting principles;
- enter into or amend any agreement or contract that would be material to
the contributed assets;
- authorize or make capital expenditures with respect to the contributed
assets in excess of $250,000 individually or $1 million in the aggregate,
except to the extent the expenditure would not have a material adverse
effect on the assets;
- permit any insurance policy covering the contributed assets to expire, be
canceled or terminated unless it obtains a substitute policy acceptable
to Excalibur;
- settle any litigation that relates to the combination, that would be
material to the contributed assets or that relates to any intellectual
property included in the contributed assets; or
- take, or agree in writing to take, any of the actions described above.
No Solicitation
From the date of the contribution and merger agreement until the closing of
the combination, Excalibur has agreed not to, directly or indirectly continue,
encourage, solicit, participate in or initiate discussions or negotiations with
or provide any information to any person or group (other than Intel or any
designees of Intel) concerning a "third party acquisition," as defined below.
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A "third party acquisition" is any of the following:
- the acquisition of Excalibur by merger or otherwise by any person other
than Intel or any affiliate thereof;
- the acquisition by a third party of 20% or more of the assets of
Excalibur and its subsidiaries, taken as a whole;
- the acquisition by a third party of 20% or more of the outstanding shares
of Excalibur;
- the adoption by Excalibur of a plan of liquidation or the declaration or
payment of an extraordinary dividend;
- the repurchase by Excalibur or any of its subsidiaries of more than 20%
of its outstanding shares; or
- the acquisition or any group of acquisitions by Excalibur or any of its
subsidiaries by merger, purchase of stock or assets, joint venture or
otherwise of a direct or indirect ownership interest or investment in any
business or businesses whose annual revenues, net income or assets is
equal or greater than 20% of the annual revenues, net income or assets of
Excalibur.
However, if the Excalibur board determines in good faith, after consulting
with its outside legal counsel, that it is necessary to do so in order to comply
with its fiduciary duties to the stockholders under Delaware law, it may:
- furnish information to a third party making a third party acquisition
proposal that is similar to the information Excalibur provided Intel
prior to the execution of the contribution and merger agreement; and
- participate in the discussions and negotiations regarding the proposal or
offer.
In order for the Excalibur board to take the above actions in response to a
proposal for a third party acquisition:
- the proposal for the third party acquisition must be unsolicited;
- the board must determine, based on consultation with its financial
advisor, that the proposal is from a third party that is capable of
consummating a "superior proposal" as defined below; and
- the board may only take these actions for so long as the board determines
that its actions are likely to lead to a superior proposal.
Excalibur is not prevented from taking and disclosing to its stockholders
its position with respect to a third party acquisition proposal in order to
comply with Rules 14d-9 and 14e-2 under the Securities Exchange Act of 1934.
A "superior proposal" for Excalibur under the contribution and merger
agreement means a bona fide proposal:
- to acquire for consideration consisting solely of cash and/or securities,
all of the outstanding shares of Excalibur, all or substantially all of
the assets, of Excalibur, or newly issued securities of Excalibur or its
successor representing at least 60% of the equity of Excalibur or its
successor after giving effect to the issuance of the securities;
- that is fully-financed and contains terms that a majority of the
Excalibur board determines in good faith, based on the written advice of
its financial advisor, to be more favorable to the Excalibur stockholders
than the combination;
- that a majority of the Excalibur board determines in good faith, after
consulting with its financial advisor, to be reasonably capable of being
completed taking into account all legal, financial, regulatory and other
aspects of the proposal and the person making the proposal;
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- that does not contain a "right of first refusal" or "right of first
offer" with respect to any counter-proposal that Intel might make; and
- that does not contain any financing or "due diligence" condition.
Under the contribution and merger agreement, the Excalibur board may not
withdraw or modify its recommendation of the combination unless a majority of
the board members determine in good faith, after consulting with outside legal
counsel, that they would be required to do so in order to comply with their
fiduciary duties to the Excalibur stockholders under Delaware law. In this case,
the board may withdraw its recommendation of the combination or approve or
recommend a superior proposal, but only after the occurrence of the following
events:
- providing written notice to Intel advising Intel that the board has
received a superior proposal, specifying the material terms and
conditions of the superior proposal and identifying the person or group
making the superior proposal, and
- if Intel does not, within five business days after Intel's receipt of
Excalibur's notice, make an offer that a majority of the board members
determine in good faith, after consultation with its financial advisors,
to be at least as favorable to Excalibur's stockholders as the superior
proposal.
In any event, Excalibur shall not be entitled to enter into any agreement
with respect to a superior proposal until it terminates the contribution and
merger agreement and pays Intel the termination fees and all other amounts
required under the agreement.
Stockholders' Meetings
We agreed to call a meeting of our stockholders to be held as promptly as
practicable to vote on the combination. Subject to the discussion above under
"-- No Solicitation," we agreed to recommend that our stockholders adopt and
approve the combination and the Convera stock option plan.
Director and Officer Indemnification
After the closing of the combination, Convera will indemnify the present
and former directors and officers of Excalibur. The directors and officers will
be indemnified against costs or expenses (including attorneys' fees),
liabilities or amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation pertaining to any matter existing at or prior
to the closing of the combination. The officers and directors will be
indemnified whether the claim is asserted or claimed prior to, at or after the
closing of the combination. The indemnification will be to the fullest extent
required or permitted under Delaware law. We will also be obligated to advance
expenses as incurred to the fullest extent permitted.
For six years after the closing of the combination, Convera will, or will
cause Excalibur to, maintain, to the extent available in the market, a
directors' and officers' liability insurance policy covering those persons who
are covered as of the date of the contribution and merger agreement by our
directors' and officers' liability insurance policy. The coverage will be at
least as favorable as our existing coverage. However, Convera and Excalibur will
not be required to spend over three times the annual premium paid by us for
coverage. If the premium would at any time exceed three times the current
premium, then Convera or Excalibur will maintain insurance policies which
provide the maximum coverage available at an annual premium equal to three times
the current premium of Excalibur.
Convera is required to maintain directors' and officers' liability
insurance covering its directors and officers on terms and in amounts as are
substantially similar to those provided for in Excalibur's current directors'
and officers' liability insurance policies. This requirement will last until the
sixth anniversary of the closing of the combination or sooner if Intel
beneficially owns less than 20% of the outstanding Convera Class A and Class B
common stock considered as a single class.
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Employee Benefits
Convera will assume and honor and make required payments when due under all
benefit plans maintained or contributed to by Excalibur that are applicable to
any employee, director or stockholder of Excalibur or any subsidiary, whether
current or former, or their beneficiaries. However, Convera may amend or
terminate any Excalibur benefit plan according to its terms.
For any welfare plans in which Excalibur or Intel employees are eligible to
participate after the closing of the combination, Convera will:
- waive all limitations about preexisting conditions exclusions and waiting
periods for participation and coverage requirements for these employees;
and
- provide each of these employees with credit for any co-payments and
deductibles paid prior to the closing of the combination in satisfying
any applicable deductible or out-of-pocket requirements under any welfare
plan.
Intel shall be designated a "Predecessor Employer" for Excalibur's 401(k) plan
that Convera will assume.
Non-Disclosure Agreements with Excalibur Employees
Excalibur will take reasonable efforts to cause its employees to sign
invention assignment and non-disclosure agreements that are acceptable to Intel.
These agreements will be in effect as long as the employee works for Convera.
Takeover Statutes
If any law concerning corporate takeover is or becomes applicable to the
combination, Excalibur and the board of Excalibur shall promptly take any action
and grant any approvals necessary to allow the combination to be completed.
Stock Options
Excalibur will take any required action that:
- is necessary for Convera to assume options to purchase Excalibur common
stock that will become options to purchase Convera stock as a result of
the combination;
- prevents the voluntary acceleration of the vesting or exercisability of
any options to purchase Excalibur common stock granted after April 30,
2000; or
- prevents the transactions contemplated by the contribution and merger
agreement from causing any Excalibur stock option to be exchanged for
cash, converted into cash or the right to receive a cash payment or
otherwise be cashed out.
Excalibur has agreed that grants of Excalibur options after the date of the
contribution and merger agreement to new employees or in connection with the
offer of new employment with existing employees will:
- not include or be subject to any provisions that accelerate vesting or
exercisability because of the combination;
- not be greater than those grants made to employees of a similar grade,
consistent with past practices; and
- not have an exercise price below the fair market value of the Excalibur
common stock on the date of grant.
Prior to the closing of the combination, Excalibur cannot grant options to any
one new employee to purchase in excess of 25,000 shares of Excalibur common
stock unless approved by Intel.
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Nasdaq
Convera has filed an initial listing application with the Nasdaq National
Market relating to the shares of the Convera Class A common stock to be issued
in connection with the combination. Convera will use reasonable efforts to cause
these shares to be listed, upon official notice of issuance, prior to the
closing of the combination. Convera, for as long as it satisfies the applicable
listing requirements of Nasdaq, or any other national securities exchange on
which the capital stock of Convera is traded, shall use commercially reasonable
efforts to cause the Convera Class A common stock to be listed on Nasdaq, or any
other national securities exchange. However, Convera is not prohibited from
taking any action or entering into any transaction that would cause Convera, or
its capital stock, to fail to satisfy any of these requirements.
Executive Officers and Board of Directors of Convera
See "Directors and Management of Convera Following the
Combination -- Directors" on page 42 and "-- Management and Executive Officers
of Convera" on page 43.
Tax Matters
Excalibur and Convera will not take any action that would cause the
combination to become a taxable transaction.
Incurrence of Debt
Convera will not, during the year after the closing of the combination,
directly or indirectly incur any debt in excess of $500 million in the
aggregate.
Subcontract
Under the contribution and merger agreement, Intel will assign to Convera
the contracts that have been entered into by the Interactive Media Services
division. One of these contracts, a software and license agreement between Intel
and Quokka Sports, Inc., encompasses numerous areas of services to be provided
by Intel to Quokka that are in addition to and separate from the services
performed by the IMS division. Because Intel, not Convera, will perform these
other, non-IMS division, services after the closing of the combination, Intel
will remain the primary obligor under the agreement with Quokka, and Convera
will act as a subcontractor for the IMS division services.
Intel and Convera have agreed in general to the terms of such subcontract,
which will be customary for subcontracts and projects of this type and will be
comparable to similar arms' length subcontracts entered into by Intel with other
third parties. We expect that the actual terms of the subcontract will be
discussed and finalized following the completion of the combination. Under the
subcontract, Intel will pass through all revenue associated with that portion of
the Quokka agreement to Convera, and Convera's obligations will be consistent
with performance obligations expected of the IMS division, had it remained at
Intel. Examples of the type of work to be performed under the subcontract
include:
- development of multiple stream management software;
- further development projects to be defined on an ongoing basis in
accordance with Quokka's needs, consistent with the amount of monies
earmarked for development projects as provided in the Quokka agreement;
and
- media services work including interactive media services (such as
digitization, integration, management, distribution).
Retention Bonuses
Intel will pay to Convera the aggregate amount required to fund retention
bonuses for each of the employees in Intel's Interactive Media Services division
who become Convera employees in amounts previously agreed to by Convera and
Intel. Intel will make this payment within five days of receiving written
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confirmation from Convera of those former Intel employees that remain employed
by Convera on April 30, 2001. Convera will pay those retained employees within
five days of receiving the retention bonus funds from Intel.
Secondment
In order to assist with the transition of Intel's Interactive Media
Services division to Convera, Intel will temporarily transfer, or second, to
Convera a number of employees in Intel's Interactive Media Services division who
do not become Convera employees on the closing of the combination. The
secondment will last for up to 12 months from the closing of the combination.
The number of seconded Intel employees will be limited to that number of
employees, which when added to the number of employees in Intel's Interactive
Media Services division who become Convera employees, satisfies the condition to
closing contained in the contribution and merger agreement relating to the
minimum number of IMS employees that shall become employees of Convera or
seconded by Convera. See "The Contribution and Merger Agreement and Related
Agreements -- Conditions to Consummation of the Combination" beginning on page
54. Convera will reimburse Intel for all amounts payable by Intel for each
seconded employee up to the amount of aggregate compensation Convera would have
paid to the seconded employee if the seconded employee were an employee of
Convera during the secondment period. The amount which Convera would have paid
will be based on compensation paid by Convera to similarly situated former Intel
employees.
Sublease
Intel will sublease to Convera its sales office in Santa Clara, California
previously agreed to by Intel and Convera on terms and conditions to be agreed
by Intel and Convera.
Other Covenants
Under the contribution and merger agreement, each of Excalibur and Intel
has also agreed to:
- file with the SEC this proxy statement/prospectus and the registration
statement;
- do all things necessary and proper under the law to complete the
combination;
- cooperate with each other in preparation of any filings made with
governmental entities in connection with the combination;
- give the other party access to all its employees, properties, books,
contracts, commitments and records, and to furnish related information
reasonably requested by the other party;
- provide the other party with unaudited consolidated balance sheets or
management accounting reports monthly;
- consult with the other party, and use reasonable efforts to agree upon
press releases or other public statements concerning the combination;
- give prompt notice to the other party of, and use reasonable efforts to
cure, any circumstance which causes a breach of any representation,
warranty, covenant or agreement;
- make any necessary additions or modifications to the disclosure schedules
of the contribution and merger agreement;
- work together to develop procedures to protect the intellectual property
rights of Convera and Excalibur and to protect the confidential
information related to this intellectual property; and
- cooperate to minimize any sales or similar taxes imposed upon Intel's
contribution of assets to Convera.
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CONDITIONS TO CONSUMMATION OF THE COMBINATION
The obligations of Excalibur and Intel to effect the combination do not
arise until the following conditions have been satisfied or waived:
- approval of the combination by the Excalibur stockholders;
- no government entity or regulatory body action which has the effect of
making the combination illegal or otherwise prohibits the combination;
- receipt of approvals and completion of filings with government entities
or regulatory bodies necessary to complete the combination;
- this proxy statement/prospectus has been cleared by the SEC and is not
subject to any stop order;
- effectiveness of the registration statement which this proxy
statement/prospectus forms a part;
- receipt of all necessary state securities laws permits or qualifications;
- expiration or termination of any applicable antitrust waiting period;
- the shares of Convera Class A common stock have been registered under
Form 8-A of the Exchange Act, and this registration will have been
declared effective and not subject to any stop order;
- the shares of Convera Class A common stock to be issued in the
combination will have been approved for listing on the Nasdaq National
Market;
- Convera and Intel have entered into licensing agreements related to the
contributed assets;
- Convera has adopted the amended and restated certificate of incorporation
and bylaws as set forth in the contribution and merger agreement;
- Convera has adopted the Convera 2000 stock option plan;
- Convera has adopted a standard director and officer indemnification
agreement and obtained a directors' and officers' liability insurance
policy; and
- Convera has granted, under the Convera stock option plan, options to
purchase shares of Convera Class A common stock to employees of Intel and
certain employees of Excalibur who will become employees of Convera
following the consummation of the combination, with an exercise price
equal to the greater of (i) $32.16 or (ii) 25% of the average of the
closing prices of Excalibur common stock as reported on the Nasdaq Stock
Market for the five trading days immediately preceding the consummation
of the combination; except that if the average of the closing prices of
Excalibur common stock for the five trading days immediately preceding
the consummation of the combination is less than $32.16, then the
exercise price for these options shall be the average of the closing
prices of the Excalibur common stock for the five trading days
immediately preceding the consummation of the combination.
In addition to the obligations described above, the obligation of Excalibur
to complete the combination is subject to the satisfaction or waiver of the
following conditions:
- the representations and warranties of Intel in the contribution and
merger agreement will be true and correct as of the date of the
contribution and merger agreement and as of the closing of the
combination, except for inaccuracies which, have not had and are not
likely to have a material adverse effect on the contributed assets;
- Intel will have materially performed all obligations required to be
performed by it under the contribution and merger agreement at or prior
to the closing of the combination unless these breaches have not and are
not likely to have a material adverse effect on the contributed assets;
- 70% of the employees of Intel named on a schedule to the contribution and
merger agreement and 50% of all other employees who are currently working
in Intel's Interactive Media Services division have indicated their
intent to become employed by Convera or shall have been seconded to
Convera by
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Intel, as long as, in any case, at least 40% of these other IMS employees
become employees of Convera;
- Intel has transferred the contributed assets to Convera;
- from the date of the contribution and merger agreement through the
closing of the combination, there shall not have occurred a material
adverse effect on the contributed assets; and
- in connection with the compliance by Convera with any applicable law or
obtaining any necessary consent from a governmental agency, Convera shall
not be required to sell any assets or business, and Convera shall not be
prohibited from owning any material portion of Excalibur's business or
assets or the assets contributed by Intel.
Similarly, the obligations of Intel to complete the combination are subject
to the satisfaction or waiver of the following conditions:
- the representations and warranties of Convera, Excalibur and Transitory
in the contribution and merger agreement will be true and correct as of
the date of the contribution and merger agreement and as of the closing
of the combination, except for inaccuracies which, have not had and are
not likely to have a material adverse effect on Excalibur;
- Excalibur, Convera and Transitory will have materially performed all
obligations required to be performed by them under the contribution and
merger agreement at or prior to the closing of the combination unless
these breaches have not and are not likely to have a material adverse
effect on Excalibur;
- from the date of the contribution and merger agreement through the
closing of the combination, there shall not have occurred a material
adverse effect on Excalibur;
- in connection with the compliance by Intel with any applicable law or
obtaining any necessary consent form a governmental agency, Intel shall
not be required to sell any assets or business, and Intel shall not be
prohibited from owning any material portion of Excalibur's business or
assets;
- 70% of the employees of Excalibur named on a schedule to the contribution
and merger agreement and 50% of all other Excalibur employees have
indicated their intent to become employed by Convera;
- Excalibur shall have entered into invention assignment and non-disclosure
agreements with the nine people named on a schedule to the contribution
and merger agreement;
- nothing has happened, in the reasonable opinion of Intel, that would
create a significant risk that the transaction would become taxable; and
- Intel and Convera have entered into a registration rights agreement.
TERMINATION; TERMINATION FEES AND EXPENSES
The contribution and merger agreement may be terminated at any time before
the closing of the combination. This termination may occur before or after
approval of the combination by the stockholders of Excalibur in the following
manner:
- by mutual written consent of Intel and Excalibur;
- by either Intel or Excalibur if a court of competent jurisdiction or
other governmental entity has issued a nonappealable final order or taken
any other nonappealable final action permanently restraining, enjoining
or prohibiting the combination; or
- by either Excalibur or Intel if the combination has not been consummated
by December 31, 2000; however, the right to terminate under this clause
is not available to a party whose failure to fulfill an obligation under
the contribution and merger agreement is the cause of the failure of the
combination to occur.
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- by Excalibur, if any of the following occurs:
-- Intel breaches its representations and warranties or its
representations and warranties become untrue, in either case resulting
in a material adverse effect on the contributed assets, so long as
Excalibur, Convera and Transitory do not materially breach any of their
obligations;
-- Intel breaches its covenants in a manner that causes or would
reasonably be expected to cause a material adverse effect on the
contributed assets or Intel's ability to complete the combination, and
Intel does not cure this breach within ten business days so long as
Excalibur, Convera and Transitory do not materially breach any of their
obligations;
-- Excalibur convenes the annual meeting and fails to obtain the necessary
vote of its stockholders to approve the contribution and merger
agreement and combination;
-- the board of Excalibur receives a superior proposal to the combination
and pays the termination fee to Intel as described below; or
-- there occurs a material adverse effect on the assets to be contributed
by Intel to Convera.
- by Intel, if any of the following occurs:
-- Excalibur, Convera or Transitory breaches its representations and
warranties or its representations and warranties become untrue, in
either case resulting in a material adverse effect on Excalibur, so
long as Intel does not materially breach any of its obligations;
-- Excalibur, Convera or Transitory breaches its covenants in a manner
that causes or would reasonably be expected to cause a material adverse
effect on Excalibur or Excalibur's ability to complete the combination
and Excalibur, Convera or Transitory does not cure this breach within
ten business days so long as Intel does not breach any of its
obligations;
-- the board of Excalibur recommends to its stockholders a superior
proposal to the combination;
-- the board of Excalibur withdraws or adversely modifies its approval or
recommendation of the combination;
-- Excalibur convenes the annual meeting and fails to obtain the necessary
vote of its stockholders to approve the contribution and merger
agreement and combination; or
-- there occurs a material adverse effect on Excalibur.
In the event of the termination of the contribution and merger agreement by
Intel or Excalibur as provided above, the contribution and merger agreement will
become void. In that case, there will be no liability or obligation, except as
described below, on the part of Intel, Excalibur, Convera or Transitory, or
their respective officers, directors, stockholders or affiliates.
There are exceptions to the limitation of liability with respect to
termination fees and expenses, and termination will not limit liability for a
willful breach of the merger agreement.
Except as described below, whether or not the combination is consummated,
all fees, costs and expenses incurred in connection with the combination will be
paid by the party incurring the expenses.
Termination Fee and Expenses
Excalibur will pay to Intel, as liquidated damages and not as a penalty, a
termination fee of $20 million immediately upon the occurrence of any of the
following events:
- the Excalibur board receives a superior proposal from a third party,
complies with the requirements of the contribution and merger agreement
for responding to a superior proposal and terminates the contribution and
merger agreement as a result of entering into an agreement for the
superior proposal;
- the board of directors of Excalibur recommends to the Excalibur
stockholders a superior proposal to the combination;
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- the board of directors of Excalibur withdraws or adversely modifies its
approval or recommendation of the combination;
- Excalibur, Convera or Transitory breaches its representations and
warranties or its representations and warranties become untrue, in either
case resulting in a material adverse effect on Excalibur, so long as
Intel does not materially breach any of its obligations and (i) there is
outstanding or announced an offer by a third party for a third party
acquisition and the third party acquisition occurs or (ii) there is no
similar offer outstanding or announced, but Excalibur enters into an
agreement for a third party acquisition within nine months after the
termination of the contribution and merger agreement;
- Excalibur, Convera or Transitory breaches its covenants in a manner that
causes or would reasonably be expected to cause a material adverse effect
on Excalibur or Excalibur's ability to complete the combination and
Excalibur, Convera or Transitory does not cure this breach within ten
business days so long as Intel does not materially breach any of its
obligations and (i) there is outstanding or announced an offer by a third
party for a third party acquisition and the third party acquisition
occurs or (ii) there is no similar offer outstanding or announced, but
Excalibur enters into an agreement for a third party acquisition within
nine months after the termination of the contribution and merger
agreement;
- Excalibur convenes the annual meeting and fails to obtain the necessary
vote of its stockholders to approve the contribution and merger agreement
and combination and (i) at the time of the meeting there is outstanding
an offer by a third party for a third party acquisition and (ii)
Excalibur enters into an agreement for a third party acquisition within
nine months after the termination of the contribution and merger
agreement.
If the combination is terminated because of any of the following events,
Excalibur shall also pay to Intel $2.5 million as reimbursement for costs, fees
and expenses:
- Excalibur convenes the annual meeting and fails to obtain the necessary
vote of its stockholders to approve the contribution and merger agreement
and combination;
- the Excalibur board receives a superior proposal from a third party,
complies with the requirements of the contribution and merger agreement
for responding to a superior proposal, terminates the contribution and
merger agreement as a result of entering into an agreement for the
superior proposal and pays the termination fee to Intel;
- Excalibur, Convera or Transitory breaches its representations and
warranties or its representations and warranties have become untrue, in
either case resulting in a material adverse effect on Excalibur, so long
as Intel does not materially breach any of its obligations;
- Excalibur, Convera or Transitory breaches its covenants in a manner that
causes or would reasonably be expected to cause a material adverse effect
on Excalibur or Excalibur's ability to complete the combination and
Excalibur, Convera or Transitory does not cure this breach within ten
business days so long as Intel does not materially breach any of its
obligations;
- the board of directors of Excalibur recommends to Excalibur stockholders
a superior proposal to the combination; or
- the board of directors of Excalibur withdraws or adversely modifies its
approval or recommendation.
This reimbursement payment shall be in addition to the termination fee
which may otherwise be payable by Excalibur to Intel.
If the contribution and merger agreement is terminated on account of either
of the following events, Intel shall pay to Excalibur $2.5 million as
reimbursement for costs, fees and expenses.
- Intel breaches its representations and warranties or its representations
and warranties become untrue, in either case resulting in a material
adverse effect on the assets to be contributed to Convera, so long as
Excalibur, Convera and Transitory do not materially breach any of their
obligations; or
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- Intel breaches its covenants in a manner that causes or would reasonably
be expected to cause a material adverse effect on the contributed assets
or Intel's ability to complete the combination, and Intel does not cure
this breach within ten business days so long as Excalibur, Convera and
Transitory do not materially breach any of their obligations.
AMENDMENT
The contribution and merger agreement may be amended by Excalibur, Intel,
Convera and Transitory at any time before or after approval of the combination
by the stockholders of Excalibur. However, after stockholder approval, the
parties may not amend the contribution and merger agreement if the amendment
requires the approval of the Excalibur stockholders unless they obtain
stockholder approval of the amendment. Amendments must be in a written document
signed by each of the parties.
VOTING AGREEMENTS
Allen & Company Incorporated and each of the directors and executive
officers of Excalibur, who together owned approximately 31% of the Excalibur
common stock outstanding on the record date, have executed a voting agreement
and irrevocable proxy with Intel.
The stockholders signing the voting agreement have agreed to vote their
Excalibur shares, including shares acquired by them following the date of the
agreement, in favor of approval of the contribution and merger agreement and the
combination and against each of the following actions:
- any action or agreement that would result in a breach in any respect of
any covenant, representation or warranty or any other obligation or
agreement of Excalibur, Convera or Transitory under the contribution and
merger agreement;
- any third party acquisition of Excalibur;
- any change in a majority of the individuals who, as of the date of the
agreement, constitute the board of directors of Excalibur;
- any extraordinary corporate transaction, such as a merger, consolidation
or other business combination involving Excalibur or any of its
subsidiaries and any third party;
- a sale, lease, transfer or disposition of any assets of Excalibur's or
any of its subsidiaries' business outside the ordinary course of
business, or any assets which are material to its business whether or not
in the ordinary course of business, or a reorganization,
recapitalization, dissolution or liquidation of Excalibur or any of its
subsidiaries;
- any material licensing, distribution or reseller agreement or arrangement
involving Excalibur;
- any change in the present capitalization of Excalibur or any amendment of
the certificate of incorporation or bylaws of Excalibur or its
subsidiaries;
- any other material change in Excalibur's corporate structure or affecting
its business; or
- any other action which is intended, or could reasonably be expected, to
impede, interfere with, delay, postpone or materially adversely affect
the combination or any of the transactions contemplated by the
contribution and merger agreement.
In addition, these stockholders have granted to Intel an irrevocable proxy
to vote their Excalibur shares as specified above, and they have agreed not to
transfer any of their shares unless the transferee becomes similarly obligated.
The voting agreements will continue in effect until the earliest of:
- the termination of the contribution and merger agreement in accordance
with its terms;
- the closing of the combination; and
- December 31, 2000.
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REGISTRATION RIGHTS AGREEMENT
The contribution and merger agreement provides that as a condition to the
combination, Convera will enter into a registration rights agreement with Intel.
The form of registration rights agreement provides that so long as Intel owns at
least 20% of the outstanding common equity of Convera, Intel has the right to
demand that Convera file a registration statement under the Securities Act of
1933 with respect to Intel's shares of Convera Class A common stock, as well as
any Class A common stock issuable upon conversion of the Convera Class B common
stock to be issued to Intel. Intel has the right to demand up to a maximum of
two of these registrations, and Convera is required to use its best efforts to
effect these registrations. If Intel owns less than 5% of the outstanding common
equity, these demand registration rights may also be exercised by Intel's
permitted assignees, which include Intel's wholly-owned subsidiaries and
transferees acquiring 5% or more of Convera's outstanding Class A common stock.
Intel or the permitted assignees are not entitled to demand a registration prior
to one year from the closing of the combination unless Convera incurs more than
$500 million of debt. During the three month period following the first
anniversary of the closing of the combination, Intel may exercise the demand
registration rights with respect to a maximum of 50% of the Class A common stock
received by Intel in the combination, including any Class A common stock
issuable upon conversion of the Class B common stock received by Intel in the
combination. Thereafter, Intel may exercise the demand registration rights with
respect to all of its shares of Class A common stock, including any Class A
common stock issuable upon conversion of the Class B common stock.
Intel or Intel's permitted assignees are also entitled to demand an
unlimited number of times that Convera register the shares of Class A common
stock under the Securities Act on Form S-3 or any similar short form
registration statement then available to Convera, provided the aggregate
offering price of the shares registered exceeds $1,000,000. Intel or the
permitted assignees are not entitled to demand an S-3 registration prior to one
year from the closing of the combination unless Convera incurs more than $500
million of debt. During the three month period following the first anniversary
of the closing of the combination, Intel or the permitted assignees may exercise
the S-3 demand registration rights with respect to a maximum of 50% of the Class
A Common Stock received by Intel in the combination, including any Class A
common stock issuable upon conversion of the Class B common stock received by
Intel in the combination. Thereafter, Intel or the permitted assignees may
exercise the S-3 demand registration rights with respect to all of its shares of
Class A common stock, including any Class A common stock issuable upon
conversion of the Class B common stock.
In addition to the demand and S-3 registration rights described above, the
registration rights agreement also provides Intel with piggyback registration
rights which allow Intel to include its shares on registrations initiated by
Convera. These registration rights are subject to various conditions and
limitations, including the right of the underwriters of an offering to limit the
number of shares that may be included in the offering. Convera is generally
required to bear all of the expenses of these registrations, except underwriting
discounts and selling commissions. The registration rights granted to Intel and
its permitted assignees terminate after seven years, except that they will
terminate sooner with respect to Intel or any assignee if all of the shares held
by Intel or an assignee may be sold under Rule 144 under the Securities Act in
one transaction without exceeding the volume limitations of Rule 144. Under the
registration rights agreement, Convera may not grant registration rights to
other parties without the consent of Intel unless the rights which are granted
to other parties are subordinate to Intel's rights. Registration of any of
Intel's shares will result in these shares becoming freely tradable without
restriction under the Securities Act immediately upon the effectiveness of the
registration with the SEC.
LICENSE AGREEMENTS
Structure of Intellectual Property Contributions
Under the contribution and merger agreement, Intel will contribute various
assets, including intellectual property assets, to Convera. All of these assets
are set forth on Exhibit A to the contribution and merger agreement, which also
sets forth the method of contribution. With respect to intellectual property
assets, Exhibit A to the contribution and merger agreement sets forth two
methods of contribution.
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The first method of contribution is assignment and transfer with a license
back to Intel. Under this method, Intel will directly contribute to Convera the
various patents, patent applications and other intellectual property assets that
are set forth on Exhibit A to the contribution and merger agreement under
"Assets Contributed by Assignment and Transfer." Intel and Convera will effect
such contribution through an assignment or other applicable and customary
transfer documentation. After such contribution, Convera will own such rights
and assets. Convera will then grant a non-exclusive license back to Intel to
continue to use the intellectual property assets that have been transferred to
Convera. The terms of this license from Convera to Intel are described below
under "-- Transferred IP License Agreement from Convera to Intel."
The second method of contribution is a non-exclusive license from Intel to
Convera of the various patents, patent applications and other intellectual
property assets that are set forth on Exhibit A to the contribution and merger
agreement under "Assets Contributed by License." The terms of this license from
Intel to Convera are described below under "-- IP License Contribution Agreement
from Intel to Convera."
Benefit of Contribution; Nature of Contributed Intellectual Property
The contributed intellectual property consists of several different
inventions and know-how pertaining to the general subject of causing a piece of
software to be secure against tampering, and to enable the management of secure
content delivery over a medium such as the internet. All of the intellectual
property rights are set forth on Exhibit A to the contribution and merger
agreement. In particular, the intellectual property assets include:
- a collection of software tools and know-how for creating or integrating a
Digital Rights Enforcement software system, manipulating and integrating
video content and data, or protecting data streams such as during
internet delivery of protected music downloads;
- 14 patents and patent applications in the area of tamper resistant
software and content security, including various methods of enabling
tamper resistance; and
- source code components, including portions of custom developed software,
or modules, which are used in current applications, or can be used or
reused in other customized applications, such as providing an attendee at
a sports event the ability to use a computer built into the seat-back
directly in front of the attendee, to watch a customized replay, or order
food, drinks or merchandise for delivery in the sports event venue.
As a result of this contribution of intellectual property rights, Convera
will be able to utilize and develop the intellectual property assets to
implement its business strategy. For example, Convera will be able to utilize
the contributed intellectual property related to content protection to support
the recently announced agreement with the National Basketball Association for
the development and distribution of interactive NBA content. In addition,
Convera, not Intel, will have the legal ability to bring suit against potential
infringers of the patents that have been assigned to Convera. Intel will retain
the legal ability to bring suit against potential infringers of the Intel
patents that have been licensed to Convera.
Transferred IP License Agreement from Convera to Intel
Under the transferred IP license agreement, Convera will grant to Intel a
non-exclusive license under all of the patents, patent applications, patent
rights and other intellectual property assets that are assigned by Intel to
Convera under the contribution and merger agreement. All of these rights and
assets are set forth on Exhibit A to the contribution and merger agreement under
"Assets Contributed by Assignment and Transfer," and include three patents and
seven patent applications.
The license to be granted under the transferred IP license agreement will
be a non-exclusive, royalty free, fully paid and worldwide license. Under this
license, despite the fact that the intellectual property to be
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licensed to Intel will be owned by Convera, Intel will have the right to utilize
the intellectual property to be contributed to Convera. In particular, Intel
will have the right, among other things, to:
- make, have made, use, directly or indirectly sell or otherwise dispose
of, any software product that incorporates the licensed intellectual
property that is developed by or on behalf of Intel;
- perform related services;
- make, use and/or import any equipment and practice any method or process
for use in the manufacture of any products that incorporate the licensed
intellectual property; and
- use, copy, display, perform, create derivative works and modifications,
distribute or otherwise dispose of or commercially exploit in any manner
any software product that is developed by or on behalf of Intel and that
incorporates or utilizes any copyrightable subject matter, such as
software, that was contributed by Intel to Convera.
IP License Contribution Agreement from Intel to Convera
Under the IP license contribution agreement, Intel will grant to Convera a
non-exclusive license under the various patents, patent applications and other
intellectual property assets that are set forth on Exhibit A to the contribution
and merger agreement under "Assets Contributed by License." These rights and
assets include six patents, 29 patent applications and other intellectual
property assets that are owned or controlled by Intel.
The license to be granted under the IP license contribution agreement will
be a non-exclusive, royalty free, fully paid and worldwide license. Under this
license, despite the fact that the intellectual property to be licensed to
Convera will be owned by Intel, Convera will have the right to utilize the
intellectual property covered by agreement. In particular, Convera will have the
right, among other things, to:
- make, have made, use, directly or indirectly sell or otherwise dispose
of, any software product that incorporates the licensed intellectual
property that is developed by or on behalf of Convera;
- perform related services;
- make, use and/or import any equipment and practice any method or process
for use in the manufacture of any products that incorporate the licensed
intellectual property; and
- use, copy, display, perform, create derivative works and modifications,
distribute or otherwise dispose of or commercially exploit in any manner
any software product that is developed by or on behalf of Convera and
that incorporates or utilizes any copyrightable subject matter, such as
software, that was contributed by Intel to Convera.
The IP license contribution agreement also contains a restriction against
either Intel or Convera sublicensing, distributing or otherwise making available
to a third party information or software relating to Intel's software and
intellectual property for generating encryption keys used to prevent
reverse-engineering or hacking of software.
Terms Applicable to Both of the License Agreements
Both of the license agreements include customary terms regarding
limitations on the license granted, such as restrictions against sublicense of
the licensed intellectual property, covenants not to sue and confidentiality. In
particular, both of the license agreements include provisions with respect to
the following:
- the license of the intellectual property is subject to restrictions
against sublicense, distribution and transfer of the licensed
intellectual property without the consent of the licensor party;
- the license granted by Intel to Convera only covers the products of
Convera and the license granted by Convera to Intel only covers the
products of Intel; neither license covers foundry activities that Intel
or Convera may undertake on behalf of third parties;
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- each of Convera and Intel agree not to assert any patent that is related
to any transferred patent that is owned by it against the other party or
their subsidiaries, customers, distributors, agents and contractors based
on an allegation that the manufacture, use, import, offer for sale or
sale of any licensed products by the other party or any of its
subsidiaries or any process or method employed in the manufacture,
testing, distribution or use thereof by the other party or any of its
subsidiaries constitutes an infringement, contributory infringement of,
or an inducement to infringe, any of the related patents owned by it;
- subject to the license granted, the licensor party will retain sole and
exclusive ownership of, and all right, title and interest in, all of the
intellectual property it licenses to the other party and to and all
enhancements or improvements of such property acquired or made by the
licensor party;
- neither party will have any obligation to disclose or license to the
other party any improvements it makes to the licensed intellectual
property after the date of the applicable license agreement; and
- each party agrees to enter into non-disclosure agreements with respect to
confidential information in connection with the license agreements.
NBA AGREEMENTS
On September 13, 2000, Intel and Convera each entered into an agreement
with NBA Media Ventures, LLC and WNBA Enterprises, LLC, referred to herein
collectively as the NBA. Intel entered into a services agreement under which
Intel agreed to provide services and technologies for the development of
interactive NBA products over a term of ten years, which will be assigned to
Convera upon consummation of the combination. Convera, on the other hand,
entered into a contribution agreement under which the NBA will contribute assets
to Convera in exchange for stock of Convera concurrent with the combination.
Services Agreement
Under the services agreement, Intel agreed to provide data and video
integration and NBA content (including highlights of recent games and classic
moments) management, logging, indexing and retrieval, as well as other related
services. Intel, the NBA and Convera have agreed that, concurrently with or
promptly following the closing of the combination, Intel will assign its rights
and obligations under the services agreement to Convera and Convera will agree
to perform the required services and will be entitled to receive any
compensation payable from the NBA.
Convera will receive in cash a percentage of NBA revenues from the sale of
NBA products subject to the services agreement, as well as a percentage of NBA
revenues from advertising and sponsorship related to the covered NBA products.
The NBA will have the exclusive right to make all sales of NBA products. The NBA
products will include highlights on demand (audio or video excerpts of recent
games that are made available over the internet in a searchable format), archive
online (audio or video excerpts of past games that are made available over the
internet in a searchable format), television broadcast enhancements and real
time distribution of NBA games over broadband networks. Convera will be the
NBA's provider of services related to the development and distribution of those
products for the term of the services agreement, subject to the NBA's right to
authorize major telecasters and certain other third-parties to provide
television broadcast enhancements and real time distribution of NBA games.
The services agreement requires Convera to make commercially reasonable
efforts to commence and complete buildouts of the various arenas where the NBA
teams play in order to obtain game feed content and make it available on the
internet and to perform other services. The buildouts will include data
transmission capability and broadband connection for acquisition of up to five
real-time game feeds from each arena. The buildouts will involve capital
expenditures, the amounts of which will vary depending on arena structure and
local labor costs. Subject to limitations, Convera is also required to use
commercially reasonable efforts to construct and equip a related facility to
obtain the game feeds and other content from the arenas, as well as to aggregate
and manage the content and apply Convera's technologies and services to the
NBA's content.
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Convera expects to fund these expenditures with working capital, which may
include a portion of the $150 million in cash to be contributed to Convera by
Intel.
Under the services agreement, if the NBA enters into an agreement with a
third party for the distribution of NBA content, the NBA is required to use
commercially reasonable efforts to use the products and services of Convera in
connection with any such agreement. In various circumstances, if the NBA enters
into agreements with third-parties that could reasonably be expected to
substantially preclude the NBA's ability to use Convera's services or, in
limited circumstances, materially compete with the NBA products, Convera would
be entitled to "lost profit" payments from the NBA.
The services agreement provides for a ten-year term, ending on the later of
June 30, 2010 or the end of the 2010 WNBA season. In addition to termination
rights for material breach, the parties have the right to terminate if specified
revenue levels beginning in the fifth year are not achieved. The services
agreement also provides the NBA with termination rights based on, among other
things, Convera's obligation to provide "state of the art" technology and the
change of control in the ownership of Convera.
Contribution Agreement
Under the contribution agreement, the NBA will contribute the following
assets to Convera, which will have the right to use these assets in any of its
business activities:
- all of the NBA know-how, designs, inventions, concepts, ideas, documents,
business plans and other materials relating to the creation, development,
distribution and marketing of products using the content of sports and
entertainment entities;
- a database of individual customer profiles for approximately 3.5 million
basketball fans and a second database of users of NBA products;
- domain names related to sports content over the internet;
- the software program "GameStats" and its trademark registration;
- the right to use 25% of the time of NBA personnel related to technical,
broadcast operations, engineering, production and marketing and the right
to use certain production facilities; and
- a non-exclusive, twelve-year license to the NBA trademark.
Convera expects to use these contributed assets to enhance the capability
and distribution of its technology and services offerings to sports related
customers and to capitalize on the value of the NBA relationship.
In exchange for the contribution of assets, the NBA will receive shares of
Class A common stock representing 10% of the outstanding stock of Convera (13.5%
of the Class A common stock), after giving effect to the combination and the
conversion of outstanding preferred stock. Based on the number of Excalibur
shares outstanding as of November 14, 2000, Convera expects to issue 4,741,079
shares of Class A common stock to the NBA. See "Summary -- Ownership of Convera
Following Completion of the NBA Transactions" on page 7. The NBA will have
registration rights with respect to its shares of Class A common stock similar
to the registration rights of Intel described under "The Contribution and Merger
Agreement and Related Agreements -- Registration Rights Agreement" on page 59.
In addition, NBA Commissioner David Stern will join the Convera board of
directors.
The shares of Convera common stock to be issued to the NBA will be recorded
based on the fair value of such shares on the closing date of the combination.
The assets contributed by the NBA to Convera under the contribution agreement
will be amortized on a straight line basis over their respective estimated
economic useful lives as more fully described in Note 7 to the Unaudited
Combined Pro Forma Financial Information beginning on page 83. Based on the
market value of Excalibur's common stock of $51.56 on October 25, 2000, the
intangible asset would be approximately $243,634,000, and the related
amortization would be approximately $30,454,000 per year.
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COMPARISON OF STOCKHOLDERS' RIGHTS
The rights of Excalibur stockholders are currently governed by Delaware law
and the certificate of incorporation and bylaws of Excalibur. In accordance with
the contribution and merger agreement, at the closing of the combination, the
stockholders of Excalibur will become stockholders of Convera. Accordingly, upon
consummation of the combination, the rights of Excalibur stockholders who become
stockholders of Convera will be governed by Delaware corporate law and Convera's
amended and restated certificate of incorporation and bylaws. The following are
summaries of material differences between current rights of Excalibur
stockholders and those of Convera's stockholders following the combination.
The following discussions are not intended to be complete, but they do
contain all of the material differences between the Excalibur certificate of
incorporation and bylaws and the Convera amended and restated certificate of
incorporation and bylaws. You should still also refer to Delaware law, the
Convera amended and restated certificate of incorporation and the Convera
bylaws. Copies of Convera's amended and restated certificate of incorporation
and bylaws as currently proposed, are attached to this proxy
statement/prospectus as Appendices D and E. Copies of the Excalibur certificate
of incorporation and bylaws will be sent to the holders of shares of Excalibur
common stock upon request. See "Where You Can Find More Information" on page
(i).
AUTHORIZED CAPITAL STOCK
The authorized capital stock of Excalibur consists of 40 million shares of
common stock, par value $.01 per share, and one million shares of preferred
stock, par value $.01 per share. The authorized capital stock of Convera
consists of 100 million shares of Class A common stock, par value $.01 per
share, 40 million shares of Class B common stock, par value $.01 per share, and
five million shares of preferred stock, par value $.01 per share. The Convera
Class B common stock is convertible into Convera Class A common stock as
described under "Description of Convera Capital Stock Following the Combination"
beginning on page 70.
VOTING RIGHTS
Each outstanding share of Excalibur common stock is entitled to one vote,
and Excalibur's outstanding preferred stock has no voting rights. Each
outstanding share of Convera's Class A common stock is entitled to one vote, and
neither Convera's Class B common stock nor Convera's preferred stock has any
voting rights, except as may be required by Delaware law.
ALLOCATION OF CORPORATE OPPORTUNITIES BETWEEN CONVERA AND INTEL OR THE NBA AND
OTHER MATTERS CONCERNING INTEL AND THE NBA
Convera's amended and restated certificate of incorporation contains in
Article Tenth provisions which are meant to regulate, define and guide the
conduct of affairs of Convera which involve Intel or the NBA and their
respective officers and directors, including the allocation of corporate
opportunities between Convera and Intel or the NBA. Contracts or other
transactions which do not comply with these charter procedures are not
automatically void or in violation of law but shall be governed by the remaining
provisions of Convera's amended and restated certificate of incorporation and
bylaws, Delaware law and other applicable law.
Unless Intel or the NBA otherwise agrees in writing, Intel or the NBA has
the right to do each of the following:
- engage in the same or similar business activities or lines of business as
Convera;
- compete against Convera;
- do business with any potential or actual competitor, customer or supplier
of Convera; and
- employ or otherwise engage any officer or employee of Convera.
If either Intel or the NBA acquires knowledge of a potential transaction or
other matter that may be a corporate opportunity or otherwise of interest to
Intel or the NBA and Convera, neither Intel nor the NBA has
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any duty to communicate or present the corporate opportunity to Convera and
shall not be liable to Convera or its stockholders for breach of any fiduciary
duty it may otherwise have as a significant stockholder of Convera by reason of
the fact that Intel or the NBA pursues or acquires the corporate opportunity for
itself, directs the corporate opportunity to another person, or does not present
the corporate opportunity to Convera. Neither Intel nor the NBA shall have any
duty and shall not be liable even if a director or officer of Convera
(including, without limitation, any such officer or director who is also a
director, officer or employee of Intel or the NBA, as the case may be) becomes
aware of the transaction or matter in his or her capacity as a director or
officer of Convera and the director or officer discloses the transaction or
matter to directors, officers, employees or other representatives of Intel, so
long as Intel also learns or develops the information independently. Absent
these provisions, each of Intel and the NBA may have been required, under
principles of fiduciary obligations, to present such corporate opportunities to
Convera.
Convera's amended and restated certificate of incorporation provides that
the following procedures apply when a director or officer of Convera who is also
a director, officer or employee of Intel or the NBA acquires knowledge of a
potential transaction or matter that may be a corporate opportunity or otherwise
of interest to Convera and Intel or the NBA, as the case may be:
- a corporate opportunity offered or disclosed to any person who is a
director but not an officer of Convera and who is also an officer or
employee (whether or not a director) of Intel or the NBA shall belong to
Intel or the NBA, unless the opportunity is expressly offered to the
person primarily in his or her capacity as a director of Convera, in
which case the opportunity shall belong to Convera;
- a corporate opportunity offered or disclosed to any person who is an
officer (whether or not a director) of Convera and who is also a director
but not an officer or employee of Intel or the NBA shall belong to
Convera, unless the opportunity is expressly offered to the person
primarily in his or her capacity as a director of Intel or the NBA, in
which case the opportunity shall belong to Intel or the NBA; and
- a corporate opportunity offered or disclosed to any other person who is
either an officer of both Convera and Intel or the NBA, or a director of
both Convera and Intel or the NBA, shall belong to Intel or the NBA if
the opportunity is expressly offered to the person primarily in his or
her capacity as an officer or director of Intel or the NBA or to Convera
if the opportunity is expressly offered to the person primarily in his or
her capacity as an officer or director of Convera; otherwise, the
opportunity shall belong to Intel or the NBA.
Any corporate opportunity that belongs to Intel or the NBA or to Convera
pursuant to the foregoing policy shall not be pursued by the other, or directed
by the other to another person, unless and until the party to whom the corporate
opportunity belongs determines not to pursue the opportunity. This prohibition
shall cease if the party to whom the corporate opportunity belongs does not
pursue the opportunity within a reasonable time or fails to do so diligently and
in good faith.
For purposes of the amended and restated certificate of incorporation,
corporate opportunities of Convera consist of business opportunities which meet
all of the following criteria:
- Convera is financially able to undertake them;
- they are, from their nature, in the line or lines of Convera's business
as described in Convera's periodic reports filed with the SEC and are of
practical advantage to Convera; and
- they are ones in which Convera has an interest or reasonable expectancy.
For purposes of the amended and restated certificate of incorporation,
corporate opportunities do not include any transaction or matter in which
Convera, Intel or the NBA is permitted to participate pursuant to any agreement
between Convera and Intel or the NBA that has been approved by a majority of the
directors of Convera who are disinterested.
Intel and the NBA shall be deemed to have satisfied their duties under
Delaware law if any agreement, arrangement or transaction between Convera and
Intel or the NBA involves a corporate opportunity and is approved in accordance
with these charter procedures. These provisions in Convera's amended and
restated
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certificate of incorporation relating to Intel and the NBA apply so long as
Intel or the NBA owns at least 5% of the outstanding Class A common stock, after
giving effect to the conversion of all convertible securities held by Intel or
the NBA. For purposes of Convera's amended and restated certificate of
incorporation, all references to Intel and the NBA also include entities in
which Intel or the NBA, as the case may be beneficially owns 50% or more of the
voting stock, other than Convera and any majority held subsidiary of Convera.
This provision of Convera's amended and restated certificate of
incorporation is enforceable against Convera stockholders who acquire stock in
the combination and after the combination.
TRANSACTIONS BETWEEN CONVERA AND RELATED PARTIES, INCLUDING INTEL AND THE NBA
Convera's amended and restated certificate of incorporation contains in
Article Eleventh provisions which are meant to regulate and guide contractual,
corporate and other business relations of Convera which involve Intel or the
NBA, Convera's officers and directors or their respective affiliates. These
provisions are meant to supplement and not to limit the provisions of Delaware
law and the other provisions of the amended and restated certificate of
incorporation. Contracts or business relations which do not comply with these
charter procedures are not automatically void or in violation of law but shall
be governed by the remaining provisions of Convera's amended and restated
certificate of incorporation and bylaws, Delaware law and other applicable law.
Convera's amended and restated certificate of incorporation provides that
no agreement, arrangement or transaction between Convera, on the one hand, and
Intel or the NBA, Convera's directors or officers or their respective
affiliates, on the other hand, shall be void or in violation of law solely
because Intel or the NBA, Convera's officers or directors or their respective
affiliates are parties to the transaction, or solely because any of Convera's
directors or officers are present at or participate in the meeting of Convera's
board of directors or committee of the board which authorizes the transaction or
solely because his, her or their votes are counted for the purpose of approving
the transaction, if any of the following requirements are met:
- the material facts of the transaction are disclosed or are known to the
board of directors or the committee of the board that authorizes the
transaction and the board of directors or committee in good faith
approves the transaction by a majority vote of disinterested directors,
even though the disinterested directors are less than a quorum;
- the material facts of the transaction are disclosed or are known to the
holders of Convera's voting stock entitled to vote on the transaction,
and the transaction is specifically approved in good faith by vote of the
holders of a majority of the then outstanding voting stock not owned by
the related party involved in the transaction, voting together as a
single class;
- the transaction is effected in accordance with guidelines which are
approved in good faith by the majority vote of disinterested directors on
the board of directors or a committee of the board after disclosure of
the material facts related to the transaction, even though the
disinterested directors are less than a quorum, or by vote of the holders
of a majority of the then outstanding voting stock not owned by the
related party involved in the transaction, voting together as a single
class; or
- the transaction is fair as to Convera as of the time it is approved by
the board of directors, a committee of the board or Convera's
stockholders.
If any of these requirements are met, the related party involved in the
transaction will be deemed to have satisfied his, her or its duties to Convera
under Delaware law.
Convera's amended and restated certificate of incorporation provides that
Intel and the NBA shall not be liable to Convera or its stockholders for breach
of any fiduciary duty that they otherwise may have as a significant stockholder
of Convera by reason of the fact that Intel or the NBA takes any action or
exercises any rights or gives or withholds any consent in connection with any
transaction between Intel or the NBA and Convera. This provision of Convera's
amended and restated certificate of incorporation is enforceable against Convera
stockholders who acquire Convera stock in the combination and after the
combination. Also, no vote
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cast or other action taken by any person who is an officer, director or other
representative of Intel or the NBA in the person's capacity as a director of
Convera shall constitute an action or consent of or exercise of a right by Intel
or the NBA for the purpose of the transaction.
NUMBER OF DIRECTORS
Excalibur's board of directors currently consists of ten directors.
Excalibur's bylaws provide that the number of directors may increased or
decreased by a resolution of the board of directors as long as the number of
directors is no fewer than one nor more than ten. The Convera board of directors
shall initially consist of seven directors, as is specified in Convera's bylaws.
The Convera amended and restated certificate of incorporation provides that the
number of directors shall be as specified in Convera's bylaws, as the same may
be amended, as long as the number of directors is no fewer than six nor more
than twelve. See "Directors and Management of Convera Following the Combination"
beginning on page 42. The Convera amended and restated certificate of
incorporation also provides that for a period of five years from the closing of
the combination, the Convera board shall include at least two directors that are
not affiliated with Intel.
VOTING BY DIRECTORS
At meetings of the Excalibur board of directors, the presence of a majority
of the directors constitutes a quorum for the transaction of business at the
meeting. A vote of a majority of the directors present at a meeting of the
Excalibur board is required to take actions. At meetings of the Convera board of
directors, the presence of a majority of the directors constitutes a quorum for
the transaction of business at the meeting. A vote of a majority of the
directors present at a meeting of the Convera board is required to take actions.
QUORUM FOR STOCKHOLDERS MEETINGS
Excalibur's certificate of incorporation provides that the presence of at
least one-third of the shares entitled to vote at a stockholders' meeting will
constitute a quorum for the transaction of business at the meeting. Convera's
amended and restated certificate of incorporation provides that the presence of
at least a majority of the shares entitled to vote at a stockholders' meeting
will constitute a quorum for the transaction of business at the meeting. See
"Approval of Two Corporate Governance Provisions of Convera's Certificate of
Incorporation and Bylaws" beginning on page 90.
AMENDMENT OF CERTIFICATE OF INCORPORATION
Excalibur's certificate of incorporation may be amended if the change is
proposed by the board of directors and approved by the holders of a majority of
the outstanding shares of common stock. Convera's amended and restated
certificate of incorporation may be amended if the change is proposed by the
board of directors and approved by the holders of a majority of the outstanding
shares, except that any change in the provisions of the amended and restated
certificate of incorporation discussed above under "-- Transactions Between
Convera and Related Parties, Including Intel and the NBA" and "-- Allocation of
Corporate Opportunities Between Convera or the NBA and Intel and Other Matters
Concerning Intel and the NBA" must be approved by the holders of more than 80%
of the outstanding shares of Class A common stock.
AMENDMENT OF BYLAWS
Excalibur's bylaws may be amended by a majority of the whole board of
directors or by the holders of a majority of the outstanding shares of common
stock. Convera's bylaws may be amended by a majority of the whole board of
directors or by the holders of a majority of the outstanding shares of Class A
common stock.
NOMINATIONS AND STOCKHOLDER BUSINESS
Excalibur's certificate of incorporation and bylaws do not contain specific
provisions relating to the nomination of directors or other stockholder business
for annual or special meetings of stockholders.
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Convera Annual Meeting of Stockholders
Convera's bylaws provide that director nominations or proposals of other
business to be considered at annual meetings of stockholders may be made in any
of the following manners:
- pursuant to Convera's notice of meeting;
- by or at the direction of the Convera board of directors; or
- by any stockholder of Convera who is a stockholder of record at the time
of giving of notice of an annual meeting, who is entitled to vote at the
meeting with respect to the business proposed to be considered and who
complied with the bylaws' procedures.
For nominations or other business to be properly brought before an annual
meeting by a stockholder, the stockholder must have given timely notice in
writing to Convera's corporate secretary, and the business must be a proper
subject for stockholder action under Delaware law. To be timely, a stockholder's
notice shall be delivered to the secretary not less than 45 days nor more than
120 days prior to the date on which Convera first mailed its proxy materials for
the prior year's annual meeting of stockholders. If however the date of the
annual meeting is advanced by more than 30 days or delayed, other than by
adjournment, by more than 30 days from the anniversary of the previous year's
annual meeting, notice by the stockholder to be timely must be delivered not
later than the close of business on the later of the 60th day prior to the
annual meeting or the 10th day following the day on which Convera first publicly
announces the date of the meeting. The stockholder's notice must set forth:
- all information required by the SEC's proxy rules for each person whom
the stockholder proposes to nominate for election or reelection as a
director;
- a brief description of other business that the stockholder proposes to
bring before the meeting, the reasons for conducting the business at the
meeting and any material interest in the business by the stockholder and
of any beneficial owner on whose behalf the proposal is made; and
- the name and address of the stockholder and of any beneficial owner on
whose behalf the nomination or proposal is made, as well as the class and
number of shares which are owned beneficially by them.
If the number of directors to be elected to the Convera board is increased
and there is no public announcement about it by Convera at least 70 days prior
to the first anniversary of the preceding year's annual meeting, a stockholder's
notice required by the bylaws shall also be considered timely, but only for
nominees for any newly created positions, if it is delivered to the Convera
corporate secretary not later than the close of business on the 10th day
following the day of Convera's first public announcement about the increase. See
"Approval of Two Corporate Governance Provisions of Convera's Certificate of
Incorporation and Bylaws" beginning on page 91.
Convera Special Meetings of Stockholders
The only business which may be conducted at a special meeting of
stockholders is that which is contained in Convera's notice of meeting. Director
nominations may be made at a special meeting of stockholders at which directors
are to be elected by Convera's notice of meeting by either of the following
manners:
- by or at the direction of the board of directors; or
- by any stockholder who is a stockholder of record at the time of giving
of notice of the special meeting, who is entitled to vote at the meeting
with respect to the election of directors and who complies with the
bylaws' notice procedures.
Nominations by stockholders of persons for election to the board of
directors may be made at a special meeting of stockholders if the stockholder's
notice is delivered to Convera's corporate secretary not earlier than the 120th
day prior to the special meeting and not later than the close of business on the
later of the 60th day prior to the special meeting or the 10th day following the
day on which Convera first publicly
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announces the date of the special meeting and the nominees proposed by the board
of directors to be elected at the meeting.
Only the persons nominated in accordance with the these bylaw provisions
shall be eligible for election at any meeting of stockholders. Similarly, the
only business which may be conducted at a meeting of stockholders is that which
is brought before the meeting in accordance with these bylaw procedures. The
bylaws do not affect a stockholder's obligation to otherwise comply with the
applicable provisions of the Exchange Act concerning stockholder meetings. Also,
these bylaw provisions do not affect any rights of stockholders to request
inclusion of proposals in Convera's proxy statement pursuant to Rule 14a-8 under
the Exchange Act. See "Approval of Two Corporate Governance Provisions of
Convera's Certificate of Incorporation and Bylaws" beginning on page 90.
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DESCRIPTION OF CONVERA CAPITAL STOCK FOLLOWING THE COMBINATION
The following summarizes the terms of the Convera capital stock following
the combination, including the Class A common stock you will receive in the
combination. Please read the amended and restated certificate of incorporation
and the bylaws of Convera which are attached hereto as Appendices D and E.
AUTHORIZED CAPITAL STOCK
The authorized capital stock of Convera will consist of:
- 100 million shares of Class A common stock, par value $.01 per share;
- 40 million shares of Class B common stock, par value $.01 per share; and
- Five million shares of preferred stock, par value $.01 per share.
The following summary description of the capital stock of Convera does not
purport to be complete and is qualified by reference to Convera's amended and
restated certificate of incorporation and to the Delaware General Corporation
Law.
CONVERA COMMON STOCK
Convera's common stock is divided into two classes designated Class A
common stock and Class B common stock. Subject to the rights of holders of any
outstanding Convera preferred stock, the holders of outstanding shares of
Convera common stock are entitled to share ratably in dividends declared out of
assets legally available therefor at that time and in those amounts as the
Convera board of directors may from time to time lawfully determine. The Class A
common stock and the Class B common stock are equal in respect of rights to
dividends and other distributions.
Each holder of Class A common stock is entitled to one vote for each share
held and, except as otherwise provided by law or by the Convera board of
directors with respect to any series of Convera preferred stock, the holders of
Class A common stock will exclusively possess all voting power. The shares of
Class B common stock are not entitled to any voting rights, except as otherwise
provided by law or in the amended and restated certificate of incorporation.
