PRE 14C 1 v161040_pre14c.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



 

SCHEDULE 14C

Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934



 

Check the appropriate box:

x Preliminary Information Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14c-5(d)(2))
o Definitive Information Statement

CONVERA CORPORATION

(Name of Registrant As Specified In Its Charter)

[GRAPHIC MISSING]

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o Fee paid previously with preliminary materials.
o Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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CONVERA CORPORATION
1919 Gallows Road, Suite 1050
Vienna, Virginia 22182
  
INFORMATION STATEMENT

October    , 2009

To Our Stockholders:

We are furnishing this Information Statement to the holders of the Class A Common Stock, par value $0.01 per share (the “Class A Common Stock”), of Convera Corporation, a Delaware corporation (“Convera,” the “Company,” “we,” “our,” “us”), in connection with stockholder approval of the following matters, which have been passed by the holders of a majority of all of the outstanding shares of our Class A Common Stock by written consent in lieu of a meeting:

1. The adoption of a plan of dissolution and liquidation (the “Plan of Dissolution”) providing for our complete dissolution and liquidation.

2. An amendment to our Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) deleting Article NINTH.

3. The election of three directors to serve on our board of directors with their terms commencing upon the filing of the certificate of dissolution with the Secretary of State of the State of Delaware in accordance with the Plan of Dissolution (the “Certificate of Dissolution”) and ending upon the due election of their successors.

You should carefully consider the “Risk Factors” section beginning on page 8 of this Information Statement. Certain statements included in this Information Statement constitute “forward-looking statements.” See “Cautionary Statement Regarding Forward-Looking Statements.”

WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.

We are not asking for a proxy and you are not requested to send one because the written consent of the holders of a majority of all of the outstanding shares of our Class A Common Stock to approve the Plan of Dissolution, the amendment to our Certificate of Incorporation, and the election of directors pursuant to the Delaware General Corporation Law (“DGCL”) and our Certificate of Incorporation and Bylaws, has already been received by us. The accompanying Information Statement is for information purposes only and explains the Plan of Dissolution, the amendment to the Certificate of Incorporation and the election of directors. A copy of the Plan of Dissolution and the Amendment to the Certificate of Incorporation are attached as annexes to this Information Statement. Please see “WHERE TO OBTAIN MORE INFORMATION” for information about how you may obtain additional copies of these documents.

We anticipate that we will first take corporate action with respect to the Plan of Dissolution in accordance with our stockholder approval by filing the Certificate of Dissolution with the Secretary of State of the State of Delaware not less than twenty (20) days after the mailing of this Information Statement to our stockholders.

Please note that only our stockholders of record on the record date will be entitled to receive the Information Statement.

You are urged to review carefully this Information Statement to consider how the matters discussed will affect you. We appreciate your interest in Convera Corporation.

Sincerely,

/s/ PATRICK C. CONDO            
Patrick C. Condo
President, Chief Executive Officer and Director (Principal Executive Officer)

This Information Statement is intended to first be mailed to our stockholders on or about October     , 2009. This Information Statement is furnished for informational purposes only.


 
 

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CONVERA CORPORATION
1919 Gallows Road, Suite 1050
Vienna, Virginia 22182
  
Notice of Stockholder Action By Written Consent
October     , 2009

NOTICE IS HEREBY GIVEN that the actions to be effective at least twenty (20) days after the mailing of this Information Statement to our stockholders are:

1. The adoption of a plan of dissolution and liquidation (the “Plan of Dissolution”) providing for our complete dissolution and liquidation.

2. An amendment to our Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) deleting Article NINTH.

3. The election of three directors to serve on our board of directors with their terms commencing upon the filing of the certificate of dissolution with the Secretary of State of the State of Delaware in accordance with the Plan of Dissolution (the “Certificate of Dissolution”) and ending upon the due election of their successors.

Following the filing of our Certificate of Dissolution, we expect to consummate the merger (the “Merger”) of B2BNetSearch, Inc. and Convera Technologies, LLC, each a wholly-owned Delaware subsidiary of Convera, with VSW 2, Inc., the Delaware parent company of Firstlight Online Limited, a company in the business of online advertising sales and marketing incorporated as a company limited by shares in the United Kingdom (“Firstlight”), pursuant to, and subject to the terms and conditions of, an Agreement and Plan of Merger dated May 29, 2009, as amended and restated on September 22, 2009 (the “Merger Agreement”). As a result of the Merger, Convera will own 33.3% of the total outstanding capital stock of Vertical Search Works, Inc., a Delaware corporation and the indirect parent company of VSW 2 (“VSW”).

The Plan of Dissolution, the amendment to our Certificate of Incorporation and the election of directors each require the approval of our stockholders. The Merger does not require stockholder approval. In order to approve the Plan of Dissolution and amendment to our Certificate of Incorporation, the affirmative vote of the holders of a majority of all outstanding shares of our Class A Common Stock is required. In order to approve the election of directors, the affirmative vote of a plurality of all outstanding shares of our Class A Common Stock is required. Our board of directors has fixed the close of business on September 22, 2009 as the record date (the “Record Date”) for the determination of stockholders who are entitled to receive this Information Statement. There were 53,501,183 shares of our Class A Common Stock issued and outstanding, which shares are entitled to one vote per share. Holders of our Class A Common Stock which represented a majority of the voting power of our outstanding capital stock as of the Record Date, have executed a written consent in favor of the actions described above and have delivered it to us on September 22, 2009 (the “Consent Date”). Therefore, no other consents will be solicited in connection with this Information Statement.

In accordance with Rule 14c-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the actions will be effective no earlier than twenty (20) days after the mailing of this Information Statement to our stockholders.

This Information Statement is furnished by us in accordance with the requirements of Regulation 14C promulgated under the Exchange Act in connection with the actions approved by written consent, delivered to us on the Consent Date, of the holders of a majority of the outstanding shares of our Class A Common Stock to approve the Plan of Dissolution, the amendment to our Certificate of Incorporation and the election of directors pursuant to the Delaware General Corporation Law (the “DGCL”) and our Certificate of Incorporation and Bylaws. Our stockholders of record as of the Record Date are entitled to notice of the actions approved by written consent by the holders of a majority of the outstanding shares of our Class A Common Stock.

This Information Statement will serve as written notice to stockholders pursuant to Section 228(e) of the DGCL.


 
 

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TABLE OF CONTENTS

 
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS     1  
SUMMARY OF TERMS     1  
RISK FACTORS     8  
PLAN OF DISSOLUTION AND MERGER     13  
Background and Reasons for the Plan of Dissolution and the Merger     13  
Fairness Opinion     24  
Material Provisions of the Plan of Dissolution     15  
Principal Provisions of the Merger Agreement     21  
Interest of Certain Persons in the Merger     23  
Past Contracts, Transactions or Negotiations     29  
Certain U.S. Federal Income Tax Considerations     30  
AMENDMENT TO THE CERTIFICATE OF INCORPORATION     33  
ELECTION OF DIRECTORS     34  
INFORMATION ABOUT FIRSTLIGHT     35  
INFORMATION ABOUT CONVERA     41  
DISTRIBUTION OF INFORMATION STATEMENT     45  
WHERE TO OBTAIN MORE INFORMATION     45  

ANNEX A

PLAN OF DISSOLUTION

    A-1  

ANNEX B

AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER

    B-1  

ANNEX C

FAIRNESS OPINION OF HEMPSTEAD AND CO., INC.

    C-1  

ANNEX D

TRANSITION AGREEMENT BETWEEN CONVERA AND PATRICK CONDO

    D-1  

ANNEX E

AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF CONVERA

    E-1  

ANNEX F

WRITTEN CONSENT OF HOLDERS OF A MAJORITY OF SHARES OF CLASS A COMMON STOCK OF CONVERA

    F-1  

ANNEX G

CONVERA’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JANUARY 31, 2009 AND ITS AMENDMENT ON FORM 10-K/A

    G-1  

ANNEX H

CONVERA’S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED APRIL 30, 2009

    H-1  

ANNEX I

CONVERA’S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JULY 31, 2009

    I-1  

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements included in this Information Statement constitute “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Portions of this Information Statement and other materials filed with the Securities and Exchange Commission (the “SEC”) contain statements that are forward-looking. These forward-looking statements are not based on historical facts, but rather reflect our current expectations concerning future events. Similarly, statements that describe our objectives, plans or goals are or may be forward-looking statements. We have tried, wherever possible, to identify such statements by using words such as “anticipate”, “assume”, “believe”, “expect”, “intend”, “plan”, and words and terms of similar substance in connection with any discussion of our objectives, plans or goals. Such forward-looking statements involve a number of risks, uncertainties and other important factors that could cause actual events to differ materially from any future events expressed or implied by such forward-looking statements. Such risks, uncertainties and other important factors include, among others, those discussed in this Information Statement under the heading “RISK FACTORS,” “INFORMATION ABOUT FIRSTLIGHT”, and “INFORMATION ABOUT CONVERA” and include statements relating to our liabilities, sales of our assets and distributions to stockholders. Neither we nor any other person assumes responsibility for the accuracy and completeness of such statements. We operate in a changing business environment and new risks arise from time to time. The forward-looking statements included in this document are made only as of the date of this document and under Section 27A of the Securities Act and Section 21E of the Exchange Act, therefore, we do not have a duty to update any of the forward-looking statements to reflect subsequent events or circumstances.

SUMMARY OF TERMS

This summary of terms is intended to give you a summary description of the material aspects of the Plan of Dissolution, the Merger, the amendment to our Certificate of Incorporation and the election of directors described in this Information Statement. This summary is qualified in its entirety by the more detailed information contained elsewhere in this Information Statement, the Plan of Dissolution, the Merger Agreement and the amendment to our Certificate of Incorporation. You should review this Information Statement, the Plan of Dissolution, the Merger Agreement and the amendment to our Certificate of Incorporation to gain a more complete understanding of these actions.

Plan of Dissolution (See page 13)

On May 29, 2009, our board of directors unanimously approved our Plan of Dissolution as the appropriate means for carrying out our complete dissolution and liquidation and determined that, as part of the Plan of Dissolution, it is deemed in our best interests to sell or convert all or substantially all of our remaining property and assets into cash and/or other distributable forms in order to facilitate liquidation and distribution to our creditors and our stockholders, as appropriate. Under the Plan of Dissolution, we will take the following actions at such times as our board of directors, in its absolute discretion, deems necessary, appropriate or advisable:

file a certificate of dissolution with the Secretary of State of the State of Delaware in accordance with the Plan of Dissolution (the “Certificate of Dissolution”);
cease conducting normal business operations, except as may be required to sell our remaining assets, consummate the Merger and wind-up our business affairs;
take all actions required or permitted under the dissolution procedures of Section 281(b) of the DGCL;
negotiate and consummate the sale or conversion into cash and/or other distributable forms of, or distribute to our stockholders, all of our assets and properties, and distribute all of our remaining properties, assets and funds to our stockholders or to liquidating trusts within three years of the date of the written consent of our stockholders’ approving the Plan of Dissolution;

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pay or make reasonable provision for payment of our liabilities and obligations, including setting aside a contingency reserve, consisting of cash or other assets that our board of directors believes to be adequate for payment of our known liabilities, as well as claims that are unknown or have not yet arisen but that are likely to arise or become known to us within ten years; and
distribute the remaining funds and assets to our stockholders or to liquidating trust(s).

The contingency reserve is set at $3,000,000 in cash, including a $1,350,000 reserve to cover potential liabilities under the indemnification provision of the Merger Agreement.

Pursuant to the Plan of Dissolution, we will be liquidated as follows: after payment or provision for all of our known, unascertained or contingent debts, obligations and liabilities (including costs and expenses incurred and anticipated to be incurred in connection with the sale or conversion of our remaining assets, if any, into cash or other distributable forms and our complete liquidation), payment or distributions will be made to our stockholders in accordance with their respective number of shares then held of record. In the event distributions have not occurred prior to the date that is three years after the Consent Date, our remaining assets (other than certain stock or ownership interests in VSW which will be distributed to our stockholders or sold with the cash proceeds distributed to our stockholders) will be transferred to one or more liquidating trusts for the benefit of our stockholders.

Following our dissolution, we will cease conducting normal business operations, except as may be required to wind-up our business affairs and to proceed with our dissolution and liquidation. We will continue our corporate existence solely for the purpose of engaging in activities appropriate for or consistent with the winding-up and liquidation of our business and affairs and preserving the value of our remaining assets until they are sold, converted into cash or other distributable forms or distributed to our stockholders in the liquidation. Following our dissolution, we will not be authorized to engage in any business activities other than those related to the winding-up of our affairs and preserving the value of our remaining assets as described above, thus limiting our exposure for business activities unrelated to the liquidation of our assets and the winding-up of our business. We will continue to actively prosecute and defend all material litigation matters affecting us and our subsidiaries.

The adoption of the Plan of Dissolution by our stockholders constitutes full and complete authority for our board of directors and our officers, without further action by our stockholders, to do and perform any and all acts, and to make, execute and deliver any and all agreements, conveyances, assignments, transfers, certificates and other documents of any kind and character that the board of directors or such officers deem necessary, appropriate or advisable: (i) to dissolve us in accordance with the laws of the State of Delaware and cause our withdrawal from all jurisdictions in which we are authorized to do business; (ii) to sell, dispose, convey, transfer and deliver all of our remaining assets and properties or otherwise convert such assets into cash or other distributable forms; (iii) to satisfy or provide for the satisfaction of our obligations in accordance with Sections 280 and 281 of the DGCL; and (iv) to distribute any of our properties and assets and all remaining funds, if any, pro rata to our stockholders.

We expect that our board of directors will be comprised of three directors upon the effectiveness of the election of the three directors as disclosed in “ELECTION OF DIRECTORS” on page 34, until their successors are duly elected, and as disclosed in “INTEREST OF CERTAIN PERSONS IN THE MERGER” on page 23, Mr. Matthew Jones, our CFO, will continue to serve as of our sole officer.

For a more complete description of the terms of the Plan of Dissolution, please see “PLAN OF DISSOLUTION AND MERGER — MATERIAL PROVISIONS OF THE PLAN OF DISSOLUTION” in this Information Statement and the Plan of Dissolution itself, which is attached as Annex A to this Information Statement.

Amendment and Abandonment of Plan of Dissolution (See Page 17)

Under the Plan of Dissolution, if for any reason our board of directors determines that such action would be in our best interests, it may amend, modify or abandon the Plan of Dissolution and all actions contemplated thereunder, including our proposed dissolution and the Merger, notwithstanding stockholder approval of the Plan of Dissolution, to the extent permitted by the DGCL; provided, however, that our board of directors

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may not abandon the Plan of Dissolution following the filing of our Certificate of Dissolution without first obtaining approval of our stockholders.

The Merger (See Page 21)

Parties to the Merger

Convera, B2B and Technologies (See Page 41)

Convera Corporation, B2BNetSearch, Inc., and Convera Technologies, LLC
1919 Gallows Road, Suite 1050
Vienna, Virginia 22182
Telephone: (703) 761-3700

Convera is a public company that provides vertical search services to trade publishers. Convera’s technology and services help publishers build a loyal online community and increase their internet advertising revenues. Convera’s Class A Common Stock is traded on the NASDAQ Global Market under the symbol “CNVR”.

B2BNetSearch, Inc. is a wholly-owned subsidiary of Convera that was incorporated in Delaware on February 10, 2009 (“B2B”). Convera Technologies, LLC is a wholly-owned subsidiary of Convera that was converted from a Delaware corporation, Convera Technologies, Inc., into a Delaware limited liability company on June 23, 2009 (“Technologies”).

Prior to the closing of the planned Merger, Convera will undergo an internal restructuring, whereby Convera and certain of its subsidiaries, other than Technologies, will assign all of its operating business and business related assets other than Technologies, including, without limitation, internet-search related patents, to B2B, and B2B will assume all the liabilites of Convera and its subsidiaries, other than Technologies, and will indemnify Convera for claims relating to such liabilities.

More information about Convera is available under the caption “Information about Convera” on page 41.

Firstlight, VSW, VSW 1 and VSW 2 (See Page 35)

Firstlight Online Limited, Vertical Search Works, Inc., VSW 1, Inc. and VSW 2, Inc.
81 Rivington Street
London EC2A 3AY
Telephone: +44 203 178 4150

Firstlight is a private company that provides a service known as Firstlight ERA, or Editorial Related Advertising, to publishers of journals with websites which are on-line versions of, or otherwise associated with, those journals. Firstlight’s service enables publishers to sell micro-sites, which are typically individual website pages that provide information about a product or service that can be researched by the reader of the journal article, to their existing advertisers. Firstlight was incorporated as a company limited by shares in the United Kingdom on October 3, 2002.

Each of Vertical Search Works, Inc. (“VSW”), VSW 1, Inc. (“VSW 1”), and VSW 2, Inc. (“VSW 2”) is a Delaware corporation incorporated on August 13, 2009. As a result of the internal restructuring of Firstlight, Firstlight will be a wholly-owned subsidiary of VSW 2, and VSW 2 will be a wholly-owned subsidiary of VSW 1. VSW 1 will be a direct wholly-owned subsidiary of VSW.

More information about Firstlight is available under the caption “Information about Firstlight” on page 35.

Material Terms of the Merger

Following the filing of the Certificate of Dissolution, we plan to consummate the Merger subject to the terms and conditions of the Merger Agreement. The Merger Agreement contains the following material terms:

Merger. B2B and Technologies will each merge with and into VSW 2, with VSW 2 as the surviving corporation.
Conversion. Upon the effectiveness of the Merger, each share of B2B’s common stock and 1/1,000th of the entire limited liability membership interest of Technologies will become 50 shares of VSW

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common stock, and each share of VSW common stock will remain as one share of VSW common stock. As a result of such conversion, we will own 33.3% and the record owners of VSW immediately prior to effectiveness of the Merger will own 66.7% of the total outstanding common stock of VSW, subject to certain adjustments described below.
Cash funding. We will transfer $3,000,000 in cash to Technologies prior to the closing of the Merger, which is subject to reduction on a dollar-for-dollar basis by an agreed upon daily amount for delays in the closing beyond July 29, 2009, which was sixty (60) days after the Merger Agreement was originally signed, with specified exceptions. As of September 23, 2009, this $3,000,000 cash funding amount has been reduced to approximately $2,216,000.
Line of Credit. We will provide VSW with a $1,000,000 line of credit, which will be convertible into VSW common stock (the “Credit Line”). VSW will be entitled to draw down the Credit Line in whole or in part, for a six-month period following the closing date of the Merger. Any portion of the Credit Line drawn down by VSW will accrue interest at an annual rate of 10% and will become due and payable by VSW upon the first anniversary of the closing date of the Merger. We have the right to convert all or any portion of the draw-down amount into VSW common stock anytime before its repayment in full. In the event that VSW draws down the full $1,000,000 of the Credit Line and we decide to convert the full amount of such draw-down amount, then our ownership in VSW will increase to 42.5% of the total outstanding VSW common stock. If we elect to convert less than the entire amount, VSW will issue shares to us equal to 0.0000092% of the total outstanding VSW common stock at closing for each dollar of the Credit Line that we elect to convert.
Closing Conditions. The closing of the Merger is subject to customary closing conditions, including, without limitation, (i) receipt of all of the required third party consents and approvals, if any, and (ii) completion of a satisfactory audit of the financial statements of VSW.
Representations and Warranties. The Merger Agreement contains customary representations and warranties, covenants and indemnities and provides that all representations and warranties will survive the closing date of the Merger for a period of six months, with specific exceptions.