Holders of Class A common stock are not entitled to accumulate votes for the
election of directors. The Convera common stock is not entitled to preemptive
rights and is not subject to redemption or assessment. Subject to the rights of
holders of any outstanding Convera preferred stock, upon liquidation,
dissolution or winding up of Convera, any assets legally available for
distribution to stockholders as such are to be distributed ratably among the
holders of the Convera common stock at that time outstanding. The Class B common
stock will be assumed to have been converted into Class A common stock
immediately prior to a distribution upon a liquidation, dissolution or winding
up of Convera. We have filed an application to have the Class A common stock of
Convera traded on the Nasdaq National Market under the ticker symbol "CNVR."
The Class B common stock may be converted at the rate of one share of Class
A common stock for each share of Class B common stock. As long as Intel remains
a holder of Class B common stock, it shall not be entitled to convert shares of
Class B common stock if Intel would beneficially own 50% or more of the voting
power or Convera immediately after the conversion. The conversion rate shall be
subject to antidilution adjustments in case of stock splits, stock dividends,
reverse stock splits, recapitalizations or similar events affecting the Class A
common stock. In the event Convera consummates any reclassification or
consolidation, merger or similar business combination, pursuant to which the
Class A common stock of Convera is exchanged solely for or changed, reclassified
or converted into a different security or other property of Convera or any
successor, a holder of the Class B common stock will thereafter have the right
to receive upon conversion of the Class B common stock the kind and amount of
shares or stock and other securities and property receivable by a holder of the
number of shares of Class A common stock into which the Class B common stock
might have been converted immediately prior to that event. Convera shall at all
times reserve a sufficient number of authorized Class A common stock to allow
for the conversion of the outstanding shares of Class B common stock.
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CONVERA PREFERRED STOCK
The Convera board of directors has the authority to issue Convera preferred
stock in one or more series with such distinctive serial designations, at such
price or prices and for such other consideration as may be fixed by the Convera
board of directors. Convera preferred stock of all series shall be in all
respects entitled to the same preferences, rights and privileges and subject to
the same qualifications, limitations and restrictions; provided, however, that
different series of Convera preferred stock may vary with respect to, among
other things, dividend rates, conversion rights, voting rights, redemption
rights, liquidation preferences and the number of shares constituting each such
series as shall be determined and fixed by resolution or resolutions of the
Convera board of directors providing for the issuance of such series, without
any further vote or action by the stockholders of Convera. All the shares of any
one series will be alike in every particular.
The ability of the Convera board of directors to issue Convera preferred
stock, while providing flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire, or of discouraging a third party from acquiring, a
majority of the outstanding voting stock of Convera.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Convera common stock is
Computershare Investor Services, formerly American Securities Transfer & Trust,
Inc., in Colorado.
NASDAQ LISTING OF THE CLASS A COMMON STOCK
It is a condition to the consummation of the combination that the shares of
Convera Class A common stock to be issued in the combination be approved for
listing on the Nasdaq National Market, subject to official notice of issuance.
If the combination is completed, the Convera Class A common stock will be listed
on the Nasdaq National Market under the symbol "CNVR," and the Excalibur common
stock will cease to be listed on the Nasdaq National Market.
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BUSINESS OF INTEL'S INTERACTIVE MEDIA SERVICES DIVISION
Intel's Interactive Media Services division is comprised of three separate
business groups that were formally established between June and October 1998:
- the Entertainment Content Services group;
- the Enhanced Video Services group; and
- the Internet Security Services group.
The Interactive Media Services division provides solutions for content
customers and broadcast networks as they deliver digital content to end users
using the internet and emerging broadband environments, such as satellite,
cable, DSL (Digital Subscriber Line) and wireless. Services offered by the
Interactive Media Services division include digital video and data integration
services, security and content protection services, conditional access and
subscriber management services and scalable distribution management services.
In the combination, Intel will contribute to Convera its Interactive Media
Services division and related intellectual property (generally under
non-exclusive licenses) and other assets. A complete listing of the assets to be
contributed is set forth on Exhibit A to the contribution and merger agreement.
These assets include:
- a collection of software tools and know-how for creating or integrating a
digital rights enforcement software system, manipulating and integrating
video content and data, or protecting data streams such as during
internet delivery of protected music downloads;
- 14 patents and patent applications in the area of tamper resistant
software and content security, including various methods of enabling
tamper resistance;
- source code components, including portions of custom developed software,
or modules, which are used in current applications, or can be used or
reused in other customized applications, such as providing an attendee at
a sports event the ability to use a computer built into the seat-back
directly in front of the attendee, to watch a customized replay, or order
food, drinks or merchandise for delivery in the sports event venue;
- Intel's rights and obligations under the contracts that have been entered
into by the Interactive Media Services division, exclusive of certain
cash payments or payments of equity which have already been earned by the
IMS division, prior to the time of the close of the Convera transaction;
and
- the collective expertise of the software and engineering personnel who
developed the IMS division's tamper resistance software technology, the
majority of whom will be transferring from Intel to Convera upon the
closing of the combination.
ENTERTAINMENT CONTENT SERVICES
The Entertainment Content Services group acts as a systems integrator to
provide consumer-oriented offerings for customers operating in the entertainment
industry. It employs its resources and knowledge in program management, human
factors engineering and software, and software engineering, together with third
party technologies, to define and implement end-to-end solutions for its
customers. Services provided by the Entertainment Content Services group
include:
- Graphical user interface development.
- Human factors engineering and software, which is the process of
evaluating the "man/machine" interaction to optimize the user interface
and experience of users of a particular software application. Typically,
cognitive psychologists and user interface ergonomics specialists would
undertake a variety of activities (focus group observation, rapid
prototyping, competitive research etc.) with the intent of optimizing the
user interface to meet the audience needs.
- Back-end integration, which is the integration of software with an
existing "legacy" software system, where the integration takes place at a
level below that of the "front-end," or graphical user-interface, layer
of the system. An example would include the enabling of an e-commerce
solution to work with the existing finance system of an organization, to
deliver a system that is ready for user/customer use.
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- Emotional analysis and data mining, which is the practice of analyzing
the interactions of a user with a web site, to try and identify trends
that might indicate the type of person on the site. These algorithms take
into account a user's prior behaviors to make predictions regarding
preferences and the selections a user may make in the future. Data mining
refers to the general practice of analyzing the activity on a particular
site to gain quantitative and/or qualitative information about the site
or its users. An example of this is tracking pages viewed, and analyzing
patterns or similarities in user data to allow a better understanding of
that user. This in turn allows a service to be provided to the user that
is more attuned to their needs or preferences.
The services provided by the Entertainment Content Services group are
targeted at companies in the music, sports, lifestyles and film and video game
industries. Customers have included Supertracks, a company which works with
record labels, storing their music digitally, and then offers a service to
online retailers to facilitate the sale of digital music to consumers over the
web, and Avid Sports, a company which offers a service to develop "highlights"
packages for sports leagues to be delivered via the internet.
ENHANCED VIDEO SERVICES
The Enhanced Video Services group provides consulting services and
web-based services for the creation, management and delivery of enhanced video
content over the internet, digital broadcast and wireless technologies. The
services are designed to enable content owners or producers to create immersive
interactive content and then protect it and deliver it in measured quantities to
end-users on a variety of devices. The Enhanced Video Services group
technologies may be applied to a variety of interactive information and
entertainment markets, such as sports, news and entertainment. Current customers
include Choice Seat and Avid Sports.
INTERNET SECURITY SERVICES
The Internet Security Services group provides software products and
services that are designed to enable providers to develop and commercialize
frameworks for secure protection of digital content distribution and playback on
personal computers and other digital devices. The Internet Security Services
group markets a generalized security product, as well as an ongoing service of
manufacturing and shipping content protection agents and keys, to the music,
documents and streaming video industries. The Internet Security Services group
works with both hardware and software vendors to develop products and services
that provide a complete end-to-end solution for secure digital content
distribution and playback in the marketplace. Current customers include Preview
Systems and Softlock.com.
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SELECTED FINANCIAL DATA
OF INTEL'S INTERACTIVE MEDIA SERVICES DIVISION
We are providing the following information concerning Intel's Interactive
Media Services division to aid you in your analysis of the financial aspects of
the combination. Intel derived this information from the audited statements of
assets to be contributed and the related statements of net revenues and direct
expenses for its Interactive Media Services division for the fiscal year ended
December 25, 1999 and the period from inception to December 26, 1998, and the
unaudited financial statements for the nine months ended September 30, 2000 and
September 25, 1999. This information is only a summary and you should read it in
conjunction with Intel's Interactive Media Services division's Financial
Statements (and related notes) beginning on page F-1 and the Interactive Media
Services division Management's Discussion and Analysis of Financial Condition
and Results of Operations beginning on page 75.
INTERACTIVE MEDIA SERVICES DIVISION OF INTEL CORPORATION
STATEMENT OF ASSETS TO BE CONTRIBUTED
<TABLE>
<CAPTION>
DECEMBER 26, DECEMBER 25, SEPTEMBER 30, 2000
1998(1) 1999 (UNAUDITED)
------------ ------------ ------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Capital contribution receivable................... $ -- $ -- $150,000
Investments....................................... -- 884 898
Consideration due or received in excess of costs
incurred on uncompleted contracts............... -- (1,910) (2,383)
Property, plant and equipment
Computer equipment.............................. 111 322 590
Accumulated depreciation........................ (23) (104) (168)
---- ------- --------
Net property, plant and equipment................. 88 218 422
---- ------- --------
Assets to be contributed(2)....................... $ 88 $ (808) $148,937
==== ======= ========
</TABLE>
INTERACTIVE MEDIA SERVICES DIVISION OF INTEL CORPORATION
STATEMENT OF NET REVENUES AND DIRECT EXPENSES
<TABLE>
<CAPTION>
PERIOD FROM NINE MONTHS ENDED
INCEPTION TO YEAR ENDED ----------------------------------------
DECEMBER 26, DECEMBER 25, SEPTEMBER 25, 1999 SEPTEMBER 30, 2000
1998 1999 (UNAUDITED) (UNAUDITED)
------------ ------------ ------------------ ------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net revenues.................... $ -- $ 1,568 $ -- $ 1,866
Cost of revenues................ -- 23 -- 532
Direct operating expenses:
Research and development...... 425 2,275 1,459 3,466
Selling, marketing and
administrative............. 5,845 5,823 4,493 8,914
------- ------- ------- --------
Total direct operating
expenses...................... 6,270 8,098 5,952 12,380
------- ------- ------- --------
Total direct expenses........... 6,270 8,121 5,952 12,912
------- ------- ------- --------
Direct expenses in excess of net
revenues...................... $(6,270) $(6,553) $(5,952) $(11,046)
======= ======= ======= ========
</TABLE>
---------------
(1) The Interactive Media Services Division is comprised of three separate but
related groups within Intel which were each formally established with
operations commencing between June 1998 and October 1998.
(2) Assets to be contributed at September 30, 2000 includes the approximately
$150 million in cash to be contributed to Convera upon closing of the
combination pursuant to the terms of the contribution and merger agreement.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION FOR INTEL'S INTERACTIVE MEDIA SERVICES DIVISION
OVERVIEW
Intel's Interactive Media Services division (IMS) is comprised of three
separate but related groups that were each formally established with operations
commencing between June and October 1998: the Entertainment Content Services
(ECS) group, the Enhanced Video Services (EVS) group and the Internet Security
Services (ISS) group. These groups were not separate legal entities or operating
segments of Intel, but were embedded in Intel's overall operations. As a result,
separate financial statements have not been maintained for these operations. The
financial statements of IMS included in this proxy statement/prospectus were
prepared from the historical accounting records of Intel and do not purport to
reflect the assets to be contributed, and the net revenues and direct expenses
that would have resulted if IMS had operated as an unaffiliated independent
company. The Statements of Net Revenues and Direct Expenses include an
allocation of expenses for facilities, information technology, management,
finance and administrative support services provided by Intel. These allocations
were derived from the direct operating expenses of the New Business Group within
which the three separate groups that comprised IMS operated within Intel, based
on the number of employees within IMS relative to the total employees within the
New Business Group. These statements do not include allocations for legal, human
resources, sales and marketing support, certain profit dependent amounts in
excess of accruals allocated to IMS, or for interest income, interest expense
and income taxes, as such expenses and income were not allocated by Intel to the
New Business Group or IMS. This Management's Discussion and Analysis of
Financial Condition and Results of Operation should be read in conjunction with
the Interactive Media Services division's financial statements (and related
notes) beginning on page F-1. Also, for further information on these three
groups, see "Business of Intel's Interactive Media Services Division" beginning
on page 72.
ENTERTAINMENT CONTENT SERVICES
The Entertainment Content Services group acts as a systems integrator to
provide consumer-oriented offerings for customers operating in the entertainment
industry. It employs its resources and knowledge in program management, human
factors engineering and software, and software engineering, together with third
party technologies, to define and implement end-to-end solutions for its
customers. Services provided by the Entertainment Content Services group
include:
- Graphical user interface development
- Human factors engineering
- Back-end integration
- Emotional analysis & data-mining
The services provided by the Entertainment Content Services group are
targeted at companies in the music, sports, lifestyles and film and video game
industries. The only current customer is Avid Sports.
ENHANCED VIDEO SERVICES
The Enhanced Video Services group provides consulting services and
web-based services for the creation, management and delivery of enhanced video
content over the internet, digital broadcast and wireless technologies. The
services are designed to enable content owners or producers to create immersive
interactive content and then protect it and deliver it in measured quantities to
end-users on a variety of devices. The Enhanced Video Services group
technologies may be applied to a variety of interactive information and
entertainment markets, such as sports, news and entertainment. Current customers
include Choice Seat and Avid Sports.
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INTERNET SECURITY SERVICES
The Internet Security Services group provides software products and
services that are designed to enable providers to develop and commercialize
frameworks for secure protection of digital content distribution and playback on
personal computers and other digital devices. The Internet Security Services
group markets a generalized security product, as well as an ongoing service of
manufacturing and shipping content protection agents and keys, to the music,
documents and streaming video industries. The Internet Security Services group
works with both hardware and software vendors to develop products and services
that provide a complete end-to-end solution for secure digital content
distribution and playback in the marketplace. Current customers include Preview
Systems and SoftLock.com.
As of September 30, 2000, IMS had approximately 80 employees including
engineers and other professionals.
IMS provides a range of services to its customers including the licensing
of software, technical support services and consulting. The arrangements to
provide software typically require significant modification or customization of
the software under a long-term development contract.
For such contracts, revenue is recognized in accordance with AICPA
Statement of Position (SOP) 97-2, Software Revenue Recognition. Given the
essential nature of the customization and development efforts to the licensed
software, the arrangements have been accounted for in accordance with SOP 81-1,
Accounting for Performance of Construction Type and Certain Production-Type
Contracts and Accounting Research Bulletin (ARB) No. 45, Long-Term
Construction-Type Contracts. In accordance with SOP 81-1, IMS has elected to
account for these contracts using the completed contract method because IMS does
not have substantial history of making estimates of the extent of progress
towards completion. In addition, certain of the contracts lack clearly defined
deliverables, terms and conditions and may be subject to acceptance or refund
provisions. Accordingly, revenue is recognized when all remaining costs, IMS
obligations and potential risks are insignificant and the product has been
delivered and accepted by the customer. Consideration due or received from
customers on uncompleted contracts and which has not been recognized as revenue
was $3,414,000 and $8,516,000 for fiscal 1999 and the nine months ended
September 30, 2000, respectively. Additionally, for those contracts that have
not been completed, the costs incurred in support of the contract were
capitalized based on the relative efforts incurred to date for the specific
contracts and includes such costs as direct labor and materials. Capitalized
costs totaled $1,504,000 and $6,133,000 as of December 26, 1999 and September
30, 2000, respectively. These capitalized costs, net of the consideration due or
received from the customer, have been classified in the Statement of Assets to
be Contributed as consideration due or received in excess of costs incurred on
uncompleted contracts. Anticipated losses, if any, on uncompleted contracts are
recognized in the period in which the losses are probable and estimable. No such
losses have been identified relative to IMS contracts.
Consideration due or received by IMS in connection with certain contracts
may be in the form of equity instruments issued by the customer. Any equity
instruments received from the customer in connection with arrangements entered
into on or before March 16, 2000 are valued at the date of the arrangement.
Amounts for equity instruments (and other consideration) which have not been
earned are netted against the costs incurred to date on uncompleted contracts
and reflected on this basis in the Statement of Assets to be Contributed.
Amounts for equity instruments (and other consideration) which have been earned
and for which the related contracts have been completed have been recorded as
net revenues in the Statement of Net Revenues and Direct Expenses. For equity
instruments received in connection with arrangements entered into after March
16, 2000, the related equity instruments are valued at the date the revenue will
be recognized by IMS, generally the date IMS has fulfilled all of its
obligations under the arrangement, in accordance with Emerging Issues Task Force
(EITF) 00-8, Accounting by a Grantee for an Equity Instrument to Be Received in
Conjunction with Providing Goods or Services. Between March 17, 2000 and
September 30, 2000, no arrangements were entered into which included equity
instruments received by IMS. Should IMS enter into additional agreements that
provide for consideration in the form of equity instruments, the final
measurement of revenue will be dependent upon the market price of the equity
instruments on the earliest of (a) the date a performance commitment is reached
or (b) the date the equity instrument vests.
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RESULTS OF OPERATIONS-INCEPTION TO DECEMBER 26, 1998 COMPARED TO FISCAL 1999
Net revenues for fiscal 1999 were $1,568,000, with no revenue recorded in
the period from inception to December 26, 1998. The 1999 net revenue was the
result of services delivered under completed contracts with MGI Software Corp.
and Matsushita Electronic Industrial Co., Ltd. No contracts were completed
between inception and December 26, 1998.
Direct expenses increased $1,851,000, from $6,270,000 to $8,121,000, for
the period of inception to December 26, 1998 compared to fiscal 1999. Research
and development expenses increased $1,850,000, largely as a result of
significant additional development initiatives within ISS during 1999. Selling,
marketing and administrative expenses during 1999 reflect a decrease of $22,000
from the period from inception to December 26, 1998. This decrease is primarily
the result of $1,186,000 in expenses that would otherwise be reflected as
selling, marketing and administrative expenses during 1999 which have been
capitalized in connection with certain uncompleted contracts. There were no
research and development or selling, marketing and administrative expenses
capitalized in connection with contracts during the period from inception to
December 26, 1998. Offsetting this decrease were costs incurred in 1998 for two
particular development initiatives which produced no revenues. Direct expenses
in excess of net revenues for IMS were ($6,270,000) in the period from inception
to December 26, 1998 compared to ($6,553,000) for the year ended December 25,
1999.
RESULTS OF OPERATIONS-NINE MONTHS ENDED SEPTEMBER 25, 1999 COMPARED TO NINE
MONTHS ENDED SEPTEMBER 30, 2000
Net revenues for the nine months ended September 30, 2000 were $1,866,000
with no revenue recorded in the nine months ended September 25, 1999. The
revenue in the first nine months of 2000 was the result of services delivered
under a completed contract with Supertracks.com, Inc. No contracts were
completed during the first nine months of 1999.
Direct expenses increased $6,960,000 from $5,952,000 in the first nine
months of 1999 to $12,912,000 in the same period in 2000. Research and
development expenses increased $2,007,000 mainly as a result of continued growth
in development efforts within each of the three business groups within IMS and
the overall expansion in IMS activity and customer agreements. Research and
development costs would have been higher during the nine month period ended
September 30, 2000 but for $2,506,000 of costs that were capitalized during the
period in connection with uncompleted contracts. Selling, marketing and
administrative expenses increased $4,421,000 in the first nine months of 2000
compared to the first nine months of 1999 due to the expansion of the overall
business and its customer relationships. Selling, marketing and administrative
expenses would have been higher during the nine month period ended September 30,
2000 but for $2,655,000 of costs that were capitalized during the period in
connection with uncompleted contracts. There were no research and development or
selling, marketing and administrative expenses capitalized in connection with
contracts during the first nine months of 1999.
LIQUIDITY AND CAPITAL RESOURCES
Through September 30, 2000, the funding of IMS operating activities has
been primarily dependent upon receipt of funds from Intel. No assets or
liabilities in the form of cash, investments, debt or equity were specifically
allocated to these IMS businesses from Intel. IMS has utilized the funding from
Intel for general operations, growth in the development efforts within each of
the three business groups of IMS and overall expansion in IMS activity and
customer agreements.
Through September 30, 2000 the capital requirements of IMS have primarily
related to the acquisition of computer equipment utilized by the engineers for
the three business groups. IMS has expended approximately $111,000, $211,000 and
$268,000 for capital equipment during the period from inception to December 26,
1998, the year ended December 25, 1999, and the nine month period ended
September 30, 2000, respectively. IMS believes its capital requirements will
approximate $7.0 million for the period from October 1, 2000 through December
30, 2000. The significant increase in capital expenditure requirements for the
period from October 1, 2000 through December 30, 2000 is primarily related to
approximately $5.4 million for building improvements and expansion. IMS has not
finalized its capital expenditure budget for fiscal 2001.
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UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial information combines
the historical consolidated statements of operations of Excalibur with the
historical statements of net revenues and direct expenses of Intel's Interactive
Media Services division of Intel after giving effect to the combination and the
impact of the NBA agreement, as if these transactions had occurred on February
1, 1999, and the historical consolidated balance sheet of Excalibur with the
historical statement of assets to be contributed of the Interactive Media
Services division as if these transactions had occurred on July 31, 2000. The
historical financial statements for Excalibur are for the fiscal year ended
January 31, 2000 and as of and for the six months ended July 31, 2000. The
historical financial information of the Interactive Media Services division is
for the fiscal year ended December 25, 1999 and as of and for the six months
ended July 1, 2000. The statements of operations of the two entities have been
combined using their respective fiscal years.
Intel's Interactive Media Services division being contributed to Convera is
comprised of three separate but related businesses that were formally
established between June 1998 and October 1998. Because these businesses did not
exist before this time, no historical financial information for any period prior
to commencement of operations of these businesses is available. No individuals
within Intel were dedicated to these businesses before these dates. These IMS
businesses were not recorded as separate operating segments within Intel or as
separate legal entities, but were embedded in Intel's overall operations. As a
result, separate financial statements have not been maintained for the
operations to be contributed to Convera. The financial statements of IMS have
been prepared from the historical accounting records of Intel and do not purport
to reflect the assets to be contributed, and the net revenues and direct
expenses that would have resulted if IMS had operated as an unaffiliated
independent company. Management does not believe there are any additional
allocations to be included in the unaudited pro forma combined financial
information as Excalibur has adequate established infrastructure to support the
incremental activity of IMS following the closing of the combination.
Since separate financial statements were not maintained for the IMS
business, preparation of statements of operations and cash flows, including
amounts charged for income taxes, interest and indirect expenses, is
impractical. Additionally, since only certain assets are being contributed, a
statement of stockholders' equity is not applicable.
The pro forma amounts are presented for illustrative purposes only and are
not necessarily indicative of the results of operations of the combined company
that would have actually occurred had we completed the combination on February
1, 1999 or of the financial condition of the combined company had we completed
the combination on July 31, 2000 or of the future results of operations or
financial condition of the combined company.
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<PAGE> 90
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
INTERACTIVE
EXCALIBUR MEDIA SERVICES PRO FORMA PRO FORMA
JULY 31, 2000 JULY 1, 2000 ADJUSTMENTS COMBINED
------------- -------------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents................ $11,695 $150,000 $ -- $ 161,695
Short term investments................... 142 1,375 (814)(9) 703
Accounts receivable, net................. 14,828 14,828
Consideration due or received in excess
of costs incurred on uncompleted
contracts............................. -- (3,262) (3,262)
Prepaid expenses and other............... 2,808 2,808
------- -------- ---------- ----------
Total current assets.................. 29,473 148,113 (814) 176,772
Equipment and leasehold improvements,
net...................................... 2,072 171 2,243
Other assets............................... 793 793
Intangibles................................ 206 243,634(7)
773,868(1a) 1,017,708
------- -------- ---------- ----------
Total assets.......................... $32,544 $148,284 $1,016,688 $1,197,516
======= ======== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable......................... $ 2,467 $ -- $ -- $ 2,467
Accrued expenses......................... 1,409 -- 1,200(1b) 2,609
Deferred revenues........................ 4,179 -- -- 4,179
------- -------- ---------- ----------
Total current liabilities............. 8,055 -- 1,200 9,255
------- -------- ---------- ----------
Total shareholders' equity............ 24,489 -- 243,634(7)
(814)(9)
-- 920,952(1c) 1,188,261
------- -------- ---------- ----------
Total liabilities and shareholders'
equity.............................. $32,544 $ $1,164,972 $1,197,516
======= ======== ========== ==========
</TABLE>
See accompanying Notes to Unaudited Combined Pro Forma Financial Information
79
<PAGE> 91
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
INTERACTIVE
EXCALIBUR MEDIA SERVICES EXCALIBUR
FISCAL YEAR FISCAL YEAR SIX MONTHS
ENDED ENDED ENDED
JANUARY 31, DECEMBER 25, PRO FORMA PRO FORMA JULY 31,
2000 1999 ADJUSTMENTS COMBINED 2000
----------- -------------- ----------- --------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues................... $37,934 $ 1,568 $ -- $ 39,502 $20,758
------- ------- -------- --------- -------
Expenses:
Cost of revenues......... 6,867 23 -- 6,890 3,508
Sales and marketing...... 16,210 3,328 -- 19,538 11,008
Research and product
development............ 9,456 2,275 -- 11,731 5,532
General and
administrative......... 5,402 2,495 -- 7,897 2,547
Amortization of acquired
intangible assets and
goodwill............... 118 -- 133,680(1d) 133,798 60
Amortization of unearned
compensation........... -- -- 38,800(4) 38,800 --
Amortization of other
intangible assets...... -- -- 30,454(7) 30,454 --
------- ------- -------- --------- -------
38,053 8,121 249,108 22,655
------- ------- -------- --------- -------
Operating loss............. (119) (6,553) -- (209,606) (1,897)
Interest income, net....... 250 -- -- 250 228
Write-off of investment in
affiliate................ (471) -- -- (471) --
------- ------- -------- --------- -------
Net loss before
non-recurring items
directly attributable to
the combination.......... (340) (6,553) -- (209,827) (1,669)
Dividends on cumulative,
convertible preferred
stock.................... 14 -- -- 14 7
------- ------- -------- --------- -------
Net loss applicable to
common stock before
non-recurring items
directly attributable to
the combination.......... $ (354) $(6,553) $ -- $(209,841) $(1,676)
======= ======= ======== ========= =======
Basic and diluted net loss
per common share......... $ (0.02) $ -- $ -- $ (4.55) $ (0.11)
Weighted average number of
common shares
outstanding.............. 14,282 -- 31,825(7)(1e) 46,107 14,815
======= ======= ======== ========= =======
<CAPTION>
INTERACTIVE
MEDIA SERVICES
SIX MONTHS
ENDED
JULY 1, PRO FORMA PRO FORMA
2000 ADJUSTMENTS COMBINED
-------------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenues................... $ 1,866 $ -- $ 22,624
------- ------- ---------
Expenses:
Cost of revenues......... 532 -- 4,040
Sales and marketing...... 3,998 -- 15,006
Research and product
development............ 2,134 -- 7,666
General and
administrative......... 1,397 -- 3,944
Amortization of acquired
intangible assets and
goodwill............... -- 66,840(1d) 66,900
Amortization of unearned
compensation........... -- 19,400(4) 19,400
Amortization of other
intangible assets...... -- 15,227(7) 15,227
------- ------- ---------
8,061 132,183
------- ------- ---------
Operating loss............. (6,195) -- (109,559)
Interest income, net....... -- -- 228
Write-off of investment in
affiliate................ -- -- --
------- ------- ---------
Net loss before
non-recurring items
directly attributable to
the combination.......... (6,195) -- (109,331)
Dividends on cumulative,
convertible preferred
stock.................... -- -- 7
------- ------- ---------
Net loss applicable to
common stock before
non-recurring items
directly attributable to
the combination.......... $(6,195) $ -- $(109,338)
======= ======= =========
Basic and diluted net loss
per common share......... $ -- $ -- $ (2.34)
Weighted average number of
common shares
outstanding.............. -- 31,825(7)(1e) 46,640
======= ======= =========
</TABLE>
See accompanying Notes to Unaudited Combined Pro Forma Financial Information
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<PAGE> 92
NOTES TO UNAUDITED COMBINED PRO FORMA FINANCIAL INFORMATION
1. PURCHASE PRICE ALLOCATION
(a) The pro forma combined balance sheet reflects the application of the
purchase method of accounting for the acquisition of the IMS division of Intel.
The estimated purchase price is $922,952,000 including transaction costs of
approximately $1,200,000. The estimated purchase price includes the
consideration to be issued for the IMS division which was calculated by
multiplying 27,100,000 shares by $34.013, the Excalibur five day average common
stock price surrounding the May 1, 2000 announcement of the combination. Based
on a preliminary allocation of the purchase price, the application of the
purchase method results in approximately $774,668,000 in excess of purchase
price over net tangible assets to be acquired. Based on a preliminary analysis
done by Excalibur, this amount is expected to be allocated as follows: (i)
acquired in-process research and development of $800,000, which will be written
off when the combination is recorded; (ii) value associated with specific
acquired contracts of $3,010,000, which will be amortized over one year; (iii)
other identified intangibles of $13,160,000, which will be amortized over three
years; and (iv) goodwill of $757,698,000, which will be amortized over six
years. Customer contracts were valued based on a discounted projected gross
profit on each of the related contracts. Other identified intangibles include
developed technology and the assembled workforce. The developed technology was
valued based on a detailed discounted cash flow analysis and the assembled
workforce was valued based on a replacement cost approach.
(b) Accrued expenses have been increased by the estimated transaction costs
of $1,200,000.
(c) Computation of Pro Forma Purchase Price
<TABLE>
<S> <C>
Issuance of 27,100,000 shares of Excalibur common stock,
representing 60% ownership of Convera..................... $921,752,000
Transaction costs........................................... 1,200,000
------------
Pro forma purchase price.................................. $922,952,000
============
Preliminary allocation of purchase price:
Value of IMS division's net tangible assets at July 1,
2000...................................................... $148,284,000
Acquired in-process research and development................ 800,000
Customer contracts (1 year useful life)..................... 3,010,000
Developed technology and assembled workforce (three year
useful life).............................................. 13,160,000
Goodwill (six year useful life)............................. 757,698,000
------------
Total allocated........................................... $922,952,000
============
Shareholders' equity has been adjusted to reflect purchase
accounting as follows:
Common stock, $0.01 par value, issuance of 27,100,000
shares.................................................... $ 271,000
Additional paid-in capital.................................. 921,481,000
Accumulated deficit (acquired in-process research and
development).............................................. (800,000)
------------
Pro forma increase in shareholders' equity................ $920,952,000
============
</TABLE>
(d) The pro forma combined statements of operations reflect the
amortization of the customer contracts, other intangibles and goodwill of
$133,680,000 for the year ended January 31, 2000 and $66,840,000 for the six
months ended July 31, 2000 based on expected estimated useful lives of one year,
three years and six years, respectively.
(e) The weighted average shares adjustment is based on the issuance of
27,100,000 shares of common stock to Intel for the IMS division.
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<PAGE> 93
2. NON-RECURRING ITEMS
Net loss applicable to common stock is presented before non-recurring
charges of $800,000 for acquired in-process research and development. The per
share amount of the acquired in-process research and development is $(0.02) for
the year ended January 31, 2000 and the six months ended July 31, 2000.
3. IMPAIRMENT OF GOODWILL AND OTHER INTANGIBLE ASSETS
Convera will periodically evaluate the recoverability of its goodwill and
acquisition related intangible assets. This evaluation will consist of a
comparison of the carrying value of the assets with the assets' expected future
cash flows, undiscounted and without interest costs. Estimates of expected
future cash flows will represent management's best estimate based on reasonable
and supportable assumptions and projections. If the expected future cash flows,
undiscounted and without interest charges, exceeds the carrying value of the
asset, no impairment will be recognized.
4. STOCK-BASED COMPENSATION
Upon consummation of the combination, Convera shall grant under the Convera
2000 Stock Option Plan to all Convera employees, options to purchase shares of
Convera Class A common stock with the exercise price of such options to be the
greater of (i) $32.16 (the average of the closing prices of the Excalibur common
stock as reported on the Nasdaq National Market for the five (5) trading days
immediately preceding the announcement of execution of the contribution and
merger agreement) or (ii) twenty-five percent (25%) of the average of the
closing prices of the Excalibur common stock as reported on the Nasdaq National
Market for the five (5) trading days immediately preceding the closing date of
the combination; provided, however, that if the average of the closing prices of
the Excalibur common stock as reported on the Nasdaq National Market for the
five (5) trading days immediately preceding the closing date of the combination
is less than $32.16, then the exercise price for such options shall be the
average of the closing prices of the Excalibur common stock as reported on the
Nasdaq National Market for the five (5) trading days immediately preceding the
closing date. The Convera 2000 Stock Option Plan is being submitted for
stockholder approval at Excalibur's 2000 Annual Meeting.
The difference between the stock option exercise price and the fair market
value of Convera's stock on the grant date, if any, will be recognized as
compensation expense ratably over the vesting period of the options. Under the
terms of the Convera 2000 Stock Option Plan, the vesting period is up to four
years with options vesting in equal increments every six months over that
period. Convera expects to grant approximately 8 million options under the
arrangement described above. Based on the market value of Excalibur's common
stock of $51.56 on October 25, 2000, the unearned compensation recorded would be
$155,200,000. The adjustment in the unaudited pro forma combined statement of
operations reflects the amortization of this amount as if these options were
granted on February 1, 1999. Assuming these options are granted on December 1,
2000, the unearned compensation would be amortized to compensation expense as
follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31, AMOUNT
---------------------- -----------
<S> <C>
2001................................................... $ 6,467,000
2002................................................... 38,800,000
2003................................................... 38,800,000
2004................................................... 38,800,000
2005................................................... 32,333,000
</TABLE>
If the market value of Excalibur's common stock changes by $1.00 per share, then
the unearned compensation amount would change by $8,000,000.
In addition, the former Intel employees who become Convera employees will
receive a payment for the excess, if any, of the calculated aggregate gain they
would have realized on forfeited Intel stock options that would have vested
between 2002 and 2005 over the calculated aggregate gain on Convera stock
options as of September 30, 2002. The gain attributable to these employees'
forfeited Intel stock options is equal to the
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<PAGE> 94
positive difference, if any between (i) $61.50, representing the approximate
fair market value of the Intel stock underlying these options in May 2000 when
this bonus arrangement was established, and (ii) the per share exercise price of
the forfeited Intel stock options. The maximum aggregate amount that Convera
would be required to pay, assuming no aggregate gain on the Convera stock
options at September 30, 2002, is approximately $5.6 million. If the market
price of Convera shares is at least $47.16 per share at September 30, 2002, then
Convera will not be required to pay any amounts to the former Intel employees
under this bonus arrangement, based on the fact that the built-in gain
attributable to the Convera stock options will be at least equivalent to the
built-in gain on the forfeited Intel stock options. Because Excalibur is unable
to predict the market value of Excalibur's common stock on September 30, 2002,
the pro forma financial statements do not reflect compensation expense related
to the potential payments to former Intel employees.
5. RETENTION BONUSES
In addition to the potential payment related to the excess calculated
aggregate gain as described in Note 4, Convera will pay bonuses to specified
former employees of Intel that remain employed by Convera as of April 30, 2001,
funded through an additional capital contribution from Intel. These employee
payments will be charged to expense on Convera's statement of operations over
the period from consummation of the combination through April 30, 2001. The
payment from Intel will be considered a capital contribution to Convera since
Intel will be a principal shareholder of Convera. This additional capital
contribution was contemplated in the determination of the Convera shares to be
issued to Intel and will not change the Intel share ownership. The retention
bonuses are contingent on the continuing employment of the Intel contributed
employees with Convera through April 30, 2001 and as such the amount cannot be
determined and has not been included in the pro forma combined statement of
operations. The retention bonus amount will be determined based upon the
intrinsic value of unvested Intel stock options forfeited that would have vested
in calendar year 2001 for those former Intel employees that become employees of
Convera. The intrinsic value will be determined based on the Intel stock price
for the five days prior to the closing of the transaction.
6. GENERAL AND ADMINISTRATIVE EXPENSES
Excalibur does not anticipate an increase in its general and administrative
expenses resulting directly from the combination. Accordingly, no additional
expense has been reflected in the pro forma financial statements. Excalibur does
expect its general and administrative expenses to increase as a result of the
overall growth in its business.
7. NBA AGREEMENTS
On September 13, 2000, Intel and Convera each entered into an agreement
with NBA Media Ventures, LLC and WNBA Enterprises, LLC, referred to herein
collectively as the NBA. Intel entered into a services agreement under which
Intel agreed to provide services and technologies for the development of
interactive NBA products over a term of ten years, which will be assigned to
Convera upon consummation of the combination. Convera, on the other hand,
entered into a contribution agreement under which the NBA will contribute assets
to Convera in exchange for stock of Convera concurrent with the combination.
Under the contribution agreement, the NBA will contribute the following
assets to Convera, which will have the right to use these assets in any of its
business activities:
- all of the NBA know-how, designs, inventions, concepts, ideas, documents,
business plans and other materials relating to the creation, development,
distribution and marketing of products using the content of sports and
entertainment entities;
- a database of individual customer profiles for approximately 3.5 million
basketball fans and a second database of users of NBA products;
- domain names related to sports content over the internet;
- the software program "GameStats" and its trademark registration;
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<PAGE> 95
- the right to use 25% of the time of NBA personnel related to technical,
broadcast operations, engineering, production and marketing and the right
to use certain production facilities; and
- a non-exclusive, twelve-year license to the NBA trademark.
In exchange for the contribution of assets, the NBA will receive shares of
Class A common stock representing 10% of the outstanding stock of Convera (13.5%
of the Class A common stock), after giving effect to the combination and the
conversion of outstanding preferred stock. Based on the number of Excalibur
shares outstanding as of November 14, 2000, Convera expects to issue 4,741,079
shares of Class A common stock to the NBA.
The shares of Convera common stock to be issued to the NBA will be recorded
based on the fair value of such shares on the closing date of the combination.
The assets contributed by the NBA to Convera under the contribution agreement
will be amortized on a straight line basis over their respective estimated
economic useful lives as follows:
<TABLE>
<CAPTION>
ASSET DESCRIPTION AMORTIZATION PERIOD
----------------- -------------------
<S> <C>
NBA know-how related to products using content of
sports/entertainment entities............................. 8 years
Database of individual customer profiles.................... 5 years
Domain names related to sports content...................... 3 years
Software program "GameStats"................................ 3 years
Right to use 25% of NBA personnel........................... 8 years
License to NBA trademark.................................... 12 years
</TABLE>
Based on the market value of Excalibur's common stock of $51.56 on October
25, 2000, the intangible asset would be approximately $243,634,000, and the
related amortization would be approximately $30,454,000 per year.
8. NET LOSS PER COMMON SHARE
The following equity instruments, under the treasury stock method, if
applicable, were not included in the calculation of pro forma diluted net loss
per common share for the periods presented because their effect would be
anti-dilutive:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
JANUARY 31, 2000 JULY 31, 2000
---------------- ----------------
<S> <C> <C>
Stock options outstanding............................ 1,008,427 1,673,565
Stock options to be granted upon consummation of the
combination........................................ -- 574,249
Estimated Class A common shares issuable upon
conversion of preferred stock...................... 217,800 217,800
--------- ---------
Total...................................... 1,226,227 2,465,614
========= =========
</TABLE>
9. SHORT TERM INVESTMENTS
Investments included in the IMS Statement of Assets to be Contributed
represent those equity instruments received by IMS in connection with certain
customer arrangements that are to be transferred to Convera. These equity
investments have been accounted for in accordance with Statement of Financial
Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt
and Equity Securities, and classified as available for sale. Available for sale
securities are recorded at fair value. As of October 25, 2000, these investments
had a market value of $561,000. This pro forma adjustment represents the
unrealized losses on the investments included in the historical financial
statements of IMS. This decline in value as compared to July 1, 2000 is
considered temporary, and, thus, a permanent impairment has not been recognized.
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<PAGE> 96
APPROVAL AND ADOPTION OF CONVERA'S 2000 STOCK OPTION PLAN
PROPOSAL
The contribution and merger agreement makes it a condition to the
completion of the combination that Convera adopt the Convera 2000 stock option
plan. To comply with the requirements of the tax code, we need your approval of
this plan. The Excalibur board of directors propose and recommend that you
approve and adopt the Convera stock option plan. The Convera 2000 stock option
plan is attached to this proxy statement/ prospectus as Appendix C.
In August 2000, the Convera board of directors adopted the Convera stock
option plan. 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.
Upon consummation of the combination, Convera expects to grant to employees
approximately 8 million options to purchase shares of Convera Class A common
stock. The exercise price of these options will be the greater of:
- $32.16 (the average of the closing prices of Excalibur common stock as
reported on the Nasdaq National Market for the five trading days
immediately preceding the announcement of the execution of the
contribution and merger agreement); or
- 25% of the average of the closing prices of Excalibur common stock as
reported on the Nasdaq National Market for the five trading days
immediately preceding the closing date of the combination.
However, if the average of the closing prices of Excalibur common stock as
reported on the Nasdaq National Market for the five trading days immediately
preceding the closing date of the combination is less than $32.16, then the
exercise price of these options will be the average of the closing prices of
Excalibur common stock as reported on the Nasdaq National Market for the five
trading days immediately preceding the closing date of the combination.
The difference between the stock option exercise price and the fair market
value of Convera's stock on the grant date, if any, will be recognized as
compensation expense over the four-year vesting period of the options. Based on
the market value of Excalibur common stock of $51.56 on October 25, 2000, the
unearned compensation recorded would be $155,200,000. If the market value of
Excalibur's common stock changes by $1.00 per share, then the unearned
compensation amount would change by $8 million.
If the stock option plan is approved by the Excalibur stockholders, it will
become effective on the effective date of the combination.
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.
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<PAGE> 97
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
A committee, appointed by the Convera board will administer and interpret
the stock option plan. Non-employee directors and outside directors may be on
the committee.
The committee determines:
- 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 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 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 APPRECIATION RIGHTS
The stock option plan provides that the 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 committee.
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<PAGE> 98
STOCK PURCHASE RIGHTS
The stock option plan provides that the 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 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 Excalibur's employee stock purchase plan which Convera will
assume upon the consummation of the combination. The Excalibur employee stock
purchase plan is described on pages 96 and 97.
DEFERRED STOCK; RESTRICTED STOCK; OTHER STOCK BASED-AWARDS
The stock option plan provides that the 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 committee. Restricted stock will be subject to
restrictions, determined by the 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 option plan to no
longer comply with Rule 16b-3 under the Exchange Act or any successor rule or
other regulatory requirements.
EFFECTIVE DATE
The stock option plan shall be effective as of completion of the
combination. Any grants made under the stock option plan prior to approval by a
majority of the votes of stockholders in person or by proxy at the annual
meeting shall be effective when made.
TERM OF PLAN
Unless sooner terminated by the board of Convera, the stock option plan
will terminate on 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/PROSPECTUS. 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
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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 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.
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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.
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APPROVAL OF TWO CORPORATE GOVERNANCE PROVISIONS OF
CONVERA'S CERTIFICATE OF INCORPORATION AND BYLAWS
PROPOSAL
At the annual meeting, you will be asked to vote on a proposal to approve
two corporate governance provisions of Convera's amended and restated
certificate of incorporation and bylaws which differ from Excalibur's
certificate of incorporation and bylaws. The first of these provisions is an
increase in the minimum number of shares required to constitute a quorum at
stockholder meetings from one third of the shares entitled to vote to a majority
of the shares entitled to vote. The second provision is the addition of a notice
procedure that Convera stockholders must follow to present matters at future
stockholder meetings. See "Comparison of Stockholders' Rights" beginning on page
64.
You will be voting on both provisions as a whole; you cannot vote in favor
of one provision and against the other. A vote in favor of one provision will
also be a vote in favor of the other provision. If the combination is
consummated and Excalibur stockholders do not approve the corporate governance
proposal, the quorum requirement and notice procedures for Convera will be the
same as they were for Excalibur. The Excalibur board of directors propose and
recommend that you approve the corporate governance proposal. The Convera
amended and restated certificate of incorporation is attached to this proxy
statement/prospectus as Appendix D, and the Convera bylaws are attached to this
proxy statement/prospectus as Appendix E.
REASONS FOR THE PROPOSAL
The Excalibur board of directors has approved the increased quorum
requirement because it believes that it is in the best interests of Convera to
ensure that at least a majority of the shares of Convera stock will vote on all
matters presented to stockholders. The Excalibur board believes that a majority
requirement is customary and ensures that important matters concerning Convera
are voted on by a more representative number of stockholders. In addition, the
Excalibur board believes that it is in the best interests of Convera to
establish explicit notice procedures for stockholder proposals to ensure that
stockholders know precisely what actions they must take in order to present
proposals at meetings of Convera stockholders and to allow sufficient time for
proposals to be considered and analyzed in advance of meetings.
VOTE REQUIRED
To be adopted, the corporate governance proposal must be approved by the
affirmative vote of the majority of the shares of Excalibur common stock
outstanding. Any shares not voted (by abstention, broker non-vote or otherwise)
with have the same effect as a vote against the corporate governance proposal.
The following is a summary of the two provisions on which you will be
voting.
QUORUM FOR STOCKHOLDERS MEETINGS
Excalibur's certificate of incorporation provides that the presence of at
least one-third of the shares entitled to vote at a stockholders' meeting will
constitute a quorum for the transaction of business at the meeting. Convera's
amended and restated certificate of incorporation provides that the presence of
at least a majority of the shares entitled to vote at a stockholders' meeting
will constitute a quorum for the transaction of business at the meeting.
NOMINATIONS AND STOCKHOLDER BUSINESS
Excalibur's certificate of incorporation and bylaws do not contain specific
provisions relating to the nomination of directors or other stockholder business
for annual or special meetings of stockholders.
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Convera Annual Meeting of Stockholders
Convera's bylaws provide that director nominations or proposals of other
business to be considered at annual meetings of stockholders may be made in any
of the following manners:
- pursuant to Convera's notice of meeting;
- by or at the direction of the Convera board of directors; or
- by any stockholder of Convera who is a stockholder of record at the time
of giving of notice of an annual meeting, who is entitled to vote at the
meeting with respect to the business proposed to be considered and who
complied with the bylaws' procedures.
For nominations or other business to be properly brought before an annual
meeting by a stockholder, the stockholder must have given timely notice in
writing to Convera's corporate secretary, and the business must be a proper
subject for stockholder action under Delaware law. To be timely, a stockholder's
notice shall be delivered to the secretary not less than 45 days nor more than
120 days prior to the date on which Convera first mailed its proxy materials for
the prior year's annual meeting of stockholders. If however the date of the
annual meeting is advanced by more than 30 days or delayed, other than by
adjournment, by more than 30 days from the anniversary of the previous year's
annual meeting, notice by the stockholder to be timely must be delivered not
later than the close of business on the later of the 60th day prior to the
annual meeting or the 10th day following the day on which Convera first publicly
announces the date of the meeting. The stockholder's notice must set forth:
- all information required by the SEC's proxy rules for each person whom
the stockholder proposes to nominate for election or reelection as a
director;
- a brief description of other business that the stockholder proposes to
bring before the meeting, the reasons for conducting the business at the
meeting and any material interest in the business by the stockholder and
of any beneficial owner on whose behalf the proposal is made; and
- the name and address of the stockholder and of any beneficial owner on
whose behalf the nomination or proposal is made, as well as the class and
number of shares which are owned beneficially by them.
If the number of directors to be elected to the Convera board is increased and
there is no public announcement about it by Convera at least 70 days prior to
the first anniversary of the preceding year's annual meeting, a stockholder's
notice required by the bylaws shall also be considered timely, but only for
nominees for any newly created positions, if it is delivered to the Convera
corporate secretary not later than the close of business on the 10th day
following the day of Convera's first public announcement about the increase.
Convera Special Meetings of Stockholders
The only business which may be conducted at a special meeting of
stockholders is that which is contained in Convera's notice of meeting. Director
nominations may be made at a special meeting of stockholders at which directors
are to be elected by Convera's notice of meeting by either of the following
manners:
- by or at the direction of the board of directors; or
- by any stockholder who is a stockholder of record at the time of giving
of notice of the special meeting, who is entitled to vote at the meeting
with respect to the election of directors and who complies with the
bylaws' notice procedures.
Nominations by stockholders of persons for election to the board of
directors may be made at a special meeting of stockholders if the stockholder's
notice is delivered to Convera's corporate secretary not earlier than the 120th
day prior to the special meeting and not later than the close of business on the
later of the 60th day prior to the special meeting or the 10th day following the
day on which Convera first publicly announces the date of the special meeting
and the nominees proposed by the board of directors to be elected at the
meeting.
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Only the persons nominated in accordance with the these bylaw provisions
shall be eligible for election at any meeting of stockholders. Similarly, the
only business which may be conducted at a meeting of stockholders is that which
is brought before the meeting in accordance with these bylaw procedures. The
bylaws do not affect a stockholder's obligation to otherwise comply with the
applicable provisions of the Exchange Act concerning stockholder meetings. Also,
these bylaw provisions do not affect any rights of stockholders to request
inclusion of proposals in Convera's proxy statement pursuant to Rule 14a-8 under
the Exchange Act.
ADVANTAGES AND DISADVANTAGES AND POTENTIAL ANTI-TAKEOVER EFFECTS OF THE CONVERA
CORPORATE GOVERNANCE PROVISIONS
If these two provisions are approved by the Excalibur stockholders, they
could potentially have an anti-takeover effect as compared with the provisions
currently in Excalibur's organizational documents. The increased quorum
requirement from 33% to 50.1% will mean that a greater percentage of
stockholders will need to be present at meetings in order to consider and
approve matters at stockholder meetings. This may make it more difficult for
proposals which may be adverse to incumbent management to be approved by
stockholders. However, the Excalibur board of directors believes that any
potential anti-takeover effect of the corporate governance proposal would be
minimal because the increase in the quorum requirements does not require the
presence of a supermajority of Convera's outstanding shares. The Excalibur board
believes that a majority quorum requirement is more in line with the standard
requirement of other public companies and believes that the majority requirement
ensures that important matters are considered by a more representative number of
Convera's stockholders.
The Convera bylaw provisions adding the notice requirements for stockholder
meetings may also make it more difficult for stockholders to submit proposals
for annual or special stockholders meetings which may be adverse to incumbent
management. Convera stockholders who fail to comply with these provisions would
not be able to have their proposals submitted for consideration at stockholder
meetings. In approving this provision, the Excalibur board believed that this
provision, rather than hinder stockholders, provides stockholders with specific
guidelines and direction for presenting matters for stockholder meetings. In
addition, these notice provisions also ensure that stockholder proposals are
received on a timely basis so that a detailed analysis of the advantages and
disadvantages of proposals can be made and presented for the benefit of
Convera's stockholders. The Excalibur board also considered the fact that this
type of notice provision is not uncommon for public companies and would not
likely constitute a significant impediment or deterrent for a potential takeover
of Convera that may be beneficial to Convera stockholders.
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ELECTION OF EXCALIBUR DIRECTORS
GENERAL
At the annual meeting, you will be asked to vote on a proposal to elect ten
directors of Excalibur who will serve until the completion of the combination
or, if the combination is not completed, the next annual meeting of Excalibur
and until their respective successors are elected and qualified. Ten
individuals, who are members of the present board of directors of Excalibur,
have been nominated for election as directors of Excalibur.
The persons named in this proxy statement/prospectus, who have been
designated by the 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 EXCALIBUR DIRECTORS AND NOMINEES
Information regarding each nominee for director is set forth in the
following table.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Donald R. Keough..................... Chairman of the Board of Directors
Patrick C. Condo..................... President and Chief Executive
Officer, Director
Herbert A. Allen..................... Director
Susan K. Allen....................... Director
Richard M. Crooks, Jr................ Director
John S. Hendricks.................... Director
W. Frank King III.................... Director
John G. McMillian.................... Director
Philip J. O'Reilly................... Director
Harry C. Payne....................... Director
</TABLE>
Donald R. Keough, 73, has been Chairman of the Board of Directors and a
Director of Excalibur since June 1996. Since April 15, 1993, Mr. Keough has been
Chairman of the Board of Allen & Company Incorporated, a New York investment
banking firm that is Excalibur's largest stockholder. Mr. Keough retired as
President, Chief Operating Officer and a Director of The Coca-Cola Company on
April 15, 1993, where he had been employed since 1950. He served as an Advisor
to the Board of Directors of The Coca-Cola Company from April 1993 to April
1998. From 1986 to 1993, he also served as Chairman of the Board of Coca-Cola
Enterprises, Inc., the world's largest bottling system. Mr. Keough serves on the
Board of Directors of Allen & Company Incorporated, H.J. Heinz Company, The
Washington Post Company, McDonald's Corporation, USA Networks, Inc. and
YankeeNets LLC.
Patrick C. Condo, 43, was named President and Chief Executive Officer in
November 1995, and a Director in January 1996. Mr. Condo was President from May
1995 to November 1995. He became Executive Vice President in January 1995 after
serving as the Director of Business Development from November 1992. From October
1987 to November 1992, Mr. Condo held several manager level positions for
Digital Equipment Corporation's Image, Video and Voice Business Unit and
Software Business Group in New Hampshire.
Herbert A. Allen, 59, was named director in June 2000. Mr. Allen is
President, Chief Executive Officer and Managing Director of Allen & Company
Incorporated, a privately held investment banking firm, and has held these
positions for more than the past five years. Mr. Allen serves on the Board of
Directors of The Coca-Cola Company.
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Susan K. Allen, 63, was named director in June 2000. Ms. Allen is a
private investor. She has been a stockholder of Allen Holding, Inc., the parent
of Allen & Company Incorporated, since its inception. She is the sister of
Herbert A. Allen.
Richard M. Crooks, Jr., 61, has been a Director of Excalibur since June
1990 and was Chairman of the Board from June 1990 to June 1996. Mr. Crooks has
been President of RMC Consultants, a financial advisory services firm, since
June 1990. Mr. Crooks is a director of and consultant to Allen & Company
Incorporated. Mr. Crooks served as a Managing Director of Allen & Company
Incorporated for more than five years prior to June 1990.
John S. Hendricks, 48, was appointed as a Director of Excalibur in May
1997. He has been Chairman and Chief Executive Officer of Discovery
Communications, Inc., a privately held, diversified media company, since he
founded the company in 1982 in order to develop a new cable television service.
The effort resulted in the launch of the Discovery Channel in 1985, which has
become one of the world's largest cable television networks. Mr. Hendricks is a
director of Internet Pictures Corporation, a provider of visual content
solutions for the Internet, TiVo, Inc., a provider of personal television
services and equipment, and a member of the boards of various cable television
industry groups, educational institutions and other organizations promoting
natural history and science.
W. Frank King III, 60, was elected a Director of Excalibur in June 1992. He
is presently a private investor. Dr. King served as President, Chief Executive
Officer, and a Director of PSW Technologies, Inc., a leading provider of
technology for open systems computing, from 1992 to August 1998. From 1988 to
November 1991, Dr. King was a Senior Vice President of Development of Lotus
Development Corporation. Prior to joining Lotus, Dr. King held various positions
with IBM over 19 years, the most recent as Vice President of Development in its
Entry Systems Division. Dr. King is a director of PSW Technologies, Inc.,
Auspex, Inc., a computer server manufacturer; EonCommunications, a provider of
Linux based communications servers, Perficient, Inc., a provider of outsourced
services to Internet software companies, Natural Microsystems, Inc., a developer
of telephone products; and several private technology companies.
John G. McMillian, 74, was elected a Director in June 1996. He is the
Chairman and CEO of Chaparral Resources, Inc. Mr. McMillian has an interest in
Peter Hughes Diving Company, a charter company, and Contender Boats, Inc., a
boat manufacturer, and serves on those boards. He also serves on the boards of
Steadman Hawkins Sports Medicine Foundation, American Country Insurance Company
and U.S. Ski Educational Foundation, and is a member of the Sun Trust/Miami
Advisory Board Committee. He was Chairman and Chief Executive Officer of
Allegheny & Western Energy Corporation, a natural gas production and
distribution company, from July 1987 until July 1995.
Philip J. O'Reilly, 62, has been a Director of Excalibur since April 1988.
Mr. O'Reilly is a partner in the law firm of O'Reilly, Marsh, Kearney &
Corteselli P.C., in Mineola, New York. Mr. O'Reilly has been in private practice
for more than the past five years.
Harry C. Payne, 53, is President of Woodward Academy, Atlanta, Georgia.
From 1994-1999, Dr. Payne served as President of Williams College. From 1988
until 1993, Dr. Payne was President of Hamilton College, Clinton, New York. Dr.
Payne is a former Chair of the Board of the National Association of Independent
Colleges and Universities and serves on the board of Barnard College. He chairs
the Academic Advisory Board of New Forum Publishers, Inc., Conshohocken,
Pennsylvania.
INFORMATION CONCERNING THE EXCALIBUR BOARD OF DIRECTORS AND ITS COMMITTEES
The board of directors held six meetings during the fiscal year ended
January 31, 2000 and acted by unanimous written consent on four occasions. 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 2000
since their election.
The board of directors has established a number of committees. The audit
committee, consisting of Mr. McMillian (Chairman), Dr. King and Mr. O'Reilly,
met four times during fiscal year 2000. The audit committee meets with
Excalibur's management, including its chief financial officer, and its
independent
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accountants several times a year to discuss internal controls and accounting
matters, Excalibur's financial statements, and the scope and results of the
auditing programs of the independent accountants. The compensation committee,
currently composed of three directors, Messrs. Crooks (Chairman), Hendricks and
O'Reilly, administers management compensation and makes recommendations in that
regard to the Board. The compensation committee met once during fiscal 2000. The
stock option plan administration committee, which currently consists of Messrs.
Crooks (Chairman) and O'Reilly, administers Excalibur's stock option plans. The
stock option administration committee met once during fiscal 2000.
Each non-employee director is paid $5,000 for each meeting of the board or
its committees attended, whether in person or by telephone, up to a maximum of
$20,000 per fiscal year. Messrs. Keough and Crooks are not paid the foregoing
fees. All directors are reimbursed for their expenses in attending meetings of
the board or its committees. Each non-employee director receives options to
purchase 25,000 shares of common stock of Excalibur upon joining the board and
additional options to purchase 25,000 shares of common stock of Excalibur after
each subsequent five-year period of service as a member of the board. The
chairman may be granted additional options to purchase 25,000 shares of common
stock of Excalibur upon being elected chairman and after each subsequent
five-year period of service. Mr. Keough has not been granted any stock options.
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APPROVAL OF THE AMENDMENT TO THE EXCALIBUR 1996 EMPLOYEE STOCK PURCHASE PLAN
PROPOSAL
Currently, under the Excalibur stock purchase plan, each eligible employee
on a date of exercise is entitled to purchase shares of Excalibur common stock
at a purchase price equal to 85% of the closing price of shares of Excalibur
common stock in the over-the-counter market on the applicable date of exercise.
The Excalibur board of directors proposes and recommends that you approve an
amendment to the stock purchase plan, pursuant to which, each eligible employee
would be entitled to purchase shares of Excalibur common stock at a purchase
price equal to the lesser of:
- 85% of the closing price of shares of Excalibur common stock in the
over-the-counter market on the applicable date of exercise; or
- 85% of the closing price of shares of Excalibur common stock in the
over-the-counter market on the date of the grant of the option.
The Excalibur board of directors is recommending this proposal because it
believes that it is an appropriate benefit that will attract and retain
competent, experienced and motivated personnel.
Convera will assume the stock purchase plan upon consummation of the
combination. If the amendment to the stock purchase plan is approved, it will
become effective whether or not the combination is completed.
VOTE REQUIRED
To be adopted, the stock purchase plan proposal must be approved by the
affirmative vote of a majority of the shares of present in person or represented
by proxy at the annual meeting and entitled to vote. Any shares not voted by
abstention will have the same legal effect as a vote against the stock purchase
plan proposal. Broker non-votes will have no effect on the stock purchase plan
proposal.
The following is a description of the Excalibur stock purchase plan. The
amended and restated stock purchase plan, as proposed, is attached to this proxy
statement/prospectus as Appendix F.
DESCRIPTION OF THE EXCALIBUR STOCK PURCHASE PLAN
In June 1996, the stockholders approved the stock purchase plan for the
purpose of encouraging eligible employees to acquire shares of Excalibur's
common stock. All full time or part-time employees of Excalibur whose customary
employment is more than twelve hours per week are eligible to participate. The
aggregate number of shares of common stock which may be purchased under the
stock purchase plan shall not exceed 250,000, subject to adjustment in the event
of stock dividends, stock splits, combination of shares, recapitalizations, or
other changes in the outstanding common stock.
Excalibur makes grants of options on February 1 and/or August 1 of each
year the stock purchase plan is in effect or on such other designated date.
Options are exercised on April 30, July 31, October 31 and January 31 of each
fiscal year.
Payment for shares of common stock purchased under the stock purchase plan
is made by authorized payroll deductions from an eligible employee's eligible
compensation. Eligible employees who elect to participate in the stock purchase
plan designate that a stated whole percentage equaling at least 1%, but no more
than 10% of eligible compensation be deducted. No participant in the stock
purchase plan is permitted to purchase common stock under the stock purchase
plan at a rate that exceeds $25,000 in fair market value of common stock,
determined at the time options are granted, for each calendar year.
It is intended that the stock purchase plan constitute an "employee stock
purchase plan" under the provisions of Section 423 of the tax code. No Federal
income tax liability results from the grant or exercise of an option to purchase
shares of common stock pursuant to an employee stock purchase plan, although
amounts deducted from payroll are included in an employee's compensation as
ordinary income. No deduction
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is allowable to the employer with respect to the discount available to the
employees under an employee stock purchase plan.
The board of Excalibur shall have the right to terminate the stock purchase
plan or any offering at any time for any reason. The stock purchase plan is
anticipated to continue in effect through July 31, 2006.
EXECUTIVE COMPENSATION OF EXCALIBUR
IDENTIFICATION OF EXCALIBUR EXECUTIVE OFFICERS AND KEY EMPLOYEES
Each year, the board of directors appoints the executive officers of
Excalibur to serve until the next annual meeting of stockholders and until their
successors have been duly appointed and qualified. The following information
indicates the position, age and business experience of the current Excalibur
executive officers, Messrs. Condo, Buchanan, Khan and Nunnerley, as well as key
employees of Excalibur. There are no family relationships between any of the
executive officers of Excalibur.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Patrick C. Condo..................... President and Chief Executive
Officer, Director
James H. Buchanan.................... Vice President, Chief Financial
Officer, Treasurer and Secretary
Kamran Khan.......................... Senior Vice President and General
Manager, Applications Group
David Nunnerley...................... Senior Vice President and General
Manager, Media Services Group
Daniel C. Agan....................... Vice President, Corporate Marketing
Nancy McKinley....................... Vice President, Human Resources &
Administration
</TABLE>
See the discussion included in the preceding section for the business
experience of Mr. Condo.
James H. Buchanan, 44, joined Excalibur as Chief Financial Officer in
September 1995. Mr. Buchanan was elected Secretary and Treasurer of Excalibur on
November 17, 1995. From March 1991 to August 1995, Mr. Buchanan was Vice
President, Controller and Treasurer of Legent Corporation, a software
development company. Prior to that, he held several financial management
positions with Norfolk Southern Corporation and PepsiCo. Mr. Buchanan is a
certified public accountant.
Kamran Khan, 37, was named Senior Vice President and General Manager,
Applications Group in November 1999. Previously, Mr. Khan held several sales
management positions since joining Excalibur in September 1993, most recently as
Vice President, Worldwide Sales. Mr. Khan served as general manager of
Excalibur's international sales operation and wholly-owned subsidiary Excalibur
Technologies, Ltd., located in the United Kingdom, from August 1995 until his
appointment to Vice President. Prior to joining Excalibur, Mr. Khan held various
positions, including regional business manager, with PAFEC Limited, a leading
firm in the United Kingdom involved with the development and implementation of
computer-aided engineering and engineering document management software systems.
David Nunnerley, 43, was named Senior Vice President and General Manager,
Media Services Group in November 1999. Mr. Nunnerley previously served as Vice
President, Visual Product Development since February 1998 and has been
instrumental in the development of Excalibur's visual products since joining
Excalibur in 1996. From 1994 to 1996, Mr. Nunnerley was Vice President of
Engineering for Videopress Software, a software company providing video delivery
products and solutions to cable companies deploying cable modems. Prior to that,
Mr. Nunnerley held various product management/marketing roles and management
positions with Digital Equipment Corporation.
Daniel C. Agan, 47, joined Excalibur as Vice President, Corporate Marketing
in September 1996. From 1991 through 1996, Mr. Agan was President and Chief
Executive Officer of Agan Associates, Limited, a
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<PAGE> 109
marketing consulting firm with experience providing executive-level service to a
diverse range of clients in the technology, online and broadcasting industries.
Prior to this, Mr. Agan spent fifteen years with the Public Broadcasting Service
(PBS) where he served in a variety of capacities, most notably as Senior Vice
President for National Programming and Promotion.
Nancy McKinley, 50, was named Vice President of Human Resources and
Administration in November 1999 after serving as Excalibur's Director of Human
Resources and Administration since 1996 during which she developed the human
resource function for Excalibur. Prior to 1996, Ms. McKinley was Director of
Human Resources and Administration for the Pelavin Research Institute of the
American Institute for Research as well as holding similar positions in other
firms in the high technology and international areas.
SUMMARY COMPENSATION TABLE
The following table presents information concerning the compensation of
Excalibur's chief executive officer and each of the other most highly
compensated executive officers of Excalibur during the 2000 fiscal year for
services rendered in all capacities to Excalibur for the fiscal year ended
January 31, 2000, as well as the previous two fiscal years:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------------------- ---------------------------------------------------
OTHER RESTRICTED SECURITIES ALL
ANNUAL STOCK UNDERLYING LTIP OTHER
SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS PAYMENTS COMPENSATION
NAME YEAR ($) ($) ($) ($) ($) ($) ($)
---- ---- ------- ------- ------------ ---------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Patrick C. Condo........... 2000 275,000 102,369 -- -- 175,000 -- --
Chief Executive Officer 1999 225,000 71,281 -- -- -- -- --
and President 1998 200,000 86,000 -- -- 400,000(1) -- --
James H. Buchanan.......... 2000 230,000 84,425 -- -- 35,000 -- --
Vice President, Chief 1999 180,000 57,024 -- -- 10,000 -- --
Financial Officer, 1998 165,514 70,950 -- -- 150,000(2) -- --
Secretary and Treasurer
Paul E. Nelson............. 2000 181,500 72,725 -- -- -- -- --
Chief Technology
Officer(3) 1999 165,000 81,800 -- -- -- -- --
1998 157,500 69,586 -- -- 84,750(4) -- --
</TABLE>
---------------
(1) This amount includes options to purchase 300,000 shares that were granted in
prior years and subsequently repriced on May 8, 1997.
(2) This amount includes options to purchase 100,000 shares that were granted in
prior years and subsequently repriced on May 8, 1997.
(3) Mr. Nelson left the employ of Excalibur in August 2000.
(4) Represents options to purchase 84,750 shares that were granted in prior
years and subsequently repriced on May 8, 1997.
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<PAGE> 110
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning options granted by
Excalibur during fiscal 2000 to the named executive officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
---------------------------- ANNUAL RATES
% OF TOTAL OF STOCK PRICE
OPTIONS APPRECIATION FOR
GRANTED TO EXERCISE OPTION TERM(2)
EMPLOYEES IN OR BASE EXPIRATION ---------------------
NAME GRANTED (#) FISCAL YEAR(1) PRICE DATE 5% ($) 10% ($)
---- ----------- -------------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Patrick C. Condo............ 175,000 25.9% $15.00 12/17/09 1,650,848 4,183,574
James H. Buchanan........... 35,000 5.2% $15.00 12/17/09 330,170 836,715
Paul E. Nelson.............. -- -- -- -- --
</TABLE>
---------------
(1) These options vest in equal 12 1/2% increments every six months from the
dates of original grant.
(2) The amounts shown are hypothetical gains that would exist for the respective
options if exercised at the end of the option term. The assumed 5% and 10%
rates of stock price appreciation are mandated by rules of the Securities
and Exchange Commission and do not represent Excalibur's estimate or
projection of future increases in the price of its common stock.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
The following table sets forth, as of January 31, 2000, the number of
options and the value of exercised and unexercised options held by the named
executive officers of Excalibur.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED IN-THE MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES FISCAL YEAR-END (#) FISCAL YEAR-END ($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE(1)
---- ------------ ------------ --------------------- ---------------------
<S> <C> <C> <C> <C>
Patrick C. Condo.......... -- -- 350,000/225,000 $6,024,750/$2,027,875
James H. Buchanan......... -- -- 128,750/66,250 $2,191,594/$727,531
Paul E. Nelson............ -- -- 84,750/0 $1,493,719/$0
</TABLE>
---------------
(1) The closing price of Excalibur's common stock on January 31, 2000, the last
trading day of Excalibur's fiscal year, was $22.375 per share.
DESCRIPTION OF THE EXCALIBUR 1989 INCENTIVE PLAN
In September 1989, Excalibur adopted and its stockholders approved the 1989
incentive plan which authorized the granting of options to purchase shares of
Excalibur's common stock, and other forms of incentive compensation, in order to
attract and retain competent, experienced and motivated personnel. At present,
options to purchase 1,592,318 shares have been granted and are outstanding
pursuant to the 1989 incentive plan. Because the 1989 Incentive Plan expired in
April 1999, no further options may be granted under the 1989 incentive plan.
The 1989 incentive plan provided for the issuance of incentive stock
options and non-qualified stock options, as well as stock appreciation rights.
All employees, including officers and directors who were also employees, were
eligible to be granted incentive stock options under the 1989 incentive plan.
Non-qualified stock options were eligible to be granted under the 1989 incentive
plan to employees or to other persons who performed substantial services for or
on behalf of Excalibur, including officers and directors who were not members of
the stock option plan administration committee of the board of Excalibur.
Options are not transferable by the option holder, other than by will or the
laws of descent and distribution, and are exercisable during the option holder's
lifetime only by the option holder.
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<PAGE> 111
The 1989 incentive plan is currently administered by the committee. Subject
to the terms of the 1989 incentive plan, the committee had the authority to
determine all terms and provisions under which stock options were granted under
the 1989 incentive plan, including determining the individuals to whom options
could be granted, the exercise price and number of shares subject to each
option, the time or times during which all or a portion of each option could be
exercised and other terms of each option. The maximum term of options granted
under the 1989 incentive plan is ten years.
Under the 1989 incentive plan, incentive stock options have been granted to
officers and key employees of Excalibur 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. The committee had the power, when and to the extent it deemed
appropriate and with the consent of option holders, to substitute outstanding
options with replacement options at a lower exercise price. Options granted and
outstanding under the 1989 incentive plan vest over a period of up to four
years. The 1989 incentive plan provided that option holders may be granted stock
appreciation rights at the discretion of the board of Excalibur. No stock
appreciation rights have been granted to date under the 1989 incentive plan.
Upon termination of an employee for cause, such 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 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 Excalibur.
The 1989 incentive plan may be amended by the board of Excalibur, except
that the board of Excalibur may not, without the approval of Excalibur's
stockholders, increase the number of shares available for distribution, decrease
the option price of a stock option below 100% of the fair market value at grant,
change the pricing rule applicable for stock purchase rights, change the class
of employees eligible to receive awards under the 1989 incentive plan or extend
the term of any option award.
DESCRIPTION OF THE EXCALIBUR 1995 STOCK OPTION PLAN
The 1995 stock option plan authorizes the granting of stock options and
other forms of incentive compensation to purchase up to 400,000 shares of
Excalibur's common stock in order to attract and retain competent, experienced
and motivated personnel. The terms of the 1995 stock option plan are identical
to the 1989 incentive plan described above, except that the 1995 stock option
plan does not provide that option holders may be granted stock appreciation
rights. The 1995 stock option plan is administered by the committee. At present,
options to purchase 186,635 shares have been granted and are outstanding
pursuant to the 1995 stock option plan.
DESCRIPTION OF THE EXCALIBUR 1999 STOCK OPTION PLAN
In August 1999, Excalibur adopted and its stockholders approved the 1999
stock option plan which authorized the granting of options to purchase up to 1
million shares of Excalibur's common stock, and other forms of incentive
compensation, in order to attract and retain competent, experienced and
motivated personnel. At present, options to purchase 919,826 shares have been
granted and are outstanding pursuant to the 1999 stock option plan.
The 1999 stock option plan provided for the issuance of incentive stock
options and non-qualified stock options, as well as stock appreciation rights.
All employees, including officers and directors who were also employees, were
eligible to be granted incentive stock options under the 1999 stock option plan.
Non-qualified stock options were eligible to be granted under the 1999 stock
option plan to employees or to other persons who performed substantial services
for or on behalf of Excalibur, including officers and directors who were not
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<PAGE> 112
members of the stock option plan administration committee of the board of
Excalibur. Options are not transferable by the option holder, other than by will
or the laws of descent and distribution, and are exercisable during the option
holder's lifetime only by the option holder.
The 1999 stock option plan is currently administered by the committee.
Subject to the terms of the 1999 stock option plan, the committee had the
authority to determine all terms and provisions under which stock options were
granted under the 1999 stock option plan, including determining the individuals
to whom options could be granted, the exercise price and number of shares
subject to each option, the time or times during which all or a portion of each
option could be exercised and other terms of each option. The maximum term of
options granted under the 1999 stock option plan is ten years.
Under the 1999 stock option plan, incentive stock options have been granted
to officers and key employees of Excalibur 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. The committee had the power, when and to the extent it deemed
appropriate and with the consent of option holders, to substitute outstanding
options with replacement options at a lower exercise price. Options granted and
outstanding under the 1999 stock option plan vest over a period of up to four
years. The 1999 stock option plan provided that option holders may be granted
stock appreciation rights at the discretion of the board of Excalibur. No stock
appreciation rights have been granted to date under the 1999 stock option plan.
Upon termination of an employee for cause, such 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 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 Excalibur.
The 1999 stock option plan may be amended by the board of Excalibur, except
that the board of Excalibur may not, without the approval of Excalibur's
stockholders, increase the number of shares available for distribution, decrease
the option price of a stock option below 100% of the fair market value at grant,
change the pricing rule applicable for stock purchase rights, change the class
of employees eligible to receive awards under the 1999 stock option plan or
extend the term of any option award.
REPORT OF THE EXCALIBUR COMPENSATION COMMITTEE
The following is the report of the compensation committee of the board of
Excalibur, describing the compensation policies and rationale applicable to
Excalibur's executive officers with respect to the compensation paid to such
executive officers for the fiscal year ended January 31, 2000. The compensation
committee of the board of directors is composed entirely of directors who have
never been employees of the corporation. As members of the compensation
committee, it is our duty to set compensation policies applicable to Excalibur's
executive officers and to evaluate the performance of Excalibur's executive
officers. The 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 corporation's business strategy, values
and management initiatives. The program:
- integrates compensation programs which link compensation with the
corporation's annual strategic planning and measurement processes;
- supports a performance-oriented environment that rewards actual
performance that is related to both strategic goals which cannot be
measured by traditional accounting tools and performance of the
corporation as compared to that of the company's annual financial
objectives; and
- helps attract and retain key executives who are critical to the long-term
success of the corporation.
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<PAGE> 113
In order to further these objectives, for fiscal 2000 executive officer
compensation included three components: (1) base salary, (2) an annual incentive
bonus, and (3) a long-term incentive award. The compensation policy of Excalibur
is that a substantial portion of the annual compensation of each executive
officer should relate to and be contingent upon the performance of Excalibur, 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 Excalibur can
continue to attract, retain and motivate key executives who are critical to the
long-term success of Excalibur. The committee does not employ outside
consultants or utilize specific compensation surveys in evaluating competing
company compensation policies or financial performance. Instead, the committee
members rely on their own experience and knowledge of Excalibur and its
industry, as well as that of management and other board members, in evaluating
such factors.
Base Salary. The 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 committee presents the salary recommendations for the named officers to the
board for approval. These salary recommendations are based on the executive's
contribution to the company, experience and expertise. There are no individual
performance matrices or pre-established weightings given to each factor.
Annual Incentive Bonus. The annual incentive bonus program provides for
cash awards based upon achievement of certain corporate and business goals set
at the beginning of the year, the individual's level of responsibility and the
individual's personal performance. Under Excalibur's bonus scheme, bonuses are
paid based upon Excalibur attaining certain sales, profitability and strategic
goals and on each officer's individual contribution to Excalibur's attainment of
such goals. For fiscal 2000, 50% of each named executive officer potential bonus
was based on the achievement of corporate revenue goals; 20% percent was based
on the achievement of corporate profitability goals; and 30% percent was based
on the achievement of quarterly management objectives as determined by the chief
executive officer and the chairman of the compensation committee. Revenue was
given the largest weighting by the committee as it was generally considered the
most important financial measure within Excalibur's industry for companies at a
comparable stage of growth. The percentage of bonus received does not directly
correspond to the percentage of the revenue target achieved. For example,
Excalibur must meet at least 90% of the revenue target for the officers to
receive any of their revenue bonus, and the bonus percentage received scales
upward depending on the percentage of the revenue target attained. There is a
similar scale for net income. The revenue and net income targets are derived
from the annual operating budget that is approved by the full board. The
quarterly management objectives represent more subjective aspects of performance
such as the development and execution of strategic plans, the development and
management of employees and the exercise of leadership within Excalibur. The
committee set a maximum bonus amount for each named executive officer. The
actual annual incentive award was then determined based on actual results
measured by the committee against these goals. For fiscal 2000, the named
executive officers received between approximately 65% and 80% of their maximum
bonus amounts.
Long-term Incentive Award. As with prior years, for fiscal 2000, long-term
compensation for the chief executive officer and other executives consisted of
stock options. Stock options provide incentive for the creation of shareholder
value over the long term since the full benefit of the compensation package
cannot be realized unless an appreciation in the price of Excalibur's common
stock occurs over a specified number of years. The size of previous grants and
the number of shares held by an executive generally are not considered in
determining annual award levels. Instead, the size of these grants are based on
the committee's evaluation of company and individual performance factors
comparable to those discussed above for the determination of bonus grants. Stock
options are granted with an exercise price equal to or greater than the fair
market value of Excalibur common stock on the day of grant, and become
exercisable after the expiration of a period of time, typically four years, and
continue to be exercisable until ten years from the date granted.
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<PAGE> 114
Compensation of the Chief Executive Officer. Mr. Condo's base salary for
the fiscal year ended January 31, 2000 was $275,000. Mr. Condo's salary was
determined following discussions between Mr. Condo and the compensation
committee. Mr. Condo was paid a bonus of $102,369 during fiscal year 2000 for
the achievement of certain goals during the fiscal year. Fifty percent of Mr.
Condo's potential bonus was based on the achievement of corporate revenue goals;
twenty percent was based on the achievement of corporate profitability goals;
and thirty percent was based on the achievement of quarterly management
objectives as determined by the chief executive officer and the compensation
committee. Mr. Condo's bonus amount represented approximately 70% of the maximum
bonus target established by the committee and reflected Excalibur's ability to
meet a portion, but not all, of its revenue and net income targets. In fiscal
2000, the committee granted Mr. Condo an option on 175,000 shares, exercisable
in 12.5% increments every six months from the date of grant. The committee
determined that Mr. Condo's contribution to the company's improving financial
performance and strategic positioning made this option award appropriate.
Compensation Committee: Richard M. Crooks, Jr., Chairman
John S. Hendricks
Philip J. O'Reilly
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the compensation committee during fiscal 2000 were Messrs.
Crooks, Hendricks and O'Reilly, none of whom is an officer or employee of
Excalibur or its subsidiaries. No member of the compensation committee or
executive officer of Excalibur has a relationship that would constitute an
interlocking relationship with executive officers or directors of another
entity.
EMPLOYMENT AGREEMENTS
In May 1998, Patrick C. Condo entered into an agreement with Excalibur
under which Mr. Condo would be paid an amount equal to twelve months of base
salary plus bonus compensation and continuation of his employee benefits for one
year in the event Mr. Condo's employment is terminated or he is removed from his
position as chief executive officer within six months following change of
control events relating to Excalibur. The full board of Excalibur approved this
arrangement. For fiscal 2000, Mr. Condo's annual salary and bonus amounted to
$377,369. In connection with the combination, Mr. Condo waived all rights to
this payment that he would have been entitled to as a result of the combination.
Simultaneously, he entered into an agreement with Convera under which Mr. Condo
will be paid an amount equal to twelve months of base salary plus bonus
compensation and continuation of his employee benefits for one year in the event
Mr. Condo's employment is terminated or he is removed from his position as
president of Convera within six months following change of control events
relating to Convera.
The offer of employment letter dated September 7, 1995 for James H.
Buchanan, chief financial officer, secretary and treasurer of Excalibur,
stipulates that Mr. Buchanan will be paid an amount equal to twelve months of
base salary in semi-monthly installments should his employment be terminated by
Excalibur without cause. Convera will assume this employment agreement if the
combination is completed.
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<PAGE> 115
PERFORMANCE GRAPH
The following graph is a comparison of the cumulative total return to
stockholders of Excalibur's common stock at January 31, 2000 since January 31,
1995 to the cumulative total return over such period of (i) the Nasdaq Stock
Market-U.S., and (ii) the Standard & Poor's High Tech Composite, assuming an
investment in each of $100 on January 31, 1995 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 Excalibur
specifically incorporates it by reference into such filing.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG EXCALIBUR TECHNOLOGIES CORPORATION,
THE NASDAQ STOCKMARKET (U.S.) INDEX
AND THE S & P TECHNOLOGY SECTOR INDEX
LOGO
* $100 INVESTED ON 1/31/95 IN STOCK OR INDEX --
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING JANUARY 31.
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<PAGE> 116
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF EXCALIBUR
The following table sets forth, as of November 14, 2000, information
concerning the ownership of Excalibur common stock of (i) all persons known to
Excalibur to beneficially own 5% or more of Excalibur's common stock, (ii) each
director of Excalibur, (iii) each named executive officer of Excalibur and (iv)
all directors and executive officers of Excalibur as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER OR GROUP BENEFICIAL OWNERSHIP(1) CLASS OWNED
--------------------------------- ----------------------- ----------------
<S> <C> <C>
Allen & Company Incorporated.......................... 3,315,846(2)(3) 21.4%
Donald R. Keough...................................... 155,500(4) 1.0%
Herbert A. Allen...................................... 556,515(5) 3.6%
Susan K. Allen........................................ 516,599(6) 3.4%
Patrick C. Condo...................................... 445,628(7) 2.8%
Richard M. Crooks, Jr................................. 404,750(8) 2.6%
John S. Hendricks..................................... 25,000(9) *
W. Frank King III..................................... 38,000(10) *
John G. McMillian..................................... 58,500(11) *
Philip J. O'Reilly.................................... 55,000(12) *
Harry C. Payne........................................ 25,000(13) *
James H. Buchanan..................................... 177,943(14) 1.2%
All directors and executive officers as a group (14 16.1% as a group
persons)............................................ 2,626,430(15) (14 persons)
</TABLE>
---------------
* Represents less than one percent of the outstanding common stock.
(1) To Excalibur's knowledge, each person listed has sole voting and investment
power as to the shares indicated, except as described below.
(2) Does not include shares owned by persons, including Messrs. Allen, Keough
and Crooks, or Ms. Allen, and entities which, together with Allen & Company
Incorporated, may be considered a "group," as such term is defined by
Section 13(d) of the Securities Exchange Act of 1934, because (as reported
on Schedule 13D filed with the SEC on May 15, 2000) many of these persons
or entities are Allen stockholders, officers, directors, relatives or
affiliates of the foregoing. No person or entity included in this possible
"group," with the exception of Allen & Company Incorporated, owns 5% or
more of the outstanding common stock.
(3) Includes 271,800 shares of common stock issuable upon conversion of 27,180
shares of Excalibur's cumulative convertible preferred stock.
(4) Does not include shares owned by Allen & Company Incorporated, of which Mr.
Keough is Chairman of the Board, and as to which shares Mr. Keough
disclaims beneficial ownership.
(5) Does not include shares owned by Allen & Company Incorporated, of which Mr.
Allen is President and Chief Executive Officer, and as to which shares Mr.
Allen disclaims beneficial ownership.
(6) Does not include shares owned by Allen & Company Incorporated. Ms. Allen is
a stockholder of Allen & Company Incorporated's parent, and Ms. Allen
disclaims beneficial ownership of these shares.
(7) Includes (a) 10,000 shares of common stock owned beneficially but not of
record upon exercise of stock options at a price of $4.75 per share
expiring November 13, 2002; (b) 15,000 shares of common stock owned
beneficially but not of record upon exercise of stock options at a price of
$4.75 per share, expiring January 4, 2004; (c) 75,000 shares of common
stock owned beneficially but not of record upon exercise of stock options
at a price of $4.75 per share, expiring December 6, 2004; (d) 100,000
shares of common stock owned beneficially but not of record, issuable upon
exercise of stock options at a price of $4.75 per share, expiring June 2,
2005; (e) 100,000 shares of common stock owned beneficially but not of
record, issuable upon exercise of stock options at a price of $4.75 per
share expiring November 1, 2005; (f) 75,000 shares of common stock owned
beneficially but not of record, issuable upon exercise of stock
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<PAGE> 117
options at a price of $7.63 per share expiring August 13, 2007; (g) 43,750
shares of common stock owned beneficially but not of record, issuable upon
exercise of stock options at a price of $15.00 per share expiring December
16, 2009; and (h) 25,000 shares of common stock owned beneficially but not
of record, issuable on exercise of stock options of Excalibur at a price of
$33.25 per share expiring April 28, 2010.
(8) Includes (a) 50,000 shares of common stock issuable upon exercise of stock
options of Excalibur at a price of $20.56 per share expiring November 27,
2005, and (b) 25,000 shares of common stock issuable upon exercise of stock
options of Excalibur at a price of $26.00 per share expiring February 17,
2010. Does not include shares owned by Allen & Company Incorporated, of
which Mr. Crooks is a director and as to which shares Mr. Crooks disclaims
beneficial ownership.
(9) Represents 25,000 shares of common stock owned beneficially but not of
record, issuable upon exercise of stock options of Excalibur at a price of
$4.875 per share expiring June 2, 2007.
(10) Includes (a) 13,000 shares of common stock owned beneficially but not of
record, issuable upon exercise of stock options of Excalibur at a price of
$12.50 per share, expiring July 2, 2002; and (b) 25,000 shares of common
stock owned beneficially but not of record, issuable upon exercise of stock
options of Excalibur at a price of $4.75 per share, expiring May 8, 2007.
(11) Includes (a) 25,000 shares of common stock owned beneficially but not of
record, issuable upon exercise of stock options of Excalibur at a price of
$22.50 per share, expiring June 28, 2006, and (b) 10,000 shares of common
stock owned beneficially but not of record, issuable upon exercise of stock
options of Excalibur at a price of $14.00 per share, expiring October 28,
2006.
(12) Includes (a) 25,000 shares of common stock owned beneficially but not of
record, issuable upon exercise of stock options of Excalibur at a price of
$13.00 per share expiring March 12, 2003; and (b) 25,000 shares of common
stock owned beneficially but not of record, issuable upon exercise of stock
options of Excalibur at a price of $6.75 per share expiring December 1,
2008.
(13) Represents 25,000 shares of common stock owned beneficially but not of
record, issuable upon exercise of stock options of Excalibur at a price of
$8.188 per share expiring August 25, 2009.
(14) Includes (a) 30,000 shares of common stock owned beneficially but not of
record, issuable upon exercise of stock options of Excalibur at a price of
$4.75 per share expiring September 13, 2005; (b) 70,000 shares owned
beneficially but not of record, issuable upon exercise of stock options of
Excalibur at a price of $4.75 per share expiring November 1, 2005; (c)
37,500 shares of common stock owned beneficially but not of record,
issuable upon exercise of stock options of Excalibur at a price of $7.63
per share expiring August 13, 2007; (d) 5,000 shares of common stock owned
beneficially but not of record, issuable upon exercise of stock options of
Excalibur at a price of $6.25 per share expiring September 1, 2008; (e)
8,750 shares of common stock owned beneficially but not of record, issuable
upon exercise of stock options of Excalibur at a price of $15.00 per share
expiring December 16, 2009; and (f) 25,000 shares of common stock owned
beneficially but not of record, issuable upon exercise of stock options of
Excalibur at a price of $33.25 per share expiring April 28, 2010.
(15) Includes 1,028,937 shares of common stock owned beneficially but not of
record, issuable upon the exercise of options to purchase common stock of
Excalibur.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Donald R. Keough, the chairman of the board of Excalibur, is the chairman
of the board of Allen & Company Incorporated. Herbert A. Allen, a director of
Excalibur, is the president and chief executive officer of Allen & Company
Incorporated. Susan K. Allen, a director of Excalibur, is a stockholder of the
parent of Allen & Company Incorporated. Richard M. Crooks, Jr., a director of
Excalibur, is a director of and consultant to Allen & Company Incorporated.
Excalibur's policy is that it will not make loans to, or enter into other
transactions with directors, officers or affiliates unless such loans or
transactions are approved by a majority of Excalibur's independent disinterested
directors, may reasonably be expected to benefit Excalibur, and will be on terms
no less favorable to Excalibur than could be obtained from unaffiliated third
parties.
106
<PAGE> 118
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 and regulations of the
SEC thereunder require Excalibur's executive officers and directors, and persons
who own more that ten percent of a registered class of Excalibur'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
Excalibur, or on written representations from other reporting persons that no
other reports were required for such persons, Excalibur believes that during or
with respect to the period from February 1, 1999 to January 31, 2000 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.
STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
If the combination is not completed, proposals of stockholders intended to
be presented by such stockholders at next year's annual meeting must be received
by Excalibur at its principal office no later than August 21, 2001 and must
satisfy the conditions established by the Securities and Exchange Commission for
stockholder proposals to be included in Excalibur's proxy statement for that
meeting. There will be no such annual meeting of Excalibur if the combination is
completed.
107
<PAGE> 119
OTHER MATTERS
EXCALIBUR'S AND CONVERA'S INDEPENDENT AUDITORS
Excalibur's and Convera's Current Auditors
On the recommendation of the audit committee of the Excalibur board of
directors, the board has selected Ernst & Young LLP as our independent auditors
for the fiscal year ending January 31, 2001. Following the closing of the
combination, Ernst & Young will serve as the independent auditors of Convera for
the fiscal year ending January 31, 2001. 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.
Information Concerning Prior Changes in Excalibur's Auditors
On October 28, 1998, Excalibur disengaged its independent accounting firm,
Arthur Andersen LLP. The decision to dismiss Arthur Andersen was approved by the
board of directors of Excalibur on the recommendation of its audit committee.
During the fiscal year ended January 31, 1998 and any subsequent interim
period, none of Arthur Andersen's reports on Excalibur's financial statements
contained an adverse opinion or a disclaimer of opinion, or was qualified or
modified as to uncertainty, audit scope or accounting principles. During that
reporting period, there were no matters of disagreement with Arthur Andersen on
any matters of accounting principles or practices, financial statement
disclosure, or auditing scope or procedures which, if not resolved to the
satisfaction of Arthur Andersen, would have caused Arthur Andersen to make a
reference thereto in its report, except for the following:
- In Arthur Andersen's report to the audit committee issued in May 1997,
Arthur Andersen noted that in the quarter ending April 30, 1996, Arthur
Andersen and Excalibur disagreed on the accounting treatment of two
sales. Arthur Andersen stated that the issues were ultimately resolved to
their satisfaction.
- In Excalibur's quarter ending July 31, 1998, Arthur Andersen and
Excalibur had a difference of opinion on the appropriate accounting
treatment of a contract which granted the licensee the rights to
distribute Excalibur's software products as an original equipment
manufacturer and use Excalibur's software products for the licensee's
internal business operations. The contract also provided for custom
development to Excalibur's software products to be distributed by the
licensee. The internal use license did not require custom developments to
Excalibur's software products. The difference of opinion between Arthur
Andersen and Excalibur related to the accounting treatment for the
internal use license granted in the contract. After discussion, Excalibur
accepted Arthur Andersen's proposed accounting treatment and employed the
percentage-of-completion method of accounting on the entire contract.
The audit committee has discussed each of the matters described above with
Arthur Andersen.
On November 9, 1998, Excalibur engaged PricewaterhouseCoopers LLP as its
independent accounting firm. The decision to engage PricewaterhouseCoopers was
approved by Excalibur's board of directors on the recommendation of its audit
committee.
On July 14, 2000, PricewaterhouseCoopers, resigned in anticipation of a
conflict of interests resulting from Excalibur's proposed combination with Intel
and the prior existence of a business alliance between PricewaterhouseCoopers
and Intel which PricewaterhouseCoopers expects would impair its auditor
independence with regard to Convera.
During the fiscal years ended January 31, 1999 and January 31, 2000 and
through July 14, 2000, none of PricewaterhouseCoopers' reports on Excalibur's
financial statements contained an adverse opinion or a disclaimer of opinion, or
were qualified or modified as to uncertainty, audit scope or accounting
principles. During that reporting period, there were no matters of disagreement
with PricewaterhouseCoopers on any matters of accounting principles or
practices, financial statement disclosure, or auditing scope or procedures
108
<PAGE> 120
which, if not resolved to the satisfaction of PricewaterhouseCoopers, would have
caused PricewaterhouseCoopers to make a reference thereto in its report.
On July 19, 2000, Excalibur engaged Ernst & Young LLP as its new
independent accounting firm. The decision to engage Ernst & Young LLP was
approved by the board of directors of Excalibur on the recommendation of its
audit committee.
DISCRETIONARY AUTHORITY
The annual meeting is called for the specific purposes set forth in this
proxy statement/prospectus 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/prospectus, Excalibur 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.
LEGAL MATTERS
The validity of the Convera common stock to be issued in connection with
the combination will be passed upon by Heller Ehrman White & McAuliffe LLP, New
York, New York, counsel to Excalibur and Convera.
EXPERTS
The financial statements of Excalibur as of and for the years ended January
31, 2000 and 1999, incorporated in this proxy statement/prospectus by reference
to the Annual Report of Excalibur on Form 10-K for the year ended January 31,
2000 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting. The financial statements of
Excalibur as of January 31, 1998 and for the year ended January 31, 1998
incorporated by reference in this proxy statement/prospectus have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
The financial statements of the Interactive Media Services division of
Intel at December 25, 1999 and December 26, 1998, and for the year ended
December 25, 1999 and the period from inception to December 26, 1998, which are
referred to and made a part of this proxy statement/prospectus, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
appearing elsewhere herein, and are included in reliance upon such report given
on the authority of such firm as experts in accounting and auditing.
The balance sheet of Convera Corporation at October 31, 2000, which is
referred to and made a part of this proxy statement/prospectus, has been audited
by Ernst & Young LLP, independent auditors, as set forth in their report
appearing elsewhere herein, and is included in reliance upon such report given
on the authority of such firm as experts in accounting and auditing.
109
<PAGE> 121
FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<S> <C>
INTERACTIVE MEDIA SERVICES DIVISION OF INTEL CORPORATION
Report of Independent Auditors.............................. F-2
Statement of Assets to be Contributed as of December 25,
1999, December 26, 1998, and September 30, 2000
(unaudited)............................................... F-3
Statement of Net Revenues and Direct Expenses for the year
ended December 25, 1999, the period from inception to
December 26, 1998 and the nine months ended September 25,
1999 (unaudited) and September 30, 2000 (unaudited)....... F-4
Notes to Financial Statements............................... F-5
CONVERA CORPORATION
Report of Independent Auditors.............................. F-12
Balance Sheet as of October 31, 2000........................ F-13
Notes to Consolidated Balance Sheet......................... F-14
</TABLE>
F-1
<PAGE> 122
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Intel Corporation
We have audited the accompanying statement of assets to be contributed of
the Interactive Media Services division of Intel Corporation as of December 25,
1999 and December 26, 1998, and the related statement of net revenues and direct
expenses for the year ended December 25, 1999 and the period from inception to
December 26, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
As described in Note 1, the accompanying financial statements were prepared
solely to present the assets to be contributed and the related net revenues and
direct expenses of the Interactive Media Services division of Intel Corporation
pursuant to the Agreement and Plan of Contribution and Merger, dated April 30,
2000, between Intel Corporation, Excalibur Technologies Corporation, Convera
Corporation, and Excalibur Transitory, Inc., as amended on August 14, 2000, and
are not intended to be a complete presentation of the assets and liabilities or
the results of operations of the Interactive Media Services division of Intel
Corporation.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the assets to be contributed of the Interactive Media
Services division of Intel Corporation as of December 25, 1999 and December 26,
1998 and the related net revenues and direct expenses for the year ended
December 25, 1999 and the period from inception to December 26, 1998 in
conformity with accounting principles generally accepted in the United States.
Ernst & Young LLP
San Jose, California
November 16, 2000
F-2
<PAGE> 123
INTERACTIVE MEDIA SERVICES DIVISION OF INTEL CORPORATION
STATEMENT OF ASSETS TO BE CONTRIBUTED
<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 26, DECEMBER 25, 2000
1998 1999 (UNAUDITED)
------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Capital contribution receivable...................... $ -- $ -- $150,000
Investments.......................................... -- 884 898
Consideration due or received in excess of costs
incurred on uncompleted contracts.................. -- (1,910) (2,383)
Property, plant and equipment:
Computer equipment................................. 111 322 590
Accumulated depreciation........................... (23) (104) (168)
---- ------- --------
Net property, plant and equipment.................... 88 218 422
---- ------- --------
Assets to be contributed............................. $ 88 $ (808) $148,937
==== ======= ========
</TABLE>
F-3
<PAGE> 124
INTERACTIVE MEDIA SERVICES DIVISION OF INTEL CORPORATION
STATEMENT OF NET REVENUES AND DIRECT EXPENSES
<TABLE>
<CAPTION>
NINE MONTHS ENDED
PERIOD FROM ------------------------------
INCEPTION TO YEAR ENDED SEPTEMBER 25, SEPTEMBER 30,
DECEMBER 26, DECEMBER 25, 1999 2000
1998 1999 (UNAUDITED) (UNAUDITED)
------------ ------------ ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net revenues............................ $ -- $ 1,568 $ -- $ 1,866
Cost of revenues........................ -- 23 -- 532
Direct operating expenses:
Research and development.............. 425 2,275 1,459 3,466
Selling, marketing and
administrative..................... 5,845 5,823 4,493 8,914
------- ------- ------- --------
Total direct operating expenses......... 6,270 8,098 5,952 12,380
------- ------- ------- --------
Total direct expenses................... 6,270 8,121 5,952 12,912
------- ------- ------- --------
Direct expenses in excess of net
revenues.............................. $(6,270) $(6,553) $(5,952) $(11,046)
======= ======= ======= ========
</TABLE>
F-4
<PAGE> 125
INTERACTIVE MEDIA SERVICES DIVISION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF JULY 1, 2000 AND FOR THE SIX MONTHS
ENDED JULY 1, 2000 AND JUNE 26, 1999 IS UNAUDITED)
1. BASIS OF PRESENTATION
RELATIONSHIP WITH INTEL CORPORATION
The Interactive Media Services division (IMS or the IMS division) is
comprised of three separate but related groups within the New Business Group of
Intel Corporation (Intel or the Company). IMS provides solutions to content
customers and broadcast networks as they deliver digital content to end users
using the internet and emerging broadband environments, such as satellite,
cable, digital subscriber lines and wireless. The accompanying financial
statements of IMS were prepared to present, pursuant to the Agreement and Plan
of Contribution and Merger dated April 30, 2000, as amended August 14, 2000 (the
Agreement) between Intel, Excalibur Technologies Corporation (Excalibur),
Convera Corporation (Convera) and Excalibur Transitory, Inc., the assets to be
contributed and the related net revenues and direct expenses of IMS, and are not
intended to be a complete presentation of the results of operations of IMS. In
connection with this transaction, Excalibur will combine all of its business
operations with Convera and become a wholly-owned subsidiary of Convera, and
Intel will contribute its IMS division, intellectual property assets and other
assets used by that division, as well as approximately $155,000,000 of cash to
Convera. The Statement of Assets to be Contributed at September 30, 2000
includes $150,000,000 of cash to be contributed by Intel to Convera
simultaneously with the closing of the Agreement. The remaining approximately
$5,000,000 will be paid to Convera by Intel during 2001 to fund retention
bonuses to certain former Intel employees in accordance with the Agreement.
While Intel is obligated to make this capital contribution to Convera in the
exact amount of the bonus payments, management believes the $5,000,000 will be
sufficient to fund the retention bonuses. The Statement of Net Revenues and
Direct Expenses includes an allocation of certain expenses for services provided
by Intel in support of IMS as described in further detail in Note 2. Separate
historical financial information was not maintained for IMS and as a result,
allocations were required to appropriately reflect the operating activity of the
IMS business (see Note 2). The closing of the Agreement and Plan of Contribution
and Merger is subject to regulatory approval and Excalibur shareholder approval.
The three groups comprising the IMS division were each formally established
and operations began between June 1998 and October 1998. Because these
businesses did not exist before that time, no historical financial information
for any period prior to commencement of operations of these businesses is
available. No individuals within Intel were dedicated to these businesses before
these dates. These businesses were not separate legal entities or operating
segments within Intel, but were embedded in Intel's overall operations. As a
result, separate financial statements have not been maintained for the
operations to be contributed to Convera.
The accompanying financial statements have been prepared from the
historical accounting records of Intel and do not purport to reflect the assets
to be contributed, and the net revenues and direct expenses that would have
resulted if IMS had operated as an unaffiliated independent company. It is not
practical for management to reasonably estimate expenses that would have
resulted if IMS had operated as an unaffiliated independent company. Since
separate financial statements were not maintained for the IMS business,
preparation of statements of operations and cash flows, including amounts
charged for income taxes, interest and indirect expenses, is impractical.
Additionally, since only certain assets are being contributed, a statement of
stockholders' equity is not applicable.
All contracts referred to herein as contracts of IMS have actually been
executed by Intel, and all cash or equity instruments described as received by
IMS under such contracts have actually been received by Intel. Certain of these
contracts, and certain portions of the equity instruments received or receivable
by Intel, will be assigned to Convera under the Agreement.
F-5
<PAGE> 126
INTERACTIVE MEDIA SERVICES DIVISION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
UNAUDITED FINANCIAL STATEMENTS
The financial information as of September 30, 2000 and for the nine months
ended September 25, 1999 and September 30, 2000 is unaudited, but includes all
adjustments (consisting of normal recurring adjustments) that IMS considers
necessary for a fair presentation of its assets to be contributed at such dates
and its results for those periods. The net revenues and direct expenses for the
nine months ended September 30, 2000 are not necessarily indicative of the
results that may be expected for the entire year or any future period.
FISCAL YEAR END
The Company has a fiscal year that ends the last Saturday in December.
Fiscal 1999 had a 52 week year. Periodically, there will be a 53 week year. The
next 53 week year will end December 30, 2000. The nine month period ended
September 30, 2000 represented a 40 week period.
2. SIGNIFICANT ACCOUNTING POLICIES
RISKS AND UNCERTAINTIES
The preparation of the financial statements requires management to make
estimates and assumptions which affect the reported amounts in the financial
statements and accompanying notes. Actual results could differ from those
estimates. Included in the Statement of Assets to be Contributed is
consideration due or received in excess of costs incurred on uncompleted
contracts. Management believes that these costs will ultimately be fully
recoverable and profits will be ultimately realized for each of the individual
contracts included. However, given the relatively early stages of certain of the
contracts, the customized nature of the contracts and the lack of clearly
defined deliverables, subsequent impairment may be possible which would result
in some of the costs not being fully recoverable and losses on the contracts
being recorded.
INVESTMENTS
Investments included in the Statement of Assets to be Contributed represent
those equity instruments received by IMS in connection with certain customer
arrangements and which under the terms of the Agreement are to be transferred to
Convera. These equity investments have been accounted for in accordance with
Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for
Certain Investments in Debt and Equity Securities, and classified as available
for sale. Available for sale securities are recorded at fair value. For all
periods presented there have been no sales of these equity investments and,
accordingly, no realized gains or losses. Unrealized gains and losses on these
investments do not impact the Statement of Assets to be Contributed due to the
absence of stockholders' equity.
The balance in the Investments account included on the Statement of Assets
to be Contributed represents the fair value at the respective dates indicated of
IMS' holding of Customer A's common stock to be transferred to Convera. See Note
3 for further discussion. Unrealized losses on the investment were $126,000 and
$112,000 as of December 25, 1999 and September 30, 2000, respectively.
Subsequent to September 30, 2000, the market value of the investment has
declined. However, management has assessed that the market decline is temporary
and therefore has not recognized a permanent impairment adjustment.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is computed
for financial reporting purposes principally by the use of the straight line
method over the estimated useful lives of the assets, approximately four years.
Direct operating expenses include depreciation expense of $23,000, $81,000,
$56,000 and $64,000 for the period from inception to December 26, 1998, the year
ended December 25, 1999, and the
F-6
<PAGE> 127
INTERACTIVE MEDIA SERVICES DIVISION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
nine month periods ended September 25, 1999 and September 30, 2000,
respectively, related to the assets to be contributed.
REVENUE RECOGNITION
IMS provides a range of services to its customers including the licensing
of software, technical support services and consulting. The arrangements to
provide software typically require significant modification or customization of
the software under a long-term development contract.
For such contracts, revenue is recognized in accordance with AICPA
Statement of Position (SOP) 97-2, Software Revenue Recognition. Given the
essential nature of the customization and development efforts to the licensed
software, the arrangements have been accounted for in accordance with SOP 81-1,
Accounting for Performance of Construction Type and Certain Production-Type
Contracts and Accounting Research Bulletin (ARB) No. 45, Long-Term
Construction-Type Contracts. In accordance with SOP 81-1, IMS has determined it
is appropriate to account for these contracts using the completed contract
method because IMS does not have substantial history of making estimates of the
extent of progress towards completion. In addition, certain of the contracts
lack clearly defined deliverables, terms and conditions and may be subject to
acceptance criteria or refund provisions. Due to the customized developmental
nature of these contracts and the nascent markets for which the services are
being performed, the detailed scope of work is frequently not determined at the
execution of the contract and efforts may be redirected as the contracts
progress. Accordingly, revenue is recognized when all remaining costs, IMS
obligations and potential risks are insignificant and the product has been
delivered and accepted by the customer. For those contracts that have not been
completed, the related costs incurred to date, net of the consideration due or
received from the customer, have been classified in the Statement of Assets to
be Contributed as consideration due or received in excess of costs incurred on
uncompleted contracts. Anticipated losses, if any, on uncompleted contracts are
recognized in the period in which the losses are probable and estimable. As of
September 30, 2000, management does not anticipate any losses on uncompleted
contracts.
Consideration due or received by IMS in connection with certain contracts
may be in the form of the customer's equity instruments. Any equity instruments
received from the customer in connection with arrangements entered into on or
before March 16, 2000 have been valued at the date of the arrangement. Amounts
for equity instruments (and other consideration) which have not been earned are
netted against the costs incurred to date on uncompleted contracts and reflected
on this basis in the Statement of Assets to be Contributed. Amounts for equity
instruments (and other consideration) which have been earned and for which the
related contracts have been completed have been recorded as net revenues in the
Statement of Net Revenues and Direct Expenses. For equity instruments received
in connection with arrangements entered into after March 16, 2000, the related
equity instrument is valued at the date the revenue will be recognized by IMS,
generally the date IMS has fulfilled all of its obligations under the
arrangement, in accordance with Emerging Issues Task Force (EITF) 00-8,
Accounting by a Grantee for an Equity Instrument to Be Received in Conjunction
with Providing Goods or Services. Between March 17, 2000 and September 30, 2000,
no arrangements were entered into which included equity instruments received by
IMS. Should IMS enter into additional agreements that provide for consideration
in the form of equity instruments, the final measurement of revenue will be
dependent upon the market price of the equity instruments on the earlier of (a)
the date a performance commitment is reached or (b) the date the equity
instrument vests.
DIRECT OPERATING EXPENSES
The caption "Direct operating expenses" on the accompanying financial
statements represents that portion of the total direct operating expenses of
Intel incurred by IMS and/or allocated to IMS. Intel does not maintain separate
accounts to capture all of the cost of revenues, research and development,
marketing, or general and administrative expenses for IMS. However, certain
research and development, and selling,
F-7
<PAGE> 128
INTERACTIVE MEDIA SERVICES DIVISION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
marketing and administrative costs were extracted from Intel's accounts based
upon specifically identifiable cost centers for IMS. These cost centers capture
a portion of IMS's total operating expenses. All other direct operating
expenses, including portions of both research and development, and selling,
marketing and administrative expenses, are allocations from the New Business
Group based upon headcount. Since IMS operated within the New Business Group of
Intel and Intel maintained separate accounts to capture certain of the
aforementioned expenses for this Group, the IMS direct operating expenses have
been derived from this Group's direct operating expenses. The portion of IMS's
direct operating expenses relating to corporate support functions (facilities,
information technology, management, finance and administrative support) was
derived by multiplying the estimated number of IMS employees compared to the
total Group employees by the Group's allocated corporate support charges.
Management believes the allocation of direct operating expenses based upon
headcount fairly reflects the operating expenses of IMS. Included in IMS's
direct operating expenses is an allocation of approximately $1,396,000,
$2,495,000, $1,962,000 and $2,372,000 for corporate support functions described
above charged to IMS for fiscal 1998 and 1999 and the nine months ended
September 25, 1999 and September 30, 2000, respectively. IMS's direct operating
expenses do not include any allocations for human resource, legal, sales and
marketing support, or certain profit dependent amounts in excess of accruals
allocated to IMS. Additionally, IMS's Statement of Net Revenues and Direct
Expenses also excludes allocations of interest income, interest expense and
income taxes. None of the aforementioned expenses or income are allocated by
Intel to either IMS or the New Business Group.
The direct operating expenses are not necessarily indicative of the
expenses that would have been incurred had IMS operated as an unaffiliated,
independent business. It is not practical for management to reasonably estimate
the expenses that would have been incurred had IMS operated as an unaffiliated,
independent business.
COST OF REVENUES AND COSTS INCURRED ON UNCOMPLETED CONTRACTS
Cost of revenues and costs incurred on uncompleted contracts include direct
labor costs and materials related to the specific contracts. The direct labor
costs are computed based on management's estimate of the percentage of time
incurred by IMS employees and contractors identified as working on the
contracts. Management believes these estimates are reasonable. The cost of
revenues is not necessarily indicative of the costs that would have been
incurred had IMS operated as an unaffiliated, independent business.
F-8
<PAGE> 129
INTERACTIVE MEDIA SERVICES DIVISION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. CONSIDERATION DUE OR RECEIVED IN EXCESS OF COSTS INCURRED ON UNCOMPLETED
CONTRACTS
The following represents the cumulative costs incurred, net of the
accumulated related consideration due or received on uncompleted contracts as of
the following dates:
<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 26, DECEMBER 25, 2000
1998 1999 (UNAUDITED)
------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
CONTRACT COSTS INCURRED TO DATE:
Customer A................................... $-- $ 19 $ 63
Customer B................................... -- 592 1,282
Customer C................................... -- -- 747
Customer D................................... -- 784 3,400
Customer E................................... -- 109 --
Customer F................................... -- -- --
Customer G................................... -- -- 225
Customer H................................... -- -- 416
CONSIDERATION DUE OR RECEIVED:
Customer A................................... $-- $ 1,010 $ 1,085
Customer B................................... -- -- 402
Customer C................................... -- -- 726
Customer D................................... -- 1,964 4,923
Customer E................................... -- 440 --
Customer F................................... -- -- --
Customer G................................... -- -- 654
Customer H................................... -- -- 726
--- ------- -------
Consideration due or received in excess of
costs incurred on uncompleted contracts.... $-- $(1,910) $(2,383)
=== ======= =======
</TABLE>
The above contracts are at varying stages of completion and are expected to
be completed at various dates through 2006. In addition, some of the above
contracts have significant efforts remaining before delivery of the product is
complete and accepted by the customer.
CONSIDERATION DUE OR RECEIVED
On November 5, 1999, the Company received warrants to purchase 209,000
shares of Series A convertible preferred stock and 994,938 shares of Series B
convertible preferred stock of Customer E in connection with certain software
development services to be performed. The warrants were immediately exercisable.
The Company determined the fair value of the warrants using the Black-Scholes
valuation model assuming a fair value of Customer E's common stock of $.56 per
share for Series A preferred stock and $1.61 for Series B preferred stock, a
volatility factor of 50% for Series A and B preferred stock, a risk-free
interest rate of 6.55% for Series A preferred stock and 5.81% for Series B
preferred stock and lives of 10 years for Series A preferred stock and 1 year
for Series B preferred stock. At November 5, 1999, the fair value of the
warrants for Series A preferred stock and Series B preferred stock was $82,000
and $358,000, respectively. In accordance with the Agreement, these shares will
not be transferred to Convera and accordingly have been excluded from the
Investment balance on the Statement of Assets to be Contributed. At December 25,
1999, the fair value of the warrants at the date of the arrangement was included
in consideration due or received on uncompleted contracts from Customer E in the
above table. The contract was completed in May 2000. As a
F-9
<PAGE> 130
INTERACTIVE MEDIA SERVICES DIVISION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
result, the fair value of the warrants and $1,426,000 to be received in cash has
been included in the Statement of Net Revenues and Direct Expenses for the nine
months ended September 30, 2000. At September 30, 2000, the above table does not
include any consideration due or received from Customer E as the contract has
been completed.
On November 12, 1999, IMS received 224,514 shares of Customer A common
stock in connection with certain software development services to be performed.
IMS determined the fair value of the common stock of $1,010,000 using Customer
A's IPO offering price of $4.50 per share on November 22, 1999. The shares are
subject to a recoupment provision in the operating agreement between IMS and
Customer A. As of September 30, 2000, IMS has earned 40% of these shares. In
accordance with the Agreement, all 224,514 shares will be transferred to Convera
and have been included in the Investments balance on the Statement of Assets to
be Contributed at their fair value at the respective dates indicated.
Additionally, in the first quarter of 2000, the Company received a $75,000
advance cash payment from Customer A. On September 26, 2000, IMS agreed with
Customer A to suspend activity under the Agreement until November 30, 2000
("Standstill Period"). During the Standstill Period, obligations to be performed
by IMS have been delayed, and the parties will discuss, in good faith, an
amendment to, or restatement of, the Agreement that will achieve common business
objectives. Management believes that the outcome of the discussions will be an
amendment which redefines the technology and deliverables under the Agreement.
Management continues to believe that all costs incurred under the contract will
be fully recoverable, and that profit will ultimately be realized relating to
the Agreement.
On November 12, 1999, Intel received 450,000 shares of Customer F common
stock in connection with certain software development services to be performed.
A portion of the development services were performed by divisions within Intel
separate from IMS. Intel assessed the relative effort based upon headcount
deployed by the multiple divisions within Intel, including IMS, to determine the
proportion of this stock to be allocated to IMS. As a result, Intel allocated
150,000 shares of Customer F common stock under this arrangement to IMS.
Management believes the allocation based upon the relative headcount of IMS as
compared to other participating Intel divisions fairly reflects the proportion
of common stock earned by IMS. The Company determined the fair value of these
shares of $771,000 using the Customer F common stock price on November 12, 1999
of $5.14 per share. This amount has been included in revenue, and the related
costs have been included in cost of revenues for fiscal 1999 as the services
related to these shares were completed during fiscal 1999. In accordance with
the Agreement, these shares will not be transferred to Convera and accordingly
have been excluded from the investment balance on the Statement of Assets to be
Contributed.
On January 27, 2000, IMS entered into an arrangement with Customer C in
which IMS received the right to earn up to 304,878 warrants exercisable for
shares of Series A convertible preferred stock at $8.95 per share in connection
with certain software development services to be performed. The stated value of
these warrants, which was established in an arms-length bargained transaction
between the two parties, approximated $1,500,000. The fair value of the warrants
using the Black-Scholes valuation model assuming a fair value of Customer C's
common stock of $8.95 per share for Series A preferred stock, a volatility
factor of 75%, a risk-free interest rate of 5.90% and a life of 3 years
approximates the stated value. As certain milestones identified within the
development agreement (entered into simultaneously with the warrant agreement)
are completed, the amount of warrants that become exercisable will be determined
by criteria defined in the warrant agreement. As of September 30, 2000, IMS had
earned $726,000 under this arrangement, $507,000 received in cash ($407,000 for
fees earned in accordance with the arrangement and $100,000 for reimbursement of
out of pocket expenses) and 44,512 warrants, with a stated value of $219,000. In
accordance with the Agreement, neither these warrants nor the cash will be
transferred to Convera and accordingly they have been excluded from the
Investment balance on the Statement of Assets to be Contributed. Convera will
retain the right to earn the remaining 260,366 unearned warrants with a stated
value of $1,281,000, subsequent to the closing of the Agreement.
F-10
<PAGE> 131
INTERACTIVE MEDIA SERVICES DIVISION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Receivables relating to all contracts are not being contributed and are
therefore excluded from the Statement of Assets to be Contributed.
4. RELATED PARTY
Customer H represents an arrangement with Intel in which IMS will perform
as a subcontractor in connection with Intel's arrangement with the end customer
following the consummation of the combination.
5. CAPITAL CONTRIBUTION RECEIVABLE
Capital contribution receivable included in the Statement of Assets to be
Contributed as of September 30, 2000 represents $150,000,000 that will be paid
simultaneously with the closing of the Agreement by Intel.
6. SIGNIFICANT CUSTOMERS
Those customers which account for more than 10% of net revenues in each
period are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 26, DECEMBER 25, 2000
1998 1999 (UNAUDITED)
------------ ------------ -------------
<S> <C> <C> <C>
Customer E................................... -- -- 100%
Customer F................................... -- 81% --
Customer G................................... -- 19% --
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
Pursuant to the Agreement, Intel has a commitment to Convera to fund
retention bonuses in 2001 for certain former Intel employees who remain employed
by Convera through a capital contribution to Convera which is currently
estimated at approximately $5,000,000. The amount is subject to the employees'
continued employment with Convera at the payment date and is a formula-based
computation. As such, the exact amount of the contribution will not be
determinable until the payment date.
F-11
<PAGE> 132
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholder
Convera Corporation
We have audited the accompanying balance sheet of Convera Corporation as of
October 31, 2000. This balance sheet is the responsibility of the Company's
management. Our responsibility is to express an opinion on this balance sheet
based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the balance sheet is free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall balance sheet presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the consolidated financial position of Convera Corporation at
October 31, 2000, in conformity with accounting principles generally accepted in
the United States.
Ernst & Young LLP
McLean, Virginia
November 7, 2000
F-12
<PAGE> 133
CONVERA CORPORATION
BALANCE SHEET
OCTOBER 31, 2000
ASSETS
<TABLE>
<S> <C>
Total assets................................................ $--
</TABLE>
LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<S> <C>
Liabilities................................................. $--
Stockholder's equity:
Common stock, par value $.0001, 1,000 shares authorized
100 shares issued, 0 shares outstanding................ $1
Stock subscription receivable............................. (1)
Total stockholder's equity........................ $--
Total liabilities and stockholder's equity........ $--
</TABLE>
The accompanying notes are an integral part of the consolidated balance sheet
F-13
<PAGE> 134
CONVERA CORPORATION
NOTES TO BALANCE SHEET
1. ORGANIZATION OF THE COMPANY
Convera Corporation (Convera) was formed on April 27, 2000 as Exca Holding,
Inc. (Exca), a wholly owned subsidiary of Excalibur Technologies Corporation
(Excalibur). On April 28, 2000, Excalibur subscribed for 100 shares of Exca for
$1.
On April 30, 2000, Excalibur entered into an Agreement and Plan of
Contribution and Merger (the "Agreement") with Intel.
Under the terms of the Agreement, Intel will contribute to Convera its
Interactive Media Services Division, intellectual property assets and other
assets used by that division, as well as approximately $155 million in cash,
$150 million of which will be paid at closing and the balance of which will be
payable in 2001 to fund retention bonuses to former Intel employees. The
contributed intellectual property assets include:
- 14 patents and patent applications in the area of content security;
- Source code components;
- Non-exclusive licenses to additional source code components and other
Intel patents and patent applications;
- Intel's rights under contracts entered into by the Interactive Media
Services division, exclusive of certain cash payments or components of
equity received by that division under the contracts prior to the
closing; and
- Technical employee resources in key areas, primarily in software and
engineering
Intel will receive 49% of the Convera Class A common stock and 100% of the
Convera Class B non-voting common stock, which together will represent a total
of 60% of the common stock of Convera, on a fully-diluted basis after giving
effect to the conversion of outstanding preferred stock and exercise of assumed
Excalibur options. Excalibur shareholders will receive 51% of the Convera Class
A common stock, which represents 40% of the common stock of Convera on a fully
diluted basis after giving effect to the conversion of outstanding preferred
stock and exercise of assumed Excalibur options.