To understand the Merger fully, you should read this Information Statement and the Merger Agreement completely. The Merger Agreement constitutes the legal document that governs the Merger. For a more complete description of the terms of the Merger Agreement, please see “PLAN OF DISSOLUTION AND MERGER — PRINCIPAL PROVISIONS OF THE MERGER AGREEMENT” in this Information Statement and the Merger Agreement itself, which is attached as Annex B to this Information Statement. Please see “WHERE TO OBTAIN MORE INFORMATION” for information about how you may obtain additional copies of the Merger Agreement.

Fairness Opinion

In determining to approve the Merger Agreement, our board of directors considered the fairness opinion of Hempstead & Co. Inc. (“Hempstead”) dated May 29, 2009. Based upon and subject to the assumptions, qualifications and limitations set forth in the written opinion, Hempstead concluded that the merger consideration as stipulated in the Merger Agreement was fair from a financial point of view to our stockholders. The conclusion in the fairness opinion is not affected by the subsequent amendment and restatement of the Merger Agreement on September 22, 2009. We urge you to read the section entitled “Fairness Opinion” beginning on page 24 of this Information Statement and Hempstead’s fairness opinion itself attached to this Information Statement as Annex C carefully for a description of the procedures followed, assumptions made, matters considered and limitations on the reviews undertaken.

Reasons for the Plan of Dissolution and the Merger (See Page 13)

Our board of directors adopted the Plan of Dissolution and approved the Merger Agreement following over a year of exploration and analysis of alternatives, and upon our board of directors’ determination that our complete dissolution and liquidation and the Merger was the strategic alternative most likely to enable us to maximize value to our stockholders.

In reaching its conclusion to approve the Plan of Dissolution and the Merger Agreement, our board of directors considered our current condition and future prospects, including our financial condition, results of

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operations, anticipated capital expenditures, capital structure and long-term capital needs, the value of our remaining assets and our remaining claims and obligations and other potential strategic alternatives for us, including the risks associated with these alternatives. After considering these factors and alternatives, our board of directors determined that the Plan of Dissolution and the Merger Agreement were advisable, expedient and in our best interests and in the best interests of our stockholders and creditors and that we should proceed with the Plan of Dissolution.

Interest of Certain Persons in the Merger (See Page 23)

Both our CEO, Patrick Condo, and CFO, Matthew Jones, will join VSW after the effectiveness of the Merger. Mr. Condo has entered into a transition agreement with us and we intend to enter into a transition agreement with Mr. Jones. Additionally, it is the intention of the parties that Messrs. Condo and Jones enter into employment agreements with VSW. In addition, one of the current members of our board of directors, Carl Rickertsen, will become a member of the board of directors of VSW after the Merger. You should be aware that Messrs. Condo, Jones and Rickertsen may each have a direct material interest in the Merger that may diverge from the interests our stockholders.

Dissenters’ Rights (See Page 30)

Under Delaware law, which governs us and the rights of our stockholders, and our Certificate of Incorporation and Bylaws, each as amended and/or restated, our stockholders are not entitled to appraisal rights or other dissenters’ rights to demand fair value for their shares of stock by reason of the approval of the Plan of Dissolution or the Merger.

Certain U.S. Federal Income Tax Considerations (See Page 30)

As described in the section entitled “Certain U.S. Federal Income Tax Considerations” in this Information Statement, and subject to the limitations, assumptions and qualifications therein, we will recognize gain or loss from the Merger equal to the difference between (i) the aggregate fair market value of the shares of VSW received by us from VSW 2 and the amount of our or our subsidiaries’ liabilities assumed by VSW 2 in the Merger and (ii) our adjusted tax basis in the assets transferred to VSW 2 in the Merger. Any distributions to our stockholders pursuant to the Plan of Dissolution will be taxable to our U.S. stockholders for U.S. federal income tax purposes. U.S. stockholders will realize taxable gain or loss on any such distributions.

Amendment to Certificate of Incorporation (See Page 33)

On May 29, 2009, our board of directors unanimously approved an amendment to our Certificate of Incorporation to delete Article NINTH thereof which required, among other things, that our board of directors consist of no less than six and no more than 12 members. The amendment will become effective upon its filing with the Secretary of State of the State of Delaware, which is expected to occur on or shortly after twenty (20) days after the mailing of this Information Statement to our stockholders. On May 29, 2009, our board of directors unanimously approved a resolution pursuant to our Bylaws fixing the number of directors that comprise our board at three with such resolution to be effective upon the filing of the amendment to our Certificate of Incorporation.

Election of Directors (See Page 34)

On May 29, 2009, at the recommendation of our Nomination Committee, our board of directors unanimously resolved to recommend to our stockholders to elect Messrs. Ronald J. Whittier, Herbert A. Allen III and Jeffrey White as directors to be effective upon the filing of the amendment to our Certificate of Incorporation, with a term commencing upon the filing of the Certificate of Dissolution and ending upon the due election of their sucessors, and since they have requisite voting power to adopt such stockholders’ action, no other consents or votes of other of our stockholders will be solicited in connection with this Information Statement.

Stockholder Approvals Required in Connection with the Plan of Dissolution, the Amendment to the Certificate of Incorporation and the Election of Directors (See Page 12)

In order to approve the Plan of Dissolution and the amendment to our Certificate of Incorporation, the affirmative vote of holders of a majority of all outstanding shares of our Class A Common Stock is required. In order to approve the election of directors, the affirmative vote of a plurality of all outstanding shares of our

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Class A Common Stock is required. As of the close of business on September 22, 2009, the Record Date for the approval of the above matters, there were 53,501,183 shares of our Class A Common Stock issued and outstanding, which shares are entitled to one vote per share. Holders of our Class A Common Stock which represented a majority of the voting power of our outstanding capital stock as of the Record Date, have executed a written consent in favor of the actions described above and have delivered it to us on September 22, 2009, the Consent Date. Therefore, no other consents will be solicited in connection with this Information Statement.

WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.

Distributions to Our Stockholders (See Page 17)

Our board of directors will determine, in its sole discretion and in accordance with applicable law, the timing, amount and nature of, and the record dates for, distributions, if any, that we will make to our stockholders pursuant to the Plan of Dissolution.

The amount available for distribution, if any, will depend principally on the amount of our cash and the ultimate value of any non-cash assets and the amount of existing and unknown claims against us and our obligations. We also intend to distribute to our stockholders sometime after the one-year anniversary of the closing of the Merger any VSW stock we own as a result of the Merger; however, we reserve the absolute right to sell such stock and distribute the net proceeds of the sale to our stockholders. Because of uncertainties concerning the amount of any unknown claims and obligations we may incur and the value of our non-cash assets, we cannot currently predict the aggregate net value of assets that may be available for distribution to our stockholders.

An initial distribution, if any, will be made to our stockholders of record at the close of business on the date on which we file our Certificate of Dissolution, pro rata to holders of our Class A Common Stock in accordance with the respective number of shares then held of record by them; provided, that in the opinion of our board of directors adequate provision has been made for the payment, satisfaction and discharge of all our known, unascertained or contingent debts, obligations and liabilities (including costs and expenses incurred and anticipated to be incurred in connection with our sale of assets and complete liquidation), including the contingency reserve.

Liquidation distributions will be made in cash or in kind and may include the stock of VSW if the Merger is consummated. Any distribution of securities will be subject to securities laws and other conditions.

Under our Plan of Dissolution, we are required to complete the distribution of all of our properties and assets to our stockholders or to liquidating trusts as soon as practicable following the filing of our Certificate of Dissolution and in any event on or prior to the third anniversary of the Consent Date.

Stock Transfers Following the Filing of the Certificate of Dissolution (See Page 20)

We intend to discontinue recording transfers of our stock on the date on which we file our Certificate of Dissolution. This filing is expected to occur on or shortly after twenty (20) days after the mailing of this Information Statement to our stockholders. After that time, there will be no further trading of our stock on the NASDAQ Global Market or otherwise, and we will not record any further transfers of our stock on our books except by will, intestate succession, or operation of law.

Risk Factors (See Page 8)

Our plan of dissolution and the proposed merger involve a number of risks, including the risks that:

our stockholders may be liable to our creditors for part or all of the amount received from us in dissolution if our reserves are inadequate;
if the proposed merger is not consummated, we may not recoup the costs incurred in connection with negotiating the proposed merger;
our Company and Firstlight have had a history of operating losses and VSW will likely incur future losses;

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VSW may need additional capital. If VSW cannot raise capital when needed on reasonable terms, its business and financial condition may be materially impacted; if VSW is able to raise additional capital through equity financing, our ownership of VSW may be diluted;
the current credit and financial market conditions have a negative impact on global business environment and may exacerbate certain risks affecting the business of VSW and thus, the value of our ownership interest in VSW, if the Merger closes, may be materially diminished;
VSW will be in an extremely competitive market, and if it fails to compete effectively or respond to rapid technological change, its revenues and market share will be adversely affected and thus, the value of our ownership interest in VSW, if the Merger closes, may be materially diminished;
VSW currently depends on a few customers for substantially all of its revenues and the loss of, or a significant reduction in orders from, any one of these customers could significantly reduce VSW’s revenues and harm its operating results;
VSW will depend in part on international sales, particularly in the United Kingdom, and any economic downturn, changes in laws, changes in currency exchange rates or political unrest in the United Kingdom or in other countries could have a material adverse effect on VSW’s business;
the planned business model of VSW is new to both businesses and may not attract the planned turnover or generate sustainable profits;
an unfavorable resolution may result from pending or potentially future legal proceedings, which could in the future materially and adversely affect VSW’s financial position, results of operations or cash flows in a particular period; and
if we decide to distribute shares of VSW’s common stock, our stockholders may be required to hold any such shares that are distributed to them for an indefinite period of time.

You should read and consider carefully the information about these and other risks set forth under the caption “Risk Factors” beginning on page 8.

Additional Questions About Matters Covered by this Information Statement

If you have any additional questions about the matters covered by this Information Statement, or would like additional copies of this Information Statement, you should contact:

Convera Corporation
1919 Gallows Road
Suite 1050
Vienna, Virginia 22182
Tel: (703) 761-3700
Attn: Matthew Jones

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RISK FACTORS

In addition to the other information contained in this Information Statement, you should carefully read the following risk factors. The Plan of Dissolution and the Merger involve substantial risks and uncertainties and our actual results and future trends may differ materially from our past performance due to a variety of factors, including, without limitation, the risk factors identified below. The risks and uncertainties described below are not the only risks and uncertainties we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. If any of the following risks actually occur, our business, results of operations and financial condition would suffer. In that event, the trading price of our common stock could decline, and our stockholders may lose part or all of their investment in our common stock. Additionally, if any of the following risks actually occur, the value of the shares of VSW’s common stock we receive in the Merger may decline substantially. The discussion below and elsewhere in this report also includes forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements as a result of the risks discussed below.

OUR STOCKHOLDERS MAY BE LIABLE TO OUR CREDITORS FOR PART OR ALL OF THE AMOUNT RECEIVED FROM US IN DISSOLUTION IF RESERVES ARE INADEQUATE.

We established a contingency reserve of $3,000,000 in cash designed to satisfy any additional claims and obligations that may arise. Although our board of directors believes such reserve is adequate for payment of our known and unknown liabilities, any contingency reserve may not be adequate to cover all of our obligations and claims against us due to the uncertainty of unknown liabilities. Under Delaware law, if we fail to create an adequate contingency reserve for payment of our claims and obligations during the three-year period after we file the Certificate of Dissolution, each of our stockholders could be held liable for payment to our creditors of such stockholder’s pro rata share of amounts owed to creditors in excess of the contingency reserve. The liability of any of our stockholders would be limited to the amounts previously received by such stockholder in dissolution from us and from any liquidating trust or trusts. Accordingly, in such event, a stockholder could be required to return part or all of the distributions previously made to such stockholder, and a stockholder could receive nothing from us under the Plan of Dissolution. Moreover, if one of our stockholders has paid taxes on amounts previously received, a repayment of all or a portion of such amount could result in a situation in which a stockholder may incur a net tax cost if the repayment of the amount previously distributed does not cause a commensurate reduction in taxes payable in an amount equal to the amount of the taxes paid on amounts previously distributed.

IF THE PROPOSED MERGER IS NOT CONSUMMATED, WE MAY NOT RECOUP THE COSTS INCURRED IN CONNECTION WITH NEGOTIATING THE PROPOSED MERGER.

The Merger may not be consummated or may be delayed because the conditions to closing may not be satisfied or waived. Conditions which must be satisfied or waived prior to the closing include customary closing conditions. If the Merger is not consummated, we will not recoup the costs incurred in connection with negotiating the proposed Merger.

OUR COMPANY AND FIRSTLIGHT HAVE HAD A HISTORY OF OPERATING LOSSES AND VSW WILL LIKELY INCUR FUTURE LOSSES DESPITE THE MERGER; IF SUCH LOSSES OCCUR AND VSW IS UNABLE TO ACHIEVE PROFITABILITY, THE VALUE OF ITS STOCK WILL LIKELY SUFFER.

As of January 31, 2009, we had an accumulated deficit of approximately $1.1 billion. We have operated at a loss for each of the past three fiscal years. For the fiscal years ended January 31, 2009, 2008 and 2007 our net losses were approximately $22.6 million, $9.1 million, $44.8 million, respectively. These financial results include revenues and expenses associated with the Enterprise Search business, the sale of which was completed on August 9, 2007. Our loss from continuing operations for the fiscal years ended January 31, 2009, 2008 and 2007 was $22.6 million, $27.0 million and $45.3 million, respectively. We expect that we will continue the trend of significant operating losses and uses of cash at least for the short term until the revenue base for our vertical search services grows to sufficient levels to support its expenses. We have a short operating history in the vertical search business; our first supported vertical search site was launched into production in November 2006. Previously, our market strength had been in the government sector, whereas we now

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compete solely within the commercial sector. In addition, our revenue contracts generally stipulate that we will receive a percentage of website advertising revenues, and online advertising is an immature and rapidly evolving industry. Firstlight has also operated at a loss for each of the past three fiscal years. For the fiscal years ended December 31, 2008, 2007 and 2006, Firstlight’s net losses were approximately $2.5 million, $3.0 million and $3.7 million, respectively. Accordingly, we cannot assure you that VSW will generate the revenues required to achieve or maintain profitability in the future or that the value of its common stock will be material. VSW’s failure to achieve and sustain its profitability will negatively impact the market value of its common stock.

VSW MAY NEED ADDITIONAL CAPITAL. IF VSW CANNOT RAISE CAPITAL WHEN NEEDED OR CANNOT RAISE CAPITAL AT REASONABLE TERMS, ITS BUSINESS AND FINANCIAL CONDITIONS MAY BE MATERIALLY IMPACTED; IF VSW IS ABLE TO RAISE ADDITIONAL CAPITAL THROUGH EQUITY FINANCING, OUR OWNERSHIP OF VSW MAY BE DILUTED.

In order to maintain its operation and pursue business strategies, VSW may require additional financing if the internally generated revenues are not sufficient for such purpose, which funding may not be available to VSW on favorable terms, if at all. The availability of such financing is further limited by the recent tightening of the global credit markets, and the lack of investors confidence in the equity markets. If VSW is not able to obtain financing when needed or on reasonable terms, its business and financial condition may be materially negatively impacted and thus, the value of our ownership interest in VSW, if the Merger closes, may be materially diminished. If VSW is able to obtain financing through equity issuance, our (and our stockholders’) existing ownership of VSW may be diluted.

THE CURRENT CREDIT AND FINANCIAL MARKET CONDITIONS HAVE HAD A NEGATIVE IMPACT ON GLOBAL BUSINESS ENVIRONMENT AND MAY EXACERBATE CERTAIN RISKS AFFECTING THE BUSINESS OF VSW.

The credit and financial markets are currently experiencing unprecedented volatility, stress, illiquidity and disruption around the world. Many of our customers have encountered and may continue to encounter much uncertainty and risks due to the weakening business environment and credit availability, particularly in the publishing area. As a result, these customers may be unable to satisfy their contract obligations, may delay payment, or may delay purchasing VSW’s services, which could negatively affect the business and financial performance of VSW. In addition, the weakening business environment has adversely impacted and may continue to adversely impact sales of on-line ads, which could negatively affect any business and general performance. If VSW’s business or financial performance is negatively affected, the value of our ownership interest in VSW, if the Merger closes, may be materially diminished.

VSW WILL BE IN AN EXTREMELY COMPETITIVE MARKET, AND IF IT FAILS TO COMPETE EFFECTIVELY OR RESPOND TO RAPID TECHNOLOGICAL CHANGE, ITS REVENUES AND MARKET SHARE WILL BE ADVERSELY AFFECTED.

The search industry is characterized by intense competition, rapid technological changes, changes in customer requirements and emerging new market segments. VSW’s competitors will include many companies that are larger and more established and have substantially more resources than VSW and may include start-ups as well. Potential competitors to VSW may establish cooperative relationships among themselves or with third parties to increase the ability of their products to address the needs of the markets which VSW intends to serve. Accordingly, it is possible that new competitors or alliances among competitors may emerge and rapidly acquire significant market share.

In order for VSW’s strategy to succeed, it must provide vertical search services that meet the needs of the business-to-business and specialized publishing companies. VSW will need to invest significant resources in research and development to provide the publishers with leading-edge search technology to help them deliver unique value to their online community and increase online advertising revenues. To effectively compete VSW will need to continually improve its service offerings and innovate by introducing new services that are responsive to the needs of its users. The development efforts required for this are expensive. If these developments do not generate substantial revenues, VSW’s business and results of operations will be

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adversely affected and thus, the value of our ownership interest in VSW, if the Merger closes, may be materially diminished. We cannot assure you that VSW will successfully develop any new products or services, complete them on a timely basis or at all, achieve market acceptance or generate significant revenues with them.