On October 25, 2000, Exca changed its name to Convera Corporation.
To date, Convera has not conducted any activities other than those incident
to its formation.
The contribution and merger is subject to regulatory review, approval of
the stockholders of the Excalibur and other conditions and is expected to close
in December 2000.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
Convera has no assets, liabilities, revenue or expenses and no principal
activities.
ACCOUNTING FOR THE CONTRIBUTION AND MERGER
The Contribution and Merger will be accounted for using the purchase method
of accounting with Excalibur representing the accounting acquirer. The purchase
price for the Interactive Media Services Division of Intel will be determined
based on the fair value of the shares of Convera issued to Intel plus
transaction related costs. The fair value of the shares issued was determined
based on the existing market price of Excalibur's common stock, which is
publicly traded. The purchase price for this transaction will be allocated to
the assets acquired based on their estimated fair values. The excess of the
purchase price over the assets acquired will be recorded as goodwill and
amortized over six years. The purchase price has been preliminarily estimated to
be approximately $923 million with estimated residual goodwill of approximately
$751 million after allocation of the purchase price to the acquired assets,
including identifiable intangible assets.
F-14
<PAGE> 135
APPENDIX A1
AGREEMENT AND PLAN OF CONTRIBUTION AND MERGER
DATED AS OF APRIL 30, 2000
AMONG
INTEL CORPORATION,
EXCALIBUR TECHNOLOGIES CORPORATION,
CONVERA CORPORATION
AND
EXCALIBUR TRANSITORY, INC.
<PAGE> 136
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
ARTICLE 1 THE CONTRIBUTION................................................. A1-1
Section 1.1. The Contribution............................................ A1-1
Section 1.2. Excluded Assets............................................. A1-2
Section 1.3. Excluded Liabilities........................................ A1-2
Section 1.4. Assignment of Contracts and Rights.......................... A1-2
Section 1.5. Method of Contribution...................................... A1-2
Section 1.6. Omitted Assets.............................................. A1-2
ARTICLE 2 THE MERGER....................................................... A1-3
Section 2.1. The Merger.................................................. A1-3
Section 2.2. Effective Time.............................................. A1-3
Section 2.3. Closing of the Merger....................................... A1-3
Section 2.4. Effects of the Merger....................................... A1-3
Section 2.5. Certificate of Incorporation and Bylaws..................... A1-3
Section 2.6. Directors................................................... A1-3
Section 2.7. Officers.................................................... A1-3
Section 2.8. Conversion of Shares........................................ A1-3
Section 2.9. Exchange of Certificates.................................... A1-4
Section
2.10. Assumed Stock Options....................................... A1-5
Section
2.11. Dissenters' Rights.......................................... A1-6
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY, CONVERA AND
TRANSITORY....................................................... A1-6
Section 3.1. Organization and Qualification; Subsidiaries; Investments... A1-6
Section 3.2. Capitalization of the Company and its Subsidiaries.......... A1-7
Section 3.3. Authority Relative to this Agreement; Recommendation........ A1-9
Section 3.4. SEC Reports; Financial Statements........................... A1-10
Section 3.5. Registration Statement and Proxy Statement.................. A1-10
Section 3.6. Consents and Approvals; No Violations....................... A1-10
Section 3.7. No Default.................................................. A1-11
Section 3.8. No Undisclosed Liabilities; Absence of Changes.............. A1-11
Section 3.9. Litigation.................................................. A1-12
Section
3.10. Compliance with Applicable Law.............................. A1-12
Section
3.11. Employee Benefits........................................... A1-12
Section
3.12. Labor and Employment Matters................................ A1-15
Section
3.13. Environmental Laws and Regulation........................... A1-16
Section
3.14. Taxes....................................................... A1-17
Section
3.15. Intellectual Property....................................... A1-19
Section
3.16. Insurance................................................... A1-22
Section
3.17. Certain Business Practices.................................. A1-22
Section
3.18. Product Warranties.......................................... A1-22
Section
3.19. Suppliers and Customers..................................... A1-23
Section
3.20. Vote Required............................................... A1-23
Section
3.21. Opinion of Financial Advisor................................ A1-23
Section
3.22. Brokers..................................................... A1-23
Section
3.23. Takeover Statute............................................ A1-23
Section
3.24. Representations Complete.................................... A1-23
</TABLE>
A1-i
<PAGE> 137
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF INTEL.......................... A1-23
Section 4.1. Organization and Qualification.............................. A1-23
Section 4.2. Authority Relative to this Agreement........................ A1-24
Section 4.3. Information Supplied........................................ A1-24
Section 4.4. Consents and Approvals; No Violations....................... A1-24
Section 4.5. No Default.................................................. A1-24
Section 4.6. Litigation.................................................. A1-25
Section 4.7. Compliance with Applicable Law.............................. A1-25
Section 4.8. Intellectual Property....................................... A1-25
Section 4.9. Product Warranties.......................................... A1-27
Section
4.10. Suppliers and Customers..................................... A1-27
Section
4.11. Brokers..................................................... A1-28
Section
4.12. Representations Complete.................................... A1-28
ARTICLE 5 COVENANTS........................................................ A1-28
Section 5.1. Conduct of Business of the Company.......................... A1-28
Section 5.2. Conduct of Business Related to the Contributed Assets....... A1-30
Section 5.3. No Solicitation or Negotiation.............................. A1-31
Section 5.4. Registration Statement...................................... A1-33
Section 5.5. Certain Filings; Reasonable Effort.......................... A1-33
Section 5.6. Meeting of Stockholders..................................... A1-34
Section 5.7. Access to Information....................................... A1-34
Section 5.8. Public Announcements........................................ A1-35
Section 5.9. Indemnification and Directors' and Officers' Insurance...... A1-35
Section
5.10. Notification of Certain Matters............................. A1-36
Section
5.11. Additions to and Modification of Disclosure Schedules....... A1-36
Section
5.12. Employee Matters............................................ A1-37
Section
5.13. Non-Disclosure Agreements with Employees of the Company..... A1-37
Section
5.14. Takeover Statutes........................................... A1-37
Section
5.15. Stock Options............................................... A1-37
Section
5.16. Nasdaq...................................................... A1-38
Section
5.17. Exchange Act Registration................................... A1-38
Section
5.18. Executive Officers of Convera............................... A1-38
Section
5.19. Board of Directors of Convera............................... A1-38
Section
5.20. Intellectual Property Matters............................... A1-38
Section
5.21. Financial Reporting......................................... A1-38
Section
5.22. Certain Actions............................................. A1-39
Section
5.23. Incurrence of Indebtedness.................................. A1-39
Section
5.24. Sales Taxes................................................. A1-39
ARTICLE 6 CONDITIONS TO CONSUMMATION OF THE CONTRIBUTION AND THE MERGER.... A1-39
Section 6.1. Conditions to Each Party's Obligations to Effect the A1-39
Contribution and the Merger...............................
Section 6.2. Conditions to the Obligations of the Company, Convera and A1-40
Transitory................................................
Section 6.3. Conditions to the Obligations of Intel...................... A1-41
</TABLE>
A1-ii
<PAGE> 138
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
ARTICLE 7 TERMINATION; AMENDMENT; WAIVER................................... A1-42
Section 7.1. Termination................................................. A1-42
Section 7.2. Effect of Termination....................................... A1-43
Section 7.3. Fees and Expenses........................................... A1-43
Section 7.4. Extension; Waiver........................................... A1-44
ARTICLE 8 MISCELLANEOUS.................................................... A1-44
Section 8.1. Nonsurvival of Representations and Warranties............... A1-44
Section 8.2. Entire Agreement; Assignment................................ A1-44
Section 8.3. Validity.................................................... A1-45
Section 8.4. Notices..................................................... A1-45
Section 8.5. Governing Law and Venue; Waiver of Jury Trial............... A1-45
Section 8.6. Descriptive Headings........................................ A1-46
Section 8.7. Parties in Interest......................................... A1-46
Section 8.8. Certain Definitions......................................... A1-46
Section 8.9. Personal Liability.......................................... A1-47
Section
8.10. Specific Performance........................................ A1-47
Section
8.11. Counterparts................................................ A1-48
Section
8.13. Ambiguities................................................. A1-48
Section
8.13. Waiver...................................................... A1-48
Section
8.14. Execution................................................... A1-48
Section
8.15. Schedules................................................... A1-48
Section
8.16. Amendment................................................... A1-48
</TABLE>
A1-iii
<PAGE> 139
TABLE OF DEFINED TERMS
<TABLE>
<CAPTION>
CROSS REFERENCE
TERM IN AGREEMENT
---- ---------------
<S> <C>
affiliate................................................... Section 8.8 (a)
Agreement................................................... Preamble
Applicable Law.............................................. Section 8.8 (b)
Assumed Option Plan......................................... Section 2.10 (a)
Assumed Option Plans........................................ Section
2.10 (a)
Assumed Option.............................................. Section 2.10 (a)
business day................................................ Section 8.8 (c)
Business System............................................. Section 3.15 (p)(i)
capital stock............................................... Section 8.8 (d)
Certificate of Merger....................................... Section 2.2
Certificates................................................ Section 2.9 (b)
Closing Date................................................ Section 2.3
Closing..................................................... Section 2.3
Code........................................................ Section 3.14 (a)(i)
Combination................................................. Preamble
Commonly Controlled Entity.................................. Section 3.11 (a)
Company Board............................................... Preamble
Company Common Stock........................................ Section 1.1
Company Disclosure Schedule................................. Article 3
Company Permits............................................. Section 3.10
Company Plans............................................... Section 8.8 (e)
Company..................................................... Preamble
Company Preferred Stock..................................... Section 1.1
Company SEC Reports......................................... Section 3.4 (a)
Company Securities.......................................... Section 3.2 (a)
Company Stock Option........................................ Section 3.2 (a)
Compensation and Benefit Plans.............................. Section 3.11 (a)
Confidentiality Agreement................................... Section 5.7 (c)
Contributed Assets.......................................... Preamble
Contribution................................................ Preamble
Cooper Disclosure Schedule.................................. Article 4
Cooper Outbound License Agreements.......................... Section 4.8 (f)
Cooper Permits.............................................. Section 4.7
Cooper...................................................... Preamble
Cooper SEC Reports.......................................... Section 4.6
Copyrights.................................................. Section 3.15 (a)
DGCL........................................................ Section 2.1
Dissenting Preferred Stock.................................. Section 2.11
Effective Time.............................................. Section 2.2
Environmental Laws.......................................... Section 3.13 (a)
ERISA....................................................... Section 3.11 (a)
Exchange Act................................................ Section 3.2 (e)
Exchange Agent.............................................. Section 2.9 (a)
Exchange Fund............................................... Section 2.9 (a)
Final Date.................................................. Section 7.1 (b)
</TABLE>
A1-iv
<PAGE> 140
<TABLE>
<CAPTION>
CROSS REFERENCE
TERM IN AGREEMENT
---- ---------------
<S> <C>
Financial Advisor........................................... Section 3.21
Foreign Plans............................................... Section 3.11 (k)
Governmental Entity......................................... Section 3.6
Hazardous Material.......................................... Section 3.13 (a)
hereof, herein and herewith................................. Section 8.8 (f)
HSR Act..................................................... Section 3.6
Inbound License Agreements.................................. Section 3.15 (f)
include..................................................... Section 8.8 (g)
Indemnified Liabilities..................................... Section 5.9 (a)
Indemnified Persons......................................... Section 5.9 (a)
Insurance Policies.......................................... Section 3.16
Insured Parties............................................. Section 5.9 (c)
Intellectual Property....................................... Section 3.15 (a)
knowledge or known.......................................... Section 8.8 (h)
Lien........................................................ Section 3.2 (d)
Material Adverse Effect on the Company...................... Section 3.1 (b)
Material Adverse Effect on the Contributed Assets........... Section 4.1 (b)
Meeting..................................................... Section 5.6 (c)
Merger...................................................... Preamble
Convera Common Stock........................................ Preamble
Convera Common Stock........................................ Section 3.2 (c)
Convera Non-Voting Common Stock............................. Preamble
Convera..................................................... Preamble
Convera Preferred Stock..................................... Section 2.8 (b)
Convera Stock Options....................................... Section 2.10 (b)
Notice of Superior Proposal................................. Section 5.3 (b)
Omitted Assets.............................................. Section 1.6
Other Interests............................................. Section 3.1 (c)
Outbound License Agreements................................. Section 3.15 (f)
Patents..................................................... Section 3.15 (a)
Pension Plans............................................... Section 3.11 (a)
person...................................................... Section 8.8 (i)
Proxy Statement............................................. Section 5.4
Registration Statement...................................... Section 5.4
SEC......................................................... Section 3.4 (a)
Securities Act.............................................. Section 2.10 (b)
Shares...................................................... Section 2.8 (a)
Software.................................................... Section 3.15 (m)
subsidiary or subsidiaries.................................. Section 8.8 (j)
Superior Proposal........................................... Section 5.3 (c)
Surviving Corporation....................................... Section 2.1
Takeover Statute............................................ Section 3.23
Tax Affiliates.............................................. Section 3.14 (a)(iii)
Tax or Taxes................................................ Section 3.14 (a)(ii)
Tax Return.................................................. Section 3.14 (a)(iv)
Third Party Acquisition..................................... Section 5.3 (c)
Third Party................................................. Section 5.3 (c)
</TABLE>
A1-v
<PAGE> 141
<TABLE>
<CAPTION>
CROSS REFERENCE
TERM IN AGREEMENT
---- ---------------
<S> <C>
Trade Secrets............................................... Section 3.15 (a)
Trademarks.................................................. Section 3.15 (a)
Transitory Common Stock..................................... Section 3.2 (c)
Transitory.................................................. Preamble
Year 2000 Capable........................................... Section 3.15 (p)(i)
</TABLE>
A1-vi
<PAGE> 142
AGREEMENT AND PLAN OF CONTRIBUTION AND MERGER
THIS AGREEMENT AND PLAN OF CONTRIBUTION AND MERGER (this "Agreement"),
dated as of April 30, 2000, is by and among Intel Corporation, a Delaware
corporation ("Intel"), Excalibur Technologies Corporation, a Delaware
corporation (the "Company"), Convera Corporation, a Delaware corporation and a
wholly owned subsidiary of the Company ("Convera"), and Excalibur Transitory,
Inc., a Delaware corporation and a wholly owned subsidiary of Convera
("Transitory"). Initially capitalized and certain other terms not otherwise
defined herein shall have the meanings ascribed to such terms in Section 8.8 of
this Agreement.
WHEREAS, the Company, Intel, Convera and Transitory have each determined
that it is in the best interests of their respective stockholders to combine
certain assets of Intel related to interactive media services with the business
and operations of the Company;
WHEREAS, in order to effect such combination, the parties contemplate,
among other things, that (i) Intel, at the Effective Time (as defined in Section
2.1) and upon satisfaction of the conditions set forth herein, will contribute
(the "Contribution") the assets of Intel set forth on Exhibit A hereto (the
"Contributed Assets") to Convera in exchange for 14,168,655 shares of the Class
A Common Stock, $.01 par value per share, of Convera (the "Convera Common
Stock") and 12,865,738 shares of the Class B Common Stock, $.01 par value per
share, of Convera (the "Convera Non-Voting Common Stock"), subject to adjustment
as provided in Section 1.1 hereof, and (ii) that Transitory will merge with and
into the Company (the "Merger"), with the Company surviving the Merger as a
wholly owned subsidiary of Convera, the holders of the Company's common stock
receiving one (1) share of Convera Common Stock for each share of the common
stock of the Company outstanding immediately prior to the Effective Time and the
holders of the Company's preferred stock receiving one (1) share of preferred
stock of Convera for each share of Company preferred stock outstanding
immediately prior to the Effective Time;
WHEREAS, the Boards of Directors of the Company (the "Company Board") and
Transitory have each (i) determined that this Agreement, the Merger, the
Contribution and the other transactions contemplated by this Agreement
(collectively, the "Combination") are advisable and fair and in the best
interests of their respective stockholders and (ii) approved the Combination
upon the terms and subject to the conditions set forth in this Agreement;
WHEREAS, certain stockholders of the Company have entered into Voting
Agreements and Irrevocable Proxies with Intel providing that such stockholders
will vote or cause all Shares (as defined in Section 2.8(a)) beneficially owned
by them to be voted in favor of the Combination;
WHEREAS, the parties to this Agreement intend that the Contribution and the
Merger constitute a single integrated transaction that will be treated as a
transfer of the Contributed Assets by Intel to Convera and a transfer of the
Company Common Stock and the Company Preferred Stock by the shareholders of the
Company to Convera governed by Section 351 of the Code, and that the Merger
constitute a "reorganization" within the meaning of Section 368(a) of the Code;
and
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the Company, Convera, Transitory and Intel
hereby agree as follows:
ARTICLE 1
THE CONTRIBUTION
Section 1.1. The Contribution. At the Effective Time and upon the terms
and subject to the conditions set forth in Section 6.3 hereof, Intel will
contribute the Contributed Assets to Convera, free and clear of all Liens other
than as set forth on Exhibit A, in exchange for 14,168,655 shares of the Convera
Common Stock and 12,865,738 shares of the Convera Non-Voting Common Stock;
provided that the number of shares to be issued to Intel shall be increased if
the Company issues additional shares of the Company's common stock, $.01 par
value per share (the "Company Common Stock") (other than upon exercise of
options or conversion
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of the Company's cumulative convertible preferred stock, $.01 par value per
share (the "Company Preferred Stock") outstanding on the date of this Agreement)
or securities convertible into shares of Company Common Stock prior to the
Effective Time, such that (i) the Convera Common Stock issued to Intel
represents 49% of the outstanding shares of Convera Common Stock immediately
after the Effective Time, and (ii) the Convera Non-Voting Common Stock issued to
Intel, when aggregated with the Convera Common Stock issued to Intel, represents
60% of the common equity of Convera immediately after the Effective Time, giving
effect to the issuance of shares of Convera Common Stock issuable upon exercise
of the Assumed Options (as defined below) and upon conversion of the Convera
Preferred Stock.
Section 1.2. Excluded Assets. Subject to Section 1.6, the parties
acknowledge that Intel shall be under no obligation to contribute, sell, assign
or otherwise transfer to the Company, Convera, Transitory or any affiliates
thereof any assets other than the Contributed Assets to be transferred under the
terms, and subject to the conditions, hereof.
Section 1.3. Excluded Liabilities. The parties acknowledge that none of
the Company, Convera or Transitory shall assume any liabilities in connection
with the Contribution other than those liabilities required to be performed
after the Effective Time pursuant to those agreements included in the
Contributed Assets.
Section 1.4. Assignment of Contracts and Rights. Notwithstanding any
provision hereof to the contrary, this Agreement shall not constitute an
agreement to contribute, sell, assign or otherwise transfer any Contributed
Asset or any claim or right or any benefit arising thereunder or resulting
therefrom if an attempted assignment thereof, without the consent of a party
thereto, would constitute a breach or other contravention thereof or in any way
adversely affect the rights of Intel or Convera thereunder.
Section 1.5. Method of Contribution. At the Effective Time, Intel shall
deliver to Convera a bill of sale and such other endorsements, consents,
assignments, instruments of conveyance and transfer documents as Convera may
reasonably request to vest in Convera all right, title and interest in, to and
under the Contributed Assets, and Intel will take all other actions reasonably
required to put Convera into full possession and enjoyment of all Contributed
Assets.
Section 1.6. Omitted Assets. With respect to assets of Intel with an
individual value of Five Thousand Dollars ($5,000) or more, that are not
included in Exhibit A, and are being used as of the date of this Agreement or
are used between the date of this Agreement and the Effective Time by the
Enhanced Video Services, the Enhanced Content Services or the Internet Security
Services departments of Intel (except for third party computer software programs
that, because of license restrictions imposed on Intel by the licensor, may not
be transferred to Convera), if the parties reasonably conclude that such assets
should have been included in Exhibit A (collectively, the "Omitted Assets"),
then Intel and Convera will execute and deliver such other documents,
certificates, agreements and other writings and to take such other actions as
may be reasonably necessary or desirable in order to consummate or implement
expeditiously the contribution of such Omitted Assets to Convera. The foregoing
obligation shall terminate one hundred eighty (180) days after the Effective
Time. Any such contribution of Omitted Assets by Intel shall be for no
additional consideration payable to Intel. Intel shall contribute any Omitted
Asset that was used (i) exclusively by the Enhanced Video Services, the Enhanced
Content Services or the Internet Security Services department by assignment to
Convera, subject to a license back to Intel, and (ii) on a shared basis by such
departments and other departments of Intel by license to Convera, in each case
on terms comparable to the manner of contribution utilized with respect to
Contributed Assets that were used exclusively or on a shared basis, as the case
may be, by such departments prior to the Effective Time. Upon any such
contribution of an Omitted Asset, such Omitted Asset shall be deemed for all
purposes hereof to constitute a "Contributed Asset." Notwithstanding the
foregoing, Intel shall not have any obligation to expend any funds or to incur
any other obligation in connection with the contribution, if any, of Omitted
Assets other than normal out-of-pocket expenses (such as fees and expenses of
counsel and accountants) reasonably necessary to consummate such contribution.
Intel shall use commercially reasonable efforts to obtain consents of third
parties required for the transfer of any Omitted Assets, provided that Intel
shall not be obligated to make any payment or assume any obligation in order to
obtain any consent.
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ARTICLE 2
THE MERGER
Section 2.1. The Merger. At the Effective Time and upon the terms and
subject to the conditions of this Agreement and in accordance with the
provisions of the Delaware General Corporation Law (the "DGCL"), Transitory
shall be merged with and into the Company. Following the Merger, the Company
shall continue as the surviving corporation (the "Surviving Corporation") and as
a wholly owned subsidiary of Convera, and the separate corporate existence of
Transitory shall cease. Convera, as the sole stockholder of Transitory, hereby
approves the Combination.
Section 2.2. Effective Time. Subject to the terms and conditions set forth
in this Agreement, on the Closing Date, a Certificate of Merger substantially in
the form of Exhibit B (the "Certificate of Merger") shall be duly executed and
acknowledged by Transitory and the Company and delivered for filing to the
Secretary of State of the State of Delaware as provided in the DGCL. The Merger
shall become effective at such time as a properly executed copy of the
Certificate of Merger is duly filed with the Secretary of State of the State of
Delaware or such later time as Intel and the Company may agree upon and as may
be set forth in the Certificate of Merger (the time the Merger becomes effective
being referred to herein as the "Effective Time").
Section 2.3. Closing of the Merger. The closing of the Merger (the
"Closing") will take place at a time and on a date (the "Closing Date") to be
specified by the parties, which shall be no later than the second business day
after satisfaction (or waiver) of the latest to occur of the conditions set
forth in Article 7, at the offices of Gibson, Dunn & Crutcher LLP, 1530 Page
Mill Road, Palo Alto, California 94304, unless another time, date or place is
agreed to in writing by the parties hereto.
Section 2.4. Effects of the Merger. The Merger shall have the effects set
forth in the DGCL. Without limiting the generality of the foregoing and subject
thereto, at the Effective Time, all the properties, rights, privileges and
powers of the Company and Transitory shall vest in the Surviving Corporation,
and all debts, liabilities and duties of the Company and Transitory shall become
the debts, liabilities and duties of the Surviving Corporation.
Section 2.5. Certificate of Incorporation and Bylaws. At the Effective
Time, the Certificate of Incorporation of the Surviving Corporation shall be
amended to read in its entirety as set forth on Exhibit C. At the Effective
Time, the bylaws of the Surviving Corporation shall be amended to read in their
entirety as set forth on Exhibit D.
Section 2.6. Directors. The board of directors of the Surviving
Corporation at the Effective Time shall be comprised of seven persons,
determined as set forth on Exhibit E.
Section 2.7. Officers. The persons specified in Exhibit F hereto as
holding the titles set forth in such Exhibit shall be the initial officers of
the Surviving Corporation, each to hold such offices in accordance with the
Certificate of Incorporation and bylaws of the Surviving Corporation until such
officer's successor is duly elected or appointed and qualified.
Section 2.8. Conversion of Shares.
(a) At the Effective Time, each share (collectively, the "Shares") of the
Company Common Stock issued and outstanding immediately prior to the Effective
Time (other than Shares held in the Company's treasury or by Convera or
Transitory) shall, by virtue of the Merger and without any action on the part of
Intel, Convera, Transitory, the Company or the holder thereof, be converted into
and shall become one (1) share of Convera Common Stock. Notwithstanding the
foregoing, if between the date of this Agreement and the Effective Time the
outstanding shares of Convera Common Stock or the Shares shall have been changed
into a different number of shares or a different class, by reason of any stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of shares, then the exchange ratio contemplated by the Merger shall be
correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares.
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(b) At the Effective Time, each share of the Company Preferred Stock issued
and outstanding immediately prior to the Effective Time (other than shares of
the Company Preferred Stock held in the Company's treasury or by Convera or
Transitory) shall, by virtue of the Merger and without any action on the part of
Intel, Convera, Transitory, the Company or the holder thereof, be converted into
and shall become one (1) share of the cumulative convertible preferred stock,
$.01 par value per share, of Convera (the "Convera Preferred Stock").
Notwithstanding the foregoing, if between the date of this Agreement and the
Effective Time the outstanding shares of Convera Preferred Stock or the Company
Preferred Stock shall have been changed into a different number of shares or a
different class, by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares, then the exchange
ratio contemplated by the Merger shall be correspondingly adjusted to reflect
such stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares.
(c) At the Effective Time, each outstanding share of the common stock, par
value $.01 per share, of Transitory shall, by virtue of the Merger and without
any action on the part of Transitory, Convera, Intel, the Company or the holder
thereof, be converted into one share of common stock, par value $.01 per share,
of the Surviving Corporation.
Section 2.9. Exchange of Certificates.
(a) From time to time following the Effective Time, Convera shall deliver
to its transfer agent, or a depository or trust institution of recognized
standing selected by the Company and Convera and reasonably satisfactory to
Intel (the "Exchange Agent"), for the benefit of the holders of Shares and
Company Preferred Stock for exchange in accordance with this Article 2,
certificates representing the appropriate number of shares of Convera Common
Stock and Convera Preferred Stock issuable pursuant to Section 2.8 (such
certificates are hereinafter referred to as the "Exchange Fund") in exchange for
outstanding Shares in connection with the Merger.
(b) As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of a certificate or
certificates that immediately prior to the Effective Time represented
outstanding Shares or shares of Company Preferred Stock (the "Certificates") and
whose shares were converted into shares of Convera Common Stock or Convera
Preferred Stock pursuant to Section 2.8: (i) a letter of transmittal (which
shall specify that delivery shall be effected and risk of loss and title to the
Certificates shall pass only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as Convera and
the Company may reasonably specify) and (ii) instructions for use in effecting
surrender of the Certificates in exchange for shares of Convera Common Stock or
Convera Preferred Stock. Upon surrender of a Certificate for cancellation to the
Exchange Agent, together with such letter of transmittal duly executed, the
holder of such Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Convera Common Stock or
Convera Preferred Stock which such holder has the right to receive pursuant to
the provisions of this Article 2, and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Shares or
Company Preferred Stock that is not registered in the transfer records of the
Company, a certificate representing the proper number of shares of Convera
Common Stock or Convera Preferred Stock may be issued to a transferee if the
Certificate representing such Shares or such Company Preferred Stock is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
2.9, each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the certificate
representing shares of Convera Common Stock or Convera Preferred Stock as
contemplated by this Section 2.9.
(c) No dividends or other distributions declared or made after the
Effective Time with respect to Convera Common Stock or Convera Preferred Stock
with a record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Convera Common Stock or
Convera Preferred Stock represented thereby until the holder of record of such
Certificate shall surrender such Certificate. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of
Convera Common Stock or Convera
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Preferred Stock issued in exchange therefore, without interest, (i) the amount
of dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Convera Common Stock or
Convera Preferred Stock, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time but
prior to surrender and a payment date subsequent to surrender payable with
respect to such whole shares of Convera Common Stock or Convera Preferred Stock.
(d) In the event that any Certificate for Shares or Company Preferred Stock
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange therefore, upon the making of an affidavit of that fact by the holder
thereof, such shares of Convera Common Stock or Convera Preferred Stock as may
be required pursuant to this Agreement; provided, however, that Convera or the
Exchange Agent may, in its discretion, require the delivery of a reasonable and
customary bond or indemnity.
(e) All shares of Convera Common Stock and Convera Preferred Stock issued
upon the surrender for exchange of Shares or Company Preferred Stock in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such Shares and such Company Preferred
Stock, subject, however, to the Surviving Corporation's obligation to pay any
dividends or make any other distributions with a record date prior to the
Effective Time which may have been declared or made by the Company on such
Shares or such Company Preferred Stock in accordance with the terms of this
Agreement or prior to the date hereof and which remain unpaid at the Effective
Time, and there shall be no further registration of transfer on the stock
transfer books of the Surviving Corporation of the Shares or the Company
Preferred Stock which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article 2.
(f) Any portion of the Exchange Fund that remains undistributed to the
stockholders of the Company upon the expiration of one hundred eighty (180) days
after the Effective Time shall be delivered to Convera upon demand and any
stockholders of the Company who have not theretofore complied with this Article
2 shall thereafter look only to Convera as general creditors for payment of
their claims for Convera Common Stock or Convera Preferred Stock and any
applicable dividends or distributions with respect to Convera Common Stock or
Convera Preferred Stock, as the case may be.
(g) None of Intel, Convera nor the Surviving Corporation shall be liable to
any holder of Shares, Company Preferred Stock, Convera Common Stock or Convera
Preferred Stock, as the case may be, for such shares (or dividends or
distributions with respect thereto) from the Exchange Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
Section 2.10. Assumed Stock Options.
(a) At the Effective Time, each option to purchase Shares granted to
employees, directors or consultants of the Company under the Company's 1989
Incentive Plan, the Company's 1995 Incentive Plan, the Company's ConQuest
Software, Inc. Stock Option Plan and the Company's 1999 Incentive Stock Option
Plan (collectively, the "Assumed Option Plans" and individually an "Assumed
Options Plan"), which are then outstanding and unexercised, shall cease to
represent a right to acquire Shares and shall be converted automatically into
options to purchase shares of Convera Common Stock, and Convera shall assume
each such option (hereinafter, an "Assumed Option") subject to the terms of the
applicable Assumed Option Plan, in each case as heretofore amended or restated,
as the case may be, and the agreement evidencing the grant thereunder of such
Assumed Option; provided, however, that from and after the Effective Time, (i)
the number of shares of Convera Common Stock purchasable upon exercise of such
Assumed Option shall be equal to the number of Shares that were purchasable
under such Assumed Option immediately prior to the Effective Time and (ii) the
per share exercise price under each such Assumed Option shall be unchanged. The
duration and other terms of the Assumed Option shall be the same as the original
option except that all references to the Company shall be deemed to be
references to Convera. The terms of each Assumed Option shall, in accordance
with its terms, be subject to further adjustment as appropriate to reflect any
stock split, stock dividend, recapitalization or other similar transaction with
respect to Convera Common Stock on or subsequent to the Effective Time.
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(b) Convera shall reserve for issuance a sufficient number of shares of
Convera Common Stock for delivery upon (i) the conversion of shares of Convera
Non-Voting Common Stock, (ii) the exercise of Assumed Options, (iii) the
conversion of shares of Convera Preferred Stock and (iv) the exercise of options
to purchase shares of Convera Common Stock issuable upon the exercise of all
options granted under Convera's 2000 Stock Option Plan in the form attached
hereto as Exhibit G (the "Convera Stock Options"). As soon as practicable
following the Effective Time, Convera shall take all action necessary to
register the Convera Common Stock subject to the Assumed Options and the Convera
Stock Options under the Securities Act of 1933, as amended, and the rules and
regulations of the Securities and Exchange Commission thereunder (the
"Securities Act") pursuant to a registration statement on Form S-8 (or any
successor form) to the extent such registration is required under the Securities
Act, and to cause the effectiveness of such registration statement or
registration statements (and the current status of the prospectus or
prospectuses contained therein) to be maintained for so long as the Assumed
Options and the Convera Stock Options remain outstanding.
Section 2.11. Dissenters' Rights. In accordance with the DGCL, holders of
shares of Company Common Stock will not be entitled to appraisal rights.
Notwithstanding any provision of this Agreement to the contrary, if and to the
extent required by the DGCL, shares of Company Preferred Stock which are issued
and outstanding immediately prior to the Effective Time and which are held by
holders of such shares of Company Preferred Stock who have properly exercised
appraisal rights with respect thereto (the "Dissenting Preferred Stock") in
accordance with Section 262 of the DGCL, shall not be exchangeable for the right
to receive shares of Convera Preferred Stock, and holders of such shares of
Dissenting Preferred Stock shall be entitled to receive payment of the appraised
value of such shares of Dissenting Preferred Stock in accordance with the
provisions of Section 262 of the DGCL unless and until such holders fail to
perfect or effectively withdraw or otherwise lose their rights to appraisal and
payment under the DGCL. If, after the Effective Time, any such holder fails to
perfect or effectively withdraws or loses such right, such shares of Dissenting
Preferred Stock shall thereupon be treated as if they had been converted into
and to have become exchangeable for, at the Effective Time, the right to receive
shares of Convera Preferred Stock, without any interest thereon. Notwithstanding
anything to the contrary contained in this Section 2.11, if (i) the Merger is
rescinded or abandoned or (ii) the stockholders of the Company revoke the
authority to effect the Merger, then the right of any stockholder to be paid the
fair value of such stockholder's Dissenting Preferred Stock pursuant to Section
262 of the DGCL shall cease. The Company shall give Intel prompt notice of any
demands received by the Company for appraisals of shares of Dissenting Preferred
Stock. The Company shall not, except as required by applicable law or with the
prior written consent of Intel, make any payment with respect to any demands for
appraisals or offer to settle or settle any such demands.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY, CONVERA AND TRANSITORY
Each of the Company, Convera and Transitory, jointly and severally, hereby
represent and warrant to Intel, subject to the exceptions set forth in the
Disclosure Schedule (the "Company Disclosure Schedule") delivered by the
Company, Convera and Transitory to Intel in accordance with Section 5.11 (which
exceptions shall specifically identify a Section or subsection, as applicable,
to which such exception relates) that:
Section 3.1. Organization and Qualification; Subsidiaries; Investments.
(a) Section 3.1(a) of the Company Disclosure Schedule sets forth a true and
complete list of all the Company's subsidiaries, together with the jurisdiction
of incorporation of each subsidiary and the percentage of each subsidiary's
outstanding capital stock or other equity interests owned by the Company or
another subsidiary of the Company. Each of the Company and its subsidiaries is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its businesses as now being conducted. The Company has heretofore made
available to Intel accurate and complete copies of the certificate of
incorporation and bylaws (or similar governing documents), as currently in full
force and effect, of the Company and each of its subsidiaries. Section 3.1(a) of
the Company Disclosure Schedule specifically
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identifies each subsidiary of the Company that contains any material assets or
through which the Company conducts any material operations.
(b) The Company and each of its subsidiaries are duly qualified or licensed
and in good standing to do business in each jurisdiction in which the property
owned, leased or operated by them or the nature of the business conducted by
them makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect on the Company. When used in connection with the
Company or its subsidiaries, the term "Material Adverse Effect on the Company"
means any circumstance, change in, or effect on the Company and its
subsidiaries, taken as a whole, that is, or is reasonably likely in the
foreseeable future to be, materially adverse to the assets, operations,
financial condition, earnings or results of operations, or the business
(financial or otherwise), of the Company and its subsidiaries, taken as a whole;
provided that none of the following shall be deemed, either alone or in
combination, to constitute a Material Adverse Effect on the Company: (i)
conditions affecting either the internet media services and distribution
industry, as a whole, or the text search retrieval industry, as a whole, and
(ii) any disruption of customer relationships arising solely out of or resulting
solely from actions contemplated by the parties in connection with, or which is
attributable to, the execution and announcement of this Agreement or to the
identity of Intel.
(c) Section 3.1(c) of the Company Disclosure Schedule sets forth a true and
complete list of each equity investment in an amount of One Hundred Thousand
Dollars ($100,000) or more or that represents a five percent (5%) or greater
ownership interest in the subject of such investment made by the Company or any
of its subsidiaries in any person other than the Company's subsidiaries ("Other
Interests"). The Other Interests are owned by the Company, by one or more of the
Company's direct or indirect subsidiaries or by the Company and one or more of
its direct or indirect subsidiaries, in each case free and clear of all Liens
(as defined in Section 3.2).
(d) Each of Convera and Transitory was formed solely for the purpose of
engaging in the Combination and has never owned any asset (other than the
capital stock of Transitory, in the case of Convera), received any revenue or
income or had any employees, operations or contractual relationships (other than
such contractual relationships as are required in connection with this
Agreement).
Section 3.2. Capitalization of the Company and its Subsidiaries.
(a) The authorized capital stock of the Company consists of Forty Million
(40,000,000) shares of Company Common Stock, of which, as of the close of
business on April 28, 2000, Fourteen Million Seven Hundred Forty-Six Thousand
Nine Hundred and Sixty-Seven (14,746,967) shares of Company Common Stock were
issued and outstanding, and One Million (1,000,000) shares of preferred stock,
of which Forty-Nine Thousand Five Hundred Eighty-Seven (49,587) have been
designated as Company Preferred Stock; Twenty-Seven Thousand One Hundred Eighty
(27,180) shares of Company Preferred Stock are outstanding and no other shares
of preferred stock of the Company are outstanding. All of the outstanding Shares
and shares of Company Preferred Stock have been validly issued and are fully
paid, nonassessable and free of preemptive rights. As of the close of business
on April 28, 2000, approximately One Hundred Thousand (100,000) Shares were
reserved for issuance and, as of the close of business on April 28, 2000, Three
Million Four Thousand One Hundred and Sixty-Two (3,004,162) Shares were issuable
upon or otherwise deliverable in connection with the exercise of outstanding
Company Stock Options. For purposes hereof, "Company Stock Option" means any
option, warrant or other right to purchase Shares. Between the close of business
on April 28, 2000 and the date hereof, no shares of the Company's capital stock
have been issued other than pursuant to Company Stock Options already in
existence on April 28, 2000 and, between the close of business on April 28, 2000
and the date hereof, no stock options have been granted, except as set forth in
Section 3.2(a) of the Company Disclosure Schedule. Section 3.2(a) of the Company
Disclosure Schedule sets forth a true and complete list of all holders of
outstanding options and other awards under the Assumed Option Plans, the
exercise or vesting schedule thereof, the exercise price per Share, the term of
each such option or other award, whether an option is a nonqualified stock
option or incentive stock option and any restrictions on exercise or sale of
such option or underlying Shares. On the Closing Date, the Company shall
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deliver to Intel a complete and correct updated Section 3.2(a) of the Company
Disclosure Schedule. Except as set forth above or in Section 3.2(a) of the
Company Disclosure Schedule, as of the date hereof, there are outstanding (i) no
shares of capital stock or other voting securities of the Company, (ii) no
securities of the Company or any of its subsidiaries convertible into or
exchangeable or exercisable for shares of capital stock or other securities of
the Company, (iii) no options, preemptive or other rights to acquire from the
Company or any of its subsidiaries, and, except as publicly disclosed in the
Company SEC Reports (as defined below), no obligations of the Company or any of
its subsidiaries to issue, any capital stock, voting securities or securities
convertible into or exchangeable or exercisable for capital stock or other
securities of the Company and (iv) no equity equivalent interests in the
ownership or earnings of the Company or its subsidiaries or other similar rights
(collectively "Company Securities"). Except as set forth in Section 3.2(a) of
the Company Disclosure Schedule, there are no stockholder agreements, voting
trusts or other agreements or understandings to which the Company is a party or
by which it is bound relating to the voting or registration of any shares of
capital stock of the Company. The Company has not voluntarily accelerated the
vesting of any Company Stock Options as a result of the Combination or any other
change in control of the Company, and the Company has taken all action required
to provide that no Company Stock Option will be exchanged for cash, converted
into cash or into the right to receive a cash payment or otherwise cashed out as
a result of the Combination.
(b) The authorized capital stock of Convera consists of One Thousand
(1,000) shares of common stock, $.0001 par value per share (the "Convera Common
Stock"). As of the date hereof, 100 shares of Convera Common Stock were issued
and outstanding. All of the outstanding shares of Convera Common Stock have been
validly issued, are fully paid, nonassessable and free of preemptive rights and
are owned beneficially and of record by the Company. As of the date hereof, no
shares of Convera Common Stock are reserved for issuance and, as of the date
hereof, no shares of Convera Common Stock are issuable upon or otherwise
deliverable in connection with the exercise of outstanding options, warrants or
other securities exercisable for or convertible into Convera Common Stock.
Except as set forth above or in Section 3.2(b) of the Company Disclosure
Schedule, as of the date hereof, there are outstanding (i) no shares of capital
stock or other voting securities of Convera, (ii) no securities of Convera or
any of its subsidiaries convertible into or exchangeable or exercisable for
shares of capital stock or other securities of Convera, (iii) no options,
preemptive or other rights to acquire from Convera or any of its subsidiaries,
and no obligations of Convera or any of its subsidiaries to issue, any capital
stock, voting securities or securities convertible into or exchangeable or
exercisable for capital stock or other securities of Convera and (iv) no equity
equivalent interests in the ownership or earnings of Convera or its subsidiaries
or other similar rights. Except as set forth in Section 3.2(b) of the Company
Disclosure Schedule, there are no stockholder agreements, voting trusts or other
agreements or understandings to which Convera is a party or by which it is bound
relating to the voting or registration of any shares of capital stock of
Convera.
(c) The authorized capital stock of Transitory consists of One Thousand
(1,000) shares of common stock, $.0001 par value per share (the "Transitory
Common Stock"). As of the date hereof, 100 shares of Transitory Common Stock
were issued and outstanding. All of the outstanding shares of Transitory Common
Stock have been validly issued, are fully paid, nonassessable and free of
preemptive rights and are owned beneficially and of record by Convera. As of the
date hereof, no shares of Transitory Common Stock are reserved for issuance and,
as of the date hereof, no shares of Transitory Common Stock are issuable upon or
otherwise deliverable in connection with the exercise of outstanding options,
warrants or other securities exercisable for or convertible into Transitory
Common Stock. Except as set forth above or in Section 3.2(b) of the Company
Disclosure Schedule, as of the date hereof, there are outstanding (i) no shares
of capital stock or other voting securities of Transitory, (ii) no securities of
Transitory or any of its subsidiaries convertible into or exchangeable or
exercisable for shares of capital stock or other securities of Transitory, (iii)
no options, preemptive or other rights to acquire from Transitory or any of its
subsidiaries, and no obligations of Transitory or any of its subsidiaries to
issue, any capital stock, voting securities or securities convertible into or
exchangeable or exercisable for capital stock or other securities of Transitory
and (iv) no equity equivalent interests in the ownership or earnings of
Transitory or its subsidiaries or other similar rights. Except as set forth in
Section 3.2(c) of the Company Disclosure Schedule, there are no stockholder
agreements, voting
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trusts or other agreements or understandings to which Transitory is a party or
by which it is bound relating to the voting or registration of any shares of
capital stock of Transitory.
(d) Except as set forth in Section 3.2(d) of the Company Disclosure
Schedule, all of the outstanding capital stock of the Company's subsidiaries is
owned by the Company, directly or indirectly, free and clear of any Lien or any
other limitation or restriction (including any restriction on the right to vote
or sell the same except as a matter of Applicable Law). Except as set forth in
Section 3.2(d) of the Company Disclosure Schedule, any director's qualifying
shares issued by a foreign subsidiary of the Company to any director of such
subsidiary are beneficially owned by the Company or another subsidiary of the
Company. Except as set forth in Section 3.2(d) of the Company Disclosure
Schedule, there are no securities of the Company or any of its subsidiaries
convertible into or exchangeable or exercisable for, or other rights to acquire
from the Company or any of its subsidiaries, any capital stock or other
ownership interests in or any other securities of any subsidiary of the Company,
and there exists no other contract, understanding, arrangement or obligation
(whether or not contingent) providing for the issuance or sale, directly or
indirectly, of any such capital stock. Except as set forth in Section 3.2(d) of
the Company Disclosure Schedule, there are no outstanding contractual
obligations of the Company or its subsidiaries to repurchase, redeem or
otherwise acquire any outstanding shares of capital stock or other ownership
interests in any subsidiary of the Company. With respect to any exception to
ownership set forth in Section 3.2(d) of the Company Disclosure Schedule, the
schedule completely and correctly identifies the record and the beneficial owner
of any such shares, whether such record or beneficial owner is an employee,
agent or affiliate of the Company, and any agreement, arrangement or
understanding, whether written or oral, with respect to such ownership. With
respect to any exception to the contractual obligations of the Company set forth
in Section 3.2(d) of the Company Disclosure Schedule, the schedule completely
and correctly identifies the parties to such obligations and the nature of any
relationship of such party or any third party beneficiary of such obligations to
the Company and any agreement, arrangement or understanding, whether written or
oral, with respect to such relationship. For purposes of this Agreement, "Lien"
means, with respect to any asset (including any security), any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset; provided, however, that the term "Lien" shall not include (i) statutory
liens for Taxes that are not yet due and payable or are being contested in good
faith by appropriate proceedings and are disclosed in Section 3.14 of the
Company Disclosure Schedule or that are otherwise not material, (ii) statutory
or common law liens to secure obligations to landlords, lessors or renters under
leases or rental agreements confined to the premises rented, (iii) deposits or
pledges made in connection with, or to secure payment of, workers' compensation,
unemployment insurance, old age pension or other social security programs
mandated by Applicable Law, (iv) statutory or common law liens in favor of
carriers, warehousemen, mechanics and materialmen, to secure claims for labor,
materials or supplies and other like liens, and (v) restrictions on transfer of
securities imposed by applicable state and federal securities laws.
(e) The Shares constitute the only class of equity securities of the
Company or its subsidiaries registered or required to be registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
Section 3.3. Authority Relative to this Agreement; Recommendation.
(a) Each of the Company, Convera and Transitory has all necessary corporate
power and authority to execute and deliver this Agreement, to perform its
obligations under this Agreement, and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby, have been duly and validly
authorized by the Company Board, Convera and Transitory, and no other corporate
proceedings on the part of the Company, Convera or Transitory are necessary to
authorize this Agreement, or to consummate the transactions contemplated hereby,
except the approval of this Agreement by the holders of a majority of the
outstanding Shares. This Agreement has been duly and validly executed and
delivered by the Company, Convera and Transitory and, assuming the due
authorization, execution and delivery by Intel, constitute the valid, legal and
binding agreements of the Company, Convera and Transitory, enforceable against
each of the Company, Convera and Transitory in accordance with its terms,
subject to any applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws now or hereafter in effect relating to creditors' rights generally
or to general principles of equity.
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(b) Without limiting the generality of the foregoing, the Company Board has
unanimously (i) approved the Combination, (ii) resolved to recommend approval
and adoption of this Agreement and the Combination by the Company's
stockholders, and (iii) has not withdrawn or modified such approval or
resolution to recommend.
Section 3.4. SEC Reports; Financial Statements.
(a) The Company has filed all required forms, reports and documents (the
"Company SEC Reports") with the Securities and Exchange Commission ("SEC") since
February 1, 1997, each of which complied at the time of filing in all material
respects with all applicable requirements of the Securities Act and the Exchange
Act, except as set forth in Section 3.4 of the Company Disclosure Schedule. None
of such Company SEC Reports, including any financial statements or schedules
included or incorporated by reference therein, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated or incorporated by reference therein or necessary in order to make the
statements therein in light of the circumstances under which they were made not
misleading, except to the extent superseded by a Company SEC Report filed
subsequently and prior to the date hereof. The audited consolidated financial
statements of the Company included in the Company SEC Reports fairly present, in
conformity in all material respects with generally accepted accounting
principles applied on a consistent basis (except as may be indicated in the
notes thereto), the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and their consolidated results
of operations and changes in financial position for the periods then ended.
Notwithstanding the foregoing, the Company shall not be deemed to be in breach
of any of the representations or warranties in this Section 3.4(a) as a result
of any changes to the Company SEC Reports that the Company may make in response
to comments received from the SEC on the Proxy Statement (as defined in Section
5.4).
(b) The Company has heretofore made, and hereafter will make, available to
Intel a complete and correct copy of any amendments or modifications that are
required to be filed with the SEC but have not yet been filed with the SEC to
agreements, documents or other instruments that previously had been filed by the
Company with the SEC pursuant to the Exchange Act.
Section 3.5. Registration Statement and Proxy Statement. The Registration
Statement (as defined in Section 5.4) and the Proxy Statement (as defined in
Section 5.4) will not, at the date mailed to stockholders of the Company, at the
time of the meeting of stockholders of the Company to be held in connection with
the Combination and at the time of issuance of shares of Convera Common Stock to
Intel in the Combination, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein in light of the circumstances under which
they are made not misleading. The Proxy Statement and the Registration Statement
will comply as to form in all material respects with the provisions of the
Securities Act and the Exchange Act and the rules and regulations thereunder.
Notwithstanding the foregoing, none of the Company, Convera or Transitory make
any representation, warranty or covenant with respect to any information
provided in writing by Intel specifically for inclusion in the Registration
Statement or the Proxy Statement that is contained in or omitted from the
Registration Statement or Proxy Statement.
Section 3.6. Consents and Approvals; No Violations. Except for (i)
filings, permits, authorizations, consents and approvals as may be required
under applicable requirements of the Securities Act, the Exchange Act, state
securities or blue sky laws, and the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), (ii) any filings under similar merger
notification laws or regulations of foreign Governmental Entities (as defined
below), (iii) the filing of the Certificate of Merger as required by the DGCL
and (iv) any filings, permits, authorizations, consents and approvals the
nonexistence of which would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on the Company, no filing with or
notice to and no permit, authorization, consent or approval of any United States
(federal, state or local) or foreign court or tribunal, or administrative,
governmental or regulatory body, agency or authority (a "Governmental Entity")
is necessary for the execution and delivery by the Company, Convera and
Transitory of this Agreement or the consummation by the Company, Convera and
Transitory of the transactions contemplated hereby. Neither the execution,
delivery and performance of this Agreement by the
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Company, Convera and Transitory, nor the consummation by the Company, Convera
and Transitory of the transactions contemplated hereby, will, (a) conflict with
or result in any breach of any provision of the respective Certificate of
Incorporation or bylaws (or similar governing documents) of the Company or any
of its subsidiaries, (b) result in a violation or breach of or constitute (with
or without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration or Lien) under any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to which
the Company or any of its subsidiaries is a party or by which any of them or any
of their respective properties and assets is bound or (c) violate any order,
writ, injunction, decree, law, statute, rule or regulation applicable to the
Company or any of its subsidiaries, or any of their respective properties or
assets, except, with respect to clauses (b) and (c) above, for matters set forth
in Section 3.6 of the Company Disclosure Schedule and for matters the existence
of which would not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect on the Company.
Section 3.7. No Default. Except as set forth in Section 3.7 of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries is in
breach, default or violation (and no event has occurred that with notice or the
lapse of time or both would constitute a breach, default or violation) of any
term, condition or provision of (i) its Certificate of Incorporation or bylaws
(or similar governing documents), (ii) any note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to which
the Company or any of its subsidiaries, is now a party or by which it or any of
its properties and assets is bound or (iii) any order, writ, injunction, decree,
law, statute, rule or regulation applicable to the Company or any of its
subsidiaries or any of its properties or assets, except, with respect to clauses
(ii) and (iii) above, for matters the existence of which would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect on
the Company.
Section 3.8. No Undisclosed Liabilities; Absence of Changes. Except as
publicly disclosed in the Company SEC Reports or as set forth in Section 3.8 of
the Company Disclosure Schedule, neither the Company nor any of its subsidiaries
has any material liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, that would be required by generally accepted
accounting principles to be reflected on a consolidated balance sheet of the
Company (including the notes thereto). Except as publicly disclosed in the
Company SEC Reports or as set forth in Section 3.8 of the Company Disclosure
Schedule, since February 1, 2000, there have been no events, changes or effects
with respect to the Company or its subsidiaries that would reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect on
the Company. Without limiting the generality of the foregoing, except as
publicly disclosed in the Company SEC Reports or as set forth in Section 3.8 of
the Company Disclosure Schedule, since February 1, 2000, the Company and its
subsidiaries have conducted their respective businesses in all material respects
only in, and have not engaged in any material transaction other than according
to, the ordinary and usual course of such businesses consistent with past
practices, and there has not been any (i) damage, destruction or other casualty
loss with respect to any material asset or property owned, leased or otherwise
used by the Company or any of its subsidiaries, not covered by insurance; (ii)
declaration, setting aside or payment of any dividend or other distribution in
respect of the capital stock of the Company or any of its subsidiaries (other
than wholly-owned subsidiaries) or any repurchase, redemption or other
acquisition by the Company or any of its subsidiaries of any outstanding shares
of capital stock or other securities of, or other ownership interests in, the
Company or any of its subsidiaries; (iii) amendment of any material term of any
outstanding security of the Company or any of its subsidiaries; (iv) incurrence,
assumption or guarantee by the Company or any of its subsidiaries of any
indebtedness for borrowed money other than in the ordinary course of business
and in amounts and on terms consistent with past practices; (v) creation or
assumption by the Company or any of its subsidiaries of any Lien on any material
asset other than in the ordinary course of business consistent with past
practices; (vi) loan, advance or capital contributions made by the Company or
any of its subsidiaries to, or investment in, any person other than (1) loans or
advances to employees in connection with business-related expenses incurred in
the ordinary course of business consistent with past practices, (2) loans made
to employees consistent with past practices that are not in the aggregate in
excess of Fifty Thousand Dollars ($50,000), and (3) loans, advances or capital
contributions to or investments in wholly-owned subsidiaries, and in each case
made in the ordinary course of business consistent with past practices; (vii)
transactions or commitments made, or any contracts or agreements entered into,
by the Company or any of its subsidiaries
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relating to its assets or business (including the acquisition (by sale, license
or otherwise) or disposition (by sale, license or otherwise) of any assets) or
any relinquishment by the Company or any of its subsidiaries of any contract,
agreement or other right, in any such case, material to the Company and its
subsidiaries, taken as a whole; (viii) license, reseller, distribution,
marketing, sales or other agreement entered into that either (1) provides for an
exclusive relationship or arrangement or (2) provides for the annual payment by
the Company for services or products rendered, or the obligation of the Company
to render products or services, in excess of Two Hundred Fifty Thousand Dollars
($250,000), or any agreement to enter into any such license, reseller,
distribution, marketing, sales or other agreement; or (ix) change by the Company
or any of its subsidiaries in any of its accounting principles, practices or
methods. Since February 1, 2000, except as publicly disclosed in the Company SEC
Reports filed prior to the date hereof or in Section 3.8 of the Company
Disclosure Schedule, except for increases in the ordinary course of business
consistent with past practices and except for any of the following made in
accordance with existing contractual provisions, there has not been any increase
in the compensation payable or that could become payable by the Company or any
of its subsidiaries to (a) officers of the Company or any of its subsidiaries or
(b) any employee of the Company or any of its subsidiaries whose annual cash
compensation is One Hundred Thousand Dollars ($100,000) or more.
Section 3.9. Litigation. Except as publicly disclosed in the Company SEC
Reports or as set forth in Section 3.9 of the Company Disclosure Schedule, there
is no suit, claim, action, arbitration, proceeding or investigation pending or,
to the knowledge of the Company, threatened against the Company or any of its
subsidiaries or any of their respective properties or assets before any
Governmental Entity or brought by any person that would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect on the
Company or would reasonably be expected to prevent or delay the consummation of
the transactions contemplated by this Agreement beyond the Final Date. Except as
publicly disclosed in the Company SEC Reports, neither the Company nor any of
its subsidiaries is subject to any outstanding order, writ, injunction or decree
that would reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on the Company or would reasonably be expected to
prevent or delay the consummation of the transactions contemplated hereby.
Section 3.10. Compliance with Applicable Law. Except as publicly disclosed
in the Company SEC Reports, the Company and its subsidiaries hold all permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities necessary for the lawful conduct of their respective businesses, except
for any permits, licenses, variances, exemptions, orders or approvals the
non-existence of which would not reasonably, individually or in the aggregate,
be expected to have a Material Adverse Effect on the Company (the "Company
Permits"). Except as publicly disclosed in the Company SEC Reports, the Company
and its subsidiaries are in compliance with the terms of the Company Permits,
except for any non-compliance the existence of which would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect on
the Company. Except as publicly disclosed in the Company SEC Reports, the
businesses of the Company and its subsidiaries have been and are being conducted
in compliance with all Applicable Laws, except for any non-compliance the
existence of which would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on the Company. Except as publicly
disclosed in the Company SEC Reports, no investigation or review by any
Governmental Entity with respect to the Company or any of its subsidiaries is
pending or, to the knowledge of the Company, threatened, nor, to the knowledge
of the Company, has any Governmental Entity indicated an intention to conduct
the same.
Section 3.11. Employee Benefits.
(a) For purposes of this Agreement, "Compensation and Benefit Plans" means,
collectively, each written bonus, deferred compensation, pension, retirement,
profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock
purchase, restricted stock, stock option, employment, termination, severance,
compensation, medical, health, or other plan, agreement, policy or arrangement,
that covers employees or directors of the Company or any of its subsidiaries, or
pursuant to which former employees or directors of the Company or any of its
subsidiaries are entitled to current or future benefits. There are no oral
Compensation and Benefit Plans to which the Company is a party. The Company has
made available to Intel copies of all "employee pension benefit plans" (as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
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as amended ("ERISA")) (sometimes referred to herein as "Pension Plans"),
"employee welfare benefit plans" (as defined in Section 3(l) of ERISA) and all
other Compensation and Benefit Plans maintained, or contributed to, by the
Company or of its subsidiaries or any person that, together with the Company and
its subsidiaries, is treated as a single employer under Section 414(b), (c), (m)
or (o) of the Code (the Company and each such other person, a "Commonly
Controlled Entity") for the benefit of any current or former employees, officers
or directors of the Company or any of its subsidiaries. The Company has also
made available to Intel true, complete and correct copies of (i) the most recent
annual report on Form 5500 filed with the Internal Revenue Service with respect
to each Compensation and Benefit Plan (if any such report was required), (ii)
the most recent summary plan description for each Compensation and Benefit Plan
for which such summary plan description is required and (iii) each trust
agreement and group annuity contract related to any Compensation and Benefit
Plan. Each Compensation and Benefit Plan has been administered in accordance
with its terms. Neither the Company nor any Commonly Controlled Entity maintains
or has ever maintained a "defined benefit plan" (as defined in Section 415 of
the Code). The Company, each of Company's subsidiaries and each of the
Compensation and Benefit Plans are in compliance with applicable provisions of
ERISA and the Code. Section 3.11(a) of the Company Disclosure Schedule sets
forth a complete and correct list of all Compensation and Benefit Plans.
(b) Except as otherwise provided in Section 3.11(b) of the Company
Disclosure Schedule, the Company and its subsidiaries have performed in all
material respects their obligations under each Compensation and Benefit Plan;
each Compensation and Benefit Plan and each trust or other funding medium, if
any, established in connection therewith has at all times been established,
maintained and operated in material compliance with its terms and the
requirements prescribed by Applicable Law, including ERISA and the Code.
(c) With respect to those Pension Plans that are intended to be qualified
under Section 401(a) of the Code, except as set forth in Section 3.11(c) of the
Company Disclosure Schedule, each such Pension Plan has been the subject of a
determination letter from the Internal Revenue Service to the effect that such
Pension Plans are qualified and exempt from Federal income taxes under Sections
401(a) and 501(a), respectively, of the Code, and no such determination letter
has been revoked nor has any event occurred since the date of its most recent
determination letter or application therefor that would materially adversely
affect its qualification or materially increase its costs.
(d) At all times on and after the effective date of ERISA, neither Company
nor any of its subsidiaries nor any entity which is under "common control" with
the Company (within the meaning of Section 4001 of ERISA) has maintained,
contributed to or otherwise had any obligation with respect to any
"multiemployer plan" (as defined in Section 3(37) of ERISA).
(e) Except as disclosed in Section 3.11(e) of the Company Disclosure
Schedule, there are no suits, actions, disputes, claims (other than routine
claims for benefits), arbitrations, administrative or other proceedings pending
or, to the knowledge of Company, threatened, anticipated or expected to be
asserted with respect to any Compensation and Benefits Plan or any related trust
or other funding medium thereunder or with respect to Company or its
subsidiaries, as the sponsor or fiduciary thereof or with respect to any other
fiduciary thereof.
(f) No Compensation and Benefit Plan maintained by Company or its
subsidiaries or any related trust or other funding medium thereunder or any
fiduciary thereof is, to the knowledge of Company, the subject of a material
audit, investigation or examination by an governmental or quasi-governmental
agency.
(g) Except as provided in Section 3.11(g) of the Company Disclosure
Schedule, (i) no "reportable event" (as such term is used in Section 4043 of
ERISA) or "prohibited transaction" (as such term is used in Section 4975 of the
Code and/or Section 406 of ERISA), has occurred with respect to any Compensation
and Benefit Plan established or maintained by Company or its subsidiaries
primarily for the benefit of participants employed within the United States;
(ii) neither Company nor its subsidiaries has any commitment, intention or
understanding to create, terminate or adopt any Compensation and Benefit Plan
that would result in any additional liability to Intel, the Company or its
subsidiaries; and (iii) since the beginning of the current fiscal year of any
Compensation and Benefit Plan, no event had occurred and no condition or
circumstance has
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existed that could result in a material increase in the benefits under or the
expense of maintaining such Compensation and Benefit Plan maintained by Company,
and its subsidiaries from the level of benefits or expense incurred for the most
recently completed fiscal year of such Compensation and Benefit Plan.
(h) Section 3.11(h) of the Company Disclosure Schedule lists all
outstanding Company Stock Options as of the date hereof, identifying for each
such option: (i) the holder of such option and such holder's relationship to the
Company, (ii) the number of shares issuable, (iii) the number of vested shares,
(iv) the date of expiration and (v) the exercise price.
(i) All contributions required to be made under the terms of any
Compensation and Benefit Plan as of the date hereof have been timely made.
(j) Except as provided by this Agreement or in Section 3.11(j) of the
Company Disclosure Schedule, the execution of, and performance of the
transactions contemplated by, this Agreement will not (either along with or upon
the occurrence of any additional or subsequent events) constitute an event under
any Compensation and Benefit Plan or agreement that will or may reasonably be
expected to result in any payment (whether severance pay or otherwise),
acceleration, vesting or increase in benefits with respect to any employee,
former employee or director of the Company, or its subsidiaries, whether or not
any such payment would be an "excess parachute payment" (within the meaning of
Section 280G of the Code).
(k) With respect to each Compensation and Benefit Plan required to be
maintained or contributed to by the law or applicable custom or rule of the
relevant jurisdiction outside of the United States (the "Foreign Plans"), are
listed on Section 3.11(k) of the Company Disclosure Schedule. As regards each
such Foreign Plan:
(i) Each of the Foreign Plans is in compliance in all material
respects with the provisions of the laws of each jurisdiction in which each
such Foreign Plan is maintained, to the extent those laws are applicable to
the Foreign Plans;
(ii) All contributions to, and payments from, the Foreign Plans which
may have been required to be made in accordance with the terms of any such
Foreign Plan, and, when applicable, the law of the jurisdiction in which
such Foreign Plan is maintained, have been timely made or shall be made by
the Closing Date. All such contributions to the Foreign Plans, and all
payments under the Foreign Plans, for any period ending before the Closing
Date that are not yet, but will be, required to be made, are reflected as
an accrued liability on the balance sheet included in the most recently
filed Company SEC Report;
(iii) All material reports, returns and similar documents, if any,
with respect to any Foreign Plan required to be filed with any governmental
body or distributed to any Foreign Plan participant have been duly and
timely filed or distributed or will be filed or distributed by the Closing
Date, and all of the Foreign Plans have obtained from the governmental body
having jurisdiction with respect to such plans any required determinations,
if any, that such Foreign Plans are in compliance with the laws of the
relevant jurisdiction if such determinations are required in order to give
effect to the Foreign Plan;
(iv) Each of the Foreign Plans has been administered at all times, and
in all material respects, in accordance with its terms. To the knowledge of
Company, there are no pending investigations by any governmental body
involving the Foreign Plans, and no pending claims (except for claims for
benefits payable in the normal operation of the Foreign Plans), suits or
proceedings against any Foreign Plan or asserting any rights or claims to
benefits under any Foreign Plan; and
(v) The consummation of the transactions contemplated by this
Agreement will not by itself create or otherwise result in any material
liability with respect to any Foreign Plan other than the triggering of
payment to participants.
(l) Each Compensation and Benefit Plan complies in all material respects
with all applicable requirements of (i) the Age Discrimination in Employment Act
of 1967, as amended, and the regulations thereunder and (ii) Title VII of the
Civil Rights Act of 1964, as amended, and the regulations thereunder and all
other applicable laws. All amendments and actions required to bring each of the
Compensation and Benefit Plans into conformity with all of the applicable
provisions of ERISA and other applicable laws have been made or
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taken except to the extent that such amendments or actions are not required by
law to be made or taken until a date after the Effective Time and are disclosed
in Section 3.11(l) of the Company Disclosure Schedule or will be provided to
Intel within fourteen (14) days of the date hereof.
(m) Each group medical plan sponsored by the Company or its subsidiaries
materially complies with the Medicare Secondary Payor Provisions of Section 1826
(b) of the Social Security Act, and the regulations promulgated thereunder.
(n) Except as set forth on Section 3.11(n) of the Company Disclosure
Schedule, Intel, the Surviving Corporation, the Company and its subsidiaries may
terminate or amend any Compensation and Benefit Plan maintained by the Company
or its subsidiaries or may cease contributions to any such Compensation and
Benefit Plans without incurring any material liability other than a benefit
liability accrued in accordance with the terms of such Compensation and Benefit
Plan immediately prior to such amendment, termination or ceasing of
contributions.
(o) Neither the Company nor any of its subsidiaries maintained any
Compensation and Benefit Plan that is a "group health plan" (as such term is
defined in Section 5000(b)(1) of the Code) that has not been administered and
operated in all respects in compliance with the applicable requirements of
Section 601 of ERISA and section 4980B(b) of the Code and the Company and its
subsidiaries are not subject to any liability, including without limitation,
additional contributions, fines, penalties or loss of tax deduction as a result
of such administration and operation.
(p) Neither the Company nor any of its subsidiaries has incurred, nor does
the Company reasonably expect either it or any subsidiary to incur, any
liability for any tax imposed under Sections 4971 through 4980B of the Code or
civil liability under Section 501(i) or (1) of ERISA;
(q) Neither the Company nor any of its subsidiaries has incurred any
liability for any tax, excise tax, penalty or fee with respect to any
Compensation and Benefit Plan, including, but not limited to, taxes arising
under Section 4971, 4977, 4978, 4878B, 4979, 4980 or 4980B of the Code, and no
event has occurred and no circumstance has existed that could give rise to any
such liability.
(r) Except as provided in Section 3.11(r) of the Company Disclosure
Schedule, no insurance policy nor any other contract or agreement affecting any
Compensation and Benefit Plan requires or permits a retroactive increase in
premiums or payments due thereunder.
Section 3.12. Labor and Employment Matters. Except as set forth on Section
3.12 of the Company Disclosure Schedule:
(a) No collective bargaining agreement exists that is binding on the
Company or any of its subsidiaries, and the Company has not been officially
apprised that any petition has been filed or proceeding instituted by an
employee or group of employees of the Company, or any of its subsidiaries,
with the National Labor Relations Board seeking recognition of a bargaining
representative.
(b) (i) There is no labor strike, dispute, slow down or stoppage
pending or threatened against the Company or any of its subsidiaries; and
(ii) Neither the Company nor any of its subsidiaries has received any
demand letters, civil rights charges, suits or drafts of suits with respect
to claims made by any of their respective employees.
(c) All individuals who are performing consulting or other services
for the Company or any of its subsidiaries are or were correctly classified
by the Company as either "independent contractors" or "employees" as the
case may be, and, at the Closing Date, will qualify for such
classification.
(d) Section 3.12(d) of the Company Disclosure Schedule contains a list
of the name of each officer, employee and consultant of the Company or any
of the Company's subsidiaries, together with such person's position or
function, annual base salary or wages and any incentives or bonus
arrangement with respect to each such officer and employee and such
person's compensation arrangement with respect to each such consultant. To
the Company's knowledge, without independent investigation or inquiry and
except as otherwise disclosed to Intel, no person who is identified on
Section 3.12(d) of the Company
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Disclosure Schedule as having an annual base salary in excess of One
Hundred Thousand Dollars ($100,000) will cease to be employed by the
Company or such subsidiary for any reason, including because of the
consummation of the transactions contemplated by this Agreement.
(e) The Company and each of its subsidiaries is in compliance with all
applicable foreign, federal, state and local laws, rules and regulations
respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to employees,
except for any non-compliance the existence of which would not reasonably
be expected, individually or in the aggregate, to have a Material Adverse
Effect on the Company.
(f) The Company and each of its subsidiaries has withheld and reported
all amounts required by law or by agreement to be withheld and reported
with respect to wages, salaries and other payments to employees, except for
any failure to withhold or report the existence of which would not
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on the Company.
(g) There are no pending or, to the Company's knowledge, threatened
claims or actions against the Company or any of its subsidiaries under any
worker's compensation policy or long-term disability policy, except for any
claim or action the existence of which would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect on the
Company.
Section 3.13. Environmental Laws and Regulations.
(a) The term "Environmental Laws" means any applicable federal, state,
local or foreign law, statute, treaty, ordinance, rule, regulation, policy,
permit, consent, approval, license, judgment, order, decree or injunction
relating to: (i) Releases (as defined in 42 U.S.C. sec. 9601(22)) or threatened
Releases of Hazardous Material (as hereinafter defined) into the environment,
(ii) the generation, treatment, storage, disposal, use, handling, manufacturing,
transportation or shipment of Hazardous Material, (iii) the health or safety of
employees in the workplace, (iv) protecting or restoring natural resources or
(e) the environment. The term "Hazardous Material" means (1) hazardous
substances (as defined in 42 U.S.C. sec. 9601(14)), including "hazardous waste"
as defined in 42 U.S.C. sec. 6903, (2) petroleum, including crude oil and any
fractions thereof, (3) natural gas, synthetic gas and any mixtures thereof, (4)
asbestos and/or asbestos containing materials, (5) PCBs or materials containing
PCBs, (6) any material regulated as a medical waste, (7) lead containing paint,
(8) radioactive materials and (9) "Hazardous Substance" or "Hazardous Material"
as those terms are defined in any indemnification provision in any contract,
lease, or agreement to which the Company or any of its subsidiaries is a party.
(b) During the period of ownership or operation by the Company and its
subsidiaries of any of their current or previously owned or leased properties,
there have been no Releases of Hazardous Material by the Company or any of its
subsidiaries in, on, under or affecting such properties or any surrounding site,
and neither the Company nor any of its subsidiaries has disposed of any
Hazardous Material in a manner that has led, or would reasonably be anticipated
to lead to a Release, except in each case for those which would not reasonably
be expected, individually or in the aggregate, to have a Material Adverse Effect
on the Company. There have been no Releases of Hazardous Material by the Company
or any of its subsidiaries in, on, under or affecting their current or
previously owned or leased properties or any surrounding site at times outside
of such periods of ownership, operation or lease, except in each case for those
which would not reasonably be expected, individually on in the aggregate, to
have a Material Adverse Effect on the Company. Since 1995, neither the Company
nor any of its subsidiaries has received any written notice of, or entered into
any order, settlement or decree relating to: (i) any violation of any
Environmental Laws or the institution or pendency of any suit, action, claim,
proceeding or investigation by any Governmental Entity or any third party in
connection with any alleged violation of Environmental Laws or (ii) the response
to or remediation of Hazardous Material at or arising from any of the Company's
properties or any subsidiary's properties. There have been no violations of any
Environmental Laws by the Company or any subsidiary which violations would
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect on the Company.
(c) There are no past or present events, conditions, circumstances,
activities, practices, incidents, actions, omissions or plans that constitute a
violation by the Company or any of its subsidiaries of, or are
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reasonably likely to prevent or interfere with the Company's or any of its
subsidiaries' future compliance with, any Environmental Laws, other than any of
the foregoing that would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on the Company.
Section 3.14. Taxes.
(a) Definitions. For purposes of this Agreement:
(i) the term "Code" means the Internal Revenue Code of 1986, as amended;
(ii) the term "Tax" (including "Taxes") means (1) all federal, state,
local, foreign and other net income, gross income, gross receipts, sales, use,
ad valorem, transfer, franchise, profits, license, lease, service, service use,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, windfall profits, customs, duties or other taxes, fees, assessments or
charges of any kind whatsoever, whether disputed or not, together with any
interest and any penalties, additions to tax or additional amounts with respect
thereto, (2) any liability for payment of amounts described in clause (1)
whether as a result of transferee liability, of being a member of an affiliated,
consolidated, combined or unitary group for any period, or otherwise through
operation of law, and (3) any liability for the payment of amounts described in
clauses (1) or (2) as a result of any tax sharing, tax indemnity or tax
allocation agreement or any other express or implied agreement to pay or
indemnify, any other person;
(iii) the term "Tax Affiliates" (including "Tax Affiliate") means the
subsidiaries and any person for whose Taxes the Company or any subsidiary is or
could be held liable, whether as a successor, by agreement, by operation of law
or otherwise; and
(iv) the term "Tax Return" means any return, declaration, report,
statement, information statement and other document filed or required to be
filed with respect to Taxes.
(b) Except as set forth in Section 3.14(b) of the Company Disclosure
Schedule, the Company and its subsidiaries have duly and timely filed all Tax
Returns required to be filed; and such Tax Returns are complete and accurate, in
all material respects, and correctly reflect the Tax liability required to be
reported thereon. Such Tax Returns do not contain a disclosure statement under
Section 6662 of the Code (or any predecessor provision or comparable provision
of state, local or foreign law). All Tax Returns provided or made available to
Intel are true and correct copies of such Tax Returns actually filed.
(c) The Company and Tax Affiliates have timely paid all Taxes that have
become due and payable, and have adequately provided in the financial statements
included in the SEC Reports for all Taxes accrued through the date of such
financial statements that were not yet due and payable as of the date thereof;
all Taxes of the Company and Tax Affiliates accrued following the end of the
most recent period covered by the most recent SEC Reports have been accrued in
the ordinary course of business of the Company and Tax Affiliates, are based on
normal operations of the Company and Tax Affiliates from the date thereof and
are properly reflected in the books and records of the Company and Tax
Affiliates. All Taxes that the Company and Tax Affiliates have been or are
required by law to withhold or to collect for payment have been duly withheld
and collected, and have been paid over to the appropriate Governmental Entity or
are accrued, reserved against and entered on the books and records of the
Company and Tax Affiliates.
(d) Except as set forth in Section 3.14(d) of the Company Disclosure
Schedule, no claim for assessment or collection of Taxes has been or is
presently being asserted against any of the Company or any Tax Affiliate; no
rationale underlying a claim for Taxes has been asserted previously by any
taxing authority that reasonably could be expected to be asserted in any other
period; none of the Company or any Tax Affiliate is (or has been during the last
five years) a party to any action, proceeding, audit or investigation by any
taxing authority nor does Company or any Tax Affiliate have knowledge of any
such threatened action, proceeding, audit or investigation; there are no
outstanding agreements extending the statutory period of limitation applicable
to any claim for, or the period for the collection or assessment of, Taxes due
from the Company or any Tax Affiliate for any taxable period; and neither the
Company nor any Tax Affiliate is a party to an agreement with, or is subject to
any private ruling from, any Governmental Entity with respect to Taxes. The
Company has provided to Intel copies of all notices, reports and other
documentation received during the last five years from
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any Governmental Entity with respect to any audit, examination, claim, inquiry
or proceeding with respect to Taxes of the Company or any Tax Affiliate. No
power of attorney with respect to Taxes is currently in effect.
(e) Except as set forth in Section 3.14(e) of the Company Disclosure
Schedule, neither the Company nor any Tax Affiliate is a party to any agreement,
contract, arrangement or plan that has resulted or would result, individually or
in the aggregate, in connection with this Agreement or any other change of
control of Convera, the Company or any subsidiary, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code (or any
comparable provision of state, local or foreign law).
(f) Except as set forth in Section 3.14(f) of the Company Disclosure
Schedule, neither the Company nor any Tax Affiliate is a party to or bound by
any obligation under any Tax sharing, Tax allocation, Tax indemnity or similar
agreement or arrangement. Other than by reason of withholding Taxes incurred in
the ordinary course of business, neither the Company nor any Tax Affiliate is or
could be held liable for the Taxes of any other person.
(g) Except as set forth in Section 3.14(g) of the Company Disclosure
Schedule, there is no limitation on the utilization by the Company and Tax
Affiliates of net operating losses, built in losses, tax credits or similar
items of the Company and Tax Affiliates under Section 382, 383, 384 or 1502 of
the Code and the Treasury Regulations thereunder (and comparable provisions of
state, local or foreign law).
(h) Except as set forth in Section 3.14(h) of the Company Disclosure
Schedule, neither the Company nor any Tax Affiliate has agreed to, or is
required to make, any adjustment under Section 481 of the Code (or any
comparable provision of state, local or foreign law) by reason of a change in
accounting method, or has any application pending with any Governmental Entity
requesting permission for any changes in accounting methods that relate to the
business or operations of the Company or Tax Affiliates.
(i) Neither the Company nor any Tax Affiliate has ever been a member of an
affiliated, combined, consolidated unitary or other tax filing group, other than
such a group having Company as the common parent. Neither the Company nor any
Tax Affiliates is a member or partner of an entity treated as a partnership for
purposes of the Code.
(j) neither the Company nor any Tax Affiliate is a "consenting corporation"
within the meaning of Section 341(f)(1) of the Code.
(k) Neither the Company nor any Tax Affiliate has taken any action not in
accordance with past practice that would have the effect of deferring a measure
of Tax (including but not limited to income, sales, gross receipts or payroll)
from a period (or portion thereof) ending on or prior to the Closing to a period
(or portion thereof) beginning after the Closing; and no election has been made
with respect to Taxes of the Company or any Tax Affiliate in any Tax Return that
has not been provided to Intel. No material item of income or gain of the
Company or any Tax Affiliate reported or to be reported for financial reporting
purposes in any pre-Closing period is required to be included in taxable income
in a post-Closing period.
(l) No property owned by any of the Company or any Tax Affiliate (i) is
property required to be treated as being owned by another person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended
and in effect immediately prior to the enactment of the Tax Reform Act of 1986,
(ii) is property described in Section 168(g)(1) of the Code; or (iii) is subject
to any provision of state, local or foreign law comparable to any of the
provisions listed above.
(m) Neither the Company nor any Tax Affiliate that is a United States
person (as defined in the Code) has engaged in business in any jurisdiction
outside of the United States in a manner that would subject person to tax in
that jurisdiction; and no Tax Affiliate that is not a United States person (as
so defined) has engaged in business in the United States in a manner that would
subject such Tax Affiliate to tax in the United States.
(n) There are no deferred intercompany items or excess loss accounts with
respect to the Company or any Tax Affiliates, and there are no elections in
effect under the sec.sec. 1.1502-1 et. seq. of the United States Treasury
Regulations.
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(o) Each Assumed Option designated as or otherwise purporting to be an
incentive stock option has at all times since the issuance of such Assumed
Option qualified as an "incentive stock option" as such term is defined in
Section 422 of the Code, and immediately prior to the Effective Time will be
held by a person whose exercise of such Assumed Option would be governed by
Section 421(a) of the Code (determined without regard to Section 422(a)(1) of
the Code).
(p) No plan, agreement, arrangement, understanding or intention is or will
be in effect that would cause any of the Convera Common Stock or Convera
Preferred Stock to be acquired by shareholders of the Company in the Merger not
to be taken into account in determining whether the "control" requirement in
Section 351(a) of the Code will be satisfied with respect to the transactions
contemplated by this Agreement. Neither the Company, Convera, Transitory nor any
of their shareholders has taken any action that would jeopardize the status of
the Contribution and the Merger, taken together, as a transaction governed by
Section 351(a) of the Code.
Section 3.15. Intellectual Property.
(a) Section 3.15(a) of the Company Disclosure Schedule sets forth, for the
Intellectual Property owned, in whole or in part, including jointly with others,
by the Company or any of its subsidiaries, a complete and accurate list of all
United States and foreign (i) patents and patent applications; (ii) Trademark
registrations and applications and material unregistered Trademarks; and (iii)
copyright registrations and applications, indicating for each, the applicable
jurisdiction, registration number (or application number) and date issued (or
date filed). For purposes of this Agreement, "Intellectual Property" means:
trademarks and service marks (whether registered or unregistered), trade names
and designs, together with all goodwill related to the foregoing (collectively,
"Trademarks"); patents (including any continuations, continuations in part,
renewals and applications for any of the foregoing) (collectively "Patents");
copyrights (including any registrations and applications therefor and whether
registered or unregistered) (collectively, "Copyrights"); computer software;
databases; works of authorship; mask works; technology; trade secrets and other
confidential information, know-how, proprietary processes, formulae, algorithms,
models, user interfaces, customer lists, inventions, discoveries, concepts,
ideas, techniques, methods, source codes, object codes, methodologies and, with
respect to all of the foregoing, related confidential data or information
(collectively, "Trade Secrets").
(b) Trademarks.
(i) The Company and its subsidiaries have complied with all legal
requirements for applying for, registering and maintaining its registered
Trademarks.
(ii) No registered Trademark has been within the last three (3) years
or is now involved in any opposition or cancellation proceeding in the
United States Patent and Trademark Office. To the Company's knowledge, no
such action has been threatened in writing within the one (1)-year period
prior to the date of this Agreement.
(iii) To the Company's knowledge, there has been no prior use of any
Trademark of the Company or its subsidiaries by any third party that
confers upon said third party superior rights in any such Trademark. No
adverse claims have been made or, to the Company's knowledge, threatened
against the Trademarks of the Company and its subsidiaries.
(iv) The Company and its subsidiaries have adequately policed their
Trademarks against third party infringement, and the Trademarks registered
in the United States have been continuously used by the Company or one of
its subsidiaries since the date set forth in, the form appearing in, and in
connection with the goods and services listed in, their respective
registration certificates or renewal certificates, as the case may be.
(c) Patents. Neither the Company nor any of its subsidiaries has any
issued Patents.
(d) Trade Secrets. The Company and each of its subsidiaries have taken
reasonable steps to protect their respective rights in confidential information
and Trade Secrets.
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(e) Assignment and Protection. The Company and each of its subsidiaries
enforces a policy of requiring each employee to execute proprietary information,
confidentiality and assignment agreements substantially in the Company's
standard forms that assign to the Company or such subsidiary, as the case may
be, all rights to any Intellectual Property relating to the Company's or such
subsidiary's business that is developed by the employee in the course of his or
her activities for the Company or any of its subsidiaries or is developed during
working hours using the resources of the Company or any such subsidiary, and has
obtained from consultants and contractors the appropriate level of intellectual
property ownership, protection or other rights sufficient to conduct the
business of the Company and its subsidiaries. To the knowledge of the Company,
there has been no disclosure by the Company or any subsidiary of confidential
information or Trade Secrets except under confidentiality agreements.
(f) License Agreements. Section 3.15(f)(i) of the Company Disclosure
Schedule sets forth a complete and accurate list of all license agreements
granting to the Company or any of its subsidiaries any right to use or practice
any rights under any Intellectual Property other than standard desktop
applications that are sold pursuant to "shrink-wrap" licenses (collectively, the
"Inbound License Agreements"), indicating for each the title and the parties
thereto and the amount of any future royalty or license fee payable thereunder.
Section 3.15(f)(ii) of the Company Disclosure Schedule sets forth a complete and
accurate list of all license agreements which involved license payments (or the
right to license payments) of Fifty Thousand Dollars ($50,000) or more in the
year ended January 31, 2000, or are reasonably expected to involve license
payments (or the right to license payments) of Fifty Thousand Dollars ($50,000)
or more in the year ending January 31, 2001 under which the Company or any of
its subsidiaries licenses software or grants other rights in to use or practice
any rights under any Intellectual Property (collectively, the "Outbound License
Agreements"), indicating for each the title and the parties thereto. There is no
outstanding or, to the Company's knowledge, threatened dispute or disagreement
with respect to any Inbound License Agreement or any Outbound License Agreement.
(g) Ownership; Sufficiency of IP Assets. The Company or one of its
subsidiaries owns or possesses adequate licenses or other rights to use, free
and clear of Liens, orders and arbitration awards, all of Intellectual Property
used in its business. The Intellectual Property identified in Section 3.15(a) of
the Company Disclosure Schedule, together with the Company's and its
subsidiaries' unregistered Copyrights and the Company's and such subsidiaries'
rights under the licenses granted to the Company or any of its subsidiaries
under the Inbound License Agreements, constitute all the material Intellectual
Property rights used in the operation of the Company's and its subsidiaries'
businesses as they are currently conducted.
(h) Protection of IP. The Company has taken reasonable steps to protect
the Intellectual Property of the Company and its subsidiaries.
(i) No Infringement by the Company. To the knowledge of the Company, the
products and services used, manufactured, marketed, sold or licensed by the
Company and its subsidiaries, and all Intellectual Property used in the conduct
of the Company's and its subsidiaries' businesses as currently conducted, do not
infringe upon, violate or constitute the unauthorized use of any valid and
enforceable rights owned or controlled by any third party, including any
Intellectual Property of any third party.
(j) No Pending or Threatened Infringement Claims. Except as publicly
disclosed in the Company SEC Reports or in Section 3.15(j) of the Company
Disclosure Schedule, no litigation is now or, within the five (5) years prior to
the date of this Agreement, was pending and no notice or other claim in writing
has been received by the Company within the one (1) year prior to the date of
this Agreement, (i) alleging that the Company any of its subsidiaries has
engaged in any activity or conduct that infringes upon, violates or constitutes
the unauthorized use of the Intellectual Property rights of any third party or
(ii) challenging the ownership, use, validity or enforceability of any
Intellectual Property owned or exclusively licensed by or to the Company. No
Intellectual Property (x) that is owned by the Company or any of its
subsidiaries is subject to any outstanding order, judgment, decree, stipulation
or agreement restricting the use thereof by the Company or any such subsidiary,
except as may be specifically provided in any such Inbound License Agreement,
(y) that is the subject of an Outbound License Agreement is subject to any
outstanding order, judgment, decree, stipulation or agreement restricting the
sale, transfer, assignment or licensing thereof by the Company
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or any of its subsidiaries to any person or (z) that is the subject of an
Inbound License Agreement is subject to any outstanding judgment, decree, order,
stipulation or agreement restricting the use thereof by the Company or any of
its subsidiaries.
(k) No Infringement by Third Parties. Except as publicly disclosed in the
Company SEC Reports, to the knowledge of the Company, no third party is
misappropriating, infringing, diluting or violating any Intellectual Property
owned or exclusively licensed by the Company or any of its subsidiaries, and no
such claims have been brought against any third party by the Company or any of
its subsidiaries.
(l) Assignment; Change of Control. Except as set forth in Section 3.15(l)
of the Company Disclosure Schedule, the execution, delivery and performance by
the Company, Convera and Transitory of this Agreement, and the consummation of
the transactions contemplated hereby, will not result in the loss or impairment
of, or give rise to any right of any third party to terminate or alter, any of
the Company's or any of its subsidiaries' rights to own any of its Intellectual
Property or their respective rights under any Inbound License Agreement or
Outbound License Agreement, nor require the consent of any Governmental
Authority or third party in respect of any such Intellectual Property.
(m) Software. The Software owned or purported to be owned by the Company
or any of its subsidiaries was either (i) developed by employees of the Company
or any of its subsidiaries within the scope of their employment; (ii) developed
by independent contractors who have assigned their rights to the Company or any
of its subsidiaries pursuant to written agreements; or (iii) otherwise acquired
by the Company or a subsidiary from a third party. Except as set forth in
Section 3.15(m) of the Company Disclosure Schedule, the Software does not
contain any programming code, documentation or other materials or development
environments that embody Intellectual Property rights of any person other than
the Company or any of its subsidiaries, except for such materials or development
environments obtained by the Company or any of its subsidiaries from other
persons who make such materials or development environments generally available
on non-discriminatory commercial terms. For purposes of this Section 3.15(m) and
Section 4.9(l), "Software" means any and all (i) computer programs, including
any and all software implementations of algorithms, models and methodologies,
whether in source code or object code, (ii) databases and compilations,
including any and all data and collections of data, whether machine readable or
otherwise, (iii) descriptions, schematics, flow-charts and other work product
used to design, plan, organize and develop any of the foregoing, and (iv) all
documentation, including user manuals and training materials, relating to any of
the foregoing.
(n) Performance of Existing Software Products. The Company's and its
subsidiaries' existing and currently manufactured and marketed Software products
listed and described on Section 3.15(n) of the Company Disclosure Schedule
perform in all material respects, free of significant bugs, viruses or
programming errors, the functions described in any agreed specifications or end
user documentation or other information provided to customers of the Company or
any of its subsidiaries on which such customers relied when licensing or
otherwise acquiring such products.
(o) Documentation. The Company and its subsidiaries have taken all actions
customary in the software industry to document the Software and its operation,
such that the materials comprising the Software, including the source code and
documentation, have been written in a clear and professional manner so that they
may be understood, modified and maintained in an efficient manner by reasonably
competent programmers.
(p) Year 2000 Capability.
(i) Except as set forth in Section 3.15(p) of the Company Disclosure
Schedule, all of the Company's and its subsidiaries' products (including
products currently under development) have recorded, stored, processed and
calculated and presented calendar dates falling on and after December 31,
1999, and will continue to calculate any information dependent on or
relating to such dates in the same manner and with the same functionality,
data integrity and performance as the products recorded, stored, processed,
calculated and presented calendar dates on or before December 31, 1999, or
calculated any information dependent on or relating to such dates, except
for any failure to satisfy the foregoing the existence of which would not
reasonably be expected, individually or in the aggregate, to have a
Material
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Adverse Effect on the Company (collectively, "Year 2000 Capable"). Except
as set forth in Section 3.15(p) of the Company Disclosure Schedule, (i) all
of the Company's and its subsidiaries' products did not lose, and will not
lose, any significant functionality with respect to the introduction of
records containing dates falling on or after December 31, 1999; and (ii)
all of the Company's and its subsidiaries' internal computer systems
comprised of software, hardware, databases or embedded control systems
(microprocessor controlled, robotic or other device) related to the
Company's and its subsidiaries' businesses (collectively, a "Business
System"), that constitutes any part of, or is used in connection with the
use, operation or enjoyment of, any tangible or intangible asset or real
property of the Company and its subsidiaries, including its accounting
systems, are Year 2000 Capable. Except as set forth on Section 3.15(p) of
the Company Disclosure Schedule, the current versions of the Company's and
its subsidiaries' software and all other Intellectual Property may be used
after December 31, 1999 such that such Software and Intellectual Property
will operate after such time period without error caused by date data that
represents or references different centuries or more than one century.
(ii) Except as set forth on Section 3.15(p) of the Company Disclosure
Schedule, the Company's products and the conduct of the Company's business
with its customers and suppliers were not impaired by the advent of the
year 2000, the advent of the twenty-first century or the transition from
the twentieth century through the year 2000 and into the twenty-first
century, except for any such impairment the existence of which would not
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on the Company. Except as set forth on Section
3.15(p) of the Company Disclosure Schedule, neither the Company nor any of
its subsidiaries incurred expenses arising from or relating to the failure
of any of its Business Systems or any products (including all products sold
on or prior to the date hereof) as a result of the advent of the year 2000,
the advent of the twenty-first century or the transition from the twentieth
century through the year 2000.
(q) Third Party NDA. To the knowledge of the Company, neither the Company
nor any subsidiary is a party to, or is bound by, any non-disclosure or similar
agreement that is materially different from the Company's standard
non-disclosure agreement, a copy of which has previously been delivered by the
Company to Intel.
Section 3.16. Insurance. Except as set forth in Section 3.16 of the
Company Disclosure Schedule, each of the Company and its subsidiaries maintains
insurance policies (the "Insurance Policies") against all risks of a character
and in such amounts as are customarily insured against by similarly situated
companies in the same or similar businesses. Each Insurance Policy is in full
force and effect and is valid, outstanding and enforceable, and all premiums due
thereon have been paid in full. None of the Insurance Policies will terminate or
lapse (or be affected in any other manner that would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect on the
Company) by reason of the transactions contemplated by this Agreement. Each of
the Company and its subsidiaries has complied with the provisions of each
Insurance Policy under which it is the insured party, except for any
non-compliance the existence of which would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect on the
Company. No insurer under any Insurance Policy has canceled or generally
disclaimed liability under any such policy or, to the Company's knowledge,
indicated any intent to do so or not to renew any such policy. All claims under
the Insurance Policies have been filed in a timely fashion.
Section 3.17. Certain Business Practices. None of the Company, any of its
subsidiaries or any directors, officers, agents or employees of the Company or
any of its subsidiaries has (i) used any funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to political activity,
(ii) made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (iii)
made any other unlawful payment.
Section 3.18. Product Warranties. Section 3.18 of the Company Disclosure
Schedule sets forth complete and accurate copies of the written warranties and
guaranties by the Company or any of its subsidiaries currently in effect with
respect to its products. Except for any of the following the existence of which
would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on
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the Company, there have not been any deviations from such warranties and
guaranties, and neither the Company, any of its subsidiaries nor any of their
respective salesmen, employees, distributors and agents is authorized to
undertake obligations to any customer or to other third parties in excess of
such warranties or guaranties. Except for any of the following the existence of
which would not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect on the Company, neither the Company nor any of
its subsidiaries has made any oral warranty or guaranty with respect to its
products not described on such schedule.
Section 3.19. Suppliers and Customers. Section 3.19 of the Company
Disclosure Schedule sets forth the names of the ten (10) largest customers of
the Company and its subsidiaries during the last twelve (12) months ended
January 31, 2000 and of each supplier who supplied the Company and its
subsidiaries with over Two Hundred Thousand Dollars ($200,000) of supplies
during such twelve month period. During the last twelve (12) months, the Company
has received no notices of termination or written threats of termination from
any such supplier or any such customer.
Section 3.20. Vote Required. The affirmative vote of the holders of a
majority of the outstanding Shares is the only vote of the Company's capital
stock necessary to approve the Merger and adopt this Agreement.
Section 3.21. Opinion of Financial Advisor. The Company has received a
fairness opinion of Needham & Company, Inc. (the "Financial Advisor"), with
respect to the Combination and such fairness opinion has not, as of the date
hereof, been withdrawn, revoked or modified. A true and complete copy of such
opinion will be delivered to Intel within three (3) business days of the date
hereof.
Section 3.22. Brokers. No broker, finder or investment banker (other than
the Financial Advisor, a true and correct copy of whose engagement agreement
have been provided to Intel) is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company, Convera or
Transitory.
Section 3.23. Takeover Statute. With respect to the Combination, no
restrictions of any "fair price," "moratorium," "control share acquisition" or
other similar anti-takeover statute or regulation (each a "Takeover Statute")
are or will be applicable to the Company, the Shares, the Company Preferred
Stock or any of the other transactions contemplated by this Agreement.
Section 3.24. Representations Complete. None of the representations or
warranties made by the Company, Convera and Transitory in this Agreement nor any
statement made in any Schedule or certificate furnished by the Company, Convera
and Transitory pursuant to this Agreement, contains or will contain at the
Effective Time, any untrue statement of a material fact, or omits or will omit
at the Effective Time to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF INTEL
Intel hereby represents and warrants to the Company, Convera and
Transitory, subject to the exceptions set forth in the Disclosure Schedule (the
"Intel Disclosure Schedule") delivered to the Company by Intel in accordance
with Section 5.11 (which exceptions shall specifically identify a Section or
subsection, as applicable, to which such exception relates) as follows:
Section 4.1. Organization and Qualification.
(a) Intel is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its businesses as now being conducted.
(b) Intel is duly qualified or licensed and in good standing to do business
in each jurisdiction in which the ownership or operation of any of the
Contributed Assets or the nature of the business of the Contributed Assets
conducted by Intel makes such qualification or licensing necessary, except in
such jurisdictions where
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the failure to be so duly qualified or licensed and in good standing would not,
individually or in the aggregate, have a Material Adverse Effect on the
Contributed Assets. When used in connection with Intel or its subsidiaries, the
term "Material Adverse Effect on the Contributed Assets" means any circumstance,
change in, or effect on the Contributed Assets that is, or is reasonably likely
in the foreseeable future to be, materially adverse to the operations, financial
condition, earnings or results of operations, or the business (financial or
otherwise), of the Contributed Assets, taken as a whole; provided, however, that
a change in conditions affecting either the internet media services and
distribution industry, as a whole, or the text search retrieval industry, as a
whole, shall not be deemed to constitute a Material Adverse Effect on the
Contributed Assets.
Section 4.2. Authority Relative to this Agreement. Intel has all necessary
corporate power and authority to execute and deliver this Agreement, to perform
its obligations under this Agreement, and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby, have been duly and validly
authorized by Intel, and no other corporate proceedings on the part of Intel are
necessary to authorize this Agreement, or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Intel and, assuming the due authorization, execution and delivery
by the Company, Convera and Transitory, constitutes the valid, legal and binding
agreement of Intel, enforceable against it in accordance with its terms, subject
to any applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws now or hereafter in effect relating to creditors' rights generally or to
general principles of equity.
Section 4.3. Information Supplied. None of the information provided or to
be provided in writing by Intel specifically for inclusion or incorporation by
reference in the Registration Statement (as defined in Section 5.4) or the Proxy
Statement (as defined in Section 5.4) will, at the date mailed to stockholders
of the Company, at the time of the meeting of stockholders of the Company to be
held in connection with the Combination and at the time of issuance of shares of
Convera Common Stock to Intel in the Combination, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein in light of the
circumstances under which they are made not misleading.
Section 4.4. Consents and Approvals; No Violations. Except for (i)
filings, permits, authorizations, consents and approvals as may be required
under applicable requirements of the Securities Act, the Exchange Act, state
securities or blue sky laws, and the HSR Act, (ii) any filings under similar
merger notification laws or regulations of foreign Governmental Entities, (iii)
the filing of the Certificate of Merger as required by the DGCL and (iv) any
filings, permits, authorizations, consents and approvals the nonexistence of
which would not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect on the Contributed Assets, no filing with or
notice to and no permit, authorization, consent or approval of any Governmental
Entity is necessary for the execution and delivery by Intel of this Agreement or
the consummation by Intel of the transactions contemplated hereby. Neither the
execution, delivery and performance of this Agreement by Intel, nor the
consummation by Intel of the transactions contemplated hereby, will (a) conflict
with or result in any breach of any provision of the Certificate of
Incorporation or bylaws (or similar governing documents) of Intel, (b) result in
a violation or breach of or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration or Lien) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which Intel is a party or by
which it or any of its properties and assets is bound or (c) violate any order,
writ, injunction, decree, law, statute, rule or regulation applicable to Intel
or any of its properties or assets, except, with respect to clauses (b) and (c),
for the matters set forth on Section 4.4 of the Intel Disclosure Schedule and
for matters the existence of which would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect on the
Contributed Assets.
Section 4.5. No Default. Except as set forth in Section 4.5 of the Intel
Disclosure Schedule, Intel is not in breach, default or violation (and no event
has occurred that with notice or the lapse of time or both would constitute a
breach, default or violation) of any term, condition or provision of (i) its
Certificate of Incorporation or bylaws (or similar governing documents), (ii)
any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which Intel is now a party or by which it or
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any of its properties and assets is bound or (iii) any order, writ, injunction,
decree, law, statute, rule or regulation applicable to Intel or any of its
properties or assets, except, with respect to clauses (i), (ii) and (iii) above,
for matters the existence of which would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect on the
Contributed Assets.
Section 4.6. Litigation. Except as publicly disclosed in the forms,
reports and documents (the "Intel SEC Reports") filed by Intel with the SEC
since January 1, 1997, or as set forth in Section 4.6 of the Intel Disclosure
Schedule, there is no suit, claim, action, arbitration, proceeding or
investigation pending or, to the knowledge of Intel, threatened against any of
the Contributed Assets before any Governmental Entity or brought by any person
that would reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on the Contributed Assets or that would reasonably be
expected to prevent or delay the consummation of the transactions contemplated
by this Agreement beyond the Final Date. Except as publicly disclosed in the
Intel SEC Reports, Intel is not subject to any outstanding order, writ,
injunction or decree that would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on the Contributed Assets or would
reasonably be expected to prevent or delay the consummation of the transactions
contemplated hereby.
Section 4.7. Compliance with Applicable Law. Except as publicly disclosed
in the Intel SEC Reports, Intel holds all permits, licenses, variances,
exemptions, orders and approvals of all Governmental Entities necessary for the
lawful conduct of the business and operation of the Contributed Assets, except
for any permits, licenses, variances, exemptions, orders or approvals the
non-existence of which would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on the Contributed Assets (the
"Intel Permits"). Except as publicly disclosed in the Intel SEC Reports, Intel
is in compliance with the terms of the Intel Permits, except for any
non-compliance the existence of which would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect on the
Contributed Assets. Except as publicly disclosed in the Intel SEC Reports, the
business and operations of the Contributed Assets have been and are being
conducted in compliance with all Applicable Laws, except for any non-compliance
the existence of which would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on the Contributed Assets. Except
as publicly disclosed in the Intel SEC Reports, no investigation or review by
any Governmental Entity with respect to the Contributed Assets is pending or, to
the knowledge of Intel, threatened, nor, to the knowledge of Intel, has any
Governmental Entity indicated an intention to conduct the same.
Section 4.8. Intellectual Property.
(a) Section 4.8(a) of the Intel Disclosure Schedule sets forth, for the
Intellectual Property included in the Contributed Assets, a complete and
accurate list of all United States and foreign (i) patents and patent
applications; and (ii) copyright registrations and applications, indicating for
each, the applicable jurisdiction, registration number (or application number)
and date issued (or date filed).
(b) Patents.
(i) Intel has complied with all legal requirements for applying for
the issuance of and maintaining the grant of Patents included in the
Contributed Assets.
(ii) No Patent included in the Contributed Assets has been or is now
involved in any interference, reissue, reexamination or opposing proceeding
in the United States Patent and Trademark Office. To Intel's knowledge, no
such action has been threatened within the one (1)-year period prior to the
date of this Agreement.
(c) Trade Secrets. Intel has taken reasonable steps to protect its rights
in confidential information and Trade Secrets related to the Contributed Assets.
(d) Assignment and Protection. Intel has enforced a policy of requiring
each employee to execute proprietary information, confidentiality and assignment
agreements substantially in Intel's standard forms that assign to Intel all
rights to any Intellectual Property included in the Contributed Assets that is
developed by the employee in the course of his or her activities for Intel or is
developed during working hours using the
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resources of Intel, and has obtained from consultants and contractors the
appropriate level of intellectual property ownership, protection or other rights
sufficient to use the Intellectual Property included in the Contributed Assets.
To the knowledge of Intel, there has been no disclosure by Intel of confidential
information or Trade Secrets related to the Contributed Assets except under
confidentiality agreements.
(e) License Agreements. Section 4.8(e)(i) of the Intel Disclosure Schedule
sets forth a complete and accurate list of all license agreements under which
any of the Enhanced Video Services, the Enhanced Content Services or the
Internet Security Services departments of Intel licenses software or grants
other rights to use or practice any rights under any Intellectual Property
included in the Contributed Assets (collectively, the "Intel Outbound License
Agreements"), indicating for each the title and the parties thereto. There is no
outstanding or, to Intel's knowledge, threatened dispute or disagreement with
respect to any Intel Outbound License Agreement.
(f) Ownership. To the knowledge of Intel, Intel owns or possesses adequate
licenses or other rights to use, free and clear of Liens, orders and arbitration
awards, all of the Intellectual Property included in the Contributed Assets.
(g) Protection of IP. Intel has taken reasonable steps to protect the
Intellectual Property included in the Contributed Assets.
(h) No Infringement by Intel. To the knowledge of Intel, the products and
services used, manufactured, marketed, sold or licensed in connection with the
Contributed Assets, and all Intellectual Property included in the Contributed
Assets, do not infringe upon, violate or constitute the unauthorized use of any
valid and enforceable rights owned or controlled by any third party, including
any Intellectual Property of any third party.
(i) No Pending or Threatened Infringement Claims. No litigation is now or,
within the five (5) years prior to the date of this Agreement, was pending and
no notice or other claim in writing has been received by Intel within the one
(1) year prior to the date of this Agreement, (i) alleging that the use by Intel
of the Intellectual Property included in the Contributed Assets infringes upon,
violates or constitutes the unauthorized use of the Intellectual Property rights
of any third party or (ii) challenging the ownership, use, validity or
enforceability of any Intellectual Property included in the Contributed Assets.
Except as disclosed in Section 4.8(i) of the Intel Disclosure Schedule, no
Intellectual Property included in the Contributed Assets (y) is subject to any
outstanding order, judgment, decree, stipulation or agreement restricting the
use thereof by Intel, or (z) is the subject of an Outbound License Agreement and
is subject to any outstanding order, judgment, decree, stipulation or agreement
restricting the sale, transfer, assignment or licensing thereof by Intel to any
person.
(j) No Infringement by Third Parties. To the knowledge of Intel, no third
party is misappropriating, infringing, diluting or violating any Intellectual
Property included in the Contributed Assets, and no such claims have been
brought against any third party by Intel.
(k) Assignment; Change of Control. Except as set forth in Section 4.8(k)
of the Intel Disclosure Schedule, the execution, delivery and performance by
Intel of this Agreement, and the consummation of the transactions contemplated
hereby, will not result in the loss or impairment of, or give rise to any right
of any third party to terminate or alter, any of Intel's rights to own any of
the Intellectual Property included in the Contributed Assets or its rights under
any Outbound License Agreement, nor require the consent of any Governmental
Authority or third party in respect of any such Intellectual Property.
(l) Software. The Software purported to be included in the Contributed
Assets was either (i) developed by employees of Intel within the scope of their
employment; (ii) developed by independent contractors who have assigned their
rights to Intel or any of its subsidiaries pursuant to written agreements; or
(iii) otherwise acquired by Intel or a subsidiary from a third party. Except as
set forth in Section 4.8(l) of the Intel Disclosure Schedule, the Software
included in the Contributed Assets does not contain any programming code,
documentation or other materials or development environments that embody
Intellectual Property rights of any person other than Intel, except for such
materials or development environments obtained by Intel from
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other persons who make such materials or development environments generally
available on non-discriminatory commercial terms.
(m) Performance of Existing Software Products. The existing and currently
manufactured and marketed Software products listed and described on Section
4.8(m) of the Intel Disclosure Schedule and included in the Contributed Assets
perform in all material respects, free of significant bugs, viruses or
programming errors, the functions described in any agreed specifications or end
user documentation or other information provided to customers of Intel on which
such customers relied when licensing or otherwise acquiring such products.
(n) Documentation. Intel has taken all actions customary in the software
industry to document the Software included in the Contributed Assets and its
operation, such that the materials comprising the Software included in the
Contributed Assets, including the source code and documentation, have been
written in a clear and professional manner so that they may be understood,
modified and maintained in an efficient manner by reasonably competent
programmers.
(o) Year 2000 Capability.
(i) Except as set forth in Section 4.8(o) of the Intel Disclosure
Schedule, all products included in the Contributed Assets (including
products currently under development) have recorded, stored, processed and
calculated and presented calendar dates falling on and after December 31,
1999, and will continue to calculate any information dependent on or
relating to such dates in the same manner and with the same functionality,
data integrity and performance as the products recorded, stored, processed,
calculated and presented calendar dates on or before December 31, 1999, or
calculated any information dependent on or relating to such dates, except
for any failure to satisfy the foregoing the existence of which would not
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on Intel. Except as set forth in Section 4.8(o) of
the Intel Disclosure Schedule, all products included in the Contributed
Assets did not lose, and will not lose, any significant functionality with
respect to the introduction of records containing dates falling on or after
December 31, 1999. Except as set forth on Section 4.8(o) of the Intel
Disclosure Schedule, the current versions of the Software and all other
Intellectual Property included in the Contributed Assets may be used after
December 31, 1999 such that such Software and Intellectual Property will
operate after such time period without error caused by date data that
represents or references different centuries or more than one century.
(ii) Except as set forth on Section 4.8(o) of the Intel Disclosure
Schedule, the products included in the Contributed Assets were not
adversely affected by the advent of the year 2000, the advent of the
twenty-first century or the transition from the twentieth century through
the year 2000 and into the twenty-first century.
(p) Foundry Relationship. The Contributed Assets do not include any (i)
foundry relationship, wafer or digital signal processor manufacturing and
fabricating agreement, understanding or commitment, or (ii) integrated circuit
die or device purchase, supply or service agreement, understanding or
commitment, whether written or oral.
Section 4.9. Product Warranties. Section 4.9 of the Intel Disclosure
Schedule sets forth complete and accurate copies of the written warranties and
guaranties by Intel currently in effect with respect to products included in the
Contributed Assets. Except for any of the following the existence of which would
not reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect on the Contributed Assets, there have not been any deviations
from such warranties and guaranties, and neither Intel nor any of its salesmen,
employees, distributors and agents is authorized to undertake obligations to any
customer or to other third parties in excess of such warranties or guaranties.
Except for any of the following the existence of which would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect on
the Contributed Assets, Intel has not made any oral warranty or guaranty with
respect to the products included in the Contributed Assets not described on such
schedule.
Section 4.10. Suppliers and Customers. Section 4.10 of the Intel
Disclosure Schedule sets forth the names of the ten (10) largest customers of
the business of the Contributed Assets during the last twelve (12)
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months ended January 31, 2000 and of each supplier who supplied the business of
the Contributed Assets with over Two Hundred Thousand Dollars ($200,000) of
supplies during such twelve month period. During the last twelve (12) months,
Intel has received no notices of termination or written threats of termination
from any such supplier or such customer.
Section 4.11. Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Intel.
Section 4.12. Representations Complete. None of the representations or
warranties made by Intel in this Agreement nor any statement made in any
Schedule or certificate furnished by Intel pursuant to this Agreement, contains
or will contain at the Effective Time, any untrue statement of a material fact,
or omits or will omit at the Effective Time to state any material fact necessary
in order to make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading.
ARTICLE 5
COVENANTS
Section 5.1. Conduct of Business of the Company. Except as contemplated by
this Agreement or as described in Section 5.1 of the Company Disclosure
Schedule, during the period from the date hereof to the Effective Time, the
Company will and will cause each of its subsidiaries to (a) conduct its
operations in the ordinary course of business consistent with past practice and,
to the extent consistent therewith, with no less diligence and effort than would
be applied in the absence of this Agreement, and (b) use all commercially
reasonable efforts to preserve intact its current business organizations, keep
available the service of its current officers and employees and preserve its
relationships with customers, suppliers, distributors, lessors, creditors,
employees, contractors and others having business dealings with it with the
intention that its goodwill and ongoing businesses shall not be materially
impaired at the Effective Time. Notwithstanding the foregoing, during the period
from the date hereof to the Effective Time, the Company will cause each of
Convera and Transitory to take no action other than actions taken in furtherance
of the Combination as contemplated by this Agreement. Without limiting the
generality of the foregoing, except as otherwise expressly provided in this
Agreement or in Section 5.1 of the Company Disclosure Schedule, prior to the
Effective Time, neither the Company nor any of its subsidiaries shall, without
the prior written consent of Intel:
(a) amend its Certificate of Incorporation or bylaws (or other similar
governing instrument);
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any stock of any class or any other debt or equity securities or
equity equivalents (including any stock options or stock appreciation
rights) except for the issuance and sale of Shares pursuant to Company
Stock Options outstanding on the date hereof, grants of shares of Company
Stock Options consistent with Section 5.15, the issuance of shares of
Convera Common Stock and Convera Non-Voting Common Stock pursuant to the
Contribution and the grant of Convera Stock Options;
(c) other than as required under the Company's Certificate of
Designation with respect to dividends payable with respect to the Company
Preferred Stock, split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect
of its capital stock, make any other actual, constructive or deemed
distribution in respect of its capital stock or otherwise make any payments
to stockholders in their capacity as such, or redeem or otherwise acquire
any of its securities or any securities of any of its subsidiaries, except
as may be required under the terms of any Company Stock Option;
(d) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its subsidiaries (other than the
Combination);
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(e) alter through merger, liquidation, reorganization, restructuring
or any other fashion the structure of any subsidiary;
(f) (i) incur or assume any long-term or short-term debt or issue any
debt securities except, in each case, for borrowings under existing lines
of credit in the ordinary course of business, or modify or agree to any
amendment of the terms of any of the foregoing; (ii) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person except
for obligations of subsidiaries of the Company incurred in the ordinary
course of business consistent with past practice, other than third-party
guarantees and lease agreements not to exceed One Hundred Fifty Thousand
Dollars ($150,000) individually or Five Hundred Thousand Dollars ($500,000)
in the aggregate; (iii) make any loans, advances or capital contributions
to or investments in any other person (other than to subsidiaries of the
Company or customary loans or advances to employees in each case in the
ordinary course of business consistent with past practice); (iv) pledge or
otherwise subject to any Lien shares of capital stock of the Company or any
of its subsidiaries; or (v) mortgage or pledge any of its material assets,
tangible or intangible, or create or suffer to exist any material Lien
thereupon;
(g) except as may be required by Applicable Law, enter into, adopt or
amend or terminate any Compensation and Benefit Plan in any manner or
increase in any manner the compensation or fringe benefits of any director,
officer or employee or pay any benefit not required by any Compensation and
Benefit Plan as in effect as of the date hereof (including the granting of
stock appreciation rights or performance units), except in accordance with
Section 5.15 and except for salary increases to employees in the ordinary
course of business consistent with past practice and intended to
incentivize employees to remain employed by the Company, provided that no
such salary increase shall be in excess of the greater of Twenty-Five
Thousand Dollars ($25,000) or twenty percent (20%) of the employee's
current salary;
(h) grant any severance or termination pay to any director, officer,
employee or consultant, except (i) payments made pursuant to written
agreements outstanding on the date, (ii) payments, with respect to any
person identified as a Named Company Employee on Exhibit I-1 hereto, for no
more than nine (9) months of salary, and with respect to any person
identified as an Other Company Employee on Exhibit I-2 hereto, for no more
than six (6) months of salary, and (iii) as required by applicable federal,
state or local law or regulations;
(i) exercise its discretion or otherwise voluntarily accelerate the
vesting of any Company Stock Option as a result of the Combination, any
other "change in control" of the Company (as defined in the Company Plans)
or otherwise.
(j) (i) sell, lease, license, transfer or otherwise dispose of any
material assets in any single transaction or series of related transactions
(including in any transaction or series of related transactions having a
fair market value in excess of Two Hundred Fifty Thousand Dollars
($250,000) individually or One Million Dollars ($1,000,000) in the
aggregate), other than sales of its products and licenses of software in
the ordinary course of business consistent with past practices, (ii) enter
into any license, reseller, distribution, marketing, sales or other
agreement that either (A) provides for an exclusive relationship or
arrangement or (B) provides for the annual payment by the Company, or the
obligation of the Company to perform services or deliver products, in
excess of Two Hundred Fifty Thousand Dollars ($250,000), or sell, transfer
or otherwise dispose of any Intellectual Property, or (iii) license any
source code to any third party;
(k) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
principles, practices or methods used by it;
(l) revalue in any material respect any of its assets, including
writing down the value of inventory or writing-off notes or accounts
receivable, other than in the ordinary course of business consistent with
past practice or as required by generally accepted accounting principles;
(m) (i) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other person or division thereof or
any equity interest therein; (ii) enter into any contract or agreement that
would be material to the Company and its subsidiaries, taken as a whole;
(iii) amend,
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modify or waive any right under any contract of the Company or any of its
subsidiaries, except to the extent such amendment, modification or waiver
would not reasonably be expected to have a Material Adverse Effect on the
Company; (iv) modify its standard warranty terms for its products or amend
or modify any product warranties in effect as of the date hereof in any
manner that is adverse to the Company or any of its subsidiaries, except to
the extent such modification or amendment would not reasonably be expected
to have a Material Adverse Effect on the Company; (v) authorize any new
capital expenditure or expenditures that are not set forth in Section
5.1(m)(v) of the Company Disclosure Schedule and that are in excess of Two
Hundred Fifty Thousand Dollars ($250,000) individually or One Million
Dollars ($1,000,000) in the aggregate; or (vi) acquire any other asset or
related group of assets, or make any investment other than cash
investments, made in the ordinary course of business and in accordance with
the Company's past cash management practices, in a single transaction or
series of related transactions with a cost in excess of One Hundred
Thousand Dollars ($100,000), provided that in no event shall the aggregate
of all acquisitions and investments exceed Five Hundred Thousand Dollars
($500,000);
(n) make any material Tax election, settle or compromise any material
income Tax liability, amend any Tax Return or permit any insurance policy
naming it as a beneficiary or loss-payee to expire, or to be canceled or
terminated, unless a comparable insurance policy reasonably acceptable to
Intel is obtained and in effect;
(o) fail to file any Tax Returns when due (or, alternatively, fail to
file for available extensions) or fail to cause such Tax Returns when filed
to be complete and accurate in all material respects;
(p) fail to pay any Taxes or other material debts when due;
(q) settle or compromise any pending or threatened suit, action or
claim that (i) relates to the transactions contemplated hereby or (ii) the
settlement or compromise of which would involves more than Two Hundred
Fifty Thousand Dollars ($250,000) or that would otherwise be material to
the Company or that relates to any Intellectual Property matters;
(r) take any action or fail to take any action that would reasonably
be expected to (i) limit the utilization of any of the net operating
losses, built-in losses, tax credits or other similar items of the Company
or its subsidiaries under Section 382, 383, 384 or 1502 of the Code and the
Treasury Regulations thereunder, or (ii) cause any transaction in which the
Company or any of its subsidiaries was a party that was intended to be
treated as a reorganization under Section 368(a) of the Code to fail to
qualify as a reorganization under Section 368(a) of the Code; or
(s) take or agree in writing or otherwise to take any of the actions
described in Sections 5.1(a) through 5.1(r) (and it shall use all
reasonable efforts not to take any action that would make any of the
representations or warranties of the Company, Convera or Transitory
contained in this Agreement untrue or incorrect).
Section 5.2. Conduct of Business Related to the Contributed Assets. Except
as contemplated by this Agreement or as described in Section 5.2 of the Intel
Disclosure Schedule, during the period from the date hereof to the Effective
Time, Intel will (a) conduct the operation of the business of the Contributed
Assets in the ordinary course of business consistent with past practice and, to
the extent consistent therewith, with no less diligence and effort than would be
applied in the absence of this Agreement, and (b) use all commercially
reasonable efforts to preserve intact the current business organizations solely
related to the Contributed Assets, keep available the service of the officers
and employees currently employed solely with respect to the Contributed Assets
and preserve its relationships with customers, suppliers, distributors, lessors,
creditors, employees, contractors and others having business dealings with the
business of the Contributed Assets with the intention that the goodwill and
ongoing business of the Contributed Assets shall not be materially impaired at
the Effective Time. Without limiting the generality of the foregoing, except as
otherwise expressly provided
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in this Agreement or in Section 5.2 of the Intel Disclosure Schedule, prior to
the Effective Time, Intel shall not, without the prior written consent of the
Company:
(a) mortgage or pledge any material asset included in the Contributed
Assets, tangible or intangible, or create or suffer to exist any material
Lien thereupon;
(b) sell, lease, license, transfer or otherwise dispose of any
material portion of the Contributed Assets in any single transaction or
series of related transactions (including in any transaction or series of
related transactions having a fair market value in excess of Two Hundred
Fifty Thousand Dollars ($250,000) individually or One Million Dollars
($1,000,000) in the aggregate), other than sales of its products and
licenses of software in the ordinary course of business consistent with
past practices, (ii) enter into any exclusive license, distribution,
marketing, sales or other agreement with respect to the Contributed Assets
or sell, transfer or otherwise dispose of any Intellectual Property
included in the Contributed Assets, or (iii) license any source code
included in the Contributed Assets to any third party;
(c) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
principles, practices or methods used by any business unit or division
constituting a part of the Contributed Assets;
(d) revalue in any material respect any of the Contributed Assets,
including writing down the value of inventory or writing-off notes or
accounts receivable, other than in the ordinary course of business
consistent with past practice or as required by generally accepted
accounting principles;
(e) (i) enter into any contract or agreement that would be material to
the Contributed Assets, taken as a whole; (ii) amend, modify or waive any
right under any material contract included in the Contributed Assets; (iii)
modify the standard warranty terms for the products included in the
Contributed Assets or amend or modify any product warranties in effect with
respect to any portion of the Contributed Assets as of the date hereof in
any material manner that is adverse to the Contributed Assets; or (iv)
authorize any new capital expenditure or expenditures with respect to the
Contributed Assets that are not set forth in Section 5.2(e)(i) of the Intel
Disclosure Schedule and that are in excess of Two Hundred Fifty Thousand
Dollars ($250,000) individually or One Million Dollars ($1,000,000) in the
aggregate, except to the extent such capital expenditure or expenditures
would not reasonably be expected to have a Material Adverse Effect on the
Contributed Assets;
(f) permit any insurance policy covering any of the Contributed Assets
to expire, or to be canceled or terminated, unless a comparable insurance
policy reasonably acceptable to the Company is obtained and in effect;
(g) settle or compromise any pending or threatened suit, action or
claim that (i) relates to the transactions contemplated hereby or (ii)
would be material to the Contributed Assets or that relates to any
Intellectual Property included in the Contributed Assets; or
(h) take or agree in writing or otherwise to take any of the actions
described in Sections 5.2(a) through 5.2(h) (and Intel shall use all
reasonable efforts not to take any action that would make any of the
representations or warranties of Intel contained in this Agreement untrue
or incorrect).