VSW CURRENTLY DEPENDS ON A FEW CUSTOMERS FOR SUBSTANTIALLY ALL OF ITS REVENUES. THE LOSS OF, OR A SIGNIFICANT REDUCTION IN ORDERS FROM, ANY ONE OF THESE CUSTOMERS COULD SIGNIFICANTLY REDUCE VSW’S REVENUES AND HARM ITS OPERATING RESULTS.

For the six months ended June 30, 2009, Firstlight’s three largest customers accounted for approximately 64% of its sales. The loss of, or a significant reduction in orders from, any of these customers could significantly reduce VSW’s revenues and harm its operating results.

VSW WILL DEPEND IN PART ON INTERNATIONAL SALES, PARTICULARLY IN THE UNITED KINGDOM, AND ANY ECONOMIC DOWNTURN, CHANGES IN LAWS, CHANGES IN CURRENCY EXCHANGE RATES OR POLITICAL UNREST IN THE UNITED KINGDOM OR IN OTHER COUNTRIES COULD HAVE A MATERIAL ADVERSE EFFECT ON VSW’S BUSINESS.

To date, the majority of revenues related to Convera’s business and a portion of revenues related to Firstlight’s business have been have been derived from publishers in the United Kingdom. For the year ended January 31, 2009, Convera’s total revenue derived from international sales was approximately $1.0 million, representing approximately 76% of its total revenue. For the year ended January 31, 2008, Convera’s total revenue derived from international sales was approximately $1.0 million, representing approximately 88% of total revenue. For the six months ended June 30, 2009, Firstlight’s total revenue derived from sales outside the United States was approximately $200,000, representing approximately 20% of its total revenue. For the years ended December 31, 2008, 2007 and 2006, Firstlight’s total revenue derived from sales outside the United States were approximately $143,000, $445,000 and $339,000, respectively, representing approximately 6%, 19% and 80%, respectively, of its total revenue.

Convera’s international operations and sales have historically exposed it to longer accounts receivable and payment cycles and fluctuations in currency exchange rates. International sales had been made mostly from its U.K. subsidiary until its closure in January 2009 and are typically denominated in British pounds. As of January 31, 2009, approximately 71% of Convera’s total consolidated accounts receivable were denominated in British pounds. Since exchange rates vary, those results when translated may vary from expectations and adversely impact overall expected profitability. VSW will also offer its services internationally and therefore expose itself to similar risks.

VSW’s international operations may expose it to a variety of other risks that could seriously impede its financial condition and growth. These risks include the following:

potentially adverse tax consequences;
difficulties in complying with regulatory requirements and standards;
trade restrictions and changes in tariffs;
import and export license requirements and restrictions;
regulations on the operation of the internet in certain countries; and
uncertainty of the effective protection of our intellectual property rights in certain foreign countries.

If any of these risks described above materialize, VSW’s international sales could decrease and our foreign operations could suffer.

THE PLANNED BUSINESS MODEL OF VSW IS NEW TO BOTH BUSINESSES AND MAY NOT ATTRACT THE PLANNED TURNOVER OR GENERATE SUSTAINABLE PROFITS.

Until recently, we offered our customers our services for an agreed upon time period in return for an agreed upon monthly charge or a share of advertising revenues. Firstlight offered its services only in return for a percentage of advertising revenues. The marketing and pricing considerations of Firstlight differ greatly from

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those of a subscription model. The cash-flow characteristics are also different. The new pricing model for the combined business has not been finalized and we expect it to evolve over the first several months after the effectiveness of the Merger. However, we presently intend to offer the combined ad-serving, vertical search and micro-site service in return for a share of advertising revenues with a an initial down-payment from the publisher, where possible. There can be no assurance that VSW’s pricing model will be widely accepted by current and new customers and, therefore, VSW may experience a decreases in the demand for its products and services, which would harm its results of operations and cash flows.

AN UNFAVORABLE RESOLUTION MAY RESULT FROM PENDING OR POTENTIALLY FUTURE LEGAL PROCEEDINGS, WHICH COULD IN THE FUTURE MATERIALLY AND ADVERSELY AFFECT VSW’S FINANCIAL POSITION, RESULTS OF OPERATIONS OR CASH FLOWS IN A PARTICULAR PERIOD.

Firstlight is involved in litigation with its former minority shareholder Jamara Holdings Limited and such entity’s chief operating officer and shareholder, Brett Campbell Bailey. Although Firstlight believes these legal proceedings have no merit, the outcome of litigation may be uncertain and the costs associated with defending any litigation may have negative financial and other effects on VSW’s financial position, results of operations or cash flows in a particular period.

IF WE DECIDE TO DISTRIBUTE SHARES OF VSW’S COMMON STOCK, OUR STOCKHOLDERS MAY BE REQUIRED TO HOLD ANY SUCH SHARES THAT ARE DISTRIBUTED TO THEM FOR AN INDEFINITE PERIOD OF TIME.

Pursuant to the terms of the Merger Agreement, we may distribute shares of VSW’s common stock to our stockholders at any time after April 30, 2010 as long as a written notice of such distribution is delivered to VSW 45 days prior to such distribution. Upon receipt of such notice, VSW is required to use its best efforts to prepare and file, at its own cost, a registration statement on Form 10 with the SEC prior to the date of such distribution, registering VSW’s common stock under the Exchange Act and to cause such common stock to be listed on the NASDAQ Global Market or such other exchange as approved by us.

Although VSW is required to use its best efforts to register and list its common stock before such shares are distributed to our stockholders, there can be no assurance that such registration and listing will be successful and no certainty when the registration and listing will become effective, if ever. As a result, our stockholders may be required under securities laws to hold their shares of VSW common stock for an indefinite period of time as “restricted securities” within the meaning of Rule 144 under the Securities Act. As restricted securities, such shares may be resold only pursuant to an effective registration statement or under the requirements of Rule 144 or other applicable exemption from registration under the Securities Act and as required under applicable state securities laws.

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STOCKHOLDER APPROVALS REQUIRED IN CONNECTION WITH THE PLAN OF DISSOLUTION, THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION AND THE ELECTION OF DIRECTORS

On May 29, 2009, our board of directors approved the Plan of Dissolution, the amendment to our Certificate of Incorporation and the election of directors unanimously in a board meeting, and recommended all of the above items for approval, authorization and adoption by our stockholders.

As of the Record Date, there were 53,501,183 shares of our Class A Common Stock issued and outstanding, which shares are entitled to one vote per share. Holders of our Class A Common Stock, the shares of which represented a majority of the voting power of our outstanding capital stock as of the Record Date, executed and delivered to us a written consent approving the Plan of Dissolution, the amendment to our Certificate of Incorporation and the election of directors. The Merger does not require stockholder approval. As a result, in accordance with Delaware law and our Certificate of Incorporation and Bylaws, the Plan of Dissolution, the amendment to our Certificate of Incorporation and the election of directors were approved and adopted by the holders of a majority of the outstanding shares of our Class A Common Stock. After the stockholders approval of the Plan of Dissolution and we file the Certificate of Dissolution, we expect to close the Merger in accordance with the terms and conditions of the Merger Agreement and applicable DGCL and federal and state securities laws. No further stockholders approval or other federal or state regulatory requirements or approvals are required.

The adoption of the Plan of Dissolution by our stockholders constitutes full and complete authority for our board of directors and our officers, without further action by our stockholders, to do and perform any and all acts, and to make, execute and deliver any and all agreements, conveyances, assignments, transfers, certificates and other documents of any kind and character that our board of directors or our officers deem necessary, appropriate or advisable: (i) to dissolve us in accordance with the laws of the State of Delaware and cause our withdrawal from all jurisdictions in which we are authorized to do business; (ii) to sell, dispose, convey, transfer and deliver all of our remaining assets and properties or otherwise convert them into cash and/or other distributable forms; (iii) to satisfy or provide for the satisfaction of our obligations, if any, in accordance with Sections 280 and 281 of the DGCL; and (iv) to distribute any of our properties and assets and all of our remaining funds pro rata to our stockholders.

No further vote or consent of any other of our stockholders is necessary to approve the Plan of Dissolution, the amendment to our Certificate of Incorporation or the election of directors and the Merger does not require stockholder approval. Accordingly, we are not soliciting any stockholder votes or consents by this Information Statement. We anticipate to first take corporate action in accordance with the stockholder approval by filing the Certificate of Dissolution not less than twenty (20) days after the mailing of this Information Statement to stockholders. The closing of the Merger is anticipated to take place as soon as practicable thereafter upon satisfaction of each of the conditions to close set forth in the Merger Agreement but in any event, no earlier than twenty (20) days after the mailing of this Information Statement to our stockholders. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND A PROXY.

This Information Statement also serves as notice to our stockholders under Section 228 of the DGCL of the approval of the Plan of Dissolution, the amendment to our Certificate of Incorporation and the election of directors by less than unanimous written consent of our stockholders.

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PLAN OF DISSOLUTION AND MERGER

Background and Reasons for the Plan of Dissolution and the Merger

During late winter of 2007 and early spring of 2008, our management undertook a review of our long-term prospects in an effort to maximize value for our stockholders. As part of its review, our management considered our current condition and future prospects, including our financial condition, results of operations, anticipated capital expenditures and capital needs.

Our management and board were concerned by our continuing operating losses and the slow adoption of our services, combined with the worldwide economic slowdown. We decided that we would attempt to establish a publishing arrangement with a large multinational technology company to leverage such company’s customer base and customer reach.

Beginning in early March 2008, Patrick C. Condo, our CEO, and members of our engineering staff met with a multinational software corporation (“Partner”) that was interested in developing a new business that would utilize our business-to-business search technology. On April 11, 2008, we began to negotiate content development with the Partner in relation to the Partner’s new business.

At a board meeting on May 20, 2008, our management, led by Mr. Condo, presented a summary of the proposed partnership arrangement with the Partner, which included a management proposed timeline, potential revenue projections over the next three-year period and other initial deal terms. Our board of directors approved moving forward with such partnership arrangement.

Through the remainder of May 2008 and June 2008, we continued to negotiate with the Partner and concluded an ad service license agreement which our board of directors approved at a meeting held on June 30, 2008. At the meeting, our management explained the reasons why the agreements were in our best interests, the costs to us of building the technology itself, the benefits and synergies to our customers and the exclusive benefits to us.

At that same meeting, our management briefly reviewed a wide range of strategic alternatives for us, including maintaining the status quo, soliciting larger corporations to purchase our business, merging with a company in a business that would provide vertical synergies, and a sale of our individual assets.

We began considering Firstlight as a potential merger candidate when Mr. Condo, spoke with Firstlight’s CEO, Colin Jeavons, on June 11, 2008 and then again on June 30, 2008. On July 1, 2008, Mr. Jeavons and Mark MacDonald, a senior officer of Firstlight, presented Firstlight’s strategy to our management and the parties discussed a possible collaboration between the two companies.

On August 20, 2008, Firstlight made a presentation to Mr. Condo and a representative of Allen & Company, LLC, our financial advisor (“Allen & Company), and a representative of our counsel, Goodwin Procter LLP, at Allen & Company’s offices. At that time, the parties discussed the possibility of our acquisition of Firstlight.

Between September 2008 and December 2008, we began a set of meetings with a company specializing in internet broadcasting solutions and providing digital media services, which was interested in merging with us. The parties began discussing a merger strategy in October of 2008 and continued to develop a strategy and financial plan in furtherance of the prospective merger in November of 2008.

On September 15, 2008, our management met with certain individual members of our board of directors in relation to financial considerations regarding our potential acquisition of Firstlight, at which time we decided not to pursue the transaction because of the cash resources required for such an acquisition. On December 15, 2008, we revived discussions of a combination with Firstlight with a different structure and continued negations on structure and preliminary terms through January and February 2009.

During the same period, we also considered partnering with another company to form a new company that would specialize in building specific vertical businesses in the search industry. Also, starting in November 2008, we began holding discussions with the Partner about the potential acquisition of us by the Partner. At a meeting of our board of directors held on December 2, 2008, our management presented an update to our board of directors of the various strategic alternatives, and the synergies provided by each alternative. Our

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board of directors determined to cease discussions with the internet broadcasting solutions business primarily because of the lack of perceived synergies between us and the company and concerns over the business plan of the target company. We terminated discussions with the internet broadcast solutions business in December 2008 and continued discussions with the Partner.

With the global economic downturn rapidly deepening, our board of directors also instructed our management to prepare a “shut-down” analysis, an alternative that our board of directors would seriously consider in an effort to curtail continuing losses, preserve cash and make a cash distribution to our stockholders. At a meeting of our board of directors on December 19, 2008, our management presented a “shut-down” analysis to our board of directors and updated it on potential strategic alternatives.

In January 2009, we terminated discussions with the vertical on-line search business and the Partner terminated acquisition discussions with us.

In January and February 2009, our representatives met with principals of a privately held on-line financial media company to discuss a potential merger. We considered a transfer of our assets to a subsidiary and a simultaneous merger of the on-line media company with Firstlight and such subsidiary and subsequent spinout of the newly combined company’s stock to our stockholders.

At a Board meeting held on February 20, 2009, Allen & Company presented an overview and analysis of the on-line media merger. Messrs. Patrick Condo and Carl Rickertsen, one of our board members, presented an overview and analysis of the Firstlight proposed merger and spinout. Our board authorized the creation of a Merger Committee comprised of the following directors, Messrs. Herbert Allen III, Carl J. Rickertsen, Jeff White and Ronald Whittier to negotiate term sheets from both transactions for further consideration of our board of directors.

The representatives from the Merger Committee continued with negotiations regarding both transactions and on March 2, 2009, our board of directors met again to consider both transactions. A representative of Allen & Company presented the merger terms with the online media company and Mr. Rickertsen presented the merger terms with respect to the proposed Firstlight member. Our board of directors decided to terminate discussions with the on-line media company primarily due to the perceived risk in the combined business plan going forward, but approved the proposed terms of the Firstlight merger subject to some modifications.

At a meeting of our board of directors held on March 25, 2009, Mr. Rickertsen and our counsel presented our board of directors with a revised term sheet and summarized the proposed internal restructuring, the Merger and our proposed dissolution. Our board of directors noted that the Merger would only use a fraction of our available cash, and our board of directors stated it was important to provide a distribution of available cash to our stockholders, to structure the entire transaction in a manner that would limit our liabilities, and to provide an upside of potential equity profits to our stockholders. After lengthy discussion, our board of directors approved the term sheet, formally authorized the Merger Committee to assist in the negotiations of the Merger and related transactions and make a recommendation to our board of directors.

On April 17, 2009, we retained Hempstead & Co. Inc. (“Hempstead”) as our formal advisor to provide a fairness opinion to us that the terms of the transactions, including the Merger, were fair to our stockholders from a financial point of view. See the section entitled “Fairness Opinion” below for more information.

Through April 2009 and May 2009, our management, along with our counsel, conducted due diligence on Firstlight and drafted and negotiated transaction documentation. The Merger Committee, with our management and counsel, met on May 11, 15, 18, 22, 27 and 28, 2009, with Hempstead and our counsel providing advice and analysis on all aspects of the Merger and dissolution during the meetings on May 27, 2009 and May 28, 2009. During the meeting on May 28, 2009, Hempstead orally rendered its opinion to the Merger Committee, that, as of that date and subject to the assumptions, qualifications and limitations set forth in its written opinion, the terms of the Merger were fair, from a financial point of view, to our stockholders. The Merger Committee then unanimously agreed to recommend the Merger, Merger Agreement and the related documentation and the Plan of Dissolution to our board of directors.

On May 29, 2009, we held a meeting of our board of directors to review the terms of the Plan of Dissolution, the Merger and related documents and to consider approval of the Plan of Dissolution and the

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Merger Agreement. Our outside counsel, Goodwin Procter, reviewed the board of directors’ fiduciary duties in connection with the proposed transaction and description of the transactions. Our management reviewed with our board of directors the strategic benefits of the transaction, and the financial analyses prepared in connection with the fairness opinion. Hempstead confirmed that it had rendered its written opinion to the Merger Committee that, as of that date and subject to the assumptions, qualifications and limitations set forth in its opinion, the total merger consideration was fair, from a financial point of view, to our stockholders. The Merger Committee reviewed with our board of directors the process undertaken and alternatives to the proposed Merger. The Merger Committee recommended the Plan of Dissolution, the Merger Agreement and the related documentation to our board of directors. Our board of directors the unanimously approved the Plan of Dissolution and the Merger Agreement and authorized our management to execute the Merger Agreement and related documentation. Our board of directors also authorized our management to make such changes to the transaction documentation as they may deem necessary or appropriate with the advice of our legal counsel.

On June 1, 2009, we issued a press release announcing the approval by our board of directors of the Plan of Dissolution and the execution of the Merger Agreement.

On September 22, 2009, the parties executed an amended and restated Merger Agreement, which, in part, reflected the internal restructurings of Convera and Firstlight, which are described in this Information Statement, and provided Convera with indemnification rights for any amounts that may be owed to Brett Campbell Bailey.

Material Provisions of The Plan of Dissolution

The following is a summary of the material provisions of the Plan of Dissolution. A copy of the Plan of Dissolution is attached to this Information Statement as Annex A. This summary is not complete and is qualified in its entirety by reference to the Plan of Dissolution. The Plan of Dissolution provides for our complete dissolution and liquidation in accordance with the requirements of Delaware law and the Internal Revenue Code of 1986, as amended. We urge you to read the Plan of Dissolution for a more complete description of its terms and conditions.

General

In connection with the Plan of Dissolution, we expect that we will file a certificate of dissolution with the Secretary of State of the State of Delaware on or shortly after twenty (20) days after the mailing of this Information Statement to our stockholders. Under the Plan of Dissolution, we will take the following actions at such times as our board of directors, in its absolute discretion, deems necessary, appropriate or advisable:

file a certificate of dissolution with the Secretary of State of the State of Delaware;
cease conducting normal business operations, except as may be required to sell or convert its assets into cash or other distributable forms and wind-up its business affairs;
take all actions required or permitted under the dissolution procedures of Section 281(b) of the DGCL;
pay or make reasonable provision for payment of our liabilities and obligations, including setting aside a contingency reserve, consisting of cash or other assets that we believe to be adequate for payment of its known liabilities, as well as claims that are unknown or have not yet arisen but that, based on facts known to us, are likely to arise or become known to us within ten years after the date of our dissolution; and
negotiate and consummate the sale of or conversion into cash or other distributable forms, or distribute to stockholders, all of our assets and properties, and all remaining properties, assets and funds to our stockholders or to liquidating trusts pursuant to the Plan of Dissolution and the DGCL within three years of the Consent Date.

Pursuant to the Plan of Dissolution, we will be liquidated as follows: after payment or provision for all of our known, unascertained or contingent debts, obligations and liabilities (including costs and expenses incurred and anticipated to be incurred in connection with the Merger and sale or conversion of our remaining assets into cash or other distributable forms and our complete liquidation), payment or distributions will be made to the holders of our Class A Common Stock in accordance with their respective number of shares then

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held of record. In the event distributions have not occurred prior to the third anniversary of the Consent Date, our remaining assets will be transferred to one or more liquidating trusts (although our remaining assets may be transferred to one or more liquidating trusts prior to such time).

Following the filing of our Certificate of Dissolution, we will cease conducting normal business operations, except as may be required to wind-up our business affairs and to proceed with the dissolution and liquidation. We will continue our corporate existence solely for the purpose of engaging in activities appropriate for or consistent with the winding-up and liquidation of our business and affairs and preserving the value of our remaining assets until they are sold, converted into cash or other distributable forms or distributed to our stockholders in the liquidation. Following dissolution, we will not be authorized to engage in any business activities other than those related to the winding-up of our affairs and preserving the value of its remaining assets as described above, thus limiting its exposure for business activities unrelated to the liquidation of its assets and the winding-up of its business. We will continue to actively prosecute and defend all material litigation matters affecting us and our subsidiaries.

The Plan of Dissolution provides that our board of directors will take all actions required or permitted under the dissolution procedures of Section 281(b) of the DGCL. These procedures require, among other things, for us to:

pay or make reasonable provision to pay all claims and obligations, including all contingent, conditional or unmatured contractual claims, known to us;
make such provision as will be reasonably likely to be sufficient to provide compensation for any claim against us which is the subject of any pending action, suit or proceeding to which we are a party; and
make such provision as will be reasonably likely to be sufficient to provide compensation for claims that have not been made known to us or that have not arisen but that, based on the facts known to us, are likely to arise or to become known within ten years after the date of our dissolution.

Notwithstanding these provisions, the Plan of Dissolution also provides that our board of directors may proceed with our dissolution and liquidation in accordance with any applicable provision of the DGCL, including, without limitation, Sections 280 and 281(a) thereof. Although we currently intend to follow the dissolution procedures of Section 281(b) of the DGCL, our board of directors may, at its option, instruct our officers to follow the procedures set forth in Sections 280 and 281(a) of the DGCL instead of those set forth in Section 281(b) of the DGCL. If our board of directors should so instruct our officers, they would, in accordance with Sections 280 and 281(a) of the DGCL, publish and deliver notice of dissolution to potential claimants, settle claims and post security as ordered by the Delaware Court of Chancery.

The adoption of the Plan of Dissolution by our stockholders constitutes full and complete authority for our board of directors and our officers, without further action by our stockholders, to do and perform any and all acts, and to make, execute and deliver any and all agreements, conveyances, assignments, transfers, certificates and other documents of any kind and character that our board of directors or such officers deem necessary, appropriate or advisable: (i) to dissolve us in accordance with the laws of the State of Delaware and cause our withdrawal from all jurisdictions in which it is authorized to do business; (ii) to sell, dispose, convey, transfer and deliver all of our assets and properties or otherwise convert them into cash or other distributable forms; (iii) to satisfy or provide for the satisfaction of our obligations in accordance with Sections 280 and 281 of the DGCL; and (iv) to distribute any of our properties and assets and all remaining funds pro rata to our stockholders. We will also manage the line of credit we issued to VSW upon the closing of the Merger.

We expect to file our Certificate of Dissolution on or shortly after twenty (20) days subsequent to the mailing of this Information Statement to our stockholders. We expect the dissolution to become effective, in accordance with the DGCL, immediately upon proper filing of the Certificate of Dissolution. Pursuant to the DGCL, we will continue to exist for three years after effectiveness of the dissolution, or for such longer period as the Delaware Court of Chancery directs, for the purpose of prosecuting and defending suits, whether civil, criminal or administrative, by or against us, and enabling us gradually to settle and close our business, to dispose of and convey our property, to discharge our liabilities and to distribute to our stockholders any

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remaining assets, but not for the purpose of continuing the business for which we were organized or any other business. Any legal action existing or commenced by or against us during the three-year dissolution period will not terminate by reason of the expiration of the period.

We expect that our board of directors will be comprised of three directors upon the effectiveness of the election of the three directors as disclosed in “ELECTION OF DIRECTORS” on page 34, until the due election of their successors, and as disclosed in “INTEREST OF CERTAIN PERSONS IN THE MERGER” on page 23, Mr. Matthew Jones, our CFO, will continue to serve as of our sole officer.

Abandonment or Amendment

Under the Plan of Dissolution, if for any reason our board of directors determines that such action would be in our best interests, it may amend, modify or abandon the Plan of Dissolution and all actions contemplated thereunder, including our proposed dissolution, notwithstanding approval by our stockholders of the Plan of Dissolution, to the extent permitted by the DGCL; provided, however, that our board of directors may not abandon the Plan of Dissolution following the filing of our Certificate of Dissolution without first obtaining consent from our stockholders.

Liquidation Distributions

Our board of directors will determine, in its sole discretion and in accordance with applicable law, the timing, amount and nature of, and the record dates for, distributions, if any, in cash or other distributable forms, that we will make to our stockholders pursuant to the Plan of Dissolution.

Liquidating distributions will be made to our stockholders of record, at the close of business on the date of filing of our certificate of dissolution with the Secretary of State of the State of Delaware, pro rata to holders of our Class A Common Stock in accordance with the respective number of shares then held of record by them; provided that in the opinion of our board of directors adequate provision has been made for the payment, satisfaction and discharge of all our known, unascertained or contingent debts, obligations and liabilities (including costs and expenses incurred and anticipated to be incurred in connection with the sale of our assets and our complete liquidation).

Liquidation distributions will be made in cash or in kind, including in stock of, or ownership interests in, our subsidiaries and other assets. Such distributions may occur in a single distribution or in a series of distributions, in such amounts and at such time or times as our board of directors, in its absolute discretion, and in accordance with Section 281 of the DGCL, may determine. Our Plan of Dissolution provides however that we must complete the distribution of all of our properties and assets to stockholders or to liquidating trusts as provided below as soon as practicable following the filing of our Certificate of Dissolution and in any event on or prior to the third anniversary of the Consent Date (the “Final Distribution Date”).

If and to the extent deemed necessary, appropriate or desirable by our board of directors in its absolute discretion, we may establish and set aside as a Contingency Reserve a reasonable amount of cash and/or property to satisfy claims against us and other of our obligations, including, without limitations, (i) tax obligations, (ii) all expenses of the sale of our property and assets, (iii) the salary, fees and expenses of members of our board of directors, management and employees, (iv) expenses for the collection and defense of our property and assets, (v) legal fees and expenses and other brokerage fees, agency and other fees of professionals retained to provide services to us, and indemnification of our officers, directors and employees and (vi) all other expenses related to our dissolution and liquidation and the winding-up of our affairs.

The amount available for distribution, if any, will depend principally upon the amount of our cash after satisfaction of all liabilities, the value of our non-cash assets and the amount of our existing and unknown claims and obligations.

Because of uncertainties concerning the ultimate net value of our non-cash assets and the amount of any unknown claims and obligations we may incur, we cannot currently predict the aggregate net value of assets that may be available for distribution, in cash or other distributable forms, to our stockholders.

Sales of Our Assets

The Plan of Dissolution gives our board of directors the authority to sell or convert all of our properties and assets into cash or other distributable forms. Other than cash, we expect to own the stock of VSW and

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certain intellectual property unrelated to our search business. If the Merger is consummated, our present intention is to distribute our shares in VSW after a lengthy holding period and subject to securities laws and other terms, we will attempt to sell our intellectual property as well. Approval of the Plan of Dissolution constitutes stockholder approval of any and all such sales or conversions into cash or other distributable forms and we do not anticipate that we will require any further stockholder vote with respect to the approval of the specific terms of any particular asset sale or conversion into cash or other distributable forms approved by our board of directors. We may conduct sales or conversions into cash or other distributable forms by any means, including by competitive bidding or private negotiations. There are no assurances that we can sell any remaining assets and the value of such assets is uncertain.

Our sale or conversion of an appreciated asset into cash or other distributable forms will result in the recognition of taxable gain to the extent that the fair market value of such asset exceeds our tax basis in such asset. We believe that we have sufficient useable net operating losses to offset substantially all of the income or gain that could be recognized by us for regular U.S. federal income tax purposes, although there can be no assurance in this regard. However, we do anticipate being subject to the alternative minimum tax and state tax liabilities, among others.

Our Conduct Following Adoption of the Plan of Dissolution

Following our the filing of our Certificate of Dissolution, our activities will be limited to winding-up our affairs, taking such actions as we believe may be necessary, appropriate, or desirable to preserve the value of our assets, and distributing our assets in accordance with the Plan of Dissolution. We will seek to distribute or liquidate all of our assets in such manner and upon such terms as our board of directors determines to be in the best interests of our stockholders. Following the filing of our Certificate of Dissolution, we will cease conducting normal business operations, except as may be required to wind-up our business affairs and to proceed with the dissolution and liquidation. We will continue our corporate existence solely for the purpose of engaging in activities appropriate for or consistent with the winding-up and liquidation of our business and affairs and preserving the value of our remaining assets until they are sold, converted into cash or other distributable forms or distributed to stockholders in the liquidation. Following the filing of our Certificate of Dissolution, we will not be authorized to engage in any business activities other than those related to the winding-up of our affairs and preserving the value of our remaining assets as described above, thus limiting its exposure for business activities unrelated to our liquidation or conversion of our assets into cash or other distributable forms and the winding-up of our business. We will continue to actively prosecute and defend all material litigation matters affecting us and our subsidiaries.

Following the filing of our Certificate of Dissolution, our directors, officers and any employees will receive compensation for the duties that each of them performs from time to time as determined by our board of directors and we will continue to indemnify our officers, directors, employees and agents in accordance with our Certificate of Incorporation and Bylaws, as amended and/or restated, and any contractual arrangements for actions taken in connection with the Plan of Dissolution and the winding-up of our affairs. Our obligation to indemnify such persons may be satisfied out of our remaining assets or the assets of any liquidating trust. Our board of directors and the trustees of any liquidating trust described below may obtain and maintain such insurance as they believe may be necessary, appropriate, or advisable to cover our indemnification obligations under the Plan of Dissolution, including, without limitation, directors’ and officers’ liability insurance.

We are in the process of implementing compensation arrangements with certain of our employees, including one member of our senior management.

Contingency Reserve

Under the DGCL, we generally are required, in connection with our dissolution, to pay or make reasonable provision for payment of our liabilities and obligations, if any. Following our dissolution, we will pay all expenses and fixed and other known liabilities, or set aside a Contingency Reserve, consisting of cash or other assets that we believe to be adequate for payment of those known liabilities, as well as claims that are unknown or have not yet arisen but that, based on facts known to us, are likely to arise or become known to

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us within ten years after the date of our dissolution. The Contingency Reserve is set at $3,000,000 in cash, including a $1,350,000 reserve to cover potential liabilities under the indemnification provisions of the Merger Agreement.

Although the board believes such Contingency Reserve is adequate for payment of our known and unknown liabilities, the Contingency Reserve may not be sufficient to satisfy all of our obligations, expenses and liabilities due to the uncertainty of the unknown obligations, in which case a creditor could bring a claim against one or more of our stockholders for each such stockholder’s pro rata portion of the claim, up to the total amount distributed by us to that stockholder pursuant to the Plan of Dissolution. Commencing with the time of our initial distribution, from time to time we expect to distribute to our stockholders any portion of such Contingency Reserve that our board of directors deems no longer to be required.

Liquidating Trusts

If deemed necessary or advisable, our board of directors for any reason, may, from time to time, transfer any of our properties or assets to one or more liquidating trusts established for the benefit of our stockholders, which properties or assets would thereafter be sold or distributed on terms approved by the liquidating trustees (as defined below) of such trusts; provided that listed stocks or securities, readily-marketable assets, operating assets of a going business, unlisted stock of a single issuer that represents 80% or more of the stock of such issuer, and general or limited partnership interest (the “Excluded Assets”) will not be transferred to a liquidating trust and will instead be sold or distributed to our stockholders. The purpose of any such liquidating trust would be to serve as a temporary repository for the trust property prior to its disposition or distribution to our stockholders, to distribute or sell such property on terms satisfactory to the liquidating trustees, and to distribute to our stockholders any net proceeds of such sale after paying any liabilities assumed by the trust. Our board of directors may determine to transfer assets to a liquidating trust in circumstances where the nature of an asset is not susceptible to distribution (for example, interests in intangibles) or where our board of directors determines that it would not be in our best interests or in the best interests of our stockholders for such assets to be distributed directly to our stockholders. Our board of directors may amend these provisions of our Plan of Dissolution without approval by our stockholders.

In addition, in the event we have not completed the distribution of our assets and properties to our stockholders on or prior to the Final Distribution Date, all our remaining monies, properties, and assets and all interests therein (including any contingency reserve but excluding any Excluded Assets which will be sold or distributed to our stockholders no later than on the Final Distribution Date) will be transferred to one or more liquidating trusts, that will exist for the principal purpose of liquidating and distributing the assets and properties transferred to them, and for the sole benefit of our stockholders. Notwithstanding the foregoing, to the extent that a distribution or transfer of any asset or property cannot be effected without the consent of a governmental authority, no such distribution or transfer will be effected without such consent. Any liquidating trust(s) acquiring all of our unsold assets will assume all of our liabilities and obligations as well and will be obligated to pay any expenses and liabilities that remain unsatisfied. If the Contingency Reserve transferred to a liquidating trust is exhausted, such expenses and liabilities will be satisfied out of the liquidating trust’s other unsold assets.

The liquidating trusts will be established pursuant to trust agreements to be entered into with one or more directors, officers or third party individuals or entities appointed by our board of directors to act as trustees thereunder (the “liquidating trustees”), in a form approved by our board of directors. Under a liquidating trust, property is transferred to one or more liquidating trustees, to be held in trust for the benefit of the stockholder beneficiaries subject to the terms of the applicable liquidating trust agreement. Immediately thereafter interests in the liquidating trust are distributed to our stockholders. Liquidating trustees, in their capacity as trustee, will assume all of our obligations and liabilities with respect to the transferred assets, including, without limitation, any unsatisfied claims and unascertained or contingent liabilities relating to these transferred assets, and any such conveyances to the liquidating trustees will be in trust for our stockholders. The transfer to the liquidating trust and distribution of interests therein to our stockholders will enable us to divest ourselves of the trust property and permit our stockholders to enjoy the economic benefits of ownership of such property. We anticipate that the interests would be evidenced only by the records of the liquidating trust, that there would be no certificates or other tangible evidence of such interests, and that no holder of our stock would be required to pay any cash or other consideration for the interests to be received in the distribution,

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subject to the surrender of stock certificates. Such interests in any liquidating trust will not be transferable other than by will, intestate succession or operation of law.

Upon the determination by the liquidating trustee(s) of such trust that all of the trust’s liabilities have been satisfied, but in any event, not more than three years from the date of its creation, such liquidating trust will, to the fullest extent permitted by law, make a final distribution of any remaining assets to the holders of the beneficial interests of the trust.

The adoption of the Plan of Dissolution by our stockholders constitutes full and complete stockholder approval of the appointment of the liquidating trustees, the execution of liquidating trust agreements and the transfer of our assets to the liquidating trusts. We have no present plans to use any liquidating trusts. However, our board of directors believes the flexibility provided by the Plan of Dissolution with respect to the liquidating trusts to be necessary, advisable, and appropriate.

Potential Liability of Stockholders

Under the DGCL, in the event we fail to create an adequate Contingency Reserve, or should such Contingency Reserve and the assets held by any liquidating trust be insufficient to satisfy the aggregate amount ultimately found payable in respect of our expenses and liabilities, each stockholder could be held liable for amounts due creditors to the extent of amounts that such stockholder received from us and from any liquidating trust under the Plan of Dissolution. Each stockholder’s exposure to liability is limited to his, her, or its pro rata portion of the amounts due each creditor in the event we create an inadequate Contingency Reserve.

If we were held by a court to have failed to make adequate provision for our expenses and liabilities or if the amount ultimately required to be paid in respect of such liabilities exceeded the amount available from the Contingency Reserve and the assets of any liquidating trust, a creditor could seek an injunction against us to prevent us from making distributions under the Plan of Dissolution. Any such action could delay and substantially diminish cash distributions to our stockholders.

In addition, each stockholder will be deemed to have received a liquidating distribution from us equal to such stockholder’s pro rata share of the value of the net assets distributed to any liquidating trust that is treated as a grantor trust for tax purposes. Therefore, the distribution could result in tax liability to our stockholders as interest holders without a distribution of cash or other liquid assets or other means of realizing the value of such interests in order to provide funds to pay such taxes. Also, our stockholders, as the deemed owners of the liquidating trust, would be taxed on their respective pro rata shares of any income earned by the liquidating trust. See “Certain U.S. Federal Income Tax Considerations” below.

Final Record Date

We intend to discontinue recording transfers of our stock on the date on which we file our certificate of dissolution with the Secretary of State of the State of Delaware. This filing is expected to occur on or shortly after twenty (20) days after the mailing of this Information Statement to our stockholders. After this time, there will be no further trading of our stock on the NASDAQ Global Market or otherwise and we will not record any further transfers of our stock on our books except by will, intestate succession, or operation of law. After the date of filing of our certificate of dissolution with the Secretary of State of the State of Delaware, we will not issue any new stock certificates, other than in connection with such permitted transfers or as replacement certificates. All liquidation distributions on or after the date of filing of our Certificate of Dissolution made by us or by a liquidating trust will be made to our stockholders according to their holdings of our stock as of the date of filing of our Certificate of Dissolution with the Secretary of State of the State of Delaware.

Our stockholders should not forward their stock certificates before receiving instructions to do so. If surrender of stock certificates should be required, any distributions otherwise payable by us or a liquidating trust to our stockholders who have not surrendered their stock certificates may be held in trust for such stockholders, without interest, pending the surrender of such certificates (subject to escheat pursuant to the laws relating to unclaimed property). If a stockholder’s certificate(s) evidencing his, her, or its stock has been lost, stolen, or destroyed, the stockholder may be required to furnish us with satisfactory evidence of the loss, theft, or destruction, together with a surety bond or other indemnity, as a condition to the receipt of any distribution.

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Trading of Interests in any Liquidating Trust

Interests in a liquidating trust that may be distributed to our stockholders will not be transferable other than by will, intestate succession or operation of law. Any liquidating trust may be required to comply with the periodic reporting and proxy requirements of the Exchange Act.

As our stockholders will be deemed to have received a liquidating distribution equal to their pro rata share of the value of the net assets distributed to any liquidating trust which is treated as a grantor trust for tax purposes, the distribution of non-transferable interests could result in tax liability to the interest holders, even though such holders will not readily be able to realize the value of such interests to pay such taxes or otherwise. See “Certain U.S. Federal Income Tax Considerations” on page 30.