Section 5.3. No Solicitation or Negotiation.
(a) The Company, its subsidiaries and other affiliates and their respective
officers and other employees with managerial responsibilities, directors,
representatives (including the Financial Advisor or any other investment banker
and any attorneys and accountants and agents shall immediately cease any
discussions or negotiations with any other persons with respect to any Third
Party Acquisition (as defined in Section 5.3(c)). The Company also agrees
promptly to request each person that has heretofore executed a confidentiality
agreement in connection with its consideration of acquiring (whether by merger,
acquisition of stock or assets or otherwise) the Company or any of its
subsidiaries or any of their respective assets, if any, to the extent such
confidentiality agreement remains in effect, to return all confidential
information heretofore furnished to such person by or on behalf of the Company
or any of its subsidiaries. None of the Company nor any of its subsidiaries and
other affiliates shall, nor shall the Company authorize or permit any of its or
their respective
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officers, directors, employees, representatives or agents to, directly or
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with or provide any information to any person or group (other than
Intel or any designees of Intel) concerning any Third Party Acquisition;
provided, however, that if the Board of Directors of the Company determines in
good faith, after consultation with and taking into account the advice of
outside legal counsel, that it is necessary to do so in order to comply with its
fiduciary duties to the Company's stockholders under the DGCL as such duties
would exist in the absence of this Section 5.3, the Company may, in response to
a proposal or offer for a Third Party Acquisition that was not solicited and
that the Board of Directors of the Company determines, based on consultation
with the Company Financial Advisor, is from a Third Party that is capable of
consummating a Superior Proposal and only for so long as the Board of Directors
so determines that its actions are likely to lead to a Superior Proposal, (i)
furnish information only of the type and scope with respect to the Company that
the Company provided to Intel prior to the date hereof to any such person
pursuant to a customary confidentiality agreement as was executed by Intel prior
to the execution of this Agreement and (ii) participate in the discussions and
negotiations regarding such proposal or offer; provided, further, nothing herein
shall prevent the Company Board from taking and disclosing to the Company's
stockholders a position contemplated by Rules 14d-9 and 14e-2 promulgated under
the Exchange Act with regard to any tender or exchange offer. The Company shall
promptly (and in any event within one business day after becoming aware thereof)
(i) notify Intel in the event the Company or any of its subsidiaries and other
affiliates or any of their respective officers, directors, employees and agents
receives any proposal or inquiry concerning a Third Party Acquisition, including
the terms and conditions thereof and the identity of the party submitting such
proposal, and any request for confidential information in connection with a
potential Third Party Acquisition, (ii) provide a copy of any written
agreements, proposals or other materials the Company receives from any such
person or group (or its representatives), and (iii) advise Intel from time to
time of the status, at any time upon Intel's request, and promptly following any
developments concerning the same.
(b) Except as set forth in this Section 5.3(b), the Company Board shall
not, subject to its fiduciary obligations, withdraw or modify its recommendation
of the transactions contemplated hereby and shall not approve or recommend, or
cause or permit the Company to enter into any agreement or obligation with
respect to, any Third Party Acquisition. Notwithstanding the foregoing, if the
Company Board by a majority vote determines in its good faith judgment, after
consultation with and taking into account the advice of outside legal counsel,
that it would be required to do so in order to comply with its fiduciary duties
to the Company's stockholders under the DGCL if the Company Board could
unilaterally terminate the Agreement, the Company Board may withdraw its
recommendation of the transactions contemplated hereby or approve or recommend a
Superior Proposal, but in each case only (i) after providing written notice to
Intel (a "Notice of Superior Proposal") advising Intel that the Company Board
has received a Superior Proposal, specifying the material terms and conditions
of such Superior Proposal and identifying the person or group making such
Superior Proposal and (ii) if Intel does not, within five (5) business days
after Intel's receipt of the Notice of Superior Proposal, make an offer that the
Company Board by a majority vote determines in its good faith judgment (based on
the advice of the Financial Advisor or another financial advisor of nationally
recognized reputation) to be at least as favorable to the Company's stockholders
as such Superior Proposal; provided, however, that the Company shall not be
entitled to enter into any agreement with respect to a Superior Proposal unless
and until this Agreement is terminated pursuant to Section 7.1 and the Company
has paid all amounts due to Intel pursuant to Section 7.3. Any disclosure that
the Company Board may be compelled to make with respect to the receipt of a
proposal for a Third Party Acquisition or otherwise in order to comply with its
fiduciary duties or Rule 14d-9 or 14e-2 will not constitute a violation of this
Agreement if such disclosure states that no action will be taken by the Company
Board in violation of this Section 5.3(b).
(c) For purposes of this Agreement, "Third Party Acquisition" means the
occurrence of any of the following events: (i) the acquisition of the Company by
merger or otherwise by any person (which includes a "person" as such term is
defined in Section 13(d)(3) of the Exchange Act) other than Intel or any
affiliate thereof (a "Third Party"); (ii) the acquisition by a Third Party of
twenty percent (20%) or more of the assets of the Company and its subsidiaries,
taken as a whole; (iii) the acquisition by a Third Party of twenty percent (20%)
or more of the outstanding Shares; (iv) the adoption by the Company of a plan of
liquidation or the declaration or payment of an extraordinary dividend; (v) the
repurchase by the Company or any of its
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subsidiaries of more than twenty percent (20%) of the outstanding Shares; or
(vi) the acquisition (or any group of acquisitions) by the Company or any of its
subsidiaries by merger, purchase of stock or assets, joint venture or otherwise
of a direct or indirect ownership interest or investment in any business (or
businesses) whose annual revenues, net income or assets is equal or greater than
twenty percent (20%) of the annual revenues, net income or assets of the
Company, respectively. For purposes of this Agreement, a "Superior Proposal"
means any bona fide proposal (1) to acquire, directly or indirectly, for
consideration consisting solely of cash and/or securities, all of the Shares
then outstanding, all or substantially all of the assets, of the Company, or
newly issued securities of the Company (or its successor) representing at least
60% of the equity of the Company (or its successor), giving effect to the
issuance of such securities, (2) that is fully-financed and contains terms that
the Company Board by a majority vote determines in its good faith judgment
(based, as to the financial terms, on the written advice of the Financial
Advisor or another financial advisor of nationally recognized reputation) to be
more favorable to the Company's stockholders than the Combination, (3) that the
Company Board by a majority vote determines in its good faith judgment
(following and based on consultation with the Financial Advisor or another
financial advisor of nationally recognized reputation and its legal and other
advisors) to be reasonably capable of being completed (taking into account all
legal, financial, regulatory and other aspects of the proposal and the person
making the proposal), (4) that does not contain a "right of first refusal" or
"right of first offer" with respect to any counter-proposal that Intel might
make and (5) that does not contain any financing or "due diligence" condition.
Section 5.4. Preparation of Registration Statement and Proxy Statement. As
promptly as practicable following the date of this Agreement, the Company and
Convera shall prepare and file with the SEC under the Securities Act and the
Exchange Act and shall use all reasonable efforts to have cleared by the SEC, a
proxy statement/prospectus or information statement/prospectus, as appropriate
(the "Proxy Statement"), with respect to the Meeting, including a registration
statement (together with any amendments thereto, the "Registration Statement")
for the purpose of registering the shares of Convera Common Stock and Convera
Non-Voting Common Stock to be issued in connection with the Combination;
provided, however that, prior to any filing, Convera or the Company shall
deliver a copy of any proposed filing (including any amendments thereto) to
Intel and provide Intel with a reasonable time period in which to review and
comment upon such filings, it being agreed that the Company and Convera will not
make any such filings without the prior consent of Intel, such consent not to be
unreasonably withheld. As promptly as practicable after the Proxy Statement has
been cleared by the SEC and the Registration Statement has been declared
effective, the Company and Convera shall mail the Proxy Statement to the
stockholders of the Company as of the record date for the Meeting. Convera shall
take such action as may be required to be taken under applicable state
securities or "blue sky" laws in connection with issuance of the shares of
Convera Common Stock and Convera Preferred Stock to be issued in connection with
the Combination; provided that Convera shall not be required to become qualified
as a foreign corporation in any jurisdiction. The Proxy Statement shall, subject
to the provisions of Section 5.3(b), include the recommendation of the Company
Board that stockholders of the Company vote in favor of the Combination, the
approval of the 2000 Convera Stock Option Plan and the other transactions
contemplated herein that require such adoption and approval in connection with
the Combination, and the written opinion of the Financial Advisor that the
consideration to be received by the stockholders of the Company in connection
with the Combination is fair to such stockholders from a financial point of
view.
Section 5.5. Certain Filings; Reasonable Efforts.
(a) Subject to the terms and conditions herein provided, including Section
5.3(b), each of the parties hereto agrees to use all reasonable efforts to take
or cause to be taken all action and to do or cause to be done all things
reasonably necessary, proper or advisable under Applicable Law to consummate and
make effective the transactions contemplated by this Agreement, including using
all reasonable efforts to do the following: (i) cooperate in the preparation and
filing of the Registration Statement, the Proxy Statement and any amendments
thereto, any filings that may be required under the HSR Act and any filings
under similar merger notification laws or regulations of foreign Governmental
Entities; (ii) obtain consents of all third parties and Governmental Entities
necessary, proper, advisable or reasonably requested by Intel or the Company,
for the consummation of the transactions contemplated by this Agreement; (iii)
contest any legal proceeding relating to the Combination; and (iv) execute any
additional instruments necessary to consummate the transactions
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contemplated hereby. Intel and the Company each agree to use all reasonable
efforts to encourage its employees to accept offers of employment, if any,
extended by Convera or the Surviving Corporation. If at any time after the
Effective Time any further action is necessary to carry out the purposes of this
Agreement the proper officers and directors of each party hereto shall take all
such necessary action.
(b) Intel and the Company will consult and cooperate with one another, and
consider in good faith the views of one another, in connection with any
analyses, appearances, presentations, letters, white papers, memoranda, briefs,
arguments, opinions or proposals made or submitted by or on behalf of any party
hereto in connection with proceedings under or relating to the HSR Act or any
other foreign, federal, or state antitrust, competition, or fair trade law. In
this regard but without limitation, each party hereto shall promptly inform the
other of any material communication between such party and the Federal Trade
Commission, the Antitrust Division of the United States Department of Justice,
or any other federal, foreign or state antitrust or competition Governmental
Entity regarding the transactions contemplated herein.
(c) Intel and the Company each shall, upon request by the other, furnish
the other with all information concerning itself, its subsidiaries, directors,
officers and stockholders and such other matters as may be reasonably necessary
or advisable in connection with the Combination or any statement, filing, notice
or application made by or on behalf of Intel or the Company or any of their
respective subsidiaries to any third party and/or Governmental Entity in
connection with the Combination.
(d) Intel and the Company each shall keep the other apprised of the status
of matters relating to completion of the transactions contemplated hereby,
including promptly furnishing the other with copies of notices or other
communications received by Intel or the Company, as the case may be, or any of
its subsidiaries, from any third party and/or any Governmental Entity with
respect to the Combination.
Section 5.6. Meeting of Stockholders.
(a) The Company shall take all actions necessary in accordance with the
DGCL, its Certificate of Incorporation and bylaws to duly call, give notice of,
convene and hold a meeting of its stockholders as promptly as practicable to
consider and vote upon the adoption and approval of the Combination, the
approval of the 2000 Convera Stock Option Plan and the other transactions
contemplated herein that require such adoption and approval in connection with
the Combination (the "Meeting"). The stockholder vote required for the adoption
and approval of the Combination and such other transactions shall be the vote
required by the DGCL, the Company's Certificate of Incorporation and bylaws. The
Company will, through the Company Board, recommend to its stockholders approval
of such matters, subject to the provisions of Section 5.3(b). Notwithstanding
anything to the contrary contained in this Agreement, the Company may adjourn or
postpone (i) the Meeting to the extent necessary to ensure that any necessary
supplement or amendment to the Proxy Statement is provided to the Company's
stockholders in advance of a vote on the Combination or such other transactions
or (ii) the time for which the Meeting is originally scheduled (as set forth in
the Proxy Statement), if there are insufficient Shares represented, either in
person or by proxy, to constitute a quorum necessary to conduct the business of
the Meeting.
(b) Intel agrees to vote in favor of the Combination, and all such other
transactions, all Shares, if any, owned by it.
Section 5.7. Access to Information.
(a) Between the date hereof and the Effective Time, upon reasonable notice
and subject in each instance to the requirements of Applicable Law, the Company
will give Intel and its authorized representatives access to all employees,
plants, offices, warehouses and other facilities and to all books and records of
the Company and its subsidiaries as Intel may reasonably require, and will cause
its officers and those of its subsidiaries to furnish Intel with such financial
and operating data and other information with respect to the business and
properties of the Company and its subsidiaries as Intel may from time to time
reasonably request.
(b) Between the date hereof and the Effective Time, the Company shall
furnish to Intel (i) within two (2) business days following preparation thereof
(and in any event within twenty (20) business days after the end of each
calendar month, commencing with May 2000), an unaudited consolidated balance
sheet as of the
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end of such month and the related consolidated statements of earnings,
stockholders' equity and cash flows, without notes to such consolidated
financial statements, (ii) within two (2) business days following preparation
thereof (and in any event within twenty (20) business days after the end of each
fiscal quarter) an unaudited consolidated balance sheet as of the end of such
quarter and the related consolidated statements of earnings, stockholders'
equity and cash flows for the quarter then ended, with condensed notes to such
consolidated financial statements, and (iii) within two (2) business days
following preparation thereof (and in any event within ninety (90) calendar days
after the end of each fiscal year) an audited consolidated balance sheet as of
the end of such year and the related consolidated statements of earnings,
stockholders' equity (deficit) and cash flows, all of such consolidated
financial statements referred to in clauses (i), (ii) and (iii) to be prepared
in accordance with generally accepted accounting principles in conformity with
the practices consistently applied by the Company with respect to such
consolidated financial statements. All the foregoing shall be in accordance with
the books and records of the Company and its subsidiaries and shall fairly
present the consolidated financial position of the Company and its subsidiaries
(taking into account the differences between the monthly, quarterly and annual
financial statements prepared by the Company in conformity with its past
practices) as of the last day of the period then ended.
(c) Between the date hereof and the Effective Time, upon reasonable notice
and subject in each instance to the requirements of Applicable Law, Intel will
give the Company and its authorized representatives, to the extent any of the
following are included in the Contributed Assets, access to all employees,
plants, offices, warehouses and other facilities and to all books and records as
the Company may reasonably request, and will cause its officers to furnish the
Company with such financial and operating data and other information with
respect to the Contributed Assets as the Company may from time to time
reasonably request.
(d) Between the date hereof and the Effective Time, Intel shall furnish to
the Company, within two (2) business days following preparation thereof (and in
any event within twenty (20) business days after the end of each calendar month,
commencing with May 2000), the management accounting reports prepared with
respect to the departments that constitute part of the Contributed Assets.
(e) Each of the parties hereto will hold, and will cause its consultants
and Advisors to hold, in confidence all documents and information furnished to
it by or on behalf of another party to this Agreement in connection with the
transactions contemplated by this Agreement pursuant to the terms of that
certain Standard Non-Disclosure Agreement entered into between the Company and
Intel dated December 10, 1999 (the "Confidentiality Agreement").
Section 5.8. Public Announcements. None of Intel, Convera, Transitory nor
the Company shall issue any press release or otherwise make any public
statements with respect to the Combination, or any Third Party Acquisition,
without the prior consent of Intel (in the case of the Company, Convera or
Transitory) or the Company (in the case of Intel), except (i) as may be required
by Applicable Law, or by the rules and regulations of, or pursuant to any
agreement with, the Nasdaq National Market, (ii) following a change, if any, of
the Company Board's recommendation of the Combination in accordance with Section
5.3(b) or (iii) only in the case of a release or statement relating to a Third
Party Acquisition, if the Company Board has been advised by outside legal
counsel that a press release or other public statement is required by Applicable
Law. The first public announcement of the Combination shall be a joint press
release agreed upon by Intel and the Company.
Section 5.9. Indemnification and Directors' and Officers' Insurance.
(a) From and after the Effective Time, Convera shall indemnify, defend and
hold harmless (and shall also advance expenses as incurred to the fullest extent
permitted under Applicable Law to) each person who is now or has been prior to
the date hereof or who becomes prior to the Effective Time an officer or
director of the Company or any of the Company's subsidiaries (the "Indemnified
Persons") against (i) all losses, claims, damages, costs, expenses (including
counsel fees and expenses), settlement, payments or liabilities arising out of
or in connection with any claim, demand, action, suit, proceeding or
investigation based in whole or in part on or arising in whole or in part out of
the fact that such person is or was an officer or director of the Company or any
of its subsidiaries, whether or not pertaining to any matter existing or
occurring at or prior to the Effective Time and whether or not asserted or
claimed prior to or at or after the Effective Time ("Indemnified
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Liabilities"); and (ii) all Indemnified Liabilities based in whole or in part on
or arising in whole or in part out of or pertaining to this Agreement or the
transactions contemplated hereby, in each case to the fullest extent required or
permitted under Applicable Law. Nothing contained herein shall make Intel,
Convera, the Company or Transitory an insurer, a co-insurer or an excess insurer
in respect of any insurance policies which may provide coverage for Indemnified
Liabilities, nor shall this Section 5.9 relieve the obligations of any insurer
in respect thereto. The parties hereto intend, to the extent not prohibited by
Applicable Law, that the indemnification provided for in this Section 5.9,
including the advancement of expenses upon the demand of any Indemnified Person,
shall apply without limitation to negligent acts or omissions by an Indemnified
Person. Each Indemnified Person is intended to be a third party beneficiary of
this Section 5.9 and may specifically enforce its terms. This Section 5.9 shall
not limit or otherwise adversely affect any rights any Indemnified Person may
have under any agreement with the Company or under the Company's Certificate of
Incorporation or bylaws as presently in effect or as provided by Delaware law.
(b) From and after the Effective Time, Convera shall, or shall cause the
Surviving Corporation to, fulfill and honor in all respects the obligations of
the Company pursuant to any indemnification agreements between the Company and
its directors and officers as of or prior to the date hereof (or indemnification
agreements in the Company's customary form for directors joining the Company
Board prior to the Effective Time) and any indemnification provisions under the
Company's certificate of incorporation or bylaws as in effect immediately prior
to the Effective Time.
(c) For a period of six (6) years after the Effective Time, Convera will
maintain or cause the Surviving Corporation to maintain in effect, if available,
directors' and officers' liability insurance covering those persons who, as of
immediately prior to the Effective Time, are covered by the Company's directors'
and officers' liability insurance policy (the "Insured Parties") on terms no
less favorable to the Insured Parties than those of the Company's present
directors' and officers' liability insurance policy; provided, however, that in
no event shall Convera or the Surviving Corporation be required to expend on an
annual basis in excess of 300% of the annual premium currently paid by the
Company for such coverage (or such coverage as is available for 300% of such
annual premium); provided further, that, in lieu of maintaining such existing
insurance as provided above, Convera, at its election, may cause coverage to be
provided under any policy maintained for the benefit of Convera or any of its
subsidiaries, so long as the terms are not materially less advantageous to the
intended beneficiaries thereof than such existing insurance.
(d) For a period ending on the later of (i) the sixth anniversary of the
Effective Time or (ii) the date upon which Intel beneficially owns less than
twenty percent (20%) of the Convera Common Stock and the Convera Non-Voting
Common Stock, considered as a single class, then outstanding, Convera will
maintain directors' and officers' liability insurance covering its directors and
officers, which insurance shall be on terms, and in such amounts, as are
substantially similar to those provided for in the Company's current directors'
and officers' liability insurance policies.
Section 5.10. Notification of Certain Matters. The Company shall give
prompt notice to Intel, and Intel shall give prompt notice to the Company, of
(i) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence
of which has caused or would be likely to cause any representation or warranty
contained in this Agreement by such first party to be untrue or inaccurate in
any material respect at or prior to the Effective Time and (ii) any material
failure by such first party to comply with or satisfy in any material respect
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 5.10 shall not cure such breach or non-compliance or limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
Section 5.11. Additions to and Modification of Disclosure Schedules.
(a) Concurrently with the execution and delivery of this Agreement, the
Company, Convera and Transitory have delivered a Company Disclosure Schedule
that includes all of the information required by the relevant provisions of this
Agreement. In addition, the Company, Convera and Transitory shall deliver to
Intel such additions to or modifications of any Sections of the Company
Disclosure Schedule necessary to make the information set forth therein true,
accurate and complete in all material respects as soon as practicable after such
information is available to the Company, Convera or Transitory after the date of
execution and delivery
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of this Agreement; provided, however, that such disclosure shall not be deemed
to constitute an exception to their respective representations and warranties
under Article 3, nor limit the rights and remedies of Intel under this Agreement
for any breach by the Company, Convera and Transitory of such representation and
warranties.
(b) Concurrently with the execution and delivery of this Agreement, Intel
has delivered a Intel Disclosure Schedule that includes all of the information
required by the relevant provisions of this Agreement. In addition, Intel shall
deliver to the Company such additions to or modifications of any Sections of the
Intel Disclosure Schedule necessary to make the information set forth therein
true, accurate and complete in all material respects as soon as practicable
after such information is available to Intel after the date of execution and
delivery of this Agreement; provided, however, that such disclosure shall not be
deemed to constitute an exception to Intel's representations and warranties
under Article 4, nor limit the rights and remedies of the Company, Convera and
Transitory under this Agreement for any breach by Intel of such representation
and warranties.
Section 5.12. Employee Matters.
(a) Convera will assume and honor, in accordance with their terms, and make
required payments when due under, all Benefit Plans maintained or contributed to
by the Company or any subsidiary or to which the Company or any subsidiary is a
party (including but not limited to employment, incentive and severance
agreements and arrangements), that are applicable with respect to any employee,
director or stockholder of the Company or any subsidiary (whether current or
former) or their beneficiaries; provided, however, that the foregoing shall not
preclude Convera from amending or terminating any such Benefit Plan in
accordance with its terms.
(b) With respect to any welfare plans in which employees of the Company and
its subsidiaries or employees of Intel are eligible to participate after the
Effective Time, Convera will (i) waive all limitations as to preexisting
conditions exclusions and waiting periods with respect to participation and
coverage requirements applicable to such employees and (ii) provide each such
employee with credit for any co-payments and deductibles paid prior to the
Effective Time in satisfying any applicable deductible or out-of-pocket
requirements under any such plan. With respect to the Company's 401(k) plan to
be assumed by Convera, Intel shall be designated a "Predecessor Employer."
Section 5.13. Non-Disclosure Agreements with Employees of the
Company. Promptly after the date hereof, the Company will use reasonable
efforts to obtain the signature of its current employees to invention assignment
and non-disclosure agreements, in form and substance reasonably satisfactory to
Intel, covering the duration of such employees' employment with the Company.
Section 5.14. Takeover Statutes. If any Takeover Statute is or may become
applicable to the Combination or any of the other transactions contemplated by
this Agreement, the Company and the Company Board shall promptly grant such
approvals and take such lawful actions as are necessary so that such
transactions may be consummated as promptly as practicable on the terms
contemplated by this Agreement or by the Combination, and otherwise act to
eliminate or minimize the effects of such statute, and any regulations
promulgated thereunder, on such transactions.
Section 5.15. Stock Options.
(a) The Company agrees that, from and after the date hereof, it will take
any required action that (i) is necessary or appropriate for Convera to assume
any of the Assumed Options or any of the Assumed Option Plans, (ii) prevents the
voluntary acceleration of the vesting or exercisability of any options to
purchase Shares granted after the date hereof or (iii) prevents the transactions
contemplated by this Agreement from causing any Company Stock Option to be
exchanged for cash, converted into cash or the right to receive a cash payment
or otherwise cashed out, and the Company further agrees that it will refrain
from taking any other action that is not consistent with the foregoing.
(b) From and after the date hereof, the Company agrees that with respect to
each grant of a Company Option in connection with an offer of employment for a
new employee or an existing employee, (i) such grant
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will not include or be subject to any provisions that accelerate vesting or
exercisability in the event of, or otherwise in connection with, the Combination
or a change of control or similar transaction, (ii) such grant will not be in an
amount in excess of such grants made to employees of a similar grade, consistent
with past practices, (iii) such grant will not have an exercise price below the
fair market value of the Shares on the date of grant and (iv) in no event will
any one new employee receive options to purchase in excess of 25,000 Shares
unless approved by Intel.
(c) The Company agrees to cause the Company Board to adopt all resolutions
reasonably necessary or appropriate to further the purposes of subsections (a)
and (b) of this Section 5.15 and provide that all options outstanding under each
Assumed Option Plan can be assumed by Convera.
(d) Convera agrees to take all actions required to adopt Convera's 2000
Stock Option Plan in the form attached hereto as Exhibit G.
(e) The Company agrees that, if between the date hereof and the earlier of
the termination hereof and the Effective Time, the grant of Company Stock
Options is permitted under the terms hereof, and any option grant is made, any
such grant shall be made only under the Company's 1999 Incentive Stock Option
Plan.
Section 5.16 Nasdaq. Promptly after the date hereof, Convera shall file an
initial listing application with the Nasdaq National Market relating to the
shares of the Convera Common Stock to be issued in connection with the
Combination (including, without limitation, shares issuable upon Assumed Options
and Convera Stock Options) and shall use reasonable efforts to cause such shares
of the Convera Common Stock to be listed, upon official notice of issuance,
prior to the Closing Date. Convera, for as long as it satisfies the applicable
listing requirements of NASDAQ, or any other national securities exchange on
which the capital stock of Convera is traded, shall use commercially reasonable
efforts to cause the Convera Common Stock to be listed on NASDAQ, or any other
national securities exchange; provided, however, that nothing herein shall be
construed or interpreted to require Convera to refrain from taking any action or
entering into any transaction that would cause Convera, or its capital stock, to
fail to satisfy any such requirements.
Section 5.17 Exchange Act Registration. Promptly after the date hereof,
Convera shall file a registration statement on Form 8-A to register under the
Exchange Act the Convera Common Stock and shall use reasonable efforts to cause
such registration statement to be declared effective prior to the Closing Date.
Section 5.18. Executive Officers of Convera. The Executive Officers of
Convera upon consummation of the Combination shall be as set forth on Exhibit F.
Convera shall obtain the signature of each such person consenting to such
appointment immediately prior to the Effective Time.
Section 5.19. Board of Directors of Convera. The Board of Directors of
Convera upon consummation of the Combination shall be as set forth on Exhibit E.
Convera shall obtain the signature of each such person consenting to such
appointment immediately prior to the Effective Time.
Section 5.20. Intellectual Property Matters. The Company, Convera and
Surviving Corporation, on the one hand, and Intel, on the other hand, will work
together to develop procedures and an implementation plan, reasonably
satisfactory to each of them, with respect to the protection of the Intellectual
Property rights of the Company, Convera and Surviving Corporation, as well as
the protection of confidential information related thereto.
Section 5.21. Financial Reporting. Following the Closing Date, Convera
shall furnish to Intel (i) within two (2) business days following preparation
thereof (and in any event within twenty (20) business days after the end of each
calendar month, commencing with May 2000), an unaudited consolidated balance
sheet as of the end of such month and the related consolidated statements of
earnings and stockholders' equity and cash flows, without notes to such
consolidated financial statements, (ii) within two (2) business days following
preparation thereof (and in any event within twenty (20) business days after the
end of each fiscal quarter) an accountant reviewed consolidated balance sheet as
of the end of such quarter and the related consolidated statements of earnings,
stockholders' equity and cash flows for the quarter then ended, with condensed
notes to such consolidated financial statements, and (iii) within two (2)
business days following preparation thereof (and in any event within ninety (90)
calendar days after the end of each fiscal year) an
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audited consolidated balance sheet as of the end of such year and the related
consolidated statements of earnings, stockholders' equity (deficit) and cash
flows, all of such consolidated financial statements referred to in clauses (i),
(ii) and (iii) to be prepared in accordance with generally accepted accounting
principles in conformity with the practices consistently applied by Convera with
respect to such consolidated financial statements. All the foregoing shall be in
accordance with the books and records of Convera and its subsidiaries and shall
fairly present the consolidated financial position of Convera and its
subsidiaries (taking into account the differences between the monthly, quarterly
and annual financial statements prepared by Convera in conformity with its past
practices) as of the last day of the period then ended.
Section 5.22. Certain Actions. None of the Company, Transitory or Convera
shall take any action inconsistent with the treatment of the Combination as a
transaction governed by Section 351(a) of the Code.
Section 5.23 Incurrence of Indebtedness. Convera agrees that it will not,
during the twelve (12) month period following the Effective Time, directly or
indirectly, create, incur, assume, guarantee or otherwise become or remain
directly or indirectly liable with respect to any Indebtedness in excess of
$500,000,000 in the aggregate. For purposes of this provision, "Indebtedness,"
means, without limitation, (i) all indebtedness for borrowed money, (ii) that
portion of obligations with respect to capital leases that is properly
classified as a liability on a balance sheet in conformity with generally
accepted accounting principles, (iii) notes payable and drafts accepted
representing extensions of credit whether or not representing obligations for
borrowed money, (iv) any obligation owed for all or any part of the deferred
purchase price of property or services, which purchase price is (a) due more
than six months from the date of incurrence of the obligation in respect thereof
or (b) evidenced by a note or similar written instrument, (excluding any trade
payables payable in the ordinary course of business), (v) all indebtedness
secured by any Lien on any property or asset owned or held by Convera regardless
of whether the indebtedness secured thereby shall have been assumed or is
nonrecourse and (vi) any direct or indirect liability, contingent or otherwise,
(a) with respect to any Indebtedness, lease, dividend or other obligation of
another person if the primary purpose or intent is to provide assurance to the
obligee of such obligation of an other person that such obligation will be
protected (in whole or in part) against loss in respect thereof, (b) with
respect to any letter of credit issued for the account of Convera or as to which
Convera is otherwise liable for reimbursement of drawings, or (c) under interest
rate agreements and currency agreements.
Section 5.24 Sales Taxes. The parties shall cooperate to minimize the
amount of any sales, use, transfer, license or other similar taxes imposed upon
the contribution of the Contributed Assets to Convera.
ARTICLE 6
CONDITIONS TO CONSUMMATION OF THE CONTRIBUTION AND THE MERGER
Section 6.1. Conditions to Each Party's Obligations to Effect the
Contribution and the Merger. The respective obligations of each party hereto to
effect the Contribution and the Merger are subject to the satisfaction at or
prior to the Effective Time of the following conditions:
(a) this Agreement and the Combination shall have been approved and
adopted by the requisite vote of the stockholders of the Company;
(b) no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
United States federal or state court or United States federal or state
Governmental Entity that prohibits, restrains, enjoins or restricts the
consummation of the Combination;
(c) any governmental or regulatory notices, approvals or other
requirements necessary to consummate the transactions contemplated hereby
shall have been given, obtained or complied with, as applicable;
(d) the Proxy Statement shall have been cleared by the SEC and shall
not be the subject of any stop order;
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(e) the Registration Statement shall have been declared effective by
the SEC and shall not be the subject of any stop order and Convera shall
have received all state securities laws or "blue sky" permits and
authorizations necessary (i) to issue shares of Convera Common Stock and
shares of Convera Non-Voting Common Stock in exchange for the Contribution
and (ii) to issue shares of Convera Common Stock in exchange for Shares in
the Merger;
(f) the waiting periods (and any extension thereof) applicable to the
Combination under the HSR Act shall have expired or been terminated;
(g) the Convera Common Stock shall have been registered under the
Exchange Act on Form 8-A and such registration statement shall have been
declared effective and no stop order with respect thereto shall be in
effect at the Effective Time;
(h) the Convera Common Stock shall have been approved for listing,
subject only to official notice of issuance, on the Nasdaq National Market;
(i) the Licensing Agreements, substantially in the forms of Exhibit
H-1 and Exhibit H-2 hereto, shall have been executed and delivered by Intel
and Convera;
(j) the Certificate of Incorporation and Bylaws of Convera shall be in
the forms attached hereto as Exhibits I and J, respectively;
(k) Convera shall have adopted its 2000 Stock Option Plan in the form
attached hereto as Exhibit G;
(l) Convera shall have adopted a standard director and officer
indemnification agreement and obtained a directors' and officers' liability
insurance policy, in each case reasonably acceptable to Intel and Convera;
and
(m) Convera, in a form and amount reasonably satisfactory to Intel and
the Company, shall have granted, under the Convera 2000 Stock Option Plan,
options to purchase shares of Convera Common Stock to the employees of
Intel and certain of the employees of the Company who will, upon
consummation of the Combination, become employees of Convera or the
Surviving Corporation, with the exercise price of such options to be the
greater of (i) the average of the closing prices of the Company Common
Stock as reported on NASDAQ for the five (5) trading days immediately
preceding the announcement of execution of this Agreement or (ii)
twenty-five percent (25%) of the average of the closing prices of the
Company Common Stock as reported on NASDAQ for the five (5) trading days
immediately preceding the Closing Date.
Section 6.2. Conditions to the Obligations of the Company, Convera and
Transitory. The obligations of the Company, Convera and Transitory to effect
the Merger is subject to the satisfaction at or prior to the Effective Time of
the following conditions:
(a) the representations and warranties of Intel contained in this
Agreement shall be true and correct (except to the extent that the
aggregate of all breaches thereof would not reasonably be expected to have
a Material Adverse Effect on the Contributed Assets) at and as of the
Effective Time with the same effect as if made at and as of the Effective
Time (except to the extent such representations specifically relate to an
earlier date, in which case such representations shall be true and correct
as of such earlier date, and in any event, subject to the foregoing
Material Adverse Effect qualification) and, at the Closing, Intel shall
have delivered to the Company a certificate to that effect, executed by an
executive officer of Intel;
(b) each of the covenants and obligations of Intel to be performed at
or before the Effective Time pursuant to the terms of this Agreement shall
have been duly performed (except to the extent the aggregate of all
breaches thereof would not reasonably be expected to have a Material
Adverse Effect on the Contributed Assets) at or before the Effective Time
and, at the Closing, Intel shall have delivered to the Company a
certificate to that effect, executed by an executive officer of Intel;
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(c) seventy percent (70%) and fifty percent (50%) of the employees of
Intel set forth on Exhibit K-1 and Exhibit K-2 hereto, respectively, shall
have indicated their intent to become employed, on terms reasonably
satisfactory to the Company, by the Surviving Corporation or Convera;
(d) the Contribution shall have been consummated;
(e) since the date hereof, there shall have been no events, changes or
effects, individually or in the aggregate, that would reasonably be
expected, individually or in the aggregate, to have a Material Adverse
Effect on the Contributed Assets;
(f) in connection with the compliance by Convera with any Applicable
Law (including the HSR Act) or obtaining the consent or approval of any
Governmental Entity whose consent or approval may be required to consummate
the transactions contemplated by this Agreement, Convera shall not be (i)
required, or be construed to be required, to sell or divest any assets or
business or to restrict any business operations in order to obtain the
consent or successful termination of any review of any such Governmental
Entity regarding the transactions contemplated hereby or (ii) prohibited
from owning, and no material limitation shall be imposed on Convera's
ownership of, any material portion of the Company's business or assets or
the Contributed Assets.
Section 6.3. Conditions to the Obligations of Intel. The obligations of
Intel to effect the Contribution are subject to the satisfaction at or prior to
the Effective Time of the following conditions:
(a) the representations and warranties of the Company, Convera and
Transitory contained in this Agreement shall be true and correct (except to
the extent that the aggregate of all breaches thereof would not reasonably
be expected, individually or in the aggregate, to have a Material Adverse
Effect on the Company) at and as of the Effective Time with the same effect
as if made at and as of the Effective Time (except to the extent such
representations specifically relate to an earlier date, in which case such
representations shall be true and correct as of such earlier date, and in
any event, subject to the foregoing Material Adverse Effect qualification)
and, at the Closing, the Company, Convera and Transitory shall have
delivered to Intel a certificate to that effect, executed by an executive
officer of the Company, Convera or Transitory, as the case may be;
(b) each of the covenants and obligations of the Company, Convera and
Transitory to be performed at or before the Effective Time pursuant to the
terms of this Agreement shall have been duly performed (except to the
extent the aggregate of all breaches thereof would not reasonably be
expected to have a Material Adverse Effect on the Company) at or before the
Effective Time and, at the Closing, the Company, Convera and Transitory
shall have delivered to Intel a certificate to that effect, executed by an
executive officer of the Company, Convera or Transitory, as the case may
be;
(c) since the date hereof, there shall have been no events, changes or
effects, individually or in the aggregate, with respect to the Company or
its subsidiaries that would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on the Company, other than any
such event, change or effect that results solely from the election by
Intel, after receipt of proper notice to not consent to the Company's
entering into an agreement, the consent to which has been requested by the
Company pursuant to Section 5.1(j) hereof;
(d) in connection with the compliance by Intel with any Applicable Law
(including the HSR Act) or obtaining the consent or approval of any
Governmental Entity whose consent or approval may be required to consummate
the transactions contemplated by this Agreement, Intel shall not be (i)
required, or be construed to be required, to sell or divest any assets or
business or to restrict any business operations in order to obtain the
consent or successful termination of any review of any such Governmental
Entity regarding the transactions contemplated hereby or (ii) prohibited
from owning, and no material limitation shall be imposed on Intel's
ownership of, any material portion of Convera's stock, business or assets;
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(e) seventy percent (70%) and fifty percent (50%) of the employees of
the Company set forth on Exhibit L-1 and Exhibit L-2 hereto, respectively,
shall have indicated their intent to become employed, on terms reasonably
satisfactory to Intel, by the Surviving Corporation or Convera;
(f) the Company shall have entered into invention assignment and
non-disclosure agreements with the individuals set forth on Exhibit M
hereto;
(g) Nothing shall have occurred that would, in the reasonable opinion
of Intel, create a significant risk that the Contribution and the Merger,
taken together, would not be governed entirely by Section 351 of the Code;
and
(h) Intel shall be reasonably satisfied that all of the conditions to
the Merger set forth in Sections 6.1 and 6.2 shall have been satisfied or,
in the case of Section 6.2, waived by the Company, and the Company shall
have provided to Intel a certificate to the effect that the Merger is
contemplated to be effected concurrently with the Contribution.
(i) Intel and Convera shall have entered into a Registration Rights
Agreement substantially in the form of Exhibit N.
ARTICLE 7
TERMINATION; AMENDMENT; WAIVER
Section 7.1. Termination. This Agreement may be terminated and the
Combination may be abandoned at any time prior to the Effective Time whether
before or after approval and adoption of the Combination by the Company's
stockholders:
(a) by mutual written consent of Intel and the Company;
(b) by Intel or the Company if (i) any court of competent jurisdiction
in the United States or other United States federal or state Governmental
Entity shall have issued a final order, decree or ruling, or taken any
other final action, restraining, enjoining or otherwise prohibiting the
Combination and such order, decree, ruling or other action is or shall have
become nonappealable or (ii) the Combination has not been consummated by
December 31, 2000 (the "Final Date"); provided, however, that no party may
terminate this Agreement pursuant to this clause (ii) if such party's
failure to fulfill any of its obligations under this Agreement shall have
been a principal reason that the Effective Time shall not have occurred on
or before said date;
(c) by the Company if (i) there shall have been a breach of any
representations or warranties on the part of Intel set forth in this
Agreement or if any representations or warranties of Intel shall have
become untrue such that, in either such instance, the conditions set forth
in Section 6.2(a) would be incapable of being satisfied by the Final Date,
provided that the Company, Convera and Transitory have not breached any of
their respective obligations hereunder in any material respect; (ii) there
shall have been a breach by Intel of any of its covenants or agreements
hereunder that would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on the Contributed Assets or
materially adversely affecting (or materially delaying) the ability of
Intel to consummate the Combination, and Intel has not cured such breach
within ten (10) business days after notice by the Company thereof, provided
that none of the Company, Convera or Transitory has breached any of its
respective obligations hereunder in any material respect; (iii) the Company
shall have convened the Meeting and shall have failed to obtain the
requisite vote of its stockholders thereat (including any adjournments
thereof) for approval of this Agreement, the Combination and the
transactions consummated thereby; (iv) the Company Board has received a
Superior Proposal, has complied with the provisions of Section 5.3(b), and
concurrently makes the payment called for by Section 7.3(a); or (v) there
shall have occurred events, changes or effects with respect to the
Contributed Assets having a Material Adverse Effect on the Contributed
Assets.
(d) by Intel if (i) there shall have been a breach of any
representations or warranties on the part of the Company, Convera or
Transitory set forth in this Agreement or if any representations or
warranties of
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the Company, Convera or Transitory shall have become untrue such that, in
either such instance, the conditions set forth in Section 6.3(a) would be
incapable of being satisfied by the Final Date, provided that Intel has not
breached any of its obligations hereunder in any material respect; (ii)
there shall have been a breach by the Company, Convera or Transitory of one
or more of their respective covenants or agreements hereunder that would
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on the Company (or, in the case of Section 5.3, any
material breach thereof) or materially adversely affecting (or materially
delaying) the ability of the Company, Convera or Transitory to consummate
the Combination, and, with respect to all breaches other than breaches
under Section 5.3, the Company, Convera or Transitory have not cured such
breach within ten (10) business days after notice by Intel thereof,
provided that Intel has not breached any of its obligations hereunder in
any material respect; (iii) the Company Board shall have recommended to the
Company's stockholders a Superior Proposal; (iv) the Company Board shall
have withdrawn or adversely modified its approval or recommendation of the
Combination or the Company Board shall have ceased using all reasonable
efforts to call, give notice of, or convene or hold the Meeting as promptly
as practicable or shall have adopted a resolution not to effect any of the
foregoing; (v) the Company shall have convened the Meeting, and the Company
shall have failed to obtain the requisite vote of its stockholders thereat
(including any adjournments thereof) for approval of this Agreement, the
Combination and the transactions consummated thereby; or (vi) there shall
have occurred events, changes or effects with respect to the Company having
a Material Adverse Effect on the Company.
Section 7.2. Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 7.1, this Agreement shall
forthwith become void and have no effect without any liability on the part of
any party hereto or its affiliates, directors, officers or stockholders other
than the provisions of this Section 7.2 and Sections 5.7(c) and 7.3. Nothing
contained in this Section 7.2 shall relieve any party from liability for any
breach of any covenant in this Agreement prior to such termination.
Section 7.3. Fees and Expenses.
(a) In the event that this Agreement shall be terminated pursuant to:
(i) Section 7.1(c)(iv) or 7.1(d)(iii) or (iv);
(ii) Section 7.1(d)(i) or (ii) and, at the time of such termination,
(x) there is outstanding an offer by a Third Party to consummate, or a
Third Party shall have publicly announced (and not withdrawn) a plan or
proposal with respect to, a Third Party Acquisition and such Third Party
Acquisition occurs, or (y) there is no such Third Party offer outstanding
or plan or proposal announced but within nine (9) months after the date on
which this Agreement has been terminated the Company enters into an
agreement with respect to a Third Party Acquisition or a Third Party
Acquisition occurs involving any person other than Intel or one of its
subsidiaries; or
(iii) Section 7.1(c)(iii) or 7.1(d)(v) and at the time of the Meeting
at which the Company failed to obtain the requisite vote (A) there shall be
outstanding an offer by a Third Party to consummate, or a Third Party shall
have publicly announced (and not withdrawn) a plan or proposal with respect
to, a Third Party Acquisition and (B) within nine (9) months after the date
on which this Agreement has been terminated the Company enters into an
agreement with respect to a Third Party Acquisition or a Third Party
Acquisition occurs involving any person other than Intel or one of its
subsidiaries;
Intel would suffer direct and substantial damages, which damages cannot be
determined with reasonable certainty. To compensate Intel for such damages, the
Company shall pay to Intel the amount of Twenty Million Dollars ($20,000,000) in
liquidated damages immediately upon the occurrence of the event described in
this Section 7.3(a) giving rise to such damages. It is specifically agreed that
the amount to be paid pursuant to this Section 7.3(a) represents liquidated
damages and not a penalty. The Company hereby waives any right to set-off or
counterclaim against such amount.
(b) Upon termination of this Agreement pursuant to Section 7.1(c)(iii) or
(iv), or Section 7.1(d)(i), (ii), (iii), (iv) or (v), in addition to any other
remedies that Intel or its affiliates may have as a result of such termination
(including pursuant to Section 7.3(a) or otherwise), the Company shall pay to
Intel the amount
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of Two Million Five Hundred Thousand Dollars ($2,500,000) as reimbursement for
the out-of-pocket costs, fees and expenses incurred by any of them or on their
behalf in connection with this Agreement, the Merger and the consummation of all
transactions contemplated by this Agreement (including fees payable to
investment bankers, counsel to any of the foregoing and accountants). Nothing
contained in this Section 7.3(b) shall relieve any party of any liability for
breach of this Agreement.
(c) Upon termination of this Agreement pursuant to Section 7.1(c)(i) or
(ii), in addition to any other remedies that the Company or its affiliates may
have as a result of such termination, Intel shall pay to the Company the amount
of Two Million Five Hundred Thousand Dollars ($2,500,000) as reimbursement for
the out-of-pocket costs, fees and expenses incurred by any of them or on their
behalf in connection with this Agreement, the Merger and the consummation of all
transactions contemplated by this Agreement (including fees payable to
investment bankers, counsel to any of the foregoing and accountants). Nothing
contained in this Section 7.3(c) shall relieve any party of any liability for
breach of this Agreement.
(d) Except as specifically provided in this Section 7.3, each party shall
bear its own expenses in connection with this Agreement and the transactions
contemplated hereby, including the fees imposed in connection with its filing
under the HSR Act; provided, however, that the filing fees to be paid in
connection with the filing of the Proxy Statement and Registration Statement
shall be borne equally.
(e) The parties acknowledge that the agreements contained in this Article 7
(including this Section 7.3) are an integral part of the transactions
contemplated by this Agreement and that, without these agreements, the parties
would not enter into this Agreement. Accordingly, if any party fails promptly to
pay the amounts required pursuant to Section 7.3 when due (including
circumstances where, in order to obtain such payment a party commences a suit
that results in a final nonappealable judgment against another party for such
amounts), the defaulting party shall pay to the other party (i) their costs and
expenses (including attorneys' fees) in connection with such suit and (ii)
interest on the amount that was determined to be due and payable hereunder at
the rate announced by Chase Manhattan Bank as its "reference rate" in effect on
the date such payment was required to be made.
Section 7.4. Extension; Waiver. At any time prior to the Effective Time,
each party hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other party, (ii) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document, certificate or writing delivered pursuant hereto or (iii) waive
compliance by the other party with any of the agreements or conditions contained
herein. Any agreement on the part of any party hereto to any such extension or
waiver shall be valid only if set forth in an instrument, in writing, signed on
behalf of such party. The failure of any party hereto to assert any of its
rights hereunder shall not constitute a waiver of such rights.
ARTICLE 8
MISCELLANEOUS
Section 8.1. Nonsurvival of Representations and Warranties. The
representations and warranties made herein and the covenants that require full
performance on or prior to the Effective Time shall not survive beyond the
Effective Time or a termination of this Agreement; provided that the
representations and warranties of Intel set forth in Section 4.8(a), (f) and (h)
shall survive until six (6) months after the Closing Date. This Section 8.1
shall not limit any covenant or agreement of the parties hereto that by its
terms requires performance after the Effective Time.
Section 8.2. Entire Agreement; Assignment. This Agreement (including the
Company Disclosure Schedule, the Intel Disclosure Schedule and the Exhibits, all
of which are incorporated by reference into this Agreement) (a) constitute the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersede all other prior and contemporaneous agreements and
understandings both written and oral between the parties with respect to the
subject matter hereof and (b) shall not be assigned by operation of law or
otherwise.
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Section 8.3. Validity. If any provision of this Agreement or the
application thereof to any person or circumstance is held invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected thereby and to
such end the provisions of this Agreement are agreed to be severable.
Section 8.4. Notices. All notices and other communications pursuant to
this Agreement shall be in writing and shall be deemed given if delivered
personally, telecopied, sent by nationally-recognized overnight courier or
mailed by registered or certified mail (return receipt requested), postage
prepaid, to the parties at the addresses set forth below or to such other
address as the party to whom notice is to be given may have furnished to the
other parties hereto in writing in accordance herewith. Any such notice or
communication shall be deemed to have been delivered and received (i) in the
case of personal delivery, on the date of such delivery, (ii) in the case of
telecopier, on the date sent if confirmation of receipt is received and such
notice is also promptly mailed by registered or certified mail (return receipt
requested), (iii) in the case of a nationally-recognized overnight courier in
circumstances under which such courier guarantees next business day delivery, on
the next business day after the date when sent and (iv) in the case of mailing,
on the third business day following that on which the piece of mail containing
such communication is posted:
if to Intel: Intel Corporation
2200 Mission College Boulevard
Santa Clara, California 95052
Telecopier: (408) 765-1855
Attention: General Counsel
and
Intel Corporation
2200 Mission College Boulevard
Santa Clara, California 95052
Attention: Treasurer
with a copy to: Gibson, Dunn & Crutcher LLP
333 S. Grand Avenue
Los Angeles, California 90071
Telecopier: (213) 229-7520
Attention: Karen E. Bertero, Esq.
if to the Company,
Convera or Transitory to: Excalibur Technologies, Inc.
1921 Gallows Road, Suite 200
Vienna, Virginia 22182
Telecopier: (703) 761-1990
Attention: Chief Financial Officer
with a copy to: Heller, Ehrman, White & McAuliffe LLP
711 Fifth Avenue
New York, NY 10028
Telecopier: (212) 832-3353
Attention: Stephen M. Davis, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
Section 8.5. Governing Law and Venue; Waiver of Jury Trial.
(a) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL
BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE
STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OR CHOICE OF LAW PRINCIPLES
THEREOF OR OF ANY OTHER JURISDICTION. The parties hereby irrevocably submit to
the jurisdiction of the courts of the State of Delaware and the Federal courts
of the United States of America
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located in the State of Delaware solely in respect of the interpretation and
enforcement of the provisions of this Agreement and of the documents referred to
in this Agreement, and in respect of the transactions contemplated hereby, and
hereby waive, and agree not to assert, as a defense in any action, suit or
proceeding for the interpretation or enforcement hereof or of any such document,
that it is not subject thereto or that such action, suit or proceeding may not
be brought or is not maintainable in said courts or that the venue thereof may
not be appropriate or that this Agreement or any such document may not be
enforced in or by such courts, and the parties hereto irrevocably agree that all
claims with respect to such action or proceeding shall be heard and determined
in such a Delaware State or Federal court. The parties hereby consent to and
grant any such court jurisdiction over the person of such parties and over the
subject matter of such dispute and agree that mailing of process or other papers
in connection with any such action or proceeding in the manner provided in
Section 8.4 or in such other manner as may be permitted by Applicable Law, shall
be valid and sufficient service thereof.
(b) The parties agree that irreparable damage would occur and that the
parties would not have any adequate remedy at law in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any Federal court located in the State of Delaware or in Delaware
state court, this being in addition to any other remedy to which they are
entitled at law or in equity.
(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH
PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND
CERTIFICATIONS IN THIS SECTION 8.5.
Section 8.6. Descriptive Headings; Article and Section References. The
table of contents and the descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement. All Article, Section,
Subsection, Schedule and Exhibit references in this Agreement are to Articles,
Sections, subsections, Schedules and Exhibits, respectively, of or to this
Agreement unless specified otherwise.
Section 8.7. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and its successors and
permitted assigns and, except for Sections 6.7 and 8.2, nothing in this
Agreement is intended to or shall confer upon any other person any rights,
benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
Section 8.8. Certain Definitions. For the purposes of this Agreement the
term:
(a) "affiliate" means a person that, directly or indirectly, through
one or more intermediaries controls, is controlled by or is under common
control with the first-mentioned person.
(b) "Applicable Law" means, with respect to any person, any domestic
or foreign, federal, state or local statute, law, ordinance, rule,
regulation, order, writ, injunction, judgment, decree or other requirement
of any Governmental Entity existing as of the date hereof or as of the
Effective Time applicable to such Person or any of its respective
properties, assets, officers, directors, employees, consultants or agents.
(c) "business day" means any day other than a day on which the New
York Stock Exchange is closed.
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<PAGE> 188
(d) "capital stock" means common stock, preferred stock, partnership
interests, limited liability company interests or other ownership interests
entitling the holder thereof to vote with respect to matters involving the
issuer thereof.
(e) "Company Plans" means the Assumed Option Plans, together with the
Company's Employee Stock Purchase Plan.
(f) "hereof," "herein" and "herewith" and words of similar import
shall, unless otherwise stated, be construed to refer to this Agreement as
a whole and not to any particular provision of this Agreement, and article,
section, paragraph, exhibit and schedule references are to the articles,
sections, paragraphs, exhibits and schedules of this Agreement unless
otherwise specified.
(g) "include" or "including" means "include, without limitation" or
"including, without limitation," as the case may be, and the language
following "include" or "including" shall not be deemed to set forth an
exhaustive list.
(h) "knowledge" or "known" means, with respect to any Person, the
actual knowledge of such Person, after reasonable inquiry. Without limiting
the generality of the foregoing, with respect to any Person that is a
corporation, limited liability company, partnership or other business
entity, actual knowledge shall be deemed to include the actual knowledge of
all directors, officers, partners and members of any such Person; provided
that with respect to Intel, actual knowledge shall be deemed to be the
actual knowledge of the individuals identified on Exhibit 8.8A; provided,
further that with respect to the Company, Convera and Transitory, actual
knowledge shall be deemed to be the actual knowledge of the individuals
identified on Exhibit 8.8B.
(i) "person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization or other
legal entity including any Governmental Entity.
(j) "subsidiary" or "subsidiaries" of the Company, Intel, the
Surviving Corporation or any other person means any corporation,
partnership, limited liability company, association, trust, unincorporated
association or other legal entity of which the Company, Intel, the
Surviving Corporation or any such other person, as the case may be (either
alone or through or together with any other subsidiary), owns, directly or
indirectly, 50% or more of the capital stock the holders of which are
generally entitled to vote for the election of the board of directors or
other governing body of such corporation or other legal entity; provided,
however, that in all events the subsidiaries of the Company shall include
Convera and Transitory.
All terms defined in this Agreement shall have the defined meanings
contained herein when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein. The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the gender and neuter
genders of such term. Any agreement, instrument or statute defined or referred
to herein or in any agreement or instrument that is referred to herein means
such agreement, instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements and instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes and all attachments thereto and instruments incorporated therein.
A reference to any legislation or to any provision of any legislation shall
include any modification or re-enactment thereof, any legislative provision
substituted therefor and all regulations and statutory instruments issued
thereunder or pursuant thereto.
Section 8.9. Personal Liability. This Agreement shall not create or be
deemed to create or permit any personal liability or obligation on the part of
any direct or indirect stockholder of the Company, Intel, Convera or Transitory
or any officer, director, employee, agent, representative or investor of any
party hereto.
Section 8.10. Specific Performance. The parties hereby acknowledge and
agree that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on its
part to the consummation of the Combination, will cause irreparable injury to
the other parties, for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby
A1-47
<PAGE> 189
consents to the issuance of injunctive relief by any court of competent
jurisdiction to compel performance of such party's obligations and to the
granting by any court of the remedy of specific performance of its obligations
hereunder; provided, however, that if a party hereto is entitled to receive any
payment or reimbursement of expenses pursuant to Section 7.3(a), (b) or (c), it
shall not be entitled to specific performance to compel the consummation of the
Combination.
Section 8.11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
Section 8.13. Ambiguities. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties, and no presumption or burden of proof
shall arise or disfavoring any party by virtue of the authorship of any
provisions of this Agreement.
Section 8.13. Waiver. Any waiver of compliance with any obligation,
covenant, agreement, provision or condition of this Agreement or consent
pursuant to this Agreement shall not be effective unless evidenced by an
instrument in writing executed by the party to be charged. Any waiver of
compliance with any such obligation, covenant, agreement, provision or condition
of this Agreement shall not operate as a waiver of, or estoppel with respect to,
any subsequent or other non-compliance.
Section 8.14. Execution. This Agreement may be executed by facsimile
signatures and such signature shall be deemed binding for all purposes hereof,
without delivery of an original signature being thereafter required.
Section 8.15. Schedules. The Intel Disclosure Schedule and the Company
Disclosure Schedule shall be construed with and as an integral part of this
Agreement to the same extent as if the same had been set forth verbatim herein.
Section 8.16. Amendment. This Agreement may be amended by action taken by
the Company, Intel, Convera and Transitory at any time before or after approval
of the Combination by the stockholders of the Company but after any such
approval no amendment shall be made that requires the approval of such
stockholders under Applicable Law without such approval. This Agreement
(including, subject to Section 5.11, the Company Disclosure Schedule and the
Intel Disclosure Schedule) may be amended only by an instrument in writing
signed on behalf of the parties hereto.
A1-48
<PAGE> 190
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
INTEL CORPORATION,
a Delaware corporation
By: /s/ ARVIND SODHANI
------------------------------------
Name: Arvind Sodhani
Title: Vice President and Treasurer
Date: April 30, 2000
EXCALIBUR TECHNOLOGIES CORPORATION,
a Delaware corporation
By: /s/ PATRICK C. CONDO
------------------------------------
Name: Patrick C. Condo
Title: President and Chief Executive
Officer
Date: April 30, 2000
CONVERA CORPORATION,
a Delaware corporation
By: /s/ PATRICK C. CONDO
------------------------------------
Name: Patrick C. Condo
Title: President and Chief Executive
Officer
Date: April 30, 2000
EXCALIBUR TRANSITORY, INC.
a Delaware corporation
By: /s/ PATRICK C. CONDO
------------------------------------
Name: Patrick C. Condo
Title: President and Chief Executive
Officer
Date: April 30, 2000
SIGNATURE PAGE TO AGREEMENT AND PLAN OF CONTRIBUTION AND MERGER BY AND AMONG
INTEL CORPORATION, EXCALIBUR TECHNOLOGIES CORPORATION, CONVERA CORPORATION AND
EXCALIBUR TRANSITORY, INC.
A1-49
<PAGE> 191
APPENDIX A2
AMENDMENT
TO
AGREEMENT AND PLAN OF CONTRIBUTION AND MERGER
This AMENDMENT dated as of August 14, 2000 (this "Amendment") to AGREEMENT
AND PLAN OF CONTRIBUTION AND MERGER, dated as of April 30, 2000 (the
"Agreement"), is by and among INTEL CORPORATION, a Delaware corporation
("Intel"), EXCALIBUR TECHNOLOGIES CORPORATION, a Delaware corporation (the
"Company"), CONVERA CORPORATION, a Delaware corporation and wholly owned
subsidiary of the Company ("Convera"), and EXCALIBUR TRANSITORY, INC., a
Delaware corporation and wholly owned subsidiary of Convera ("Transitory").
Initially capitalized terms not otherwise defined herein shall have the meanings
ascribed to such terms in the Agreement.