Treatment of Stock Options

We intend to discontinue recording transfers of our stock on the date on which we file our Certificate of Dissolution. This filing is expected to occur on or shortly after twenty (20) days after the mailing of this Information Statement to stockholders. After the filing of the Certificate of Dissolution, shares of our stock will no longer be issuable upon exercise of outstanding options.

Payment of Expenses

In the discretion of our board of directors, we may pay brokerage, agency, professional and other fees and expenses to any person rendering services to us in connection with the collection, sale, exchange or other disposition or conversion of our property and assets into cash or other distributable forms and the implementation of the Plan of Dissolution.

Reporting Obligations

We are currently obligated to comply with the applicable reporting requirements of the Exchange Act. In order to eliminate expenses we incur to comply with these requirements, we intend to cease filing annual and quarterly reports with the SEC under the Exchange Act as soon as possible after we satisfy the requirements for deregistration under the securities laws, which requires that we have less than 300 holders of record. We intend to continue filing reports with the SEC under the Exchange Act during the liquidation process for so long as we are required to do so.

Material Provisions of the Merger Agreement

The following is a summary of the material provisions of the Merger Agreement. A copy of the Merger Agreement, as amended and restated, is attached to this Information Statement as Annex B. This summary is not complete and is qualified in its entirety by reference to the Merger Agreement. We urge you to read the Merger Agreement for a more complete description of its terms and conditions.

Parties

The parties to the Merger Agreement are Convera, B2B, Technologies, Firstlight, VSW, VSW1 and VSW2.

General

Pursuant to the Merger Agreement, B2B and Technologies will each merge with and into VSW 2, which will be a direct wholly-owned subsidiary of VSW 1, which will, in turn, be wholly-owned by VSW prior to the closing of the Merger. Firstlight will be a wholly-owned subsidiary of VSW 2. VSW 2 will be the surviving corporation after the Merger. Upon the effectiveness of the Merger, each share of B2B’s common stock and 1/1,000th of the entire limited liability membership interest of Technologies will become 50 shares of VSW common stock, and each share of VSW common stock will remain as one share of VSW common stock. As a result of such share conversion, we will own 33.3% and the record owners of VSW immediately prior to the effectiveness of the Merger will own 66.7% of the total outstanding common stock of VSW, subject to certain adjustments as described below.

Prior to the closing of the Merger, we will undergo an internal restructuring, whereby we, and certain of our subsidiaries, other than Technologies, will assign all of our operating business and business related assets other than Technologies, including, without limitation, internet-search related patents to B2B, and B2B will

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assume all of our liabilities and the liabilities of certain of our subsidiaries, other than Technologies. B2B will indemnify us with respect to such assumed liabilities. In addition, we will assign up to $3,000,000 cash to Technologies, subject to certain adjustments as described below.

Pursuant to the Merger Agreement, the $3,000,000 cash to be assigned by us to Technologies is subject to reduction on a dollar-for-dollar basis by an agreed upon daily amount for delays in the closing beyond July 29, 2009, which was 60 days after the Merger Agreement was signed, with specified exceptions. As of the September 23, 2009, the cash funding has been reduced to approximately $2,216,000. In addition, we will provide VSW with a $1,000,000 Line of Credit, which is convertible into VSW common stock (the “Credit Line”). VSW will be entitled to draw down the Credit Line in whole or in part, for a six-month period following the closing date of the Merger. Any portion of the Credit Line drawn down by VSW will accrue a 10% annual interest and will become due and payable by VSW upon the first anniversary of the closing date of the Merger. We have the right to convert all or any portion of the draw-down amount into VSW common stock anytime before its repayment in full. The full draw-down and full conversion of the Credit Line will result in an increase of our ownership in VSW to 42.5% of the total outstanding VSW common stock. If we elect to convert less than the entire amount, VSW will issue shares to us equal to 0.0000092% of the total outstanding VSW common stock at closing for each dollar of the Credit Line that we elect to convert.

Since the Plan of Dissolution was approved by our stockholders, the Merger does not require a separate approval of our stockholders because Delaware law allows our board of directors to transfer substantially all of our assets and authorize the closing of the Merger as a way of disposing our assets in accordance with the Plan of Dissolution and Delaware law. The closing of the Merger is subject to customary closing conditions, including, without limitation, (i) receipt of all the required third party consents and approvals, if any, and (ii) completion of a satisfactory audit of the financial statements of VSW. The parties have the right to terminate the Merger Agreement in the event that the transaction does not close on or before October 31, 2009.

Representations and Warranties

Articles III and IV of the Merger Agreement contain reciprocal representations and warranties customary for transactions of this nature and most representations and warranties will survive for a period of six months after the closing of the Merger. Convera, B2B and Technologies on one side, and Firstlight, VSW, VSW1 and VSW2 on the other side, are jointly and severally responsible for the representations and warranties. The Merger Agreement contemplates a mutual indemnification provision, which will expire six months after the consummation of the Merger and is capped at $1,350,000. We are required to keep $3,000,000 in reserve for a period of six months for any potential indemnification claim.

Covenants

Articles V and VI of the Merger Agreement also contains a number of covenants that may affect us, which relate to the conduct of the parties to the Merger Agreement prior to closing, including, without limitation to:

From the execution date of the Merger Agreement until the time at which point the Merger is consummated, unless consented to or approved in writing by all parties, each party and its subsidiaries should conduct the business in the ordinary course and in accordance, in all material respects, with their respective past policies and procedures and in compliance in all material respects with all applicable laws and regulations. Each party and its subsidiaries should use reasonable best efforts to preserve substantially intact the business organization of such party and its subsidiaries, to preserve the services of the current officers, employees and consultants and to preserve the present relationship of such party and its subsidiaries and customers, suppliers and other persons which it has significant business relationship.
Prior to the effective time of the Merger, VSW is required to enter into an employment agreement with our key employees and Firstlight’s key employees, and reach employment arrangements with other employees of ours and Firstlight, with such terms and conditions to be agreed upon by the parties prior to the closing, such agreements and arrangements to be effective at the effective time.

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Employees of each party of their subsidiaries who continue in the employ of VSW or any subsidiaries of VSW after the effective time of the Merger should be eligible for participation in VSW’s employee stock option plan established from time to time.
Following the effective time of the Merger, VSW and its subsidiaries should at their own costs, timely prepare and provide us with all information, forms, reports and other documents required or needed by us so we can timely file or furnish all reports and documents with the SEC and our stockholders.
No party may directly or indirectly solicit any other acquisition inquiries or proposals, except that our board of directors may determine in good faith that it is required to do so in order to comply with our fiduciary duties to our stockholders, in response to an unsolicited superior proposal.

Conditions to the Merger

Under Article VII of the Merger Agreement, the obligations of each party to consummate the Merger is subject to customary closing conditions, including, without limitation to:

our receipt of a fairness opinion, which we have already received as described in this Information Statement;
receipt of all the required third party consents and approvals;
execution and delivery of employment agreements with VSW by certain key employees of Convera, Firstlight and their respective subsidiaries;
completion of the audit of the financial statements of VSW and there is no material adverse difference between the audited and unaudited financial statements, other than the differences caused by GAAP adjustments, conversion into accrual basis or consolidation;
no material adverse effect on any of the parties; and
our grant of a royalty free, use license on video patents to Firstlight, so long as such license will not materially reduce the value of the patents to us.

Termination

Article VIII of the Merger Agreement sets forth the rights of each party to terminate the Merger Agreement under certain circumstances, including, without limitation, termination by any non-breaching party if the transaction has not closed by October 31, 2009.

Regulatory Approval

No regulatory approval is required for the Plan of Dissolution, the Merger, the amendment to our Certificate of Incorporation or the election of directors.

Interest of Certain Persons in the Merger

In connection with the Merger, we modified the severance provision of our employment agreement with Patrick Condo, our President and CEO. On May 29, 2009, we entered into a transition agreement with Mr. Condo, pursuant to which Mr. Condo will transition employment from us to B2B. In accordance with such agreement, we will pay Mr. Condo, among other benefits, an aggregate amount of $480,000 in cash in a lump sum on the 30th day after the closing of the Merger, provided that Mr. Condo has signed and delivered a general release in favor of us and the release has become effective. All of Mr. Condo’s stock options will vest on the effective date of the Merger, and Mr. Condo may exercise vested stock options for a period of 90 days after the Merger. We will not grant Mr. Condo any stock options going forward. Mr. Condo has previously entered into an employment agreement with us on October 26, 2005, under which Mr. Condo would be entitled to, among other benefits, a severance payment equal to 18 months of his current regular base salary and bonus paid out over our regular payroll schedule following the effective date of his employment termination. Upon the completion of the Merger, Mr. Condo’s previous employment agreement will be superseded by such transition agreement. Mr. Condo will not resign from his positions with us until the closing of the Merger.

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In connection with the Merger, we also plan on entering into a transition agreement with Matthew Jones, our CFO, which is intended to supersede the existing employment agreement we entered into with Mr. Jones on December 6, 2006.

VSW plans on entering into employment agreements with all of our employees who will be employed by VSW after the Merger, including Mr. Condo and Mr. Jones, effective upon the closing of the Merger.

In addition, pursuant to the Merger Agreement, one of our current directors, Mr. Carl Rickertsen, will be elected as a director of VSW.

As a result, these persons may each have a direct material interest in the Merger that may diverge from the interests of our stockholders.

A copy of the above described transition agreement with Mr. Condo is attached as Annex D to this Information Statement and is incorporated herein by reference. The above description of the terms and conditions of the transition agreement is merely a summary of the agreement and is modified and supplemented by such reference. Please see “WHERE TO OBTAIN MORE INFORMATION” for information on how to obtain a copy of such agreement.

Fairness Opinion

Hempstead was engaged by the Merger Committee of our board of directors to provide an opinion as to the fairness to our stockholders, from a financial point of view, of the cash consideration and VSW common stock proposed to be paid to our stockholders in connection with the Merger Agreement.

Hempstead has been a financial consulting firm for approximately 30 years. It has provided companies in various industries with corporate valuations, fairness opinions and other financial advisory services. Hempstead had no prior relationship with Convera or Firstlight; Hempstead’s engagement is limited to the fairness opinion and it has not and will not provide other financial advisory services relating to the Merger. The fees of Hempstead are not contingent upon the completion of the Merger nor does Hempstead have any other financial interest in the Merger.

Hempstead was engaged by the Merger Committee of our board of directors on April 17, 2009 to provide the fairness opinion. A preliminary conference call to discuss the engagement occurred in mid-April 2009 between Hempstead and Mr. Stephen Davis of Goodwin Procter LLP, counsel to Convera. Hempstead also had a conference call with Patrick Condo, our CEO, Matthew Jones, our CFO, and Mr. Davis on April 23, 2009 to discuss the nature of the engagement, the transaction structure, the rationale for the Merger, information about Convera and other related topics. On May 7, 2009, Hempstead met Mr. Condo, Mr. Davis, Colin Jeavons, CEO of Firstlight, and Nicolas Kittoe, a director representative of Firstlight at the offices of Goodwin Procter to further discuss the transaction structure, company information and other relevant topics. Hempstead also had numerous telephone conversations throughout the period of its engagement with Jeffrey White, Chairman of our Merger Committee, Mr. Condo and Mr. Jones relating to financial and other data. On May 27, 2009, Hempstead had preliminary discussions with, and made a presentation to, the Merger Committee. Such discussions continued on May 28, 2009 and May 29, 2009. During the meeting on May 28, 2009, Hempstead orally rendered its opinion to the Merger Committee, that, as of that date and subject to the assumptions, qualifications and limitations set forth in its written opinion, the terms of the Merger were fair, from a financial point of view, to our stockholders.

The three basic components to Hempstead’s fairness analysis were examination of (i) the value that our stockholders will receive as a consequence of the Merger, in the form of a cash distribution and VSW stock (ii) the relative fairness of our contribution to VSW in exchange for one-third of the common stock of VSW, and (iii) the value that our stockholders give up as a result of the Merger, in the form of our common stock.

Value to be Received by Our Stockholders

In connection with the Merger, our stockholders will receive cash, plus a pro-rata share of an aggregate of one-third of the common stock of VSW.

Our management estimates that our residual cash, after transfer of all of the operating assets and $3,000,000 in cash at closing of the Merger, drawn-down portion of the $1,000,000 line of credit, and various

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wind-down activities, will be approximately $14,000,000. We plan to distribute $10,000,000 shortly after the closing of the Merger, with the remaining $4,000,000 to be distributed in $2,000,000 increments at six months and 12 months after the closing of the Merger, subject to possible holdbacks for potential liabilities and on-going expenses deemed necessary by our board of directors in its sole discretion.

The present value of this cash distribution, assuming a discount rate of 10%, is estimated at $0.26 per share. The calculation was performed as follows:

       
($ in 000)   Cash Balance   Closing   6-Months   12-Months
Cash Remaining in Convera   $ 14,000     $ 10,000     $ 2,000     $ 2,000  
Discount Interval              0       0.5       1  
Present Value (PV) Factor @ 10%           1.0000       0.9535       0.9091  
PV of Cash Distribution           10,000       1,907       1,818  
Total PV of Cash Distribution         $ 13,725              
Shares Outstanding (Fully-Diluted)           53,501              
Present Value of Cash Per-Share         $ 0.26              

Hempstead assessed the value indication associated with a one-third equity interest in VSW based upon the discounted cash flows methodology. Specifically, under a discounted cash flows methodology, the value of a company’s stock is determined by discounting to present value the expected returns that accrue to holders of such equity. Projected cash flows for VSW were based upon projected financial data prepared by our management. Estimated cash flows to equity holders were discounted to present value based upon a range of discount rates, from 25% to 35%. This range of discount rates is reflective of the required rates of return on later-stage venture capital investments. The resultant value indications for the VSW component of the transaction, on a per-Convera share basis, are as follows:

             
Newco Discounted Cash Flows Analysis
Fiscal Year Ended January 31,     2010   2011   2012   2013   2014   Terminal
Equity Net Cash Flow            $ (2,765 )      1,688     $ 3,496     $ 8,280     $ 13,934     $ 9,554  
Partial Period Adjustment            $ (1,843 )                                              
Discount Interval              0.333       1.167       2.167       3.167       4.167           
Present Value Factor @ 30%           0.92       0.74       0.57       0.44       0.34        
PV of Equity Net Cash Flow           (1,689 )      1,243       1,980       3,607       4,670        
PV of Discrete Period              9,812                                               
Terminal Cash Flow     9,554                                                        
Terminal Multiple: 1/ (.30 – .05)     4                                      
Terminal Value     38,216                                                        
PV Factor     0.34                                      
Present Value of Terminal Value           12,808                                
Aggregate Equity Value              22,620                Discount
Rate
      Per-Share
Value
                   
33.3% of Aggregate Equity Value              7,540                                               
Convera Shares Outstanding           53,501             25 %    $ 0.19              
                                  30 %    $ 0.14                    
VSW Value Per Convera Share         $ 0.14             35 %    $ 0.11              

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Based upon the above analyses, the value indications for the cash and VSW stock to be received by our stockholders in exchange for their current Convera shares are within a range of $0.37 to $0.45 per Convera share.

Analysis of Relative Fairness

We will contribute $3,000,000 in cash and our search technology for one-third of the outstanding stock of VSW. We have a history of unprofitable operations and the market has not widely accepted our vertical search technology. Our stock price is roughly equivalent to our cash balance, net of liabilities thereby indicating only a de minimis or speculative value to its technology assets. Firstlight will contribute its operating business with experience in online advertising and strategic partnerships, sales and marketing in exchange for two-thirds of the outstanding common stock of VSW. The Merger is anticipated to provide synergistic benefits to both Firstlight and us; however, Firstlight brings a revenue stream and a sales network which will absorb our operating losses in the front-end of the projection period. The synergistic value that we contribute to VSW is anticipated to be realized in the intermediate to longer-term (back-end of the projection period). Firstlight’s contribution will facilitate VSW’s growth in the early periods.

For the calendar year ended December 31, 2008, Firstlight generated approximately $8,500,000 of advertising sales that were subject to revenue sharing arrangements with customers. Firstlight’s share of the revenue earned in 2008 was $2,208,000. Firstlight employed approximately four salespeople in 2008. It is anticipated that this will double to eight salespeople in 2009, with additional salespeople being added in subsequent years. Actual results of Firstlight’s operations for January through March 2009 indicate net revenues of approximately $1,000,000 and positive cash flow.

On a stand-alone basis, Hempstead estimated Firstlight’s value in the range of $10,300,000 to $15,800,000. This range of values was derived utilizing discounted cash flows methodology based upon projected cash flows for Firstlight on a stand-alone basis (assuming the transaction did not occur) and discount rates in the range of $25% to 35%. The low end of this indicated valuation range is in excess of $6,000,000. The calculation is shown following:

             
Firstlight Discounted Cash Flows Analysis
Fiscal Year Ended January 31,     2010   2011   2012   2013   2014   Terminal
Equity Net Cash Flow              1,776     $ 2,498     $ 1,894     $ 3,157     $ 3,717     $ 4,359  
Partial Period Adjustment            $ 1,184                                               
Discount Interval              0.333       1.167       2.167       3.167       4.167           
Present Value Factor @ 30%           0.92       0.74       0.57       0.44       0.34        
PV of Equity Net Cash Flow           1,085       1,839       1,073       1,376       1,246        
PV of Discrete Period              6,618                                               
Terminal Cash Flow     4,359                                                        
Terminal Multiple: 1/ (.30 – .05)     4                                      
Terminal Value     17,435                         Discount
Rate
      Equity
Value
                   
PV Factor     0.34                          
Present Value of Terminal Value           5,843             25 %    $ 15,817              
                                  30 %    $ 12,461                    
Aggregate Equity Value         $ 12,461             35 %    $ 10,266              

The estimated value of our contribution to VSW consists of $3,000,000 in cash plus search technology of speculative value, on a stand-alone basis. Discounted cash flow analysis of Firstlight projected cash flow indicates a stand-alone value in excess of $6,000,000. Since the relative value of our contributions is not in excess of one-third of the total stand-alone value of each entity, Hempstead opined that the conversion ratio is fair, from a financial point of view to our stockholders.

Value Given Up by Our Stockholders

In analyzing value indications for our common stock, on a stand-alone basis, Hempstead considered three approaches to value: market based, income based and asset based. These three approaches implied a range of value from $0.25 to $0.31 per share.

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Market-Based Approach

Hempstead initially considered our actual stock price as quoted on the NASDAQ Global Market. From December 2008 to April 30, 2009, the adjusted monthly closing price of our common stock ranged from $0.16 to $0.26 per share. Average trading volume (average of daily volumes) ranged from 32,000 to 478,000 shares. Our stock price quoted on the NASDAQ Global Market as of the measurement date (May 21, 2009) was $0.31 per share.