WHEREAS, Section 6.1(m) of the Agreement provides that as a condition to
the respective obligations of the parties to the Agreement to effect the
Contribution and Merger, Convera, in form and amount reasonably satisfactory to
Intel and the Company, shall have granted, under the Convera 2000 Stock Option
Plan, options to purchase shares of Convera Company Stock to the employees of
Intel and certain employees of the Company who will, upon consummation of the
Combination, become employees of Convera or the Surviving Corporation, with the
exercise price of such options to be the greater of (i) the average of the
closing prices of the Company Common Stock as reported on the Nasdaq National
Market for the five (5) trading days immediately preceding the announcement of
execution of this Agreement or (ii) twenty-five percent (25%) of the average of
the closing prices of the Company Common Stock as reported on the Nasdaq
National Market for the five (5) trading days immediately preceding the Closing
Date (the "Closing Date Average Price");
WHEREAS, Intel, the Company, Convera and Transitory wish to amend Section
6.1(m) of the Agreement to provide that if the Closing Date Average Price is
less than $32.16, then the exercise price of the options to purchase shares of
Convera Common Stock shall be the Closing Date Average Price; and
WHEREAS, Intel, the Company, Convera and Transitory also wish to provide
additional covenants in the Agreement, amend the closing condition in Section
6.2(c) of the Agreement and amend certain Exhibits attached to the Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Intel, the Company, Convera and Transitory agree as follows:
1. Amendments to the Agreement.
(a) Section 5.25 is added to the Agreement to read in its entirety as
follows:
"Section 5.25 Subcontract. Intel agrees that it will use Convera as
the subcontract provider of services to be provided by Intel pursuant
to that certain Software License and Development Agreement, dated as
of March 20, 1998, by and between Intel and Quokka Sports, Inc., as
the same may be amended from time to time, that were previously
provided by the enhanced video service group of Intel's interactive
media services division, and which Convera is capable of providing in
full after the Effective Time. Intel and Convera will agree in good
faith to the terms of such subcontract, which terms shall be
customary for subcontracts with respect to similarly situated
subcontractors and projects and shall be comparable to similar
subcontracts entered into by Intel with similarly situated providers
of subcontracting services in connection with similar projects and
services, including a right of termination for nonperformance or
breach."
(b) Section 5.26 is added to the Agreement to read in its entirety as
follows:
"Section 5.26 Retention Bonuses. Intel agrees that, within five days
of receiving written confirmation from Convera of those former Intel
employees that remain employed by Convera as of April 30, 2001 (each
a "Retained Employee"), Intel shall pay to Convera the aggregate
A2-1
<PAGE> 192
amount required to fund retention bonuses for each Retained Employee
in amounts previously agreed by Convera and Intel. Convera agrees
that, within five business days of receiving the aggregate retention
bonus funds from Intel, Convera shall pay the bonus amounts
previously agreed by Intel and Convera to each Retained Employee."
(c) Section 5.27 is added to the Agreement to read in its entirety as
follows:
"Section 5.27 Secondment. For the purposes of assisting with the
transition of Intel's interactive media services division to Convera,
Intel agrees that, for a period to be determined by Convera of up to
twelve (12) months from the Closing Date (the "Secondment Period"),
it will second to Convera that number of employees in Intel's
interactive media services division who do not become Convera
employees upon the Effective Time (the "Seconded Employees")
necessary for satisfaction of the condition in Section 6.2(c). In
connection therewith, Convera shall reimburse Intel for all amounts
payable by Intel to the Seconded Employees in such a manner that
Intel shall bear no costs for the Seconded Employees' employment
during the Secondment Period; provided, that the amount reimbursed by
Convera for any Seconded Employee shall be no greater than the amount
of aggregate compensation Convera would have paid to such Seconded
Employee (based on compensation paid by Convera to similarly situated
former Intel employees) if such Seconded Employee were an employee of
Convera during the Secondment Period."
(d) Section 5.28 is added to the Agreement to read in its entirety as
follows:
"Section 5.28 Sublease. Intel agrees to sublease to Convera its
sales office in Santa Clara, California previously agreed to by Intel
and Convera on terms and conditions to be agreed by Intel and
Convera."
(e) Section 6.1(m) of the Agreement is amended to read in its entirety
as follows:
"(m) Convera, in form and amount reasonably satisfactory to Intel and
the Company, shall have granted, under the Convera 2000 Stock Option
Plan, options to purchase shares of Convera Company Stock to the
employees of Intel and certain employees of the Company who will,
upon consummation of the Combination, become employees of Convera or
the Surviving Corporation, with the exercise price of such options to
be the greater of (i) $32.16 (the average of the closing prices of
the Company Common Stock as reported on the Nasdaq National Market
for the five (5) trading days immediately preceding the announcement
of execution of this Agreement) or (ii) twenty-five percent (25%) of
the average of the closing prices of the Company Common Stock as
reported on the Nasdaq National Market for the five (5) trading days
immediately preceding the Closing Date; provided, however, that if
the average of the closing prices of the Company Common Stock as
reported on the Nasdaq National Market for the five (5) trading days
immediately preceding the Closing Date is less than $32.16, then the
exercise price for such options shall be the average of the closing
prices of the Company Common Stock as reported on the Nasdaq National
Market for the five (5) trading days immediately preceding the
Closing Date."
(f) Section 6.2(c) of the Agreement is amended to read in its entirety
as follows:
"(c) seventy percent (70%) of the employees of Intel set forth on
Exhibit K-1 hereto shall have indicated their intent to become
employed, on terms reasonably satisfactory to the Company, by the
Surviving Corporation or Convera and fifty percent (50%) of the
employees of Intel set forth on Exhibit K-2 hereto (i) shall have
indicated their intent to become employed, on terms reasonably
satisfactory to the Company, by the Surviving Corporation or Convera
or (ii) shall have been seconded to Convera pursuant to Section 5.27;
provided, however, that, in any case, at least forty percent (40%) of
the employees of Intel set forth on Exhibit K-2 hereto shall have
indicated their intent to become employed, on terms reasonably
satisfactory to the Company, by the Surviving Corporation or
Convera;"
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<PAGE> 193
2. Amendments to Exhibit A.
(a) Section II of Exhibit A to the Agreement ("Exhibit A") is amended
to read in its entirety as follows:
"II. CONTRACTS
License Agreement, dated as of November 10, 1999, by and between Intel Internet
Security Services of Intel Corporation and SoftLock.com, Inc. (Intel will
also assign to Convera 224,514 shares of the common stock of SoftLock.com,
Inc. The assignment also includes the right to receive shares of the common
stock of SoftLock.com, Inc. issuable as service fees).
Software License Agreement, dated as of December 17, 1999, by and between Intel
Corporation and Lucent Technologies Inc.
Cooperation Agreement, dated as of September 14, 1999, by and between the
Renewable Security Services Group of Intel Corporation and Preview Systems,
Inc.
Intel Internet Services Avid Sports Development Agreement, dated as of January
2000, by and between Intel Corporation and Avid Sports, Inc.
Warrants to purchase approximately 242,078 shares of Series A Preferred Stock of
Avid Sports, Inc., dated as of January 27, 2000 (Intel holds a warrant to
purchase 304,878 shares of Series A Preferred Stock, a portion of which
will be vested at the Effective Time. The unvested portion of the warrant
at the Effective Time will be assigned to Convera. Warrants to purchase
45,000 shares of Series A Preferred Stock are currently exercisable by
Intel and warrants to purchase approximately 17,800 additional shares of
Series A Preferred Stock are expected to vest prior to the Effective Time.
That portion of the warrants that is vested as of the Effective Time will
not be assigned to Convera).
"Miami" Master Agreement, dated as of August 9, 1999, by and between Intel
Corporation and CSI Incorporated.
Intel/Supertracks Cooperation Agreement, dated as of November 5, 1999, by and
between Intel Corporation and Supertracks.com, Inc.
MEI/Intel Secure Run Time Layer Collaboration Agreement, dated as of July 11,
2000, by and between Intel Corporation and Matsushita Electric Industrial
Co., Ltd.
Except as set forth above, any equity securities associated with the assigned
contracts will not be assigned to Convera.
To the extent any new contracts that will be assigned to Convera are entered
into by Intel prior to the Effective Time and such contracts include as part of
the consideration shares of equity or warrants to acquire equity of a third
party, the parties intend that the portion of any such shares or warrants that
is vested prior to the Effective Time, or will become vested after the Effective
Time with respect to the percentage of work completed before the Effective Time,
will be retained by Intel and the portion of any such shares or warrants that is
not vested as of the Effective Time or may become vested with respect to work
completed after the Effective Time will be assigned to Convera.
To the extent that a consent to any such assignment of the portion of shares of
equity or a warrant that is not vested as of the Effective Time, or that may
become vested with respect to work completed after the Effective Time, is
required and not obtained, but the contract to which it relates is assigned,
Convera shall have the right to direct Intel to take, or refrain from taking,
all actions with respect to the portion of any such shares of equity or warrant
that would have otherwise been assigned to Convera as a result of work actually
performed by Convera and Convera shall be entitled to the economic benefit of
any such portion."
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<PAGE> 194
(b) Section III "Contributed Assets: ECS Software List" of Exhibit A
is amended to read in its entirety as follows:
"CONTRIBUTED ASSETS: ECS SOFTWARE LIST
AVID SPORTS
ASP Programs
Java Programs
PRISMA DEMO
WebActivate plug-in
Packaging/Installation
SUPERTRACKS
Data model and document"
(c) Section III "Contributed Assets: EVS Hardware List" of Exhibit A
is amended to read in its entirety as follows:
"CONTRIBUTED ASSETS: EVS HARDWARE LIST
<TABLE>
<CAPTION>
DESCRIPTION QUANTITY
<S> <C>
Desktops 103
Laptops 37
Servers 126
Office Equipment (printers, fax machines, telephones, etc.) 37
Monitors 105
Other (networking equipment, power supplies, etc.) 18
</TABLE>
(d) Section III "Contributed Patent Assets" of Exhibit A is amended to
read in its entirety as follows:
"CONTRIBUTED PATENT ASSETS
<TABLE>
<CAPTION>
NO. IDENTIFICATION
<S> <C>
1 US Pat. 5,991,399
2 US Pat. 5,974,550
3 US Pat. 6,041,122
4 App. filed 5/20/99 (P6534)
5 App. filed 11/16/99 (P7393)
6 App. filed 12/30/99 (P7618)
7 App. filed 3/1/00 (P8352)
8 App. filed 3/1/00 (P8379)
9 App. filed 2/15/00 (P8353)
10 App. filed 4/23/99 (P6309)
11 App. (P8775)
12 App. (P8778)
13 App. (P8779)
14 App. (P8781)"
</TABLE>
A2-4
<PAGE> 195
(e) Section III "Contributed Assets: Licensed EVS Software List" of
Exhibit A is amended to read in its entirety as follows:
"CONTRIBUTED ASSETS: LICENSED EVS SOFTWARE LIST
To be separately licensed to Convera on prevailing reasonable non-discriminatory
terms.
ATVEF SDK and tools
"Holmdel" consumer multimedia publishing
Pentium III-processor optimized alpha blending.
Oregon Retail Center components"
3. Amendment to By-Laws.
(a) Section 2.06 of the Form of Surviving Corporation By-Laws attached
to the Agreement as Exhibit D (the "By-Laws") is amended to read in its
entirety as follows:
"Section 2.06 Quorum; Voting. Except as otherwise required by these
By-Laws, at all meetings of the Board of Directors, the presence of a
majority of the total number of Directors shall constitute a quorum
for the transaction of business. Except as otherwise required by law,
the vote of a majority of the Directors present at any meeting at
which a quorum is present shall be the act of the Board of
Directors."
(b) Section 9.01 of the By-Laws is amended to read in its entirety as
follows:
"Section 9.01 Amendment. These By-Laws may be amended, altered or
repealed at any regular or special meeting of the stockholders, if,
in the case of such special meeting only, notice of such amendment,
alteration or repeal is contained in the notice or waiver of notice
of such meeting. Any amendment, alteration or repeal must be approved
by holders of a majority of the voting power of the Corporation
entitled to vote. These By-laws may also be amended, altered or
repealed by a majority of the whole Board of Directors."
4. Amendment to Stock Option Plan.
(a) The first paragraph of Section 3 ("Stock Subject to the Plan") of
the Convera 2000 Stock Option Plan attached to the Agreement as Exhibit G
is amended to read in its entirety as follows:
"The total number of shares of Stock reserved and available for
distribution under the Plan shall be 11,250,000 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."
5. Amendment to Employee List.
(a) The list of "Other Intel Employees" attached to the Agreement as
Exhibit K-2 is amended to read in its entirety as follows:
"Other Intel Employees
All employees of Intel's Enhanced Video Services, Enhanced Content Services
and Internet Security Services departments not listed on Exhibit K-1 (aggregate
of 62 employees as of April 30, 2000)."
6. General.
(a) This Amendment may be executed in one or more counterparts, each
of which shall be deemed to be an original but all of which shall
constitute one and the same agreement.
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<PAGE> 196
(b) THIS AMENDMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS
SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OR CHOICE OF
LAW PRINCIPLES THEREOF OR OF ANY OTHER JURISDICTION.
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<PAGE> 197
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered as of the date first set forth above.
INTEL CORPORATION,
a Delaware corporation
By: /s/
------------------------------------
Name:
Title:
Date: August 14, 2000
EXCALIBUR TECHNOLOGIES
CORPORATION,
a Delaware corporation
By: /s/ PATRICK C. CONDO
------------------------------------
Name: Patrick C. Condo
Title: President and Chief Executive
Officer
Date: August 14, 2000
CONVERA CORPORATION,
a Delaware corporation
By: /s/ PATRICK C. CONDO
------------------------------------
Name: Patrick C. Condo
Title: President and Chief Executive
Officer
Date: August 14, 2000
EXCALIBUR TRANSITORY, INC.,
a Delaware corporation
By: /s/ PATRICK C. CONDO
------------------------------------
Name: Patrick C. Condo
Title: President and Chief Executive
Officer
Date: August 14, 2000
[Signature Page to Amendment to Agreement and Plan of Contribution and Merger by
and among Intel Corporation, Excalibur Technologies Corporation, Convera
Corporation and Excalibur Transitory, Inc.]
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APPENDIX B
June 30, 2000
CONFIDENTIAL
Board of Directors
Excalibur Technologies Corporation
1921 Gallows Road, Suite 200
Vienna, VA 22182
Ladies and Gentlemen:
We understand that Excalibur Technologies Corporation ("Excalibur"), Intel
Corporation ("Intel"), Exca Holdings, Inc., a wholly owned subsidiary of
Excalibur ("Newco"), and Excalibur Transitory, Inc., a wholly owned subsidiary
of Newco ("Transitory"), have entered into an Agreement and Plan of Contribution
and Merger dated as of April 30, 2000 (the "Contribution and Merger Agreement")
whereby Intel will contribute certain assets specified therein to Newco,
Transitory will be merged with and into Excalibur and Excalibur will become a
wholly-owned subsidiary of Newco (the "Contribution and Merger"). The terms of
the Contribution and Merger are set forth more fully in the Contribution and
Merger Agreement.
Pursuant to the Contribution and Merger Agreement, we understand that Intel
will contribute $150 million in cash and certain assets of the Interactive Media
Services division of Intel ("IMS") to Newco (collectively, the "Contributed
Assets") in exchange for shares of the Class A Common Stock, $.01 par value, of
Newco ("Newco Common Stock") and shares of the Class B Common Stock, $.01 par
value per share, of Newco (the "Newco Non-Voting Common Stock"), all as
specified in the Contribution and Merger Agreement.
Pursuant to the Contribution and Merger Agreement, we understand that (i)
each share of Excalibur Common Stock issued and outstanding immediately prior to
the Effective Time (other than Shares held in Excalibur's treasury or by Newco
or Transitory) shall, by virtue of the Merger, be converted into and shall
become one (1) share (the "Common Stock Exchange Ratio") of Newco Common Stock,
and (ii) each share of cumulative convertible preferred stock, $.01 par value
per share, of Excalibur (the "Excalibur Preferred Stock") issued and outstanding
immediately prior to the Effective Time (other than shares of Excalibur
Preferred Stock held in Excalibur's treasury or by Newco or Transitory) shall,
by virtue of the Merger, be converted into and shall become one (1) share (the
"Preferred Stock Exchange Ratio") of the cumulative convertible preferred stock,
$.01 par value per share, of Newco (the "Newco Preferred Stock").
You have asked us to advise you as to the fairness, from a financial point
of view, of the Common Stock Exchange Ratio to the holders of Excalibur Common
Stock and of the Preferred Stock Exchange Ratio to the holders of Excalibur
Preferred Stock. Needham & Company, Inc., as part of its investment banking
business, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of securities, private placements and
other purposes. We have been engaged by Excalibur as financial advisor to render
this opinion in connection with the Contribution and Merger and will receive a
fee for rendering this opinion, none of which is contingent upon the
consummation of the Contribution and Merger. In addition, Excalibur has agreed
to indemnify us for certain liabilities arising from our role as financial
advisor and out of the rendering of this opinion.
For purposes of this opinion we have, among other things: (i) reviewed the
Contribution and Merger Agreement; (ii) reviewed certain publicly available
information concerning Excalibur and IMS, and certain other information
concerning Excalibur and IMS furnished to us by Excalibur and IMS; (iii) held
discussions with members of senior management of Excalibur and IMS concerning
the current and future business prospects of the respective companies and joint
prospects of the combined companies; (iv) reviewed certain financial forecasts
and projections prepared by the management of Excalibur and IMS; (v) compared
certain publicly available financial data of companies whose securities are
traded in the public markets and that we deemed relevant to similar data for IMS
and Excalibur; (vi) reviewed the financial terms of certain other business
combinations that we deemed generally relevant; and (vii) performed and/or
considered such other studies, analyses, inquiries and investigations as we
deemed appropriate.
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In connection with our review and in arriving at our opinion, we have
assumed and relied on the accuracy and completeness of all of the financial and
other information publicly available or furnished to or otherwise reviewed by or
discussed with us for purposes of rendering this opinion and have neither
attempted to verify independently nor assumed responsibility to verify any of
such information. In addition, we have assumed, with your consent, (i) that the
voting powers, rights, preferences and qualifications, limitations and
restrictions thereon of the Newco Preferred Stock are substantially the same as
those of the Excalibur Preferred Stock, (ii) that any material liabilities
(contingent or otherwise, known or unknown) of Excalibur and the Contributed
Assets (including IMS) are set forth in the consolidated financial statements of
Excalibur and Intel, respectively, (iii) that the Contribution and Merger will
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended, and (iv) that all conditions to the closing of
the Contribution and Merger will be satisfied without waiver. With respect to
the IMS and Excalibur financial forecasts provided to us by management of IMS
and Excalibur, and with respect to the information relating to the joint
prospects of the combined companies, we have assumed for purposes of our opinion
that such forecasts and information have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of such
respective managements, at the time of preparation, of the future operating and
financial performance of IMS and Excalibur and the combined companies, and we
have relied upon estimates of the management of Excalibur of the synergies that
may be achieved as a result of the proposed Contribution and Merger. We express
no opinion with respect to such forecasts or information or the assumptions on
which they were based. We have not assumed any responsibility for or made or
obtained any independent evaluation, appraisal or physical inspection of the
assets or liabilities of the Contributed Assets (including IMS) or Excalibur.
Further, our opinion is based on economic, monetary and market conditions as
they exist and can be evaluated as of the date hereof. Our opinion as expressed
herein is limited to the fairness, from a financial point of view, of the Common
Stock Exchange Ratio to the holders of Excalibur Common Stock and of the
Preferred Stock Exchange Ratio to the holders of Excalibur Preferred Stock and
does not address Excalibur's underlying business decision to engage in the
Contribution and Merger. Our opinion does not constitute a recommendation to any
stockholder of Excalibur as to how such stockholder should vote on the proposed
Contribution and Merger. We are not expressing any opinion as to the prices at
which the stock of Excalibur or Newco will actually trade at any time.
In the ordinary course of our business, we may actively trade the equity
securities of Excalibur and Intel for our own account or for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
This letter and the opinion expressed herein are provided at the request
and for the information of the Board of Directors of Excalibur and may not be
quoted or referred to or used for any purpose without our prior written consent,
except that this letter may be disclosed in connection with any registration or
proxy statement used in connection with the Contribution and Merger so long as
this letter is quoted in full in such registration statement or proxy statement.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Common Stock Exchange Ratio is fair to the holders of Excalibur
Common Stock, and the Preferred Stock Exchange Ratio is fair to the holders of
Excalibur Preferred Stock, in each case from a financial point of view.
Very truly yours,
/s/ NEEDHAM & COMPANY, INC.
--------------------------------------
Needham & Company, Inc.
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<PAGE> 200
APPENDIX C
CONVERA CORPORATION
2000 STOCK OPTION PLAN
SECTION 1. PURPOSE; DEFINITIONS
The purpose of the Convera Corporation 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 from
time to time, 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.
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(1) "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.
(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
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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);
(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
The total number of shares of Stock reserved and available for distribution
under the Plan shall be 11,250,000 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
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subject to other 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.
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.
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 in full of the
purchase price, either by check, note or such other instrument 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 also be made
in the form of Stock or, in the case of the exercise
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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).
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 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.
(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 during any calendar year
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(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 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.
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(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.
(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
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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.
(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 any part of any Deferred Stock
award and/or waive the deferral limitations for all or any part of such
award.
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(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 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.
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(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.
(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
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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 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 of such
disposition, notify the Company thereof, by delivery of written notice
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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 , 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.
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APPENDIX D
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CONVERA CORPORATION
* * * *
FIRST: The name of the Corporation is Convera Corporation.
SECOND: The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of the registered agent at such address is The
Corporation Trust Company.
THIRD: The nature of the business or purpose to be conducted or promoted
is to engage in any lawful act or activity for which corporations may be
organized under the Delaware General Corporation Law.
FOURTH: The Corporation will have authority to issue One Hundred
Forty-Five Million (145,000,000) shares of capital stock, of which One Hundred
Million (100,000,000) shares are Class A Common Stock, $.01 par value per share
(the "Class A Common Stock") Forty Million (40,000,000) shares are Class B
Common Stock, $.01 par value per share (the "Class B Common Stock" and, together
with the Class A Common Stock, the "Common Stock") and Five Million (5,000,000)
shares are Preferred Stock, par value $.01 per share (the "Preferred Stock").
A. Preferred Stock
1. The Board of Directors of the Corporation is expressly authorized at
any time, and from time to time, to provide for the issuance of shares of
Preferred Stock in one or more series, with such designations, preferences and
relative, participating, optional or other special rights, and qualification,
limitations, or restrictions thereof, as shall be stated and expressed in the
resolution or resolutions providing for the issue thereof adopted by the Board
of Directors, and as are not stated and expressed in this Certificate, or any
amendment thereto, including, without limiting the generality of the foregoing,
the following:
(a) the designation and the number of shares of Preferred Stock which
shall constitute such series;
(b) the rate and time at which, and the terms and conditions upon
which, dividends, if any, on the Preferred Stock of such series shall be
paid, the extent of the preference or relation, if any, of such dividends
to the dividends payable on any other class or classes or of any other
series of capital stock of the Corporation and whether such dividends shall
be cumulative or noncumulative;
(c) whether the shares of such series shall be subject to redemption
by the Corporation, and, if made subject to redemption, the times, prices
and other terms and conditions of such redemption;
(d) the terms and amount of any sinking fund or redemption or purchase
account provided for the Preferred Stock of such series;
(e) whether or not the shares of such series shall be convertible into
or exchangeable for shares of any other class or classes of capital stock
of the Corporation, and, if provision be made for conversion or exchange,
the times, prices, rates, adjustments, and other terms and conditions of
such conversion or exchange;
(f) the extent, if any, to which the holders of the shares of such
series shall be entitled to vote as a class or otherwise with respect to
the election of the directors or otherwise;
(g) the restriction, if any, on the issue or reissue of any additional
Preferred Stock; and
(h) the rights of the holders of the shares of such series of
Preferred Stock upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or winding up of
the Corporation.
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2. Except as otherwise required by law and except for such voting powers
with respect to the election of directors or other matters as may be stated in
the resolutions of the Board of Directors creating any series of Preferred
Stock, the holders of any such series shall have no voting power whatsoever.
B. [Reserved]
C. Common Stock.
1. The Common Stock shall consist solely of two classes designated "Class
A Common Stock" and "Class B Common Stock. The Board of Directors of the
Corporation is expressly authorized at any time, and from time to time, to
provide for the issuance of shares of Class A Common Stock and shares of Class B
Common Stock subject to the foregoing. The Board of Directors shall have no
power to alter the rights, preferences or privileges with respect to Class A
Common Stock or Class B Common Stock.
2. After any requirements with respect to preferential dividends on the
Preferred Stock to the end of the then current dividend period for said stock,
fixed in accordance with the provisions of Parts A and B of this ARTICLE FOURTH,
shall have been met and after the Corporation shall have complied with all the
requirements, if any, with respect to the setting aside of sums of sinking funds
or purchase or redemption accounts (fixed in accordance with the provisions of
Parts A and B of this ARTICLE FOURTH), and subject further to any conditions
which may be fixed in accordance with the provisions of Parts A and B of this
ARTICLE FOURTH), the holders of the Common Stock shall be entitled to receive
out of any remaining net profits or net assets of the Corporation available for
dividends such dividends as may from time to time be declared by the Board of
Directors, provided that each share of Class A Common Stock and Class B Common
Stock shall be equal in respect of rights to dividends and other distributions
in cash, stock or property of the Corporation, and provided that in the case of
dividends or other distributions payable in Class A Common Stock or Class B
Common Stock, including distributions pursuant to stock split-ups or divisions
of Class A Common Stock or Class B Common Stock which occur after the first date
upon which the Corporation has issued shares of both Class A Common Stock and
Class B Common Stock, only shares of Class A Common Stock shall be distributed
with respect to Class A Common Stock and only shares of Class B Common Stock
shall be distributed with respect to Class B Common Stock.
3. In the event of any voluntary or involuntary liquidation, distribution
or sale of assets, dissolution or winding up of the Corporation, after payment
in full of the amounts payable in respect of the Preferred Stock (fixed in
accordance with the provisions of Parts A and B of this ARTICLE FOURTH), the
holders of the Common Stock shall be entitled, to the exclusion of the holders
of the Preferred Stock, to share ratably per share of Common Stock in all the
assets of the Corporation then remaining, assuming for such purpose that all
outstanding shares of Class B Common Stock have been converted into shares of
Class A Common Stock immediately prior to any distribution pursuant to this
paragraph C.3.
4. Except as otherwise provided in this Certificate or as otherwise made
mandatory by law, stockholders of Class A Common Stock shall be entitled to one
vote for each full share of such stock then outstanding and of record in his or
her name on the books of the Corporation, and the holders of the Class A Common
Stock shall vote together with the holders of any series of Preferred Stock
which may then have voting rights (fixed in accordance with Part A of this
ARTICLE FOURTH) entitled to vote in such manner, and not as a separate class.
Except as otherwise provided in this Certificate or as otherwise made mandatory
by law, shares of Class B Common Stock shall not be entitled to any voting
rights.
5. (a) Any share or shares of Class B Common Stock may be converted on and
after the date of issue, at the option of the holder thereof, in the manner
hereinafter provided, into fully paid and non-assessable shares of Class A
Common Stock; provided that while Intel Corporation remains a holder of Class B
Common Stock, it shall not be entitled to convert shares of Class B Common Stock
to the extent that, immediately after the conversion, Intel Corporation would
beneficially own 50% or more of the voting power of the Corporation.
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(b) The conversion rate shall be one share of Class A Common Stock for each
share of Class B Common Stock, subject to adjustment as hereinafter provided:
(i) In case the shares of Class A Common Stock at any time outstanding
shall be combined into a lesser number of shares, whether by
reclassification, reduction of capital stock or otherwise, the conversion
rate shall be proportionately decreased.
(ii) In case the shares of Class A Common Stock at any time
outstanding shall be subdivided, by reclassification, recapitalization or
otherwise (including the issuance of shares of Class A Common Stock as a
dividend or distribution on the Class A Common Stock), into a greater
number of shares without the actual receipt by the Corporation of any
consideration for the additional number of shares so issued, the conversion
rate shall be proportionately increased.
(c) Any conversion rate determined or adjusted as herein provided shall
remain in effect until further adjustment as required herein. Upon each
adjustment of the conversion rate a written instrument signed by an officer of
the Corporation, setting forth such adjustment and the computation and a summary
of the facts upon which it is based, shall forthwith be filed with the Transfer
Agent for the Class B Common Stock and made available for inspection by the
holders of such stock, and any adjustment so evidenced, made in good faith,
shall be binding upon all such holders and upon the Corporation. Upon any
conversion, fractional shares shall not be issued but any fractions shall be
adjusted by the payment of the cash equivalent thereof, computed as set forth in
paragraph C.5.(d) below. Upon any conversion, no payment or adjustment shall be
made for dividends on the Class B Common Stock surrendered for conversion or on
the Class A Common Stock delivered. The Corporation shall pay all issue taxes,
if any, incurred in respect of the issue of the Class A Common Stock on
conversion; provided, however, that the Corporation shall not be required to pay
any transfer or other taxes incurred by reason of the issuance of such Class A
Common Stock in names other than those in which the Class B Common Stock may
stand.
(d) For the purpose of any computation under paragraph C.5.(c) of the cash
equivalent of a fractional share, the market price per share of Class A Common
Stock at any date shall be deemed to be the average of the daily closing prices
for the ten consecutive business days next preceding the day in question. The
closing price for each day shall be the last sales price, regular way or, in
case no sale takes place on such day, the average of the closing bid and asked
prices as furnished by any two firms selected in good faith from time to time by
the Corporation for that purpose.
(e) Any conversion of Class B Common Stock into shares of Class A Common
Stock shall be made by the surrender to the Corporation, at the office of any
Transfer Agent for the Class B Common Stock, of the certificate or certificates
representing the share or shares of Class B Common Stock to be converted, duly
endorsed or assigned (unless such endorsement or assignment be waived by the
Corporation), together with written request for conversion.
(f) All shares of Class B Common Stock which shall have been converted as
herein provided shall no longer be deemed to be outstanding and all rights with
respect to such shares shall forthwith cease except only the right of the
holders thereof to receive Class A Common Stock in exchange therefor.
(g) In case of any reclassification or change of outstanding shares of
Class A Common Stock issuable upon conversion of the shares of Class B Common
Stock (including any such reclassification or change in connection with any
merger to which the Corporation is a party and in which the Corporation is the
continuing corporation), the holder of each share of Class B Common Stock then
outstanding shall have the right thereafter to receive upon the conversion of
such share such kind and amount of shares of stock and other securities and
property receivable, upon such reclassification or change, by a holder of the
number of shares of Class A Common Stock (whole or fractional) of the
Corporation in which such share of Class B Common Stock might have been
converted had such conversion occurred immediately prior to such
reclassification or change; provided that effective provision shall be made, in
the charter of the Corporation or otherwise, so that, in the opinion of the
Board of Directors of the Corporation, the provisions set forth herein for the
protection of the conversion rights of the Class B Common Stock shall thereafter
be applicable, as nearly as reasonably may be, to any such other shares of stock
and other securities and property deliverable upon conversion of the
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Class B Common Stock remaining outstanding. In case of any consolidation or
merger to which the Corporation is a party and in which the Corporation is not
the continuing corporation, or in case of any sale or conveyance to another
corporation of the property of the Corporation as an entirety or substantially
as an entirety, the holder of each share of Class B Common Stock then
outstanding shall have the right thereafter to convert such share into the kind
and amount of shares of stock and other securities and property receivable, upon
such consolidation, merger, sale or conveyance, by a holder of the number of
shares of Class A Common Stock (whole or fractional) of the Corporation into
which such share of Class B Common Stock might have been converted had such
conversion occurred immediately prior to such consolidation, merger, sale or
conveyance; provided that effective provision shall be made, in the charter of
the successor corporation or otherwise, so that, in the opinion of the Board of
Directors of the Corporation, the provisions set forth herein for the protection
of the conversion rights of the Class B Common Stock shall thereafter be
applicable, as nearly as reasonably may be, to any such other shares of stock
and other securities and property deliverable upon conversion of the Class B
Common Stock remaining outstanding; and provided, further, that any such
successor corporation shall expressly assume the obligation to deliver, upon the
exercise of the conversion privilege, such shares, securities or property as the
holders of shares of the Class B Common Stock remaining outstanding shall be
entitled to receive pursuant to the provisions hereof, and to make provisions
for the protection of the conversion right as above provided. In case securities
or property other than Class A Common Stock shall be issuable or deliverable
upon conversion as aforesaid, then all references in this paragraph B.5(g) shall
be deemed to apply, so far as appropriate and as nearly as may be, to such other
securities or property.
(h) A number of shares of the authorized Class A Common Stock sufficient to
provide for the conversion of the Class B Common Stock outstanding upon the
basis hereinbefore provided shall at all times be reserved for such conversion.
If the Corporation shall propose to make any change in its capital structure
which would change the number of shares of Class A Common Stock to which each
share of the Class B Common Stock shall be convertible as herein provided, the
Corporation shall at the same time also make proper provision so that thereafter
there shall be a sufficient number of shares of Class A Common Stock authorized
and reserved for conversion of the outstanding Class B Common Stock on the new
basis.
FIFTH: The name and mailing address of the incorporator is as follows:
Michelle White
Heller Ehrman White & McAuliffe, LLP
711 Fifth Avenue
New York, New York 10022
SIXTH: The shareholders will have no preemptive rights to acquire unissued
or treasury shares or securities convertible into such shares, or carrying a
right to subscribe to or acquire shares.
SEVENTH: The presence at a meeting of shareholders of at least a majority
of the shares entitled to vote at that meeting will constitute a quorum for the
transaction of business at that meeting.
EIGHTH: To the fullest extent permitted by Delaware statutory or
decisional law, as amended or interpreted, no director of this Corporation shall
be personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director. This ARTICLE EIGHTH does not affect
the availability of equitable remedies for breach of fiduciary duties. The
Corporation shall indemnify, in the manner and to the fullest extent permitted
by the Delaware General Corporation Law as the same exists or may hereafter be
amended (but in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights than
permitted prior thereto), any person (or the estate of any person) who is or was
a party to, or is threatened to be made a party to, any threatened, pending or
completed action, suit or proceeding, whether or not by or in the right of the
Corporation, and whether civil, criminal, administrative, investigative or
otherwise, by reason of the fact that such person is or was a director or
officer of the Corporation, or is or was serving at the request of the
Corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise. Any repeal or modification of the provisions
of this ARTICLE EIGHTH by the stockholders of the Corporation shall not
adversely affect any right or protection of any director existing at the time of
such repeal or modification.
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NINTH: The number of directors that shall constitute the whole Board shall
be as specified in the Bylaws of the Corporation, as the same may be amended
from time to time, but in no event shall such number be less than six (6) nor
greater than twelve (12). The Board shall for a period of five (5) years from
include at least two (2) directors that are not affiliated with
Intel Corporation ("Intel"). Notwithstanding the foregoing, during any period in
which the holders of any one or more series of Preferred Stock, voting as a
class, shall be entitled pursuant to the terms of the Certificate of Designation
with respect to such series of Preferred Stock to elect a specified number of
directors by reason of dividend arrearages or other contingencies giving them
the right to do so, then and during such time as such right continues, (i) the
then otherwise authorized number of directors shall be increased by such
specified number of directors and the holders of shares of such series of
Preferred Stock, voting as a class, shall be entitled to elect such specified
number of directors in accordance with the provisions of such Preferred Stock,
and (ii) each such additional director shall serve until the next annual meeting
of stockholders and until his or her successor shall be elected and shall
qualify, or until his or her right to hold such office terminates pursuant to
the provisions of such Preferred Stock or series, whichever occurs earlier.
Whenever the holders of shares of such series of Preferred Stock are divested of
such right to elect directors pursuant to the provisions of such Preferred Stock
or series, the terms of office of all directors elected by the holders of such
series of Preferred Stock pursuant to such provisions, or elected to fill any
vacancies resulting from the death, resignation or removal of directors so
elected by the holders of such Preferred Stock or series, shall forthwith
terminate and the authorized number of directors shall be reduced accordingly.
TENTH: 1. For purposes of this Certificate, "Holder" or "Holders" shall
mean (a) Intel, for so long as Intel holds at least five percent (5%) of the
outstanding shares of Class A Common Stock (taking into account any securities
held by Intel that are convertible into shares of Class A Common Stock at the
time of any determination), (b) NBA Media Ventures, LLC ("NBA"), for so long as
NBA holds at least five percent (5%) of the outstanding shares of Class A Common
Stock, (c) all successors to a Holder by way of merger, consolidation or sale of
all or substantially all of such Holder's assets and (d) all existing or future
corporations, partnerships, joint ventures, associations and other entities
(each a "Subsidiary Entity") in which such person or entity beneficially owns,
directly or indirectly, fifty percent (50%) or more of the outstanding voting
stock, but excluding the Corporation or any Subsidiary Entity in which the
Corporation beneficially owns, directly or indirectly, fifty percent (50%) or
more of the outstanding voting stock.
2. In anticipation that:
(a) each Holder will remain, for some period of time, a stockholder of
the Corporation;
(b) the Corporation and each Holder may engage in the same or similar
activities or lines of business and may have an interest in the same or
similar areas of corporate opportunities;
(c) there will or may be benefits to be derived by the Corporation
through its continued or potential contractual, corporate and business
relations with the Holders (including without limitation service of
officers of the Holders as directors of the Corporation); and
(d) there will be benefits in providing guidelines for directors and
officers of the Holders and of the Corporation with respect to the
allocation of corporate opportunities and other matters; the provisions of
this Article TENTH are set forth to regulate, define and guide the conduct
of certain affairs of the Corporation as they may involve each Holder and
its officers and directors, and the powers, rights, duties and liabilities
of the Corporation and its officers, directors and stockholders in
connection therewith.
3. Except as each Holder may otherwise agree in writing, each Holder shall
have the right to, and shall have no duty not to, (a) engage in the same or
similar business activities or lines of business as the Corporation, (b) compete
against the Corporation, (c) do business with any potential or actual
competitor, customer or supplier of the Corporation, and (d) employ or otherwise
engage any officer or employee of the Corporation. Neither a Holder nor any
officer, director or employee thereof (except as provided in paragraph 4 of this
Article TENTH) shall be liable to the Corporation or its stockholders,
regardless of the impact any such activities may have on the Corporation, for
breach of any fiduciary duty by reason of any such activities of such Holder or
of the participation therein of such person and the Corporation shall have no
interest or
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expectancy that such Holder will not engage in any of the foregoing activities,
any such interest or expectancy being hereby renounced by the Corporation. In
the event that a Holder acquires knowledge of a potential transaction or matter
that may be a corporate opportunity or otherwise of interest to such Holder and
the Corporation, such Holder shall have no duty to communicate or present such
corporate opportunity to the Corporation, the Corporation shall have no interest
or expectancy in any such transaction or matter, any such interest or expectancy
being hereby renounced by the Corporation, and, without limiting the generality
of the foregoing, shall not be liable to the Corporation or its stockholders for
breach of any fiduciary duty as a stockholder of the Corporation by reason of
the fact that such Holder pursues or acquires such corporate opportunity for
itself, directs such corporate opportunity to another person, or does not
present such corporate opportunity to the Corporation. Without limiting the
generality of the foregoing, a Holder shall have no such duty and shall not be
so liable even if a director or officer of the Corporation (including, without
limitation, any such director or officer who is also a director, officer or
employee of such Holder) becomes aware of such transaction or matter in his or
her capacity as a director or officer of the Corporation and such director or
officer discloses such transaction or matter to directors, officers, employees
or other representatives of such Holder, so long as such Holder also learns,
discovers, acquires or develops such transaction or matters independently or
otherwise in a manner that was not based on such director's or officer's
awareness of such transaction or matter. The provisions of this paragraph 3 of
Article TENTH shall apply and not be affected by any other provision of this
Certificate of Incorporation including, without limitation, paragraph 4 or 5 of
Article TENTH.
4. In the event that a director or officer of the Corporation who is also a
director, officer or employee of a Holder acquires knowledge of a potential
transaction or matter that may be a corporate opportunity or otherwise of
interest to the Corporation and such Holder, such director or officer of the
Corporation (a) shall have fully satisfied and fulfilled the fiduciary duties of
such director or officer to the Corporation and its stockholders with respect to
such corporate opportunity, (b) shall not be liable to the Corporation or its
stockholders for breach of any fiduciary duty with respect to such corporate
opportunity by reason of his or her not communicating information regarding such
corporate opportunity to the Corporation, and/or such Holder's pursuing or
acquiring such corporate opportunity for itself or directing such corporate
opportunity to another person, (c) shall be deemed to have acted in good faith
and in a manner such person reasonably believes to be in and not opposed to the
best interests of the Corporation, and (d) shall be deemed not to have breached
his or her duty of loyalty to the Corporation or its stockholders and not to
have derived an improper benefit therefrom, if such corporate opportunity
belongs to such Holder in accordance with the following policy:
(i) a corporate opportunity offered or disclosed to any person who is
a director but not an officer of the Corporation and who is also an officer
or employee (whether or not a director) of a Holder shall belong to such
Holder, unless such opportunity is expressly offered to such person
primarily in his or her capacity as a director of the Corporation, in which
case such opportunity shall belong to the Corporation;
(ii) a corporate opportunity offered or disclosed to any person who is
an officer (whether or not a director) of the Corporation and who is also a
director but not an officer or employee of a Holder shall belong to the
Corporation, unless such opportunity is expressly offered to such person
primarily in his or her capacity as a director of such Holder, in which
case such opportunity shall belong to such Holder; and
(iii) a corporate opportunity offered or disclosed to any other person
who is either an officer of both the Corporation and a Holder, or a
director of both the Corporation and a Holder, shall belong to such Holder
or to the Corporation, as the case may be, if such opportunity is expressly
offered to such person primarily in his or her capacity as an officer or
director of such Holder or of the Corporation, respectively; otherwise,
such opportunity shall belong to such Holder.
5. Except as otherwise provided in paragraph 3 of Article TENTH, any
corporate opportunity that belongs to a Holder or to the Corporation pursuant to
the foregoing policy shall not be pursued by the other, or directed by the other
to another person, unless and until such Holder or the Corporation, as the case
may be, determines not to pursue the opportunity. The foregoing prohibition
shall cease if the party to whom the
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corporate opportunity belongs does not within a reasonable period of time begin
to pursue, or thereafter continue to pursue, such opportunity diligently and in
good faith.
6. For purposes of this Article TENTH, "corporate opportunities" shall
consist of business opportunities which (a) the Corporation is financially able
to undertake, (b) are, from their nature, in the line or lines of the
Corporation's business as described in the Corporation's periodic reports filed
with the Securities and Exchange Commission and are of practical advantage to
it, and (c) are ones in which the Corporation has an interest or reasonable
expectancy. "Corporate opportunities" shall not include any transaction or
matter in which the Corporation or a Holder is permitted to participate pursuant
to any agreement between the Corporation and such Holder that has been approved
by a majority of the directors of the Corporation who are disinterested
("Disinterested Directors"), it being acknowledged that the rights of the
Corporation under any such agreement shall be deemed to be contractual rights
and shall not be corporate opportunities of the Corporation for any purpose;
provided, however, that no presumption or implication as to corporate
opportunities relating to any transaction not explicitly covered by such an
agreement shall arise from the existence or absence of any such agreement.
7. Any person purchasing or otherwise acquiring any interest in any shares
of stock or other securities (including without limitation stock options) of the
Corporation shall be deemed to have notice of and consented to the provisions of
this Article TENTH.
8. Nothing in this Article TENTH is intended to, and shall not be construed
to, expand any party's fiduciary duties under applicable law.
9. If any contract, agreement, arrangement or transaction between the
Corporation and a Holder involves a corporate opportunity and is approved in
accordance with the procedures set forth in Article TENTH hereof, such Holder
and its officers and directors (including without limitation, any such person
who is also a director or officer of the Corporation) shall also, for the
purposes of this Article TENTH and the other provisions of this Certificate of
Incorporation, be deemed to have fully satisfied and fulfilled any fiduciary
duties they may have to the Corporation and its stockholders. Any such contract,
agreement, arrangement or transaction involving a corporate opportunity not so
approved shall not by reason thereof result in any such breach of any fiduciary
duty, but shall be governed by the other provisions of Article TENTH, this
Certificate, the bylaws, the Delaware General Corporation Law and other
applicable law.
10. For purposes of this Article TENTH, a director of the Corporation who
is Chairman of the Board of Directors of the Corporation shall not be deemed to
be an officer of the Corporation by reason of holding such position (regardless
of whether such position is deemed an office of the Corporation under the bylaws
of the Corporation), unless such person is a full-time employee of the
Corporation.
ELEVENTH: 1. In anticipation that:
(a) each Holder will remain, for some period of time, a stockholder of
the Corporation and have continued contractual, corporate and business
relations with the Corporation;
(b) the Corporation and each Holder may enter into contracts or
otherwise transact business with each other and the Corporation may derive
benefits therefrom; and
(c) the Corporation may from time to time enter into contractual,
corporate or business relations with one or more of its directors, or one
or more corporations, partnerships, associations or other organizations in
which one or more of its directors have a financial interest (collectively,
"Related Entities");
the provisions of this Article ELEVENTH are set forth to regulate and guide
certain contractual relations and other business relations of the Corporation as
they may involve each Holder, Related Entities and their respective officers and
directors, and the powers, rights, duties and liabilities of the Corporation and
its officers, directors and stockholders in connection therewith.
2. The provisions of this Article ELEVENTH are in addition to, and not in
limitation of, the provisions of the Delaware General Corporation Law and the
other provisions of this Certificate. Any contract or
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business relation which does not comply with procedures set forth in this
Article ELEVENTH shall not by reason thereof be deemed void or voidable or
result in any breach of any fiduciary duty to, or duty of loyalty to, or failure
to act in good faith or in the best interests of, the Corporation, or the
derivation of any improper personal benefit, but shall be governed by the
remaining provisions of this Certificate, the Bylaws, the Delaware General
Corporation Law and other applicable law.
3. No contract, agreement, arrangement or transaction between the
Corporation, on the one hand, and a Holder or a Related Entity or one or more of
the directors or officers of the Corporation, on the other hand, or any
amendment, modification or termination thereof, shall be void or voidable solely
for the reason that a Holder or Related Entity or any one or more of the
officers or directors of the Corporation are parties thereto, or solely because
any such directors or officers are present at or participate in the meeting of
the Board of Directors or committee thereof which authorizes such contract,
agreement, arrangement, transaction, amendment, modification or termination
(each, a "Transaction") or solely because his, her or their votes are counted
for such purpose, and a Holder, any Related Entity and such directors and
officers (a) shall have fully satisfied and fulfilled any fiduciary duties they
may have to the Corporation and its stockholders with respect thereto, (b) shall
not be liable to the Corporation or its stockholders for any breach of any
fiduciary duty they may have by reason of their approving any such Transaction
or the Corporation's entering into, performing or consummating any such
Transaction, (c) shall be deemed to have acted in good faith and in a manner
such persons reasonably believed to be in and not opposed to the best interests
of the Corporation, to the extent such standard is applicable to such person's
conduct, and (d) shall be deemed not to have breached any duties of loyalty to
the Corporation or its stockholders, whether or not they have derived a personal
benefit therefrom, if:
(i) the material facts as to the Transaction are disclosed or are
known to the Board of Directors or the committee thereof that authorizes
the Transaction and the Board of Directors or such committee in good faith
authorizes or approves the Transaction by the affirmative vote of a
majority of the Disinterested Directors on the Board of Directors or such
committee (even though the Disinterested Directors are less than a quorum);
(ii) the material facts as to the Transaction are disclosed or are
known to the holders of the voting stock entitled to vote thereon, and the
Transaction is specifically approved in good faith by vote of the holders
of a majority of the then outstanding voting stock not owned by such Holder
or such Related Entity, voting together as a single class;
(iii) such Transaction is effected pursuant to, and consistent with,
terms and conditions specified in any arrangements, standards, protocols or
guidelines (collectively, the "Guidelines") which are in good faith
authorized or approved, after disclosure or knowledge of the material facts
related thereto, by the affirmative vote of a majority of the Disinterested
Directors on the Board of Directors or the applicable committee thereof
(even though the Disinterested Directors are less than a quorum) or by vote
of the holders of a majority of the then outstanding voting stock not owned
by such Holder or such Related Entity, voting together as a single class
(such authorization or approval of such Guidelines constituting or being
deemed to constitute authorization or approval of such Transaction); or
(iv) such Transaction is fair as to the Corporation as of the time it
is authorized, approved or ratified by the Board of Directors, a committee
thereof or the stockholders of the Corporation.
In addition, each Transaction authorized, approved or effected, and such
Guidelines so authorized or approved, as described in (i), (ii), or (iii) above,
shall be deemed to be entirely fair to the Corporation and its stockholders;
provided, however, that if such authorization or approval is not obtained, or
such Transaction is not so effected, no presumption shall arise that such
Transaction or such Guidelines are not fair to the Corporation and its
stockholders.
4. Directors of the Corporation who are also directors, officers or
employees of a Holder or any Related Entity may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
that authorizes or approves any such Transaction or any such Guidelines. Voting
stock owned by a
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Holder and any Related Entities may be counted in determining the presence of a
quorum at a meeting of stockholders that authorizes or approves any such
Transaction or any such Guidelines.
5. A Holder shall not be liable to the Corporation or its stockholders for
breach of any fiduciary duty it may have by reason of the fact that such Holder
takes any action or exercises any rights or gives or withholds any consent in
connection with any Transaction between such Holder and the Corporation. No vote
cast or other action taken by any person who is an officer, director or other
representative of a Holder, which vote is cast or action is taken by such person
in his capacity as a director of the Corporation, shall constitute an action of,
or the exercise of a right by, or a consent of, such Holder for the purpose of
any such Transaction.
6. Any person purchasing or otherwise acquiring any interest in any shares
of stock or other securities (including without limitation stock options) of the
Corporation shall be deemed to have notice of and to have consented to the
provisions of this Article ELEVENTH.
7. Nothing in this Article ELEVENTH is intended to, nor shall anything in
this Article ELEVENTH be construed to, expand any party's fiduciary duties under
applicable law.
TWELFTH: The Board of Directors is expressly authorized to make, alter or
repeal the Bylaws of the Corporation.
THIRTEENTH: Notwithstanding anything in this Certificate to the contrary,
and in addition to any vote of the Board of Directors required by applicable law
or this Certificate, the affirmative vote of the holders of more than eighty
percent (80%) of the outstanding Class A Common Stock, voting together as a
single class, shall be required to alter, amend or repeal, or adopt any
provision inconsistent with, any provision of Articles TENTH or ELEVENTH.
Neither the alteration, amendment or repeal of Articles TENTH or ELEVENTH nor
the adoption of any provision inconsistent with Articles TENTH or ELEVENTH shall
eliminate or reduce the effect of Articles TENTH or ELEVENTH in respect of any
matter occurring, or any cause of action, suit or claim that, but for Articles
TENTH or ELEVENTH, would accrue or arise, prior to such alteration, amendment,
repeal or adoption.
[SIGNATURE PAGE FOLLOWS.]
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CONVERA CORPORATION
By:
------------------------------------
Patrick C. Condo, President
[SIGNATURE PAGE TO CONVERA CORPORATION AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION]
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APPENDIX E
CONVERA CORPORATION
BY-LAWS
Adopted as of , 2000
<PAGE> 223
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ARTICLE I STOCKHOLDERS...................................... 1
ARTICLE II BOARD OF DIRECTORS............................... 4
ARTICLE III EXECUTIVE COMMITTEE AND OTHER COMMITTEES........ 6
ARTICLE IV OFFICERS......................................... 7
ARTICLE V CAPITAL STOCK..................................... 9
ARTICLE VI INDEMNIFICATION.................................. 11
ARTICLE VII OFFICES......................................... 13
ARTICLE VIII GENERAL PROVISIONS............................. 13
ARTICLE IX AMENDMENT OF BY-LAWS............................. 14
</TABLE>
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CONVERA CORPORATION
BY-LAWS
ARTICLE I
STOCKHOLDERS
Section 1.01 Annual Meetings. The annual meeting of the stockholders of
the Corporation for the election of directors and for the transaction of such
other business as properly may come before such meeting shall be held at such
place, within or without the State of Delaware, and on such date and at such
hour as may be fixed from time to time by resolution of the Board of Directors
and set forth in the notice or waiver of notice of the meeting. [Sections
211(a), (b).]*
Section 1.02 Special Meetings. Special meetings of the stockholders may be
called at any time by the Chairman of the Board or by the President (or, in the
event of their absence or disability, by any Vice President), or by the Board of
Directors. A special meeting shall be called by the Chairman of the Board or the
President (or, in the event of their absence or disability, by any Vice
President), or by the Secretary, immediately upon receipt of a written request
therefor by stockholders holding in the aggregate not less than a majority of
the outstanding shares of the Corporation at the time entitled to vote at any
meeting of the stockholders. If such officers shall fail to call such meeting
within 20 days after receipt of such request, any stockholder executing such
request may call such meeting. Such special meetings of the stockholders shall
be held at such places, within or without the State of Delaware, as shall be
specified in the respective notices or waivers of notice thereof. [Section
211(d).]
Section 1.03 Notice of Meetings; Waiver. The Secretary or any Assistant
Secretary shall cause written notice of the place, date and hour of each meeting
of the stockholders, and, in the case of a special meeting, the purpose or
purposes for which such meeting is called, to be given personally or by mail,
not less than ten nor more than sixty days prior to the meeting, to each
stockholder of record entitled to vote at such meeting. If such notice is
mailed, it shall be deemed to have been given to a stockholder when deposited in
the United States mail, postage prepaid, directed to the stockholder at his
address as it appears on the record of stockholders of the Corporation, or, if
he shall have filed with the Secretary of the Corporation a written request that
notices to him be mailed to some other address, then directed to him at such
other address. Such further notice shall be given as may be required by law. No
notice of any meeting of stockholders need be given to any stockholder who
submits a signed waiver of notice, whether before or after the meeting. Neither
the business to be transacted at, nor the purpose of, any regular or special
meeting of the stockholders need be specified in a written waiver of notice. The
attendance of any stockholder at a meeting of stockholders shall constitute a
waiver of notice of such meeting, except when the stockholder attends a meeting
for the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business on the ground that the meeting is not lawfully
called or convened. [Sections 222, 229.]
Section 1.04 Quorum. Except as otherwise required by law or by the
Certificate of Incorporation, the presence in person or by proxy of the holders
of record of a majority of the shares entitled to vote at a meeting of
stockholders shall constitute a quorum for the transaction of business at such
meeting. [Section 216.]
Section 1.05 Voting. If, pursuant to Section 5.05 of these By-Laws, a
record date has been fixed, every holder of record of shares entitled to vote at
a meeting of stockholders shall be entitled to one vote for each share
outstanding in his name on the books of the Corporation at the close of business
on such record date. If no record date has been fixed, then every holder of
record of shares entitled to vote at a meeting of stockholders shall be entitled
to one vote for each share of stock standing in his name on the books of the
Corporation at the close of business on the day next preceding the day on which
notice of the meeting is given, or, if notice is waived, at the close of
business on the day next preceding the day on which the meeting is held. Except
as otherwise required by law, by the Certificate of Incorporation or by these
By-Laws, the vote of a
---------------
* Citations are to the General Corporation Law of the State of Delaware, as in
effect on , 2000, are inserted for reference only, and do not
constitute a part of the By-Laws.
<PAGE> 225
majority of the shares represented in person or by proxy at any meeting at which
a quorum is present shall be sufficient for the transaction of any business at
such meeting. [Sections 212(a), 216.]
Section 1.06 Voting by Ballot. No vote of the stockholders need be taken
by written ballot, unless otherwise required by law. Any vote which need not be
taken by ballot may be conducted in any manner approved by the meeting.
[Sections 211(e), 212.]
Section 1.07 Adjournment. If a quorum is not present at any meeting of the
stockholders, the stockholders present in person or by proxy shall have the
power to adjourn any such meeting from time to time until a quorum is present.
Notice of any adjourned meeting of the stockholders of the Corporation need not
be given if the place, date and hour thereof are announced at the meeting at
which the adjournment is taken, provided, however, that if the adjournment is
for more than thirty days, or if after the adjournment a new record date for the
adjourned meeting is fixed pursuant to Section 5.05 of these By-Laws, a notice
of the adjourned meeting, conforming to the requirements of Section 1.03 hereof,
shall be given to each stockholder of record entitled to vote at such meeting.
At any adjourned meeting at which a quorum is present, any business may be
transacted that might have been transacted on the original date of the meeting.
[Section 222(c).]
Section 1.08 Proxies. Any stockholder entitled to vote at any meeting of
the stockholders or to express consent to or dissent from corporate action
without a meeting may, by a written instrument signed by such stockholder or his
attorney-in-fact, authorize another person or persons to vote at any such
meeting and express such consent or dissent for him by proxy. No such proxy
shall be voted or acted upon after the expiration of three years from the date
of such proxy, unless such proxy provides for a longer period. Every proxy shall
be revocable at the pleasure of the stockholder executing it, except in those
cases where applicable law provides that a proxy shall be irrevocable. [Sections
212(b), (c).]
Section 1.09 Organization; Procedure. At every meeting of stockholders the
presiding officer shall be the Chairman of the Board or, in the event of his
absence or disability, the President or, in the event of his absence or
disability, a presiding officer chosen by a majority of the stockholders
entitled to vote at the meeting and present in person or by proxy. The
Secretary, or in the event of his absence or disability, an appointee of the
presiding officer, shall act as Secretary of the meeting. The order of business
and all other matters of procedure at every meeting of stockholders may be
determined by such presiding officer.
Section 1.10 Nominations and Stockholder Business. (a) Nominations of
persons for election to the Board of Directors of the Corporation and the
proposal of business to be considered by the stockholders may be made at an
annual meeting of stockholders (i) pursuant to the Corporation's notice of
meeting, (ii) by or at the direction of the Board of Directors, or (iii) by any
stockholder of the Corporation who is a stockholder of record at the time of
giving of notice provided for in this Section 1.10, who is entitled to vote at
the meeting with respect to the business proposed to be considered and who
complied with the notice procedures set forth in this Section 1.10.
(b) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to this Section 1.10, the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation, and such business must be a proper subject for stockholder action
under the Delaware General Corporation Law. To be timely, a stockholder's notice
shall be delivered to the secretary at the principal executive offices of the
Corporation not less than 45 days nor more than 120 days prior to the date on
which the Corporation first mailed its proxy materials for the prior year's
annual meeting of stockholders; provided, however, that in the event that the
date of the annual meeting is advanced by more than 30 days or delayed (other
than as a result of adjournment) by more than 30 days from the anniversary of
the previous year's annual meeting, notice by the stockholder to be timely must
be delivered not later than the close of business on the later of the 60th day
prior to such annual meeting or the 10th day following the day on which public
announcement of the date of such meeting is first made. Such stockholder's
notice shall set forth (i) as to each person whom the stockholder proposes to
nominate for election or reelection as a director all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (including such person's written consent to being named in
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the proxy statement as a nominee and to serving as a director if elected); (ii)
as to any other business that the stockholder proposes to bring before the
meeting, a brief description of the business desired to be brought before the
meeting, the reasons for conducting such business at the meeting and any
material interest in such business of such stockholder and the beneficial owner,
if any, on whose behalf the proposal is made; and (iii) as to the stockholder
giving the notice and the beneficial owners if any on whose behalf the
nomination or proposal is made (x) the name and address of such stockholder, as
they appear on the Corporation's books, and of such beneficial owner, and (y)
the class and number of shares of the Corporation which are owned beneficially
and of record by such stockholder and such beneficial owner.
(c) Notwithstanding anything in this Section 1.10 to the contrary, in the
event that the number of directors to be elected to the Board of Directors of
the Corporation is increased and there is no public announcement specifying the
size of the increased Board of Directors made by the Corporation at least 70
days prior to the first anniversary of the preceding year's annual meeting, a
stockholder's notice required by this Section 1.10 shall also be considered
timely, but only with respect to nominees for any new positions created by such
increase, it if shall be delivered to the Secretary at the principal executive
offices of the Corporation not later than the close of business on the 10th day
following the day on which such public announcement is first made by the
Corporation.
(d) Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant to the
Corporation's notice of meeting. Nominations of persons for election to the
Board of Directors may be made at a special meeting of stockholders at which
directors are to be elected pursuant to the Corporation's notice of meeting (i)
by or at the direction of the Board of Directors or (ii) by any stockholder of
the Corporation who is a stockholder of record at the time of giving of notice
provided for in this section, who is entitled to vote at the meeting with
respect to such election of Directors and who complies with the notice
procedures set forth in this section. Nominations by stockholders of persons for
election to the Board of Directors may be made at such a special meeting of
Stockholders if the stockholder's notice required by this section shall be
delivered to the secretary at the principal executive offices of the Corporation
not earlier than the 120th day prior to such special meeting and not later than
the close of business on the later of the 60th day prior to such special meeting
or the 10th day following the day on which public announcement is first made of
the date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting.
(e) Only those persons who are nominated in accordance with the procedures
set forth in this section shall be eligible for election as directors at any
meeting of stockholders. Only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this section. The chairman of the meeting shall have
the power and duty to determine whether a nomination or any business proposed to
be brought before the meeting was made in accordance with the procedures set
forth in this section and, if any proposed nomination or business is not in
compliance with this section, to declare that such defective proposal shall be
disregarded.