In addition to the actual trading price of our stock on the NASDAQ Global Market, Hempstead considered valuation benchmarks developed via comparison to transactions involving the equity or assets of other companies. Market-based information was researched from two primary sources of pricing data:

market prices of publicly traded stocks (guideline public company method); and
comparative transaction data relating to the sale or purchase of companies in their entirety (transaction / M&A method).

Under the guideline public company method, Hempstead identified several companies which, in their judgment, provide a reasonable basis for comparison to the relevant investment characteristics of the subject company. Hoover’s online database was utilized to identify potential comparables. Primary search criteria were companies classified under the primary SIC codes 7371 and 7375 and companies identified by Hoover’s as being potential competitors. Results of this analysis are as follows:

             
Company Name   Ticker   Recent
SEC Filing
  Stock
Price
  Shares
O.S.
  MVE   Recent
Book
Value
  Price /
Book
Answers Corp.     ANSW       10Q – 3/09       6.86       7,876       54,031       5,245       10.30  
Bridgeline Software, Inc.     BLSW       10Q – 3/09       1.59       11,133       17,701       19,127       0.93  
Collexis Holdings, Inc.     CLXS       10Q – 12/2008       0.10       120,965       12,097       4,438       2.73  
InfoSpace Inc.     INSP       10Q – 3/09       6.89       35,000       241,147       259,110       0.93  
LookSmart, Ltd.     LOOK       10Q – 3/09       1.25       17,098       21,373       28,896       0.74  
Progress Software Corp.     PRGS       10Q – 3/09       21.88       39,894       872,881       487,250       1.79  
Vignette Corp.     VIGN       10Q – 3/09       12.07       23,826       287,576       264,136       1.09  
                                                    High       10.30  
MVE: Market Value of Equity
                                                 Low       0.74  
                                                    Median       1.09  
                                                    Average       2.64  

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The transaction/M&A method is based upon the prices paid for comparable property in mergers and acquisitions. Sources of data are Pratt’s Stat’s Transaction Reports and custom transaction reports obtained from FactSet Mergerstat LLC. The results of the transaction/M&A method are shown following:

                 
                 
Announced   Seller   Buyer   Deal Size
(Base Equity
Price) ($mm)
  Target
Revenue
LTM ($mm)
  Target Net
Income
LTM ($mm)
  Target Book
Value ($mm)
  Price to
Book
Value
  Price to
Revenue
  30 Day
Premium
6/27/2007     Web.com, Inc.       Website Pros, Inc.       119.1     $ 49.91       -$5.25     $ 17.20       6.9       2.4       46.31 % 
6/25/2007     NEON Communications
Group, Inc.
      RCN Corp.       252.8       71.8       -11.8       131.6       1.9       3.5       3.00 % 
5/18/2007     aQuantive, Inc.       Microsoft Corp.       5,373.6       492.6       60.6       275.3       19.5       10.9       137.58 % 
11/24/2008     Digital Fusion, Inc.       Kratos Defense & Security
Solutions, Inc.
      34.5       51.7       1.6       5.2       6.7       0.7       74.21 % 
9/17/2007     InfoSpace, Inc.       Idearc, Inc.       225.0       16.0       1.7       56.1       4.0       14.1           
2/25/2008     Getty Images, Inc.       Hellman & Friedman LLC       2,028.1       233.2       23.9       123.9       16.4       8.7       33.54 % 
4/14/2008     Clayton Holdings, Inc.       Greenfield Partners LLC       133.1       118.4       -8.0       7.8       17.0       1.1       38.57 % 
12/17/2008     IA Global, Inc.       Golden Century Wealth
Investment Ltd.
      21.5       61.8       -2.2       12.8       3.3       0.7       233.33 % 
8/4/2008     PeopleSupport, Inc.       Essar Group       234.8       144.8       1.4       149.7       1.6       1.6       36.11 % 
4/27/2007     Arkona, Inc.       DealerTrack Holdings, Inc.       45.6       12.8       1.2       3.0       15.4       3.5       28.97 % 
9/3/2008     The Leadstream LLC       CornerWorld Corp.       3.7       3.7       -0.1       0.4       9.0       1.0           
4/25/2007     Covansys Corp.       Computer Sciences Corp.       1,240.8       474.5       39.1       223.3       5.6       2.6       38.72 % 
2/7/2007     Keane, Inc.       Citigroup Venture Capital
International
      845.9       948.3       37.5       133.6       6.3       0.9       18.48 % 
5/15/2008     CNET Networks, Inc.       CBS Corp.       1,752.0       408.2       198.2       378.6       4.6       4.3       48.01 % 
7/9/2007     Objectware, Inc.       Bridgeline Software, Inc.       6.2       4.8       0.0       0.8       8.1       1.3           
11/19/2008     MIVA, Inc.       Blinkx PLC       19.1       137.9       -19.2       3.0       6.4       0.1       37.50 % 
12/21/2007     MTC Technologies, Inc.       BAE Systems PLC       364.1       432.3       15.1       8.6       42.6       0.8       37.54 % 
5/1/2008     Moldflow Corp.       Autodesk, Inc.       267.3       61.3       7.2       87.5       3.1       4.4       30.10 % 
1/31/2008     Audible, Inc.       Amazon.com, Inc.       280.7       110.0       2.4       50.5       5.6       2.6       29.21 % 
High     5,373.6       948.3       198.2       378.6       42.6       14.1       233.3 % 
Low                       3.7       3.7       (19.2 )      0.4       1.6       0.1       3.0 % 
Median     234.8       110.0       1.6       50.5       6.4       2.4       37.5 % 
Average     697.3       201.8       18.1       87.8       9.7       3.4       54.4 % 

The results of the guideline public company method and the transaction/M&A method were a wide range of pricing data. In assessing the applicability of the alternative market-based data, Hempstead considered the fact our balance sheet is comprised primarily of cash. Absent cash, our adjusted book value would be de minimis, making a market-based relative valuation approach (guideline company or transaction/M&A method) impractical. Given the wide range of pricing data and lack of a meaningful basis for determining the magnitude of an appropriate pricing multiple and application of a multiple, it was Hempstead’s opinion that our actual stock price provides the best market-based indication of value as of the measurement date, May 21, 2009.

Income Approach

Hempstead was informed by our management that, absent a material transaction such as the Merger, the likely course of action would be a wind-down scenario. Under this scenario, our management estimated that residual cash, after payment of certain wind-down expenses, would be approximately $14,100,000. Two-thirds of the cash would be released at wind-down, with the remaining one-third released one-year later. Expected cash distributions from the remaining cash balance are discounted at a rate of 10%, which is equivalent to the expected long-term return on a portfolio of large stocks. Based upon the preceding assumptions, the discounted cash distribution in the wind-down scenario is estimated at $0.25 per share. This calculation is shown following:

     
Distribution Date   Jul-09   Jan-10   Jul-10
Distribution Amount     9,414       2,354       2,354  
Discount Interval     0.17       0.67       1.17  
PV Factor @ 10%     0.9842       0.9384       0.8948  
PV of Distribution     9,266       2,209       2,106  
Value of Cash to Shareholders (Rounded)   $ 13,580              

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Asset Approach

In the asset-based approach, value is based upon the subject company’s underlying net asset value. The adjusted net asset value (“NAV”) methodology is applied by determining the market value of a company’s underlying assets. The value of a company’s liabilities and other senior claims are then determined, and deducted from adjusted assets with the residual amount providing an indication of equity value on a going concern basis. Applicable adjustments include a 50% reduction of fixed assets and deduction of CDs ($526,000) collateralizing letters of credit required for leased facilities (removed from other assets). One year cash burn is deducted in arriving at an indication of the “going concern” net asset value. Absent the Merger, cash flow is indeterminate beyond one year. The value indication for our aggregate equity, based on NAV methodology is estimated at $16,400,000. The per-share value indication implied by the NAV method is $0.31.

     
  As of 31-Jan-09   Adjustment   Pro-Forma
ASSETS
                          
Total current assets     23,821             23,821  
Equipment and leasehold improvements, net     460       (230 )      230  
Other assets     596       (526 )      70  
Total assets   $ 24,877           $ 24,121  
LIABILITIES AND SHAREHOLDERS’ EQUITY
                          
Total current liabilities     2,181             2,181  
Preliminary Net Asset Value                     $ 21,940  
Less: Cash burn                 (5,500 ) 
Adjusted Net Asset Value                     $ 16,440  

Fairness Analysis

Hempstead examined the indications of value of our shares on a stand-alone basis relative to consideration to be received as a result of the Merger. Hempstead estimated the value of our stock on a stand-alone basis in the range of $0.25 to $0.31 per share. Hempstead estimated the value of cash distributions to be received by our stockholders at approximately $0.26 per share. The valuation analyses for VSW imply a range of value of $0.11 to $0.19 per share. Adding the two components of consideration, the value is indicated to be in the range of $0.37 to $0.45 per share.

The value of our contribution to VSW consists of $3,000,000 plus search technology indicated to have speculative value, on a stand-alone basis. Discounted cash flow analysis of Firstlight projected cash flow indicates a stand-alone value in excess of $6,000,000. Since the relative value of our contributions is not in excess of one-third of the total standalone value of each entity, Hempstead opined that the conversion ratio is fair, from a financial point of view to our stockholders.

Hempstead did not determine or suggest the amount of consideration to be paid; however, Hempstead’s final opinion, based upon the relevant facts and their interpretation of them, was that the cash distribution and VSW common stock, proposed to be paid to our stockholders in connection with the Merger Agreement is fair to our stockholders, as of May 29, 2009, from a financial point of view. This conclusion is not affected by subsequent amendment and restatement of the Merger Agreement on September 22, 2009.

Past Contracts, Transactions or Negotiations

Other than the agreements and director arrangement disclosed above, there is no past, present or proposed contacts, transactions, negotiations or agreements between us (including any of our affiliates) and Firstlight (including any of its affiliates).

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Dissenters’ Rights

Under Delaware law, which governs us and the rights of our stockholders, and our Certificate of Incorporation and Bylaws, each as amended and/or restated, our stockholders are not entitled to appraisal rights or other dissenters’ rights to demand fair value for their shares of stock by reason of the approval of the Plan of Dissolution or the Merger.

Certain U.S. Federal Income Tax Considerations

The following summary describes certain U.S. federal income tax considerations for the Company and the current stockholders of Class A Common Stock of the Company as of the date hereof with respect to the Plan of Dissolution and the Merger. This summary assumes that such stockholders are “U.S. holders” (as defined below) that hold their Class A Common Stock of the Company as capital assets. This summary does not address the tax considerations that may be relevant to taxpayers subject to special rules under the Internal Revenue Code of 1986, as amended (the “Code”), in light of the holder’s individual investment or tax circumstances. In addition, this discussion does not address (a) U.S. gift or estate tax laws, (b) state, local or non-U.S. tax considerations, (c) special tax rules that may apply to certain stockholders, including without limitation, banks, insurance companies, financial institutions, broker-dealers, taxpayers who have elected mark-to-market accounting, taxpayers that are subject to the alternative minimum tax, tax-exempt entities, regulated investment companies, real estate investment trusts, taxpayers whose functional currency is not the U.S. dollar, United States expatriates or persons other than U.S. holders, (d) special tax rules that may apply to stockholders that acquire, hold, or dispose of Class A Common Stock of the Company as part of a straddle, hedge, constructive sale, or conversion transaction or other integrated investment, or (e) special tax rules that may apply with respect to stockholders that have acquired Class A Common Stock of the Company as compensation or in exchange for the provision of services. Additionally, this discussion does not consider the tax treatment of partnerships (or other entities treated as partnerships for U.S. federal income tax purposes) or other pass-through entities or persons who hold Class A Common Stock of the Company through such entities.

This discussion is based on the Code, and regulations, rulings and judicial decisions thereunder as of the date hereof, and such authorities may be repealed, revoked or modified, or may be subject to differing interpretations, so as to result in U.S. federal income tax considerations significantly different from those discussed below. Moreover, this summary is not binding on the Internal Revenue Service (the “IRS”) or the U.S. courts, and no assurance can be provided that the conclusions reached in this summary will not be challenged by the IRS or will be sustained by a U.S. court if so challenged. The U.S. federal income tax discussion set forth below is included for general information only.

As used herein, a “U.S. holder” means a person that is a beneficial owner of Class A Common Stock of the Company that, for U.S. federal income tax purposes, is (a) an individual who is a citizen or resident of the U.S., (b) a corporation, or other entity classified as a corporation for U.S. federal income tax purposes, that is created or organized in or under the laws of the U.S. or any state in the U.S., including the District of Columbia, (c) an estate if the income of such estate is subject to U.S. federal income tax regardless of the source of such income, or (d) a trust if (i) such trust has validly elected to be treated as a U.S. person for U.S. federal income tax purposes or (ii) a U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of such trust.

STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM IN CONNECTION WITH THE PLAN OF DISSOLUTION AND THE MERGER, INCLUDING TAX REPORTING REQUIREMENTS, THE APPLICABILITY AND EFFECT OF FOREIGN, FEDERAL, STATE, LOCAL AND OTHER APPLICABLE TAX LAWS AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX LAWS. NON-U.S. HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THEIR PARTICULAR TAX CONSEQUENCES.

Certain Considerations for the Company

Dissolution.  The Company intends to treat liquidating distributions made pursuant to the Plan of Dissolution as taxable transactions in which the Company will recognize gain or loss on the distribution of its assets (including the VSW common stock received in the Merger) to the extent of the difference between (i) the aggregate fair market value of such assets at the time of the distribution and (ii) the Company’s

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adjusted tax basis in such assets. As described above, the value of VSW common stock (and the corresponding amount of gain or loss to the Company) at the time of the liquidating distributions may be difficult to determine.

Merger.  The Company intends to treat the Merger as a taxable sale of assets, although other characterizations are possible. Assuming that the Merger is treated as a taxable transaction, the Company (including, for purposes of this discussion, B2B) will recognize gain or loss equal to the difference between (i) the aggregate fair market value of the shares of VSW common stock received by the Company from VSW 2 and the amount of any liabilities of the Company or its subsidiaries assumed by VSW 2 in the Merger and (ii) the Company’s adjusted tax basis in the assets transferred to VSW 2 in the Merger. Because VSW is a privately-held company and its stock is illiquid, the value of VSW common stock received at the time of the Merger (and the corresponding amount of gain or loss to the Company for U.S. federal income tax purposes) may be difficult to determine.

Net Operating Losses; Other Taxes.  Subject to the discussion below, for regular U.S. federal income tax purposes, the Company intends to offset any income and gain it recognizes in connection with the Plan of Dissolution and the Merger and otherwise by its net operating losses (“NOLs”). However, there can be no assurance regarding the amount or availability of any Company NOLs at the relevant times at which it recognizes income or gain. Any tax liability of the Company resulting from recognizing income or gain in excess of any available NOLs will reduce net cash available for distribution.

In addition, depending on the type and amount of income recognized by the Company and the identity of the Company’s stockholders, the Company may be subject to special tax rules under the Code applicable to corporations treated as “personal holding companies”, and, as such, the Company may be subject to certain additional taxes (beyond the regular corporate income tax) with respect to certain amounts of undistributed income. If these rules are applicable, the Company’s ability to use NOLs to offset these amounts will be limited. In order to mitigate such additional corporate level taxation, depending on the circumstances, the Company may choose to designate certain distributions to its stockholders as dividends in any applicable tax period, as further described below under “Certain Considerations for Stockholders”.

Certain Considerations for Stockholders

Except as described herein, the Company intends to treat amounts distributed to stockholders pursuant to the Plan of Dissolution as full payment in exchange for their shares of Class A Common Stock of the Company in a taxable transaction, although other characterizations are possible (including transactions in which stockholders may recognize gain, but not loss, with respect to their Class A Common Stock). Assuming that the liquidating distributions are treated as a taxable exchange, a stockholder generally will recognize gain or loss equal to the difference between (i) the aggregate fair market value of cash or other property (including the VSW common stock) distributed to such stockholder (including distributions to any liquidating trust (as described below)), less any known liabilities assumed by the stockholder or to which the distributed property is subject, and (ii) such stockholder’s adjusted tax basis in the shares of Class A Common Stock of the Company. As described above, the value of the VSW common stock (and the corresponding amount of gain or loss to the stockholders) at the time of the liquidating distributions may be difficult to determine. In addition, as described above, certain distributions to stockholders may be classified by the Company as dividends (taxable without offset for tax basis). Any such dividends would decrease the gain or increase the loss recognized by such stockholders on liquidation.

Any such gain or loss will be computed on a “per share” basis, so that gain or loss is calculated separately for blocks of stock acquired at different dates or for different prices. Each liquidating distribution will be allocated proportionately to each share of stock owned by a stockholder and will be applied first to recover a stockholder’s tax basis with respect to such share of stock. Gain will be recognized in connection with liquidating distributions allocated to a share of stock to the extent that the aggregate value of all liquidating distributions received by a stockholder with respect to that share exceeds such stockholder’s tax basis for that share. Any loss generally will be recognized only in the tax year that a stockholder receives the final distribution to stockholders, and then only if the aggregate value of the liquidating distributions with respect to a share of stock is less than the stockholder’s tax basis for that share. Any payments by a stockholder in satisfaction of any Company contingent liability not covered by the Company’s contingency reserve generally

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would produce a loss in the year paid. Generally, gain or loss recognized by a stockholder in connection with the liquidation will be capital gain or loss and will be long-term capital gain or loss if the share has been held for more than one year and short-term capital gain or loss if the share has not been held for more than one year. Long-term capital gain of non-corporate taxpayers may be subject to more favorable tax rates than ordinary income or short-term capital gain. The deductibility of capital losses is subject to limitations.

Liquidating Trusts

In the event the Company transfers assets to a liquidating trust for the benefit of the stockholders, the Company intends to treat any such liquidating trust as a grantor trust of the stockholders. Assuming the liquidating trust is properly characterized as a grantor trust, stockholders will be treated for U.S. federal income tax purposes as first having constructively received their pro rata share of the property transferred to the trust in a taxable transaction and then having contributed such property to the trust. In the event that one or more liquidating trusts are formed, the stockholders generally will receive notice of the transfer(s). The amount of the deemed distribution to the stockholders generally will be reduced by the amount of any known liabilities assumed by the liquidating trust or to which the transferred property is subject. A liquidating trust qualifying as a grantor trust is itself not subject to U.S. federal income tax. Former holders of Class A Common Stock of the Company, as owners of the liquidating trust, would be required to take into account for U.S. federal income tax purposes their respective allocable portions of any income, gain or loss recognized by such liquidating trust, whether or not they receive any actual distributions from the liquidating trust, and accordingly may recognize taxable income without the receipt of cash. As a result, stockholders will not be taxable when distributions are actually made by the liquidating trust and, if stockholders never receive an amount previously treated as income as a distribution from the liquidating trust, the stockholders may be entitled to a loss deduction. Stockholders would receive annual statements from the liquidating trust reporting their respective allocable shares of the various tax items of the trust.