(f) For purposes of this section, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Sections 9,
13, 14 or 15(d) of the Exchange Act.
(g) Notwithstanding the foregoing provisions of this Section 1.10, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Section 1.10. Nothing in this Section 1.10 shall be deemed to
affect any rights of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act.
Section 1.11 Consent of Stockholders in Lieu of Meeting. To the fullest
extent permitted by law, whenever the vote of stockholders at a meeting thereof
is required or permitted to be taken for or in connection with any corporate
action, such action may be taken without a meeting, without prior notice and
without a vote of stockholders, if the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote
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thereon were present and voted shall consent in writing to such corporate action
being taken. Any such consent or consents shall be delivered to the Corporation
by delivery to its registered office in the State of Delaware, its principal
place of business, or an officer or agent of the Corporation having custody of
the book in which proceedings of meetings of stockholders are recorded. Delivery
made to the Corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. Every written consent shall bear the
date of signature of each stockholder or member who signs the consent and no
written consent shall be effective to take the corporate action refereed to
therein unless, within sixty days of the earliest dated consent delivered in the
manner required by this Section 1.10 of these By-Laws to the Corporation,
written consents signed by a sufficient number of holders or members to take
action are delivered to the Corporation in such manner. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not so consented in
writing. [Section 228.]
ARTICLE II
BOARD OF DIRECTORS
Section 2.01 General Powers. Except as may otherwise be provided by law,
by the Certificate of Incorporation or by these By-Laws, the business and
affairs of the Corporation shall be managed by or under the direction of the
Board of Directors and the Board of Directors may exercise all the powers of the
Corporation. [Section 141(a).]
Section 2.02 Number and Term of Office. The number of Directors shall be
seven. Each Director (whenever elected) shall hold office until his successor
has been duly elected and qualified, or until his earlier death, resignation or
removal. [Section 141(b).]
Section 2.03 Election of Directors. The Directors shall be appointed
initially by the incorporator. Thereafter, except as otherwise provided in
Sections 2.12 and 2.13 of these By-Laws, the Directors shall be elected at each
annual meeting of the stockholders. If the annual meeting for the election of
Directors is not held on the date designated therefor, the Directors shall cause
the meeting to be held as soon thereafter as convenient. At each meeting of the
stockholders for the election of Directors, provided a quorum is present, the
Directors shall be elected by a plurality of the votes validly cast in such
election. [Sections 107, 108(a), 211(b), (c), 216.]
Section 2.04 Annual and Regular Meetings. The annual meeting of the Board
of Directors for the purpose of electing officers and for the transaction of
such other business as may come before the meeting shall be held as soon as
possible following adjournment of the annual meeting of the stockholders at the
place of such annual meeting of the stockholders. Notice of such annual meeting
of the Board of Directors need not be given. The Board of Directors from time to
time may by resolution provide for the holding of regular meetings and fix the
place (which may be within or without the State of Delaware) and the date and
hour of such meetings. Notice of regular meetings need not be given, provided,
however, that if the Board of Directors shall fix or change the time or place of
any regular meeting, notice of such action shall be mailed promptly, or sent by
telegram, telex or cable, to each Director who shall not have been present at
the meeting at which such action was taken, addressed to him at his usual place
of business, or shall be delivered to him personally. Notice of such action need
not be given to any Director who attends the first regular meeting after such
action is taken without protesting the lack of notice to him, prior to or at the
commencement of such meeting, or to any Director who submits a signed waiver of
notice, whether before or after such meeting. [Sections 141(g), 229, 230.]
Section 2.05 Special Meetings; Notice. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board or by the
President or, in the event of their absence or disability, by any Vice
President, at such place (within or without the State of Delaware), date and
hour as may be specified in the respective notices or waivers of notice of such
meetings. Special meetings of the Board of Directors may be called on 24 hours'
notice, if notice is given to each Director personally or by telephone, telex or
telegram, or on five days' notice, if notice is mailed to each Director,
addressed to him at his usual place of business. Notice of any special meeting
need not be given to any Director who attends such meeting
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without protesting the lack of notice to him, prior to or at the commencement of
such meeting, or to any Director who submits a signed waiver of notice, whether
before or after such meeting, and any business may be transacted thereat.
[Sections 141(g), 229.]
Section 2.06 Quorum; Voting. Except as otherwise required by these
By-Laws, at all meetings of the Board of Directors, the presence of a majority
of the total number of Directors shall constitute a quorum for the transaction
of business. Except as otherwise required by law, the vote of a majority of the
Directors present at any meeting at which a quorum is present shall be the act
of the Board of Directors.
Section 2.07 Adjournment. A majority of the Directors present, whether or
not a quorum is present, may adjourn any meeting of the Board of Directors to
another time or place. No notice need be given of any adjourned meeting unless
the time and place of the adjourned meeting are not announced at the time of
adjournment, in which case notice conforming to the requirements of Section 2.05
shall be given to each Director.
Section 2.08 Action Without a Meeting. Any action required or permitted to
be taken at any meeting of the Board of Directors may be taken without a meeting
if all members of the Board of Directors consent thereto in writing, and such
writing or writings are filed with the minutes of proceedings of the Board of
Directors. [Section 141(f).]
Section 2.09 Regulations; Manner of Acting. To the extent consistent with
applicable law, the Certificate of Incorporation and these By-Laws, the Board of
Directors may adopt such rules and regulations for the conduct of meetings of
the Board of Directors and for the management of the property, affairs and
business of the Corporation as the Board of Directors may deem appropriate. The
Directors shall act only as a Board, and the individual Directors shall have no
power as such.
Section 2.10 Action by Telephonic Communications. Members of the Board of
Directors may participate in a meeting of the Board of Directors by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear one another, and participation in
a meeting pursuant to this provision shall constitute presence in person at such
meeting. [Section 141(i).]
Section 2.11 Resignations. Any Director may resign at any time by
delivering a written notice of resignation, signed by such Director, to the
Chairman or the President. Unless otherwise specified therein, such resignation
shall take effect upon delivery. [Section 141(b).]
Section 2.12 Removal of Directors. Any Director may be removed at any
time, either for or without cause, by vote of the stockholders entitled to vote
for the election of such Director. Any vacancy in the Board of Directors caused
by any removal of a Director by vote of the stockholders may be filled by the
stockholders entitled to vote for the election of the Director so removed. If
such stockholders do not fill such vacancy at the meeting at which such removal
was effected (or in the written instrument effecting such removal, if such
removal was effected by consent without a meeting), such vacancy may be filled
in the manner provided in Section 2.13 of these By-Laws. [Section 141(k).]
Section 2.13 Vacancies and Newly Created Directorships. If any vacancies
shall occur in the Board of Directors, by reason of death, resignation, removal
or otherwise, or if the authorized number of Directors shall be increased, the
Directors then in office shall continue to act, and such vacancies and newly
created directorships may be filled by a majority of the Directors then in
office, although less than a quorum. A Director elected to fill a vacancy or a
newly created directorship shall hold office until his successor has been
elected and qualified or until his earlier death, resignation or removal. Any
such vacancy or newly created directorship may also be filled it any time by
vote of the stockholders entitled to elect the Director with respect to whom a
vacancy exists. [Section 223.]
Section 2.14 Compensation. The amount, if any, which each Director shall
be entitled to receive as compensation for his services as such shall be fixed
from time to time by resolution of the Board of Directors. [Section 141(h).]
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Section 2.15 Reliance on Accounts and Reports, etc. A Director, or a
member of any Committee designated by the Board of Directors shall, in the
performance of his duties, be fully protected in relying in good faith upon the
records of the Corporation and upon such information, opinions, reports or
statements presented to the Corporation by any of the Corporation's officers or
employees, or Committees of the Board of Directors, or by any other person as to
matters the member reasonably believes are within such other person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Corporation. [Section 141(e).]
ARTICLE III
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 3.01 How Constituted. The Board of Directors may, by resolution
adopted by a majority of the whole Board, designate one or more Committees,
including an Executive Committee, each such Committee to consist of such number
of Directors as from time to time may be fixed by the Board of Directors. The
Board of Directors may designate one or more Directors as alternate members of
any such Committee, who may replace any absent or disqualified member or members
at any meeting of such Committee. Thereafter, members (and alternate members, if
any) of each such Committee may be designated at the annual meeting of the Board
of Directors. Any such Committee may be abolished or re-designated from time to
time by the Board of Directors. Each member (and each alternate member) of any
such Committee (whether designated at an annual meeting of the Board of
Directors or to fill a vacancy or otherwise) shall hold office until his
successor shall have been designated or until he shall cease to be a Director,
or until his earlier death, resignation or removal. [Section 141(c).]
Section 3.02 Powers. During the intervals between the meetings of the
Board of Directors, the Executive Committee, except as otherwise provided in
this section or by resolutions of the Board of Directors adopted from time to
time by a majority of the whole Board, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the
property, affairs and business of the Corporation, including the power to
declare dividends and to authorize the issuance of stock. Each such other
Committee, except as otherwise provided in this section, shall have and may
exercise such powers of the Board of Directors as may be provided by resolution
or resolutions of the whole Board. Neither the Executive Committee nor any such
other Committee shall have the power or authority to:
(a) approve or adopt, or recommend to stockholders, any action or
matter expressly required by the Delaware General Corporation Law to be
submitted to stockholders for approval, or
(b) amend or repeal these By-Laws.
The Executive Committee shall have, and any such other Committee may be granted
by the Board of Directors power to authorize the seal of the Corporation to be
affixed to any or all papers which may require it. [Section 141(c).]
Section 3.03 Proceedings. Each such Committee may fix its own rules of
procedure and may meet at such place (within or without the State of Delaware),
at such time and upon such notice, if any, as it shall determine from time to
time. Each such Committee shall keep minutes of its proceedings and shall report
such proceedings to the Board of Directors at the Meeting of the Board of
Directors next following any such proceedings.
Section 3.04 Quorum and Manner of Acting. Except as may be otherwise
provided in the resolution creating such Committee, at all meetings of any
Committee the presence of members (or alternate members) constituting a majority
of the total authorized membership of such Committee shall constitute a quorum
for the transaction of business. The act of the majority of the members present
at any meeting at which a quorum is present shall be the act of such Committee.
Any action required or permitted to be taken at any meeting of any such
Committee may be taken without a meeting, if all members of such Committee shall
consent to such action in writing and such writing or writings are filed with
the minutes of the proceedings of the Committee.
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The members of any such Committee shall act only as a Committee, and the
individual members of such Committee shall have no power as such. [Sections
141(c), (f).]
Section 3.05 Action by Telephonic Communications. Members of any Committee
designated by the Board of Directors may participate in a meeting of such
Committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear one another,
and participation in a meeting pursuant to this provision shall constitute
presence in person at such meeting. [Section 141(i).]
Section 3.06 Absent or Disqualified Members. In the absence or
disqualification of a member of any Committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member. [Section 141(c).]
Section 3.07 Resignations. Any member (and any alternate member) of any
Committee may resign at any time by delivering a written notice of resignation,
signed by such member, to the Chairman or the President. Unless otherwise
specified therein, such resignation shall take effect upon delivery.
Section 3.08 Removal. Any member (and any alternate member) of any
Committee may be removed at any time, either for or without cause, by resolution
adopted by majority of the whole Board of Directors.
Section 3.09 Vacancies. If any vacancy shall occur in any Committee, by
reason of disqualification, death, resignation, removal or otherwise, the
remaining members (and any alternate members) shall continue to act, and any
such vacancy may be filled by the Board of Directors.
ARTICLE IV
OFFICERS
Section 4.01 Number. The officers of the Corporation shall be elected by
the Board of Directors and shall be a President and a Secretary. The Board of
Directors also may elect a Chairman and one or more Vice Presidents, a Treasurer
and one or more Assistant Secretaries and Assistant Treasurers in such numbers
as the Board of Directors may determine. Any number of offices may be held by
the same person. No officer need be a Director of the Corporation. [Sections
142(a), (b).]
Section 4.02 Election. Unless otherwise determined by the Board of
Directors, the officers of the Corporation shall be elected by the Board of
Directors at its initial meeting and thereafter annually at the annual meeting
of the Board of Directors. In the event of the failure to elect officers at any
annual meeting, officers may be elected at any regular or special meeting of the
Board of Directors. Subject to the provisions of Section 4.11, each officer
(whether chosen at any annual meeting of the Board of Directors or to fill a
vacancy or otherwise) shall hold office until the next succeeding annual meeting
of the Board of Directors and until his successor has been elected and
qualified, or until his earlier death, resignation or removal. [Section 142(b).]
Section 4.03 Salaries. The salaries of all officers and agents of the
Corporation shall be fixed by the Board of Directors.
Section 4.04 Removal and Resignation; Vacancies. Any officer may be
removed for or without cause at any time by the Board of Directors. Any officer
may resign at any time by delivering a written notice of resignation, signed by
such officer, to the Board of Directors the Chairman or the President. Unless
otherwise specified therein, such resignation shall take effect upon delivery.
Any vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise, shall be filled by the Board of Directors. [Sections
142(b), (e).]
Section 4.05 Authority and Duties of Officers. The officers of the
Corporation shall have such authority and shall exercise such powers and perform
such duties as may be specified in these By-Laws or in a resolution of the Board
of Directors which is not inconsistent with these By-Laws, except that in any
event each officer shall exercise such powers and perform such duties as may be
required by law. [Section 142(a).]
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Section 4.06 The Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the stockholders and directors at which he is
present, and shall exercise such other powers and perform such other duties as
may from time to time be assigned to him by these By-Laws or by the Board of
Directors.
Section 4.07 The President. The President shall exercise such powers and
perform such duties as may from time to time be assigned to him by these By-Laws
or by the Board of Directors.
Section 4.08 The Vice Presidents. Each Vice President shall exercise such
powers and perform such duties as from time to time may be assigned to him by
these By-Laws or by the Board of Directors or by the President. At the request
of the President or in the event of his absence or disability, the Vice
President designated by the Board of Directors or, if no such designation shall
have been made, then the Vice President designated by the President shall
perform all the duties of the President and, when so acting, shall have all the
powers of and be subject to all the restrictions upon the President. Any Vice
President may sign (unless the President or another Vice President shall have
signed), certificates representing shares of the Corporation the issuance of
which shall have been authorized by the Board of Directors.
Section 4.09 The Secretary. The Secretary shall have the following powers
and duties:
(a) He shall keep or cause to be kept a record of all the proceedings
of the meetings of the stockholders and of the Board of Directors in books
provided for that purpose.
(b) He shall cause all notices to be duly given in accordance with the
provisions of these By-Laws and as required by law.
(c) Whenever any Committee shall be appointed pursuant to a resolution
of the Board of Directors, he shall furnish a copy of such resolution to
the members of such Committee.
(d) He shall be the custodian of the records and of the seal of the
Corporation and cause such seal (or a facsimile thereof) to be affixed to
all certificates representing shares of the Corporation prior to the
issuance thereof and to all instruments the execution of which on behalf of
the Corporation under its seal shall have been duly authorized in
accordance with these By-Laws, and when so affixed he may attest the same.
(e) He shall properly maintain and file all books, reports,
statements, certificates and all other documents and records required by
law, the Certificate of Incorporation or these By-Laws.
(f) He shall have charge of the stock books and ledgers of the
Corporation and shell cause the stock and transfer books to be kept in such
manner as to show at any time the number of shares of stock of the
Corporation of each class issued and outstanding, the names (alphabetically
arranged) and the addresses of the holders of record of such shares, the
number of shares held by each holder and the date as of which each became
such holder of record.
(g) He shall sign (unless the Treasurer, an Assistant Treasurer or
Assistant Secretary shall have signed) certificates representing shares of
the Corporation the issuance of which shall have been authorized by the
Board of Directors.
(h) He shall perform, in general, all duties incident to the office of
Secretary and such other duties as may be given to him by these By-Laws or
as may be assigned to him from time to time by the Board of Directors or
the President.
Section 4.10 The Treasurer. The Treasurer shall have the following powers
and duties:
(a) He shall have charge and supervision over and be responsible for
the moneys, securities, receipts and disbursements of the Corporation, and
shall keep or cause to be kept full and accurate records of all receipts of
the Corporation.
(b) He shall cause the moneys and other valuable effects of the
Corporation to be deposited in the name and to the credit of the
Corporation in such banks or trust companies or with such bankers or other
depositaries as shall be selected in accordance with Section 8.05 of these
By-Laws.
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(c) He shall cause the moneys of the Corporation to be disbursed by
checks or drafts (signed as provided in Section 8.06 of these By-Laws) upon
the authorized depositaries of the Corporation and cause to be taken and
preserved proper vouchers for all moneys disbursed.
(d) He shall render to the Board of Directors or the President,
whenever requested, a statement of the financial condition of the
Corporation and of all his transactions as Treasurer, and render a full
financial report at the annual meeting of the stockholders, if called upon
to do so.
(e) He shall be empowered from time to time to require from all
officers or agents of the Corporation reports or statements giving such
information as he may desire with respect to any and all financial
transactions of the Corporation.
(f) He may sign (unless an Assistant Treasurer or the Secretary or an
Assistant Secretary shall have signed) certificates representing stock of
the Corporation the issuance of which shall have been authorized by the
Board of Directors.
Section 4.11 Additional Officers. The Board of Directors may appoint such
other officers and agents as it may deem appropriate, and such other officers
and agents shall hold their offices for such terms and shall exercise such
powers and perform such duties as may be determined from time to time by the
Board of Directors. The Board of Directors from time to time may delegate to any
officer or agent the power to appoint subordinate officers or agents and to
prescribe their respective rights, terms of office, authorities and duties. Any
such officer or agent may remove any such subordinate officer or agent appointed
by him, for or without cause. [Sections 142(a), (b).]
Section 4.12 Security. The Board of Directors may require any officer,
agent or employee of the Company to provide security for the faithful
performance of his duties, in such amount and of such character as may be
determined from time to time by the Board of Directors. [Section 142(c).]
ARTICLE V
CAPITAL STOCK
Section 5.01 Certificates of Stock. The shares of the Corporation shall be
represented by certificates, provided that the Board of Directors of the
Corporation may provide by resolution or resolutions that some or all of any or
all classes or series of its stock shall be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate until such
certificate is surrendered to the Corporation. Notwithstanding the adoption of
such a resolution by the Board of Directors, every holder of stock represented
by certificates and upon request every holder of uncertificated shares shall be
entitled to have a certificate signed by, or in the name of the Corporation by
the Chairman, or the President or a Vice President, and by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary, representing
the number of shares registered in certificate form. Such certificate shall be
in such form as the Board of Directors may determine, to the extent consistent
with applicable law, the Certificate of Incorporation and these By-Laws.
[Section 158.]
Section 5.02 Signatures; Facsimile. Any or all the signatures on such
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed, or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
[Section 158.]
Section 5.03 Lost, Stolen or Destroyed Certificates. The Board of
Directors may direct that a new certificate or uncertificated shares be issued
in place of any certificate theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon delivery to the Board of Directors of
an affidavit of the owner or owners of such certificate, setting forth such
allegation. The Board of Directors may require the owner of such lost, stolen or
destroyed certificate, or his legal representative, to give the Corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of any such new certificate or uncertificated shares. [Section 167.]
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Section 5.04 Transfer of Stock. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares, duly endorsed or
accompanied by appropriate evidence of succession, assignment or authority to
transfer, the Corporation shall issue a new certificate or uncertificated shares
to the person entitled thereto, cancel the old certificate and record the
transaction upon its books. Transfer of uncertificated shares shall be governed
by applicable provisions of law. Subject to the provisions of the Certificate of
Incorporation and these By-Laws, the Board of Directors way prescribe such
additional rules and regulations as it may deem appropriate relating to the
issue, transfer and registration of shares of the Corporation.
Section 5.05 Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which record date shall
not be more than sixty nor less than ten days before the date of such meeting.
If no record date is fixed by the Board of Directors, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the date next preceding the
day on which notice is given or, if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held. A determination
of stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
In order that the Corporation may determine the stockholders entitled to consent
to corporate action in writing without a meeting, the Board of Directors may fix
a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. If no
record date has been fixed by the Board of Directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is required by
law, shall be the first date on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the Corporation by delivery
to its registered office in the State, its principal place of business, or an
officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. If no record date has been fixed by the Board of
Directors and prior action by the Board of Directors is required by law, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action. In
order that the Corporation may determine the stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted,
and which record date shall be not more than sixty days prior to such action. If
no record date is fixed, the record date for determining stockholders for any
such purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. [Section 213.]
Section 5.06 Registered Stockholders. Prior to due surrender of a
certificate for registration of transfer or transfer of uncertificated shares,
the Corporation may treat the registered owner as the person exclusively
entitled to receive dividends and other distributions, to vote, to receive
notice and otherwise to exercise all the rights and powers of the owner of the
shares represented by such certificate or such uncertificated shares, and the
Corporation shall not be bound to recognize any equitable or legal claim to or
interest in such shares on the part of any other person, whether or not the
Corporation shall have notice of such claim or interests. Whenever any transfer
of shares shall be made for collateral security, and not absolutely, it shall be
so expressed in the entry of the transfer if, when the certificates are
presented to the Corporation for transfer or uncertificated shares are requested
to be transferred, both the transferor and transferee request the Corporation to
do so. [Section 159.]
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Section 5.07 Transfer Agent and Registrar. The Board of Directors may
appoint one or more transfer agents and one or more registrars, and may require
all certificates representing shares to bear the signature of any such transfer
agents or registrars.
ARTICLE VI
INDEMNIFICATION
Section 6.01 Nature of Indemnity. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was or has agreed to become a director or officer of the Corporation, or is or
was serving or has agreed to serve at the request of the Corporation as a
director or officer, of another corporation, partnership, joint venture, trust
or other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, and may indemnify any parson who was or is a party or
is threatened to be made a party to such an action, suit or proceeding by reason
of the fact that he is or was or has agreed to become an employee or agent of
the Corporation, or is or was serving or has agreed to serve at the request of
the Corporation as an employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or on his behalf in connection with such action, suit or
proceeding and any appeal therefrom, if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding had no
reasonable cause to believe his conduct was unlawful; except that in the case of
an action or suit by or in the right of the Corporation to procure a judgment in
its favor (a) such indemnification shall be limited to expenses (including
attorneys' fees) actually and reasonably incurred by such person in the defense
or settlement of such action or suit, and (b) no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Delaware Court of
Chancery or such other court shall deem proper.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith or in a manner in which he reasonably believed to be in or not opposed to
the best interests of the Corporation, or, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 6.02 Successful Defense. To the extent that a director, officer,
employee or agent of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Section
6.01 or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
Section 6.03 Determination that Indemnification is Proper. Any
indemnification of a director or officer of the Corporation under Section 6.01.
(unless ordered by a court) shall be made by the Corporation unless a
determination is made that indemnification of the director or officer is not
proper in the circumstances because he has not met the applicable standard of
conduct set forth in Section 6.01. Any indemnification of an employee or agent
of the Corporation under Section 6.01 (unless ordered by a court) may be made by
the Corporation upon a determination that indemnification of the employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in Section 6.01. Any such determination shall be made (a)
by the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (b) if such a quorum
is not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (c) by the
stockholders.
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Section 6.04 Advance Payment of Expenses. Expenses incurred by a director
or officer in defending a civil or criminal action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized by this Article.
Such expenses incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the Board of Directors deems appropriate. The
Board of Directors may authorize the Corporation's counsel to represent such
director, officer, employee or agent in any action, suit or proceeding, whether
or not the Corporation is a party to such action, suit or proceeding.
Section 6.05 Procedure for Indemnification of Directors and Officers. Any
indemnification of a director or officer of the Corporation under Sections 6.01
and 6.02 or advance of costs, charges and expenses to a director or officer
under Section 6.04, shall be made promptly, and in any event within 30 days,
upon the written request of the director or officer. If a determination by the
Corporation that the director or officer is entitled to indemnification pursuant
to this Article is required, and the Corporation fails to respond within sixty
days to a written request for indemnity, the Corporation shall be deemed to have
approved such request. If the Corporation denies a written request for indemnity
or advancement of expenses, in whole or in part, or if payment in full pursuant
to such request is not made within 30 days, the right to indemnification or
advances as granted by this Article shall be enforceable by the director or
officer in any court of competent jurisdiction. Such person's costs and expenses
incurred in connection with successfully establishing his right to
indemnification, in whole or in part, in any such action shall also be
indemnified by the Corporation. It shall be a defense to any such action (other
than an action brought to enforce a Claim for the advance of costs, charges and
expenses under Section 6.04 where the required undertaking, if any, has been
received by the Corporation) that the claimant has not met the standard of
conduct set forth in Section 6.01, but the burden of proving such defense shall
be on the Corporation. Neither the failure of the Corporation (including its
Board of Directors, its independent legal counsel, and its stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he has
met the applicable standard of conduct set forth in Section 6.01, nor the fact
that there has been an actual determination by the Corporation (including its
Board of Directors, its independent legal counsel, and its stockholders) that
the claimant has not met such applicable standard of conduct, shall be a defense
to the action or create a presumption that the claimant has not met the
applicable standard of conduct.
Section 6.06 Survival; Preservation of Other Rights. The foregoing
indemnification provisions shall be deemed to be a contract between the
Corporation and each director, officer, employee and agent who serves in any
such capacity at any time while these provisions as well as the relevant
provisions of the Delaware General Corporation Law are in effect and any repeal
or modification thereof shall not affect any right or obligation then existing
with respect to any state of facts then or previously existing or any action,
suit, or proceeding previously or thereafter brought or threatened based in
whole or in part upon any such state of facts. Such a "contract right" may not
be modified retroactively without the consent of such director, officer,
employee or agent.
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which any person indemnified may be entitled
under any by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
Section 6.07 Insurance. By action of the Board of Directors, the
Corporation may purchase and maintain insurance on behalf of any person who is
or was or has agreed to become a director or officer of the Corporation, or is
or was serving at the request of the Corporation as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against him and incurred by him or on his behalf
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article.
Section 6.08 Severability. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director or officer and
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may indemnify each employee or agent of the Corporation as to costs, charges and
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Corporation, to the fullest extent permitted by any applicable
portion of this Article that shall not have been invalidated and to the fullest
extent permitted by applicable law.
ARTICLE VII
OFFICES
Section 7.01 Registered Office. The registered office of the Corporation
in the State of Delaware shall be located at The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. [Section 131.]
Section 7.02 Other Offices. The Corporation may maintain offices or places
of business at such other locations within or without the State of Delaware as
the Board of Directors may from time to time determine or as the business of the
Corporation may require. [Section 122(8).]
ARTICLE VIII
GENERAL PROVISIONS
Section 8.01 Dividends. Subject to any applicable provisions of law and
the Certificate of Incorporation, dividends upon the shares of the Corporation
may be declared by the Board of Directors at any regular or special meeting of
the Board of Directors and any such dividend may be paid in cash, property, or
shares of the Corporation. [Section 173.]
Section 8.02 Reserves. There may be set aside out of any funds of the
Corporation available for dividends such sum or sums as the Board of Directors
from time to time, in its absolute discretion thinks proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation or for such other purpose as the
Board of Directors shall think conducive to the interest of the Corporation, and
the Board of Directors may similarly modify or abolish any such reserve.
[Section 171.]
Section 8.03 Execution of Instruments. Subject to any limitation contained
in the Certificate of Incorporation or these By-Laws, the Chairman of the Board
or the President may enter into any contract or execute and deliver any
instrument in the name and on behalf of the Corporation and in the ordinary
course of its business. The Board of Directors may, subject to any limitation
contained in the Certificate of Incorporation or these By-Laws, authorize any
officer or agent to enter into any contract or execute and deliver any
instrument in the name and on behalf of the Corporation. Any such authorization
may be general or limited to specific contracts or instruments.
Section 8.04 Corporate Indebtedness. No loan shall be contracted on behalf
of the Corporation, and no evidence of indebtedness shall be issued in its name,
unless authorized by the Board of Directors. Such authorization may be general
or confined to specific instances. Loans so authorized may be effected at any
time for the Corporation from any bank, trust company or other institution, or
from any firm, corporation or individual. All bonds, debentures, notes and other
obligations or evidences of indebtedness of the Corporation issued for such
loans shall be made, executed and delivered as the Board of Directors shall
authorize. When so authorized by the Board of Directors, any part of or all the
properties, including contract rights, assets, business or good will of the
Corporation, whether then owned or thereafter acquired, may be mortgaged,
pledged, hypothecated or conveyed or assigned in trust as security for the
payment of such bonds, debentures, notes and other obligations or evidences of
indebtedness of the Corporation, and of the interest thereon, by instruments
executed and delivered in the name of the Corporation.
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Section 8.05 Deposits. Any funds of the Corporation may be deposited from
time to time in such banks, trust companies or other depositaries as may be
determined by the Board of Directors, or by such officers or agents as may be
authorized by the Board of Directors to make such determination.
Section 8.06 Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such agent or agents
of the Corporation, and in such manner, as the Board of Directors from time to
time may determine.
Section 8.07 Sale, Transfer, etc. of Securities. To the extent authorized
by the Board of Directors, the Chairman of the Board, the President, or any Vice
President together with the Secretary or Treasurer or an Assistant Secretary or
Assistant Treasurer may sell, transfer, endorse, and assign any shares of stock,
bonds or other securities owned by or held in the name of the Corporation, and
may make, execute and deliver in the name of the Corporation, under its
corporate seal, any instruments that may be appropriate to effect any such sale,
transfer, endorsement or assignment.
Section 8.08 Voting as Stockholder. Unless otherwise determined by
resolution of the Board of Directors, the Chairman of the Board or the President
shall have full power and authority on behalf of the Corporation to attend any
meeting of stockholders of any corporation in which the Corporation may hold
stock, and to act, vote (or execute proxies to vote) and exercise in person or
by proxy all other rights, powers and privileges incident to the ownership of
such stock. Such officers acting on behalf of the Corporation shall have full
power and authority to execute any instrument expressing consent to or dissent
from any action of any such corporation without a meeting. The Board of
Directors may by resolution from time to time confer such power and authority
upon any other person or persons.
Section 8.09 Fiscal Year. The fiscal year of the Corporation shall
commence on the first day of February in each calendar year and terminate on the
31st day of January.
Section 8.10 Seal. The seal of the Corporation shall be circular in form
and shall contain the name of the Corporation, the year of its incorporation and
the words "Corporate Seal" and "Delaware." The form of such seal shall be
subject to alteration by the Board of Directors. The seal may be used by causing
it or a facsimile thereof to be impressed, affixed or reproduced, or may be used
in any other lawful manner.
Section 8.11 Books and Records; Inspection. Except to the extent otherwise
required by law, the books and records of the Corporation shall be kept at such
place or places within or without the State of Delaware as may be determined
from time to time by the Board of Directors.
ARTICLE IX
AMENDMENT OF BY-LAWS
Section 9.01 Amendment. These By-Laws may be amended, altered or repealed
at any regular or special meeting of the stockholders, if, in the case of such
special meeting only, notice of such amendment, alteration or repeal is
contained in the notice or waiver of notice of such meeting. Any amendment,
alteration or repeal must be approved by holders of a majority of the voting
power of the Corporation entitled to vote. These By-laws may also be amended,
altered or repealed by a majority of the whole Board of Directors.
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APPENDIX F
AMENDED AND RESTATED EXCALIBUR TECHNOLOGIES CORPORATION
1996 EMPLOYEE STOCK PURCHASE PLAN
Excalibur Technologies Corporation, a Delaware corporation, hereby adopted
this Excalibur 1996 Employee Stock Purchase Plan (the "Plan") as of the
Effective Date, and is amending the Plan as of the first Option Period beginning
after the date of shareholder approval of the Plan so amended. The purposes of
this Plan are as follows:
(1) To assist employees of the Company in acquiring a stock ownership
interest in the Company pursuant to a plan that is intended to qualify as
an "employee stock purchase plan" under section 423 of the Internal Revenue
Code of 1986, as amended.
(2) To help employees provide for their future security and to
encourage them to remain in the employment of the Company.
1. Definitions
Whenever any of the following terms is used in the Plan with the first
letter or letters capitalized, it shall have the following meaning unless the
context clearly indicates to the contrary (such definitions to be equally
applicable to both the singular and plural forms of the terms defined):
(a) "Code" means the Internal Revenue Code of 1986, as amended.
(b) "Committee" means the committee appointed to administer the Plan
pursuant to paragraph 10.
(c) "Company" means Excalibur Technologies Corporation, a Delaware
corporation.
(d) "Date of Exercise" means the date as of which an Option is
exercised and the Stock subject to that Option is purchased. With respect
to any Option, the Dates of Exercise are the last day of each three-month
period ending January 31, April 30, July 31 and October 31 in which Stock
is traded in the over-the-counter market during the Option Period in which
that Option was granted.
(e) "Date of Grant" means the date as of which an Option is granted,
as set forth in paragraph 3(a).
(f) "Eligible Compensation" means total cash compensation received
from the Company as regular compensation during an Option Period. By way of
illustration, and not by way of limitation, Eligible Compensation includes
regular compensation such as salary, wages, overtime, bonuses, commissions,
and incentive compensation, but excludes relocation expense reimbursements,
other reimbursements and income realized as a result of participation in
any stock option, stock purchase, or similar plan of the Company.
(g) "Effective Date" means August 1, 1996.
(h) "Eligible Employee" means any employee of the Company (or any
subsidiary designated by the board of directors of the Company) (i) who is
a full time employee or a part-time employee whose customary employment is
more than twelve hours per week and (ii) who does not, immediately after
the Option is granted, own (within the meaning of Code Sections 423(b)(3)
and 424(d)) stock possessing five percent or more of the total combined
voting power or value of all classes of stock of the Company.
(i) "Option" means an option granted under the Plan to an Eligible
Employee to purchase shares of Stock.
(j) "Option Period" means with respect to any Option the period
beginning upon the Date of Grant and ending on the July 31 or January 31
immediately following the Date of Grant, whichever is earlier, or ending on
such other date as the Committee shall determine. No Option Period may
exceed 5 years from the Date of Grant.
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(k) "Option Price" with respect to any Option has the meaning set
forth in paragraph 4(b).
(l) "Participant" means an Eligible Employee who has complied with the
provisions of paragraph 3(b).
(m) "Periodic Deposit Account" means the account established and
maintained by the Company to which shall be credited pursuant to paragraph
3(c) amounts received from Participants for the purchase of Stock under the
Plan.
(n) "Plan" means this Amended and Restated Excalibur Technologies
Corporation 1996 Employee Stock Purchase Plan.
(o) "Plan Year" means the fiscal year of the Company which begins on
February 1.
(p) "Stock" means shares of common stock, par value $.01 per share, of
the Company.
(q) "Stock Purchase Account" means the account established and
maintained by the Company for each Participant at a securities brokerage
firm to be designated by the Company to which Stock purchased upon exercise
of an Option under the Plan shall be credited pursuant to paragraph 4(c).
(r) "Subsidiary" means any corporation other than the Company in an
unbroken chain of corporations beginning with the Company if at the time of
the granting of the Option each of the corporations other than the last
corporation, in the unbroken chain owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
2. Stock Subject to Plan
Subject to the provisions of paragraph 8 (relating to adjustment upon
changes in the Stock) the Stock which may be sold pursuant to Options granted
under the Plan shall not exceed in the aggregate 250,000 shares, and may be
newly issued shares or treasury shares or shares bought in the market or
otherwise for purposes of the Plan.
3. Grant of Options
(a) General Statement
The Company may grant Options under the Plan to all Eligible Employees on
February 1 and/or August 1 of each Plan Year or on such other date as the
Committee shall designate. The term of each Option shall end on the last day of
the Option Period with respect to which the Option is granted. With respect to
each Option Period each Eligible Employee shall be granted an Option on the Date
of Grant for the number of shares of Common Stock determined by dividing (i)
$25,000 multiplied by the number of (whole or part) calendar years in the Option
Period by (ii) the fair market value of a share of Common Stock on the Date of
Grant.
(b) Election to Participate
Each Eligible Employee who elects to participate in the Plan shall
communicate to the Company in accordance with procedures established by the
Committee an election to participate in the Plan whereby the Eligible Employee
designates a stated whole percentage equaling at least 1% but no more than 10%
of his or her Eligible Compensation during the Option Period to be deposited
periodically in his or her Periodic Deposit Account under paragraph 3(c). The
cumulative amount deposited in the Periodic Deposit Account during a Plan Year
with respect to any Eligible Employee may not exceed the limitation stated in
paragraph 3(d). A Participant's election to participate in the Plan shall
continue in effect during the current and subsequent Option Periods until
changed pursuant to paragraph 3(c).
(c) Periodic Deposit Accounts
The Company shall maintain a Periodic Deposit Account for each Participant
and shall credit to that account in U.S. dollars all amounts received under the
Plan from the Participant. No interest will be paid to any Participant or
credited to his or her Periodic Deposit Account under the Plan with respect to
such funds. All amounts credited to a Participant's Periodic Deposit Account
shall be used to purchase Stock under
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paragraph 4(c) and no portion of a Participant's Periodic Deposit Account shall
be refunded to him or her, subject to paragraph 5.
Credits to an Eligible Employee's Periodic Deposit Account shall be made by
payroll deduction or by other alternate payment arrangements in accordance with
rules and procedures established by the Committee. An Eligible Employee may
increase, decrease or eliminate the periodic credits to his or her Periodic
Deposit Account for future periods by filing a new election amount at any time
during an Option Period. The change shall become effective in accordance with
the Committee's rules and procedures as soon as practicable after the Company
receives the election but the change will not affect the amounts deposited with
respect to Eligible Compensation sooner than the Eligible Compensation payable
with respect to the next pay period after the Company receives the
authorization.
(d) $25,000 Limitation
No Eligible Employee shall be permitted to purchase Stock under the Plan or
under any other employee stock purchase plan of the Company or of any Subsidiary
which is intended to qualify under Code Section 423, at a rate which exceeds
$25,000 in fair market value of Stock (determined at the time the Option is
granted) for each calendar year in which any such Option granted to such
Participant is outstanding at any time.
4. Exercise of Options
(a) General Statement
On each Date of Exercise the entire Periodic Deposit Account of each
Participant shall be used to purchase at the Option Price whole of Stock subject
to the Option. No fractional shares shall be issued. Each Participant
automatically and without any act on his or her part will be deemed to have
exercised his or her Option on each such Date of Exercise to the extent that the
amounts then credited to the Participant's Periodic Deposit Account under the
Plan are used to purchase Stock.
(b) Option Price Defined
Starting with the first Option Period after the date of shareholder
approval of the Plan, the Option Price per share of Stock to be paid by each
Participant on each exercise of his or her Option shall be an amount in U.S.
dollars equal to the lesser of (i) 85% of the fair market value of a share of
Stock as of the applicable Date of Exercise or (ii) 85% of the fair market value
of a share of Stock as of the Date of Grant. The fair market value of a share of
Stock as of an applicable Date of Exercise or Date of Grant shall be the closing
sale price of a share of Stock traded in the over-the-counter market on such
date.
(c) Stock Purchase Accounts; Stock Certificates
The Company shall maintain a Stock Purchase Account for each Participant at
a securities brokerage firm to be designated by the Company to reflect the Stock
purchased under the Plan by the Participant. Upon exercise of an Option by a
Participant pursuant to paragraph 4(a), the Company shall credit to the
Participant's Stock Purchase Account the whole or fractional shares of Stock
purchased at that time.
Except as provided in paragraph 5, certificates with respect to Stock
credited to a Participant's Stock Purchase Account shall be issued only on
request by the Participant for a distribution of whole shares or when necessary
to comply with the transaction requirements outside the United States. Upon
issuance of such a Stock certificate to a Participant, the Participant's Stock
Purchase Account shall be adjusted to reflect the number of shares of Stock
distributed to the Participant.
5. Rights on Retirement, Death, Termination of Employment
If a Participant retires, dies, or otherwise terminates employment, then to
the extent practicable, no further amounts shall be credited to the
Participant's Periodic Deposit Account from any pay due and owing with respect
to the Participant after such retirement, death, or other termination of
employment. All amounts credited to such a Participant's Periodic Deposit
Account shall be used on the next Date of Exercise in that Option Period to
purchase whole shares of Stock under paragraph 4. Such a Participant's Stock
Purchase
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Account shall be terminated, and Stock certificates with respect to whole shares
of Stock and cash with respect to fractional shares of Stock shall be
distributed as soon as practicable after such Date of Exercise.
Notwithstanding anything in this Plan to the contrary and except to the
extent permitted under Code Section 423(a), a Participant's Option shall not be
exercisable more than three months after the Participant retires or otherwise
ceases to be employed by the Company.
6. Restriction Upon Assignment
An Option granted under the Plan shall not be transferable otherwise than
by will or the laws of descent and distribution, and is exercisable during the
Participant's lifetime only by the Participant. The Company will not recognize
and shall be under no duty to recognize any assignment or purported assignment
by a Participant, other than by will or the laws of descent and distribution, of
the Participant's interest in the Plan or of his or her Option or of any rights
under his or her Option.
7. No Rights of Stockholder Until Exercise of Option
A Participant shall not be deemed to be a stockholder of the Company, nor
have any rights or privileges of a stockholder, with respect to the number of
shares of Stock subject to an Option. A Participant shall have the rights and
privileges of a stockholder of the Company when, but not until, the
Participant's Option is exercised pursuant to paragraph 4(a) and the Stock
purchased by the Participant at that time has been credited to the Participant's
Stock Purchase Account.
8. Changes in the Stock; Adjustments of an Option
If, while any Options are outstanding, the outstanding shares of Stock have
increased, decreased, changed into, or been exchanged for a different number or
kind of shares or securities of the Company, or there has been any other change
in the capitalization of the Company, through reorganization, merger,
recapitalization, reclassification, stock split, reverse stock split, spinoff or
similar transaction, appropriate and proportionate adjustments may be made by
the Committee in the number and/or kind of shares which are subject to purchase
under outstanding Options and to the Option Price or prices applicable to such
outstanding Options, including, if the Committee deems appropriate, the
substitution of similar options to purchase shares of another company (with such
other company's consent). In addition, in any such event, the number and/or kind
of shares which may be offered in the Options shall also be proportionately
adjusted. No adjustments to outstanding Options shall be made for dividends paid
in the form of stock.
9. Use of Funds; Repurchase of Stock
All funds received or held by the Company under the Plan will be included
in the general funds of the Company free of any trust or other restriction and
may be used for any corporate purpose. The Company shall not be required to
repurchase from any Eligible Employee shares of Stock which such Eligible
Employee acquires under the Plan.
10. Administration by Committee
(a) Appointment of Committee
The board of directors of the Company, or its delegate, shall appoint a
Committee, which shall be composed of one or more members, to administer the
Plan on behalf of the Company. Each member of the Committee shall serve for a
term commencing on the date specified by the board of directors of the Company,
or its delegate, and continuing until he or she dies or resigns or is removed
from office by such board of directors, or its delegate.
(b) Duties and Powers of Committee
It shall be the duty of the Committee to conduct the general administration
of the Plan in accordance with its provisions. The Committee shall have the
power to:
(1) determine when the initial and subsequent Option Periods will
commence;
(2) interpret the Plan and the Options;
F-4
<PAGE> 242
(3) adopt such rules for the administration, interpretation, and
application of the Plan as are consistent with the Plan and Code Section
423; and
(4) interpret, amend, or revoke any such rules.
In its absolute discretion, the board of the directors of the Company may
at any time and from time to time exercise any and all rights and duties of the
Committee under the Plan. The Committee may delegate any of its responsibilities
under the Plan by designating in writing other persons to carry out any or all
of such responsibilities.
(c) Majority Rule
The Committee shall act by a majority of its members in office. The
Committee may act either by vote at a meeting or by a memorandum or other
written instrument signed by a majority of the Committee.
(d) Compensation; Professional Assistance; Good Faith Actions
Each member of the Committee who is an employee of the Company or a
Subsidiary shall receive no additional compensation for his or her services
under the Plan. Each Committee member who is not an employee of the Company or a
Subsidiary shall receive such compensation for his or her services under the
Plan as may be determined by the board of directors of the Company, or its
delegate. All expenses and liabilities incurred by members of the Committee in
connection with the administration of the Plan shall be borne by the Company.
The Committee may employ attorneys, consultants, accountants, appraisers,
brokers or other persons. The Committee, the Company, and its officers and
directors shall be entitled to rely upon the advice, opinions, or valuations of
any such persons. All actions taken and all interpretations and determinations
made by the Committee in good faith shall be final and binding upon all
Participants, the Company and all other interested persons. No member of the
Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or the Options, and
all members of the Committee shall be fully protected by the Company in respect
to any such action, determination or interpretation.
11. No Rights as an Employee
Nothing in the Plan nor any Option shall be construed to give any person
(including any Eligible Employee or Participant) the right to remain in the
employ of the Company or to affect the right of the Company to terminate the
employment of any person (including any Eligible Employee or Participant) at any
time with or without cause, to the extent otherwise permitted under law.
12. Term of Plan
No Option may be granted during any period of suspension of the Plan or
after termination of the Plan, and in no event may any Option be granted under
the Plan after ten years from the commencement of the initial Option Period.
13. Amendment of the Plan
The board of directors of the Company, or its delegate, may amend, suspend,
or terminate the Plan at any time; provided that approval by the vote of the
holders of more than 50% of the outstanding shares of the Stock entitled to vote
shall be required to amend the Plan to reduce the Exercise Price or increase the
number of shares of Stock reserved for the Options under the Plan.
14. Effect Upon Other Plans
The adoption of the Plan shall not affect any other compensation or
incentive plans in effect for the Company, except to the extent required by law.
Nothing in this Plan shall be construed to limit the right of the Company (a) to
establish any other forms of incentives or compensation for employees of the
Company or (b) to grant or assume options otherwise than under this Plan in
connection with any proper corporate purpose, including, but not by way of
limitation, the grant or assumption of options in connection with the
acquisition, by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, firm or association.
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<PAGE> 243
15. Notices
Any notice to be given under the terms of the Plan to the Company shall be
addressed to the Company in care of the Committee and any notice to be given to
the Eligible Employee shall be addressed to the Eligible Employee at his or her
last address as reflected in the Company's records. By a notice given pursuant
to this paragraph, either party may hereafter designate a different address for
notices to be given to it or the Eligible Employee. Any notice which is required
to be given to an Eligible Employee shall, if the Eligible Employee is then
deceased, be given to the Eligible Employee's personal representative if such
representative has previously informed the Company of his or her status and
address by written notice under this paragraph. Any notice shall have been
deemed duly given when enclosed in a properly sealed envelope or wrapper
addressed as aforesaid, deposited (with postage prepaid) in a post office,
branch post office, or other depository regularly maintained by the United
States Postal Services.
16. Titles
Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of the Plan.
F-6
<PAGE> 244
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The following summary is qualified in its entirety by reference to the
complete text of the Delaware General Corporation Law ("DGCL"), and the
By-Laws and Amended and Restated Certificate of Incorporation of Convera
Corporation ("Convera") referred to below.
Section 145 of the DGCL provides in relevant part that a corporation
may indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that such person
is or was a director, officer, employee, or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe such person's conduct
was unlawful.
In addition, Section 145 of the DGCL provides that a corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of
the corporation to procure a judgment in its favor by reason of the fact that
such person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred
by such person in connection with the defense or settlement of such action or
suit if such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the corporation and
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Delaware Court of Chancery
or the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Delaware Court of Chancery or such other
court shall deem proper.
Section 145 of the DGCL further provides that nothing in the
above-described provisions shall be deemed exclusive of any other rights to
indemnification or advancement of expenses to which any person may be entitled
under any bylaw, agreement, vote of stockholders or disinterested directors or
otherwise.
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<PAGE> 245
Convera provides for indemnification of its directors and officers
pursuant to Article Eighth of its Amended and Restated Certificate of
Incorporation and Article VI of its By-laws. Article Eighth of Convera's
Amended and Restated Certificate of Incorporation and Article VI of Convera's
By-laws provide in effect that, unless prohibited by applicable law, Convera
will indemnify directors and officers against all expenses (including
attorney's fees), judgments, fines and amounts paid in settlement incurred in
connection with any such proceedings to the fullest extent permitted by
Delaware statutory or decisional law. Under Article VI of the By-laws, Convera
will also advance amounts to any director or officer during the pendency of
any such proceedings against expenses incurred in connection with such
proceedings, provided that Convera receives an undertaking to repay such
amount if it is ultimately determined that such person is not entitled to be
indemnified under such Article. The indemnification provided for in such
Articles is in addition to any rights to which any director or officer may
otherwise be entitled. Article VI of Convera's By-laws provides that the right
of a director or officer to such indemnification and advancement of expenses
will be a contract right and further provides procedures for the enforcement
of such right.
As authorized by Article VI of its By-Laws, Convera has purchased
directors' and officers' liability insurance policies indemnifying its
directors and officers and the directors and officers of its subsidiaries
against claims and liabilities (with stated exceptions) to which they may
become subject by reason of their positions with Convera or its subsidiaries
as directors and officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
---------- -----------
<S> <C>
2.1 Agreement and Plan of Contribution and Merger dated as
of April 30, 2000, by and among Excalibur Technologies
Corporation ("Excalibur"), Intel Corporation, Convera
Corporation and Excalibur Transitory, Inc. (Appendix A1
to the Proxy Statement/ Prospectus).
2.2 Amendment, dated August 14, 2000 to Agreement and Plan
of Contribution and Merger, dated April 30, 2000, by
and among Excalibur, Intel Corporation, Convera
Corporation and Excalibur Transitory, Inc. (Appendix A2
to the Proxy Statement/Prospectus)
2.3 Form of Voting Agreement and Irrevocable Proxy between
Intel Corporation and the stockholder reflected on the
signature page thereto (1)
3.1 Amended and Restated Certificate of Incorporation of
Convera (Appendix D to the Proxy Statement/Prospectus)
3.2 By-Laws of Convera (Appendix E to the Proxy
Statement/Prospectus)
5.1 Opinion of Heller Ehrman White & McAuliffe LLP, as to
the legality of the securities being registered.(9)
</TABLE>
II-2
<PAGE> 246
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
---------- -----------
<S> <C>
8.1 Opinion of Heller Ehrman White & McAuliffe LLP
supporting the tax matters and consequences to the
Convera shareholders as described in this Registration
Statement.(9)
10.1 Incentive Stock Option Plan, dated April 1989. (2)
10.2 1995 Incentive Plan, dated November 1995. (3)
10.3 ConQuest Incentive Stock Option Plan, dated August 19,
1993. (4)
10.4 Office Lease (10440 Little Patuxent Parkway, Suite 800,
Columbia, Maryland), commencing January 1, 1996. (4)
10.5 Office Lease (1959 Palomar Oaks Way, Carlsbad,
California), commencing November 15, 1995. (4)
10.6 Excalibur Technologies Corporation Employee Stock
Purchase Plan, effective August 1, 1996. (5)
10.7 Office Lease (4675 Stevens Creek Boulevard, Santa
Clara, California 95051), commencing July 1, 1997. (6)
10.8 Office Lease (1921 Gallows Road, Vienna, Virginia
22182), commencing May 1, 1999. (7)
10.9 Employment agreement with James H. Buchanan, dated
September 7, 1995. (7)
10.10 Office lease (11000 Broken Land Parkway, Columbia
Maryland), commencing June 15, 2000. (8)
10.11 Convera 2000 Stock Option Plan (1)
10.12 Form of Transferred IP License Agreement between Intel
Corporation and Convera (1)
10.13 Form of IP License Contribution Agreement between Intel
Corporation and Convera (1)
10.14 Form of Registration Rights Agreement between Intel
Corporation and Convera (1)
10.15 Contribution Agreement, dated as of September 13, 2000
between Convera and NBA Media Ventures, LLC.(9)
10.16 Form of Registration Rights Agreement between Convera
and NBA Media Ventures, LLC.(9)
21.1 Subsidiaries of Convera.(9)
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23.2 Consent of Arthur Andersen LLP, Independent Public
Accountants.
23.3 Consent of Ernst & Young LLP, Independent Public
Accountants.
</TABLE>
II-3
<PAGE> 247
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
---------- -----------
<S> <C>
23.4 Consent of Ernst & Young LLP, Independent Public
Accountants
23.5 Consent of Heller Ehrman White & McAuliffe, LLP
(included in Exhibit 5.1 to this Registration Statement).
23.6 Consent of Heller Ehrman White & McAuliffe, LLP
(included in Exhibit 8.1 to this Registration
Statement).
24.1 Powers of Attorney (included in signature page to this
Registration Statement).
99.1 Form of Proxy Card to be mailed to Excalibur stockholders.
99.2 Consent of Needham & Company, Inc.(9)
</TABLE>
----------------------
* To be filed by amendment
<TABLE>
<S> <C>
(1) Incorporated herein by reference to Excalibur's Form 8-K dated April 30, 2000, filed May 3, 2000.
(2) Incorporated herein by reference to Excalibur's Form 10-K for the year ended January 31, 1991, filed
April 22, 1991.
(3) Incorporated herein by reference to the Excalibur's Proxy Statement for the 1995 Annual Meeting of
Shareholders, dated October 16, 1995.
(4) Incorporated herein by reference to Excalibur's Form 10-K for the year ended January 31, 1996, filed
April 30, 1996.
(5) Incorporated herein by reference to the Excalibur's Proxy Statement for the 1996 Annual Meeting of
Shareholders, dated May 28, 1996.
(6) Incorporated herein by reference to Excalibur's Form 10-K for the year ended January 31, 1998, filed
April 23, 1998.
(7) Incorporated herein by reference to Excalibur's Form 10-K for the year ended January 31, 1999, filed
April 30, 1999.
(8) Incorporated herein by reference to Excalibur's Form 10-K for the year ended January 31, 2000, filed
April 28, 2000.
(9) Previously filed.
</TABLE>
(b) Financial Statement Schedules.
The information required to be set forth herein is incorporated by
reference to Excalibur's Annual Report on Form 10-K for the fiscal year ended
January 31, 2000.
II-4
<PAGE> 248
ITEM 17. UNDERTAKINGS
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(a) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(b) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement; and
(c) To include any material information with respect
to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
B. That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that
is incorporated by reference in the Registration Statement shall be deemed to
be a new registration statement relating to the securities offering herein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
C. (1) That, prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is part of this
registration statement, by any person or party who is deemed to be an
underwriter within the meaning of 145(c), the issuer undertakes that such
reoffering prospectus will contain the information called for by the
applicable registration form with respect to reofferings by person who may be
deemed underwriters, in addition to the information called for by other items
of the applicable form.
(2) That every prospectus: (i) that is filed pursuant to
paragraph (1) immediately preceding, or (ii) purports to meet the requirements
of Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415 will be filed as part of an amendment to the
registration statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed a bona fide offering thereof.
II-5
<PAGE> 249
D. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
E. To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the effective
date of the registration statement through the date of responding to the
request.
F. To supply by means of a post-effective amendment all
information concerning a transaction, and the company being acquired involved
therein, that was not the subject of and included in the registration
statement when it became effective.
II-6
<PAGE> 250
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-4 and has duly caused this
Registration Statement on Form S-4 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Vienna, Virginia on
November 21, 2000.
CONVERA CORPORATION
By: /s/ Patrick C. Condo
--------------------------------------
Patrick C. Condo, President and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Patrick C. Condo and James H. Buchanan his true and lawful attorneys-in-fact
and agents, each acting alone, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective
amendments) to the Registration Statement, and file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-of-fact and agents full
power and authority to do and perform each and every act and thing requisite
and necessary to be done in and about the premises, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and
confirming all that each said attorneys-in-fact and agent or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ Patrick C. Condo President and Chief Executive Officer November 21, 2000
---------------------------- (Principal Executive Officer)
Patrick C. Condo
/s/ James H. Buchanan Chief Financial Officer (Principal November 21, 2000
---------------------------- Financial and Accounting Officer)
James H. Buchanan
</TABLE>
II-7
<PAGE> 251
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
2.1 Agreement and Plan of Contribution and Merger dated as
of April 30, 2000, as amended, by and among Excalibur
Technologies Corporation ("Excalibur"), Intel
Corporation, Convera Corporation and Excalibur
Transitory, Inc. (Appendix A1 to the Proxy Statement/
Prospectus).
2.2 Amendment, dated August 14, 2000 to Agreement and Plan
of Contribution and Merger, dated April 30, 2000, by
and among Excalibur, Intel Corporation, Convera
Corporation and Excalibur Transitory, Inc. (Appendix A2
to the Proxy Statement/Prospectus)
2.3 Form of Voting Agreement and Irrevocable Proxy between
Intel Corporation and the stockholder reflected on the
signature page thereto (1)
3.1 Amended and Restated Certificate of Incorporation of
Convera (Appendix D to the Proxy Statement/Prospectus)
3.2 By-Laws of Convera (Appendix E to the Proxy
Statement/Prospectus)
5.1 Opinion of Heller Ehrman White & McAuliffe LLP, as to
the legality of the securities being registered. (9)
8.1 Opinion of Heller Ehrman White & McAuliffe LLP
supporting the tax matters and consequences to the
Convera shareholders as described in this Registration
Statement. (9)
10.1 Incentive Stock Option Plan, dated April 1989. (2)
10.2 1995 Incentive Plan, dated November 1995. (3)
10.3 ConQuest Incentive Stock Option Plan, dated August 19,
1993. (4)
10.4 Office Lease (10440 Little Patuxent Parkway, Suite 800,
Columbia, Maryland), commencing January 1, 1996. (4)
10.5 Office Lease (1959 Palomar Oaks Way, Carlsbad,
California), commencing November 15, 1995. (4)
10.6 Excalibur Technologies Corporation Employee Stock
Purchase Plan, effective August 1, 1996. (5)
10.7 Office Lease (4675 Stevens Creek Boulevard, Santa
Clara, California 95051), commencing July 1, 1997. (6)
10.8 Office Lease (1921 Gallows Road, Vienna, Virginia
22182), commencing May 1, 1999. (7)
10.9 Employment agreement with James H. Buchanan, dated
September 7, 1995. (7)
10.10 Office lease (11000 Broken Land Parkway, Columbia
Maryland), commencing June 15, 2000. (8)
</TABLE>
<PAGE> 252
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
10.11 Convera 2000 Stock Option Plan (1)
10.12 Form of Transferred IP License Agreement between Intel
Corporation and Convera (1)
10.13 Form of IP License Contribution Agreement between Intel
Corporation and Convera (1)
10.14 Form of Registration Rights Agreement between Intel
Corporation and Convera (1)
10.15 Contribution Agreement, dated as of September 13, 2000
between Convera and NBA Media Ventures, LLC. (9)
10.16 Form of Registration Rights Agreement between Convera
and NBA Media Ventures, LLC. (9)
21.1 Subsidiaries of Convera. (9)
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23.2 Consent of Arthur Andersen LLP, Independent Public
Accountants.
23.3 Consent of Ernst & Young LLP, Independent Public
Accountants.
23.4 Consent of Ernst & Young LLP, Independent Public
Accountants.
23.5 Consent of Heller Ehrman White & McAuliffe, LLP
(included in Exhibit 5.1 to this Registration Statement).
23.6 Consent of Heller Ehrman White & McAuliffe, LLP
(included in Exhibit 8.1 to this Registration Statement).
24.1 Powers of Attorney (included in signature page to this
Registration Statement).
99.1 Form of Proxy Card to be mailed to Excalibur
stockholders.
99.2 Consent of Needham & Company, Inc. (9)
</TABLE>
----------------------
* To be filed by amendment
<TABLE>
<S> <C>
(1) Incorporated herein by reference to Excalibur's Form 8-K dated
April 30, 2000, filed May 3, 2000.
(2) Incorporated herein by reference to Excalibur's Form 10-K for the
year ended January 31, 1991, filed April 22, 1991.
(3) Incorporated herein by reference to the Excalibur's Proxy Statement
for the 1995 Annual Meeting of Shareholders, dated October 16, 1995.
(4) Incorporated herein by reference to Excalibur's Form 10-K for the
year ended January 31, 1996, filed April 30, 1996.
</TABLE>
<PAGE> 253
<TABLE>
<S> <C>
(5) Incorporated herein by reference to the Excalibur's Proxy Statement for the 1996 Annual Meeting of
Shareholders, dated May 28, 1996.
(6) Incorporated herein by reference to Excalibur's Form 10-K for the year ended January 31, 1998, filed
April 23, 1998.
(7) Incorporated herein by reference to Excalibur's Form 10-K for the year ended January 31, 1999, filed
April 30, 1999.
(8) Incorporated herein by reference to Excalibur's Form 10-K for the year ended January 31, 2000, filed
April 28, 2000.
(9) Previously filed.
</TABLE>