Back-Up Withholding

The gross amount of any distributions paid pursuant to the Plan of Dissolution to a stockholder that fails to provide the appropriate certification in accordance with applicable U.S. Treasury regulations generally will be reduced by backup withholding at the rate applicable at the time of such distributions. Back-up withholding generally will not apply to payments made to some exempt recipients, such as a corporation or a stockholder who furnishes a correct taxpayer identification number or provides a certificate of foreign status and provides certain other required information.

Back-up withholding is not an additional tax. Amounts that are withheld under the back-up withholding rules may be refunded or credited against the stockholder’s U.S. federal income tax liability, if any, provided that certain required information is furnished to the IRS in a timely manner. Stockholders should consult their own tax advisors regarding application of back-up withholding in their particular circumstance and the availability of and procedure for obtaining an exemption from backup withholding under current law.

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AMENDMENT TO CERTIFICATE OF INCORPORATION

On May 29, 2009, our board of directors unanimously approved an amendment to our Certificate of Incorporation to delete Article NINTH thereof which required, among other things, that our board of directors consist of no less than six and no more than 12 members. Our board of directors determined that in light of our dissolution, it needed more flexibility in determining the number of members of our board and recommended such amendment to our stockholders, who approved the amendment on September 22, 2009 by the written consent of the requisite majority. The amendment will become effective upon its filing with the Secretary of State of the State of Delaware, which is expected to occur on or shortly after twenty (20) days after the mailing of this Information Statement to our stockholders. A copy of the Amendment to the Certificate of Incorporation is attached as Annex E to this Information Statement. On May 29, 2009, our board of directors unanimously approved a resolution pursuant to our Bylaws fixing the number of directors that compromise our board at three with such resolution to be effective upon the filing of the amendment to our Certificate of Incorporation.

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ELECTION OF DIRECTORS

General

On May 29, 2009, board of directors unanimously approved a resolution pursuant to our Bylaws fixing the number of directors that comprise our board at three with such resolution to be effective upon the filing of the amendment to our Certificate of Incorporation.

Three individuals, all of whom are members of our present board of directors, have been nominated for election as directors of the Company until the dissolution of our Company becomes effective. As of the Record Date, there were 53,501,183 shares of our Class A Common Stock issued and outstanding, which shares are entitled to one vote per share. The affirmative vote of the holders of a plurality of the outstanding shares of our Class A Common Stock is necessary for the election of directors. The term of the directors will commence upon the filing of our Certificate of Dissolution and will end upon the due election of their successors dissolution. Holders of our Class A Common Stock representing a majority of the votes entitled to be cast as of the Record Date have voted to elect directors by written consent in lieu of a meeting, and since they have requisite voting power to adopt such stockholders’ action, no other consents or votes of other of our stockholders will be solicited in connection with this Information Statement.

Information Concerning Directors and Nominees

Information regarding each nominee for director is set forth in the following table:

   
Name   Age   Position
Ronald J. Whittier   73   Chairman
Herbert A. Allen III   41   Director
Jeffrey White   61   Director

Ronald J. Whittier has been our Chairman since the effective date of the business combination transaction of the former Excalibur Technologies Corporation and Intel Corporation’s (“Intel”) Interactive Media Services division which created us on December 21, 2000 and was our Chief Executive Officer from December 21, 2000 through April 5, 2001. Mr. Whittier is a founder and Chairman of TechFutures, a non-profit school, and has held that position since 1999. Mr. Whittier formerly held the position of Senior Vice President of Intel and General Manager of Intel’s Interactive Media Services division from 1999 until December 21, 2000. From 1995 to 1999, he was responsible for coordinating Intel’s various activities in content, applications and authoring tools. Prior to 1995, he held various jobs at Intel, including manager of Intel Architecture Labs, Director of Corporate Marketing and general manager of the Memory Products Division. Mr. Whittier joined Intel in 1970.

Herbert A. Allen III has been our director since January 2002. He has been President of Allen & Company LLC, an investment banking firm and broker-dealer affiliated with Allen & Company Incorporated, since September 2002. Prior to that, he was a Vice-President and later an Executive Vice President and a Managing Director of Allen & Company Incorporated since 1993. Prior to 1993, Mr. Allen was employed by T. Rowe Price, an investment management firm, and Botts & Company Limited, a funds management and investment company. He is the son of Herbert A. Allen, our significant stockholder.

Jeffrey White has been a one of our directors since May 2003. Since February 2003, Mr. White has been President of Fare Play, Inc., a consulting company to major league baseball teams. He was self-employed as a consultant from April 2002 until February 2003. From 1991 through 2002, Mr. White served as Senior Vice President and Chief Financial Officer for Major League Baseball, Office of the Commissioner.

Board Committees

After the commencement of the terms of the three directors as described above, we will only maintain one standing committee of the board of directors, the Audit Committee, comprised of Mr. Jeffrey White. Until the filing of the Certificate of Dissolution, we will maintain a Merger Committee comprised of Messrs. Herbert A. Allen III, Carl J. Rickertsen, Jeffrey White and Ronald J. Whitter (Chairman).

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INFORMATION ABOUT FIRSTLIGHT

Business Overview and History

Firstlight was established in London, England on October 3, 2002 as a company limited by shares registered in England. Firstlight was formed to utilize software which was originally created to operate the on-line development of a specialist British parliamentary journal, “The House,” owned by Mr. Young, which Mr. Jeavons had managed up to the point of the sale of that journal.

From October 2002 through May 2004, Firstlight operated as a web development company, engaging in the development of World Wide Web applications that are run over the HTTP protocol from a web server to a web browser, for its then parent company Parliamentary Communications Limited. Beginning in May 2004, Firstlight marketed itself as a technology company, providing a “white-label” service, or a service pursuant to which the actual service provider is not identified to the customer of the service, known as Firstlight ERA (Editorial Related Advertising) to publishers of journals with websites on-line versions of, or otherwise associated with, those journals. The service enabled publishers to sell micro-sites, which are typically individual website pages that provide information about a product or service that can be researched by the reader of the journal article, to their existing advertisers. The software placed advertising in contextually relevant locations next to relevant text in articles on the publisher clients’ websites, displaying the advertisements as hyperlinks in the text of the article. Algorithms would enable content to be matched as a text hyperlink next to relevant editorial content. Firstlight also tags, or provide hyperlinks, content and advertising content for publishers who are not tagging their own web-content and supplied advertiser metrics.

Publishers who subscribed to this service would sell the text links at an annual price for unlimited cost per thousand views and unlimited clicks. Under its business model at that time, Firstlight provided the above services for a revenue share of approximately 35%. The publisher would invoice the advertiser and the publisher would pay Firstlight its revenue share. In the first 18 months from May 2004 to January 2006, Firstlight relied on publishers to sell the service to advertisers and it made very few sales. Firstlight then hired its own sales-force and formed a marketing division to sell the technology in partnership with publishers. The publisher would set up a meeting with their advertiser; Firstlight would demonstrate how the technology worked, and make the sale. The publisher would then invoice the advertiser and pay Firstlight after, often long after, the publisher had received funds. In 2007, Firstlight, with four sales people, generated approximately $4,600,000 worth of advertising revenue and received approximately $1,600,000 as its revenue share. In 2008, with four sales people again, Firstlight generated approximately $9,000,000 worth of advertising and received approximately $3,000,000 as its revenue share.

From March 2008 to September 2008, operational support for Firstlight’s Firstlight ERA service was transferred from Firstlight Online (NZ) Ltd., its New Zealand subsidiary (“FLNZ”), to Firstlight Online India Private Limited, its Indian subsidiary, since India is more cost efficient. In September 2008, system support and enhancement was also transferred from FLNZ to Firstlight Online India Private Limited and FLNZ ceased its operations. Firstlight currently sells ad-serving and search services principally to United States and British businesses through its offices in New York, New York and London, England. See “Products and Services” below. Management is situated in New York, operations are undertaken in Bangalore, India and administrative functions are carried out in the three locations.

Firstlight was incorporated in England on October 3, 2002. Firstlight’s registered office is 14 Great College Street, London SW1P 3RX and its principal place of business and mailing address is 81 Rivington Street, London EC2A 3AY, Tel: +44 203 178 4150).

Firstlight is the parent of multiple wholly-owned subsidiaries, including (i) Firstlight Online UK Limited incorporated in England on March 21, 2006, (ii) Firstlight Global Limited, incorporated in England on October, 15, 2004, and (iii) Firstlight Online India Private Limited, incorporated in India on August 3, 2006. Firstlight also was the majority owner of FLNZ; however, FLNZ has ceased operations.

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Recent Transactions

Prior to the consummation of the following transactions, Firstlight was owned by Global News Net Limited, a company limited by shares registered in England (“GNN”), and Jamara Holdings Limited, a company limited by shares registered in New Zealand (“Jamara Holdings”).

On August 13, 2009, Vertical Search Works, Inc. (“VSW”), VSW1, Inc. (“VSW 1”) and VSW2, Inc. (“VSW 2”) were each incorporated under the laws of Delaware and each company has a registered office and a principal place of business located at 1105 North Market Street, Suite 1300, Wilmington, DE 19801. The sole stockholder, director and officer of VSW on the date of its incorporation was Mr. Nicholas Kittoe. Immediately prior to the closing of the Merger, the sole stockholder of VSW 1 will be VSW and the sole stockholder of VSW 2 will be VSW 1. Mr. Kittoe will be the sole director and officer of VSW 1 and VSW 2 until the Merger becomes effective.

On September 17, 2009, Thorlake Limited, a company limited by shares registered in England (“Thorlake”), completed its purchase of all of the outstanding capital stock of Firstlight from Firstlight’s then shareholders, GNN and Jamara Holdings, in accordance with Firstlight’s organizational documents. The consideration for Thorlake’s purchase was £1 per ordinary Firstlight share outstanding and conditional payments in an amount up to £2,000 per outstanding share, which was accepted by, or on behalf of, 100% of Firstlight’s shareholders. Firstlight, a then wholly-owned subsidiary of Thorlake, retained its debt obligation to GNN in the amount of approximately £4,700,000 (the “GNN Debt”).

On September 17, 2009, Messrs. Colin Jeavons and Keith Young purchased all of Firstlight’s outstanding shares from Thorlake for £5,000 and conditional payments in an amount up to £2,000 per outstanding share. On September 23, 2009, VSW 2 entered into a purchase and sale agreement with Messrs. Jeavons and Young pursuant to which VSW 2 purchased all of the issued share capital of Firstlight from Messrs. Jeavons and Young for nominal consideration. The GNN Debt remained an obligation of Firstlight throughout these transactions.

Subsequent to the date of this Information Statement and prior to the consummation of the Merger, the GNN Debt will be transferred to Messrs. Jeavons and Young either through an assignment from GNN or in connection with the dissolution and liquidation of GNN. VSW will then purchase the GNN Debt held by Firstlight, its indirect wholly-owned subsidiary, from Messrs. Jeavons and Young, and issue additional shares of VSW to Messrs. Jeavons and Young as consideration for such purchase. Therefore, the GNN Debt that was formerly payable to GNN from Firstlight will be payable to VSW from Firstlight, its indirect wholly owned subsidiary. As a result of these transactions, the ownership of VSW will be as follows:

 
Name of Shareholder   Percentage
Ownership in
VSW
Keith Young     50.03 % 
Colin Jeavons     49.95 % 
Nicholas Kittoe     0.02 % 

Products and Services

Firstlight is a software and internet services company, which provides a software system and services to the online publishers by which such publishers can sell advertising on their web-pages. The service is intended to assist advertisers in building name recognition and an online presence, and to generate online revenue through editorial related advertising.

Firstlight provides publishers both the technology and the business model to offer their existing advertisers a targeted form of advertising on the Internet. Firstlight hosts all of the content and delivers turnkey technology into the existing platform of the publisher.

Firstlight provides a “white-label” service, or a service pursuant to which the actual service provider is not identified to the customer of the service, known as Firstlight ERA (Editorial Related Advertising) to publishers of journals with websites on-line versions of, or otherwise associated with, those journals. Firstlight ERA matches and displays advertisements next to the text of a publication and such advertisements are related

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to the content of the article and targeted to its readers. This enables advertisers to improve the targeting of their advertising with the result that such advertising enjoys higher response rates than conventional unmatched display advertising. The service also enables publishers to sell micro-sites, which are typically individual website pages that provide information about a product or service that can be researched by the reader of the journal article, to their existing advertisers. Firstlight also tags, or hyperlinks, content and advertising content for publishers who are not tagging their own web-content and supplied advertiser metrics. All the revenues of Firstlight for the last three fiscal years were generated by Firstlight ERA services.

Sales and Marketing

Firstlight maintains a sales and marketing team to sell and market the technology in partnership with publishers of online media. Typically, Firstlight will approach the publisher and ask the publisher to set up a meeting between one of its advertisers and Firstlight. Firstlight’s sales and marketing team then makes a presentation to the advertiser and demonstrates how the technology works. If the advertiser purchases the Firstlight ERA service, it will enter into a contract with the publisher. The publisher then invoices the advertiser on a monthly, quarterly or annual basis and pays Firstlight its 35% revenue share after the publisher has received funds from the advertiser. The publisher invoices the advertiser directly and the publisher pays Firstlight its revenue share. Firstlight typically focuses its sales efforts on business-to-business advertisers.

Customers

Firstlight performs its marketing and sales functions primarily in the United Kingdom and the United States. The majority of Firstlight’s customers are located in the United States. Its customer base is predominantly comprised of Internet advertisers and publishers. Firstlight’s editorially-related advertising service is sold primarily to publishers via telephone by its sales teams based in New York and London and through its website, www.firstlightera.com.

For the six months ended June 30, 2009, Firstlight’s three largest customers accounted for 64.2% of sales, as follows:

 
Reed Elsevier PLC     44.8 % 
United Business Media Limited     15.0 % 
Penton Business Media, Inc.     5.4 % 
Total     64.2%  

If Firstlight loses either Reed Elsevier PLC or United Business Media Limited as one of its customers, it would have a material adverse effect upon its revenues. See “Risk Factors”.

Supplier Relationships

All the services of Firstlight are delivered by computers hosted by Rackspace, Inc. of 0725 Datapoint Drive, Suite 100, San Antonio, Texas 78229. Firstlight believes that it can replace Rackspace, if necessary, without any interruptions in its business.

Competition

Firstlight believes that its principal competitors in the ad-serving business are Google, Microsoft and Yahoo. Firstlight also expects to face competition from new entrants into the ad-serving business. Firstlight may also face competition from existing competitors and other companies developing similar products or services. The principal methods of competition in the ad-serving business are pricing and technology.

Many of Firstlight’s existing and potential competitors have substantially greater financial, technical, marketing, and other resources than it has, as well as more experience and revenues. Their greater technical resources and research and development experience may enable them to respond more quickly and effectively than Firstlight can to evolving technologies and industry standards as well as changes in market conditions. Many of its competitors also have greater brand name recognition, well-established relationships with current and potential customers and have more extensive knowledge of Firstlight’s target markets.

Firstlight believes that it derives certain competitive advantage from its ability to offer publishers ad-serving on a white label basis, so that it appears to the reader that the publisher is offering the selected

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advertisers rather than a third party advertiser such as Google, Microsoft or Yahoo as the advertisements appear on websites serviced by such companies.

Employees

As of June 30, 2009, Firstlight and its subsidiaries employed 102 full-time employees, one consultant and one part-time bookkeeper. None of Firstlight’s employees is covered by a collective bargaining agreement. Firstlight believes it has a good relationship with its employees. The following table shows the breakdown of the number of employees by department and geographic location as of June 30, 2009:

   
Location Employees   Department/Responsibilities   Number of
People
Bangalore, India     Senior Management       1  
       Quality Assurance       20  
       Tagging, Content and Advertiser Development       59  
       Administrative       9  
       Subtotal       89  
New York, USA     Senior Management       1  
       Senior Sales       1  
       Ad Sales       2  
       Appointment Setters       2  
       Customer Support       2  
       Administrative       2  
       Subtotal       10  
London, England     Senior Management       1  
       Sales       1  
       Customer Support       1  
       Subtotal       3  
Total Employees           102  
Long-Term Contractors
 
London, England     Consultant       1  
USA     Bookkeeper       1  
Total Long-Term contractors           2  
Total Employees and Long-Term Contractors              104  

Intellectual Property

Firstlight’s current business is operated on proprietary self-developed software which utilizes US Patent Application Serial No. 11/789,474, which is Firstlight’s technology relating to the micro-sites that link to editorial content in the online journals. Firstlight also owns various domain names, including firstlightera.com, firstlightsearch.com and B2bnetsearch.com.

Government Regulation

Firstlight does not require governmental approval of any of its products and services.

Research and Development

Firstlight has ceased its research and development activities in anticipation of its merger with us and our engineering and development activities.

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Segment and Geographic Area Financial Information

Firstlight has operated in 2007, 2008 and in the current year in a single reportable industrial sector. To date, Firstlight’s revenues have been earned principally from customers located in the U.S. The following table presents information about our unaudited revenues by geographical area (in thousands):

         
  Six Months Ended
June 30,
  Year Ended
December 31,
     2009   2008   2008   2007   2006
Revenue
                                            
US Revenue   $ 821     $ 1,086     $ 2,065     $ 1,095     $ 86  
UK Revenue     200       53       143       445       339  
Total   $ 1,021     $ 1,139       2,208     $ 1,540     $ 424  
US Revenue     80 %      95 %      94 %      71 %      20 % 
UK Revenue     20 %      5 %      6 %      29 %      80 % 
Total     100 %      100 %      100 %      100 %      100 % 

Available Information

Firstlight’s website address is www.firstlightera.com.

Properties

Firstlight occupies approximately 500 square feet of office space in London, England pursuant to a lease that expires on March 7, 2010. Firstlight’s U.K. subsidiary, Firstlight Global Limited, leases approximately 4,803 square feet of office space in New York, New York pursuant to a lease that expires on October 31, 2009. In addition, Firstlight’s Indian subsidiary, Firstlight Online Private Limited, leases approximately 4,450 square feet of office space in Bangalore, India. Firstlight’s data centers are hosted in Dallas, Texas pursuant to a Master Services Agreement and certain Service Orders related thereto by and between Rackspace US, Inc. and Firstlight.

Legal Proceedings

On April 29, 2009, Firstlight was granted summary judgment by the U.K. High Court in relation to a dispute with Firstlight’s subsidiary, FLNZ, and its chief executive, Brett Campbell Bailey (collectively, the “Defendants”), in which the Defendants were ordered to pay Firstlight £75,000 for breaches of trust and fiduciary duty. Firstlight alleged that the Defendants tampered with Firstlight’s demonstration server and domain name and disrupted Firstlight’s business in the suit instituted on September 8, 2008.

In addition to the proceedings before the U.K. High Court, Firstlight also instituted proceedings against the Defendants in New Zealand on September 29, 2008 regarding related matters, requesting the Defendants to deliver to Firstlight the source code of Firstlight ERA software and pay damages as a result of the Defendants’ interference of Firstlight’s business. One of the Defendants, FLNZ, submitted a counterclaim for an approximate amount of NZ$522,348 allegedly owed by Firstlight to the Defendants under a service agreement. On May 5, 2009, Mr. Bailey was adjudged bankrupt in the Wellington High Court after which he ceased to be a director of FLNZ. Proceedings regarding the matter in New Zealand have been adjourned until November 9, 2009 pending liquidation of FLNZ, which commenced on September 14, 2009, and resolution of the counterclaim. Firstlight intends to defend itself vigorously in the counterclaim regarding this matter. There can be no assurance, however, of a favorable result.

Mr. Bailey and his affiliated company have also threatened to sue Firstlight for various alleged wrongdoings of Firstlight and its majority shareholders. Firstlight believes that such allegations have no merit and intends to defend itself vigorously against such suit, should it be instituted.

Although claims, suits, investigations and proceedings are inherently uncertain and their results cannot be predicted with certainty, Firstlight believes that the resolution of its current pending matters will not have a material adverse effect on its business, consolidated financial position, results of operations or cash flow. Regardless of the outcome, litigation can have an adverse impact on Firstlight because of defense costs, diversion of management resources and other factors. In addition, it is possible that an unfavorable resolution

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of one or more such proceedings could in the future materially and adversely affect its financial position, results of operations or cash flows in a particular period. See the risk factor “An Unfavorable Resolution May Result from Pending or Potentially Future Legal Proceedings, Which Could in the Future Materially and Adversely Affect VSW’s Financial Position, Results of Operations or Cash Flows in a Particular Period” on page 11 of this Information Statement.

Regulatory Approval

None required.

Dividends

As of September 1, 2009, Firstlight had two shareholders of record. As a result of the recent transactions described above, Firstlight will have one shareholder immediately prior to the closing of the Merger, which will be VSW 2. Firstlight has never declared or paid dividends and does not expect to do so for the foreseeable future. Firstlight has never issued equity compensation and does not currently have any equity compensation or stock option plan.

Changes or Disagreements with Accountants

Firstlight has had no disagreements with their accountants. Firstlight appointed McGladrey & Pullen, LLP as its accountants to audit its financial statements in accordance with U.S. GAAP.

Quantitative and Qualitative Disclosures about Market Risk

Firstlight’s market risks, without taking into account the proposed merger, have consisted primarily of currency and interest-rate risks arising from the GNN Debt. Such loans will be assigned for the benefit of VSW in consideration of the issuance of shares of common stock of VSW to Messrs. Jeavons and Young, the shareholders of GNN and the intended holders of such loans immediately prior to the closing of the Merger.

Profit/Loss History

Firstlight has incurred substantial operating losses in every year of its existence.

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INFORMATION ABOUT CONVERA

Business Overview

We provide vertical search services to trade publishers. Our technology and services help publishers to build a loyal online community and increase their internet advertising revenues. With the use of our vertical search services, our customers can create search engines customized to meet the specialized information needs of their audience by combining publisher proprietary content with an authoritative subset of the World Wide Web. The result is a more relevant and comprehensive search experience for the user designed to drive traffic to the publishers’ websites.

Revenues for our vertical search services are generated under two different pricing models that are determined at the time that the contract with the publisher is executed. These pricing models result in us either receiving a percentage of the publishers’ advertising revenues earned by the search sites or from selling a fixed quantity of searches executed on the search site each month for a fixed monthly fee. Many of our Ad share contracts with publishers also contain minimum fees that we are entitled to receive until website advertising revenue generated by the publishers’ search sites exceeds these minimum amounts. We can also generate revenues from hosting publisher websites and from providing technical staff training. We offer professional services to customize publisher websites and optimize search engines, as well as website monetization consulting. Our Converanet service, which was launched in December 2008, is designed to drive traffic to our publisher sites also generates revenues from selling advertising on its site.

The first publisher search site using our vertical search services was launched in November 2006. Our sales and marketing efforts are targeting the top 50 business-to-business publishers in both the United States and United Kingdom, with the goal of building the largest collection of search-based professional user websites on the internet.

Our Class A Common Stock is traded on the NASDAQ Global Market under the symbol “CNVR”. As of September 22, 2009, Allen Holding, Inc., together with Allen & Company Incorporated, Herbert A. Allen and certain related parties beneficially owned approximately 42% of our voting power and currently hold two seats on the board of directors, and would therefore be able to influence the outcome of matters requiring a vote by our stockholders.

For a more detailed description of our business, please see please see Item 1 in Convera’s Annual Report on Form 10-K for the fiscal year ended January 31, 2009, as amended, attached as Annex G to this Information Statement. You can find more information about us under “Where You Can Find More Information.”

We are located at 1919 Gallows Road, Suite 1050, Vienna, Virginia 22182, Telephone: (703) 761-3700.

Description of Property

We occupy our corporate headquarters under a lease agreement that expires on January 31, 2013 for a total of approximately 15,577 square feet of space in an office building in Vienna, Virginia.

We also lease office space in Carlsbad, California and have subleased space to tenants at our former offices in Montreal, Canada. We utilize a hosting facility located in Dallas, Texas operated under a master hosting arrangement with AT&T that expires in July 2009.

Legal Proceedings

None.

Changes and Disagreements with Accountants

None.

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Market Price and Dividends on Convera’s Common Equity and Related Stockholder Matters

Our Class A common stock is listed on the NASDAQ Global Market under the symbol “CNVR.”

The following table sets forth the high and low sale prices for our Class A common stock on the NASDAQ Global Market for the period from February 1, 2007 through September 17, 2009. The number of stockholders of record of our Class A common stock as of September 17, 2009 was 786. There were no shares of our Class B common stock issued or outstanding at that date. We have never declared or paid dividends on our common stock and do not expect to do so for the foreseeable future.

   
  High   Low
Fiscal 2010 (February 1, 2009 – September 17, 2009)
                 
First Quarter   $ 0.22     $ 0.15  
Second Quarter     0.35       0.18  
Third Quarter (through September 17, 2009)     0.32       0.19  
Fiscal 2009 (February 1, 2008 – January 31, 2009)
                 
First Quarter   $ 2.24     $ 1.33  
Second Quarter     1.72       1.03  
Third Quarter     1.26       0.32  
Fourth Quarter     0.72       0.16  
Fiscal 2008 (February 1, 2007 – January 31, 2008)
                 
First Quarter   $ 3.98     $ 2.50  
Second Quarter     4.75       3.08  
Third Quarter     3.98       2.72  
Fourth Quarter     3.89       2.00  

The following table sets forth, as of July 31, 2009, information with respect to our equity compensation plans:

     
Plan Category   Number of
Securities to
Be Issued Upon
Exercise of
Outstanding
Options,
Warrants and
Rights
(a)
  Weighted-
Average Exercise
Price of
Outstanding
Options,
Warrants and
Rights
(b)
  Number of
Securities
Remaining
Available for
Future Issuance
Under Equity
Compensation
Plans (Excluding
Securities
Reflected in
Column (a))
(c)
Equity compensation plans approved by
security holders:
                          
Convera Employee Stock Option Plan     6,191,396     $ 3.77       4,425,557  
Equity compensation plans not approved by security holders:     None       N/A       N/A  

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OTHER INFORMATION

Outstanding Voting Stock of the Company

As of September 9, 2009, there were 54,157,738 shares of our Class A Common Stock issued and 53,501,183 shares of our Class A Common Stock outstanding. Each outstanding share of our Class A Common Stock entitles its holder to one vote on each matter submitted to the stockholders.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth, as of September 9, 2009, information concerning the beneficial ownership of all classes of our common stock of (i) all persons known to us to beneficially own 5% or more of our common stock, (ii) each of our directors, (iii) the Named Executive Officers and (iv) all of our directors and executive officers as a group. Share ownership includes shares issuable upon exercise of outstanding options that are exercisable within 60 days of September 9, 2009.

   
Name and Address of Beneficial Owner**   Amount and
Nature of
Beneficial
Ownership(1)
  Percent of
Class (%)
Allen Holding Inc.     11,728,587 (2)      21.9  
LMM LLC     4,443,889 (3)      8.3  
Susan K. Allen     3,170,369 (4)      5.9  
Ronald J. Whittier     1,359,771 (5)      2.5  
Herbert A. Allen     17,276,457 (6)      32.3  
Herbert A. Allen III     605,787 (7)      1.1  
Eli S. Jacobs     30,834 (8)      *  
Ajay Menon     20,834 (9)      *  
Carl J. Rickertsen     65,000 (10)      *  
Jeffrey White     85,000 (11)      *  
John C. Botts     20,834 (12)      *  
Alexander F. Parker     20,834 (13)      *  
Patrick C. Condo     1,705,655 (14)      3.1  
Matthew G. Jones     210,507 (15)      *  
All directors and executive officers as a group (11 persons)     21,401,513 (16)      38.0  

* Represents less than one percent of the outstanding common stock.
** Unless otherwise indicated, the address should be: c/o Convera Corporation, at 1919 Gallows Road, Suite 1050, Vienna, Virginia.
(1) To our knowledge, each person or entity listed has sole voting and investment power as to the shares indicated, except as described below.
(2) Includes shares owned by Allen & Company Incorporated (“ACI”), a wholly-owned subsidiary of Allen Holding Inc. (“AHI”). Does not include any shares held directly by Herbert A. Allen, Herbert A. Allen III, Susan K. Allen, Bruce Allen and certain of their affiliates, who together with AHI and ACI may be considered a “group,” as such term is defined by Section 13(d) of the Securities Exchange Act of 1934 (“Section 13(d)”), and as disclosed in the Amendment No. 4 on Schedule 13D filed by such parties with the SEC on July 14, 2005. The address for AHI is 711 Fifth Avenue, NY, NY 10022.
(3) As reported in an Amendment No. 5 to Schedule 13G filed with the SEC by LMM, LLC and Legg Mason Opportunity Trust on February 17, 2009. The address for this holder is 100 Light Street, Baltimore, MD 21202.
(4) Does not include shares owned by AHI, ACI, Herbert A. Allen, Herbert A. Allen III, Bruce Allen and certain of their affiliates, who together with Ms. Allen may be considered a “group,” as such term is defined by Section 13(d). The address for Ms. Allen is 711 Fifth Avenue, NY, NY 10022.
(5) Includes outstanding options to purchase 925,000 shares, which were exercisable on or within 60 days of September 9, 2009.

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(6) Includes the shares held directly by AHI, ACI and Allen SBH Investments LLC (“SBH”). Mr. Allen, a stockholder and the President and Chief Executive Officer of AHI, the President and Chief Executive Officer of ACI and a stockholder and the Managing Member, President and Chief Executive Officer of SBH, may be deemed a beneficial owner of the shares held by AHI, ACI and SBH. Mr. Allen disclaims beneficial ownership of the securities reported to be held by AHI, ACI and SBH, except to the extent of his pecuniary interest therein. Also includes 25,000 shares underlying outstanding stock options exercisable within 60 days of September 9, 2009 held by Mr. Allen. Does not include shares owned by Herbert A. Allen III, Susan K. Allen, Bruce Allen and certain of their affiliates, who together with Mr. Allen, AHI, ACI and SBH may be considered a “group,” as such term is defined by Section 13(d).
(7) Includes 196,667 shares owned by Allen & Company LLC, as to which Mr. Herbert A. Allen III shares voting and disposition authority. Also includes outstanding options to purchase 25,000 shares, which were exercisable on or within 60 days of September 9, 2009. Mr. Allen disclaims beneficial ownership of the shares held by Allen & Company LLC, except to the extent of his pecuniary interest therein. Does not include shares owned by AHI, ACI, SBH, Herbert A. Allen, Susan K. Allen, Bruce Allen and certain of their affiliates, who together with Mr. Herbert A. Allen III may be considered a “group,” as such term is defined by Section 13(d).
(8) Represents outstanding options to purchase 30,834 shares, which were exercisable on or within 60 days of September 9, 2009.
(9) Represents outstanding options to purchase 20,834 shares, which were exercisable on or within 60 days of September 9, 2009.
(10) Represents outstanding options to purchase 65,000 shares, which were exercisable on or within 60 days of September 9, 2009.
(11) Represents outstanding options to purchase 85,000 shares, which were exercisable on or within 60 days of September 9, 2009.
(12) Represents outstanding options to purchase 20,834 shares, which were exercisable on or within 60 days of September 9, 2009.
(13) Represents outstanding options to purchase 20,834 shares, which were exercisable on or within 60 days of September 9, 2009.
(14) Includes outstanding options to purchase 1,454,700 shares, which were exercisable on or within 60 days of September 9, 2009.
(15) Includes outstanding options to purchase 202,498 shares, which were exercisable on or within 60 days of September 9, 2009.
(16) Includes outstanding options to purchase 2,875,534 shares, which were exercisable on or within 60 days of September 9, 2009. Also includes the shares held by the entities described in footnotes (7) and (8) above deemed to be beneficially owned by Herbert A. Allen and Herbert A. Allen III, respectively.

Certain Relationship and Related Transactions

Since February 1, 2007, there has not been, nor is there currently planned, any transaction or series of similar transactions to which we were or are a party in which the amount involved exceeds $120,000 and in which any director, executive officer or holder of more than 5% of our capital stock or any member of such person’s immediate family had or will have a direct or indirect material interest other than agreements which are described under the caption “Executive Compensation” of our annual report on Form 10-K for fiscal year ended January 1, 2009 attached as Annex G to this Information Statement and the transactions described below.

Pursuant to the Audit Committee Charter, our Audit Committee is responsible for reviewing and approving any transaction with an executive officer, director, principal stockholder or any of such persons’ immediate family members or affiliates in which the amount involved exceeds $120,000. The Audit Committee will consider the relevant facts and circumstances available and deemed relevant, including, but not limited to, the risks, costs and benefits to us, the terms of the transaction, the availability of other sources for comparable services or products.

On March 31, 2007, we agreed to sell the assets of its Enterprise Search business to Fast Search & Transfer (“FAST”) for $23.0 million. The transaction closed on August 9, 2007, with FAST assuming certain obligations of the business and retaining certain employees serving our Enterprise Search customers. Allen & Company LLC, an investment banking firm affiliated with certain of our directors, acted as a financial advisor

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to us with respect to the transaction and received 1.5% of the consideration plus expenses, which totaled $349,000. Mr. Herbert A. Allen III is President of Allen & Company LLC and Mr. Donald R. Keough is Chairman of Allen & Company LLC. Mr. Herbert A. Allen is President, Chief Executive Officer, and a director of Allen & Company Incorporated, which is affiliated with Allen & Company LLC.

John C. Botts, a member of our board of directors, is also Chairman of United Business Media PLC, the parent company of CMP Information LTD (“CMP”) which is one of our customers. Sales by us to CMP for the three and six months ended July 31, 2009 were $16,000 and $39,000, respectively. Amounts due to us from CMP were $16,000, and $377,000 (excluding deferred revenue) as of July 31, 2009 and January 31, 2009, respectively.

We have entered into indemnification agreements with our directors and certain officers for the indemnification of and advancement of expenses to these persons to the fullest extent permitted by law. We also intend to enter into these agreements with our future directors and certain future officers.

Financial Information

Our financial statements for the year ended January 31, 2009 are included in our Annual Report on Form 10-K, which was filed with the SEC on April 3, 2009 for the fiscal year ended January 31, 2009 and attached as Annex G to this Information Statement. You should read our Annual Report on Form 10-K and Form 10-K/A for the twelve months ended January 31, 2009, quarterly reports on Forms 10-Q for the periods ended April 30, 2009 and July 31, 2009, which are attached to this Information Statement as Annex H and Annex I, and all documents filed by us with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Information Statement and prior to the effective date of the Plan of Dissolution.

Management’s Discussion and Analysis of Financial Condition and Results of Operation of Convera

For “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the year ended January 31, 2009, please see Item 7 in Convera’s Annual Report on Form 10-K, as amended, attached as Annex G to this Information Statement.

For “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the three months ended April 30, 2009, please see Item 2 in Convera’s Quarterly Report on Form 10-Q, attached as Annex H to this Information Statement.

For “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the three months ended July 31, 2009, please see Item 2 in Convera’s Quarterly Report on Form 10-Q, attached as Annex I to this Information Statement.

Quantitative and Qualitative Disclosure about Market Risk

For “Quantitative and Qualitative Disclosures about Market Risk” for the three months ended July 31, 2009, please see Item 3 in Convera’s Quarterly Report on Form 10-Q for the same fiscal period, attached as Annex G to this Information Statement.

DISTRIBUTION OF INFORMATION STATEMENT

We will pay the costs of distributing this Information Statement. This distribution will be made by mail.

WHERE TO OBTAIN MORE INFORMATION

We are subject to the informational reporting requirements of the Exchange Act and file reports, proxy statements and other information required under the Exchange Act with the SEC. Such reports, proxy statements and other information may be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Copies of such materials and information from the SEC can be obtained at existing published rates from the Public Reference Section of the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. The SEC also maintains a site on the Internet at http://www.sec.gov that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC which may be downloaded free of charge. When requesting such materials and information from the SEC, please reference the Company’s SEC file number, which is “001-13507.”

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We have attached as annexes to this Information Statement the following additional documents:

Plan of Dissolution, attached to this Information Statement as Annex A;
Amended and Restated Agreement and Plan of Merger attached to this Information Statement as Annex B;
Fairness Opinion of Hempstead and Co., Inc., attached to this Information Statement as Annex C;
Transition Agreement between Convera and Patrick Condo, attached to this Information Statement as Annex D;
Amendment to the Certificate of Incorporation of Convera, attached to this Information Statement as Annex E;
Written Consent of Holders of a Majority of Shares of Class A Common Stock of Convera attached to this Information Statement as Annex F;
Convera’s Annual Report on Form 10-K for the year ended January 31, 2009 attached to this Information Statement as Annex G;
Convera’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2009 attached to this Information Statement as Annex H; and
Convera’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2009 attached to this Information Statement as Annex I.

We have supplied all information contained or attached to this Information Statement relating to Convera and its subsidiaries, and Firstlight has supplied all information relating to Firstlight and its parent and affiliated companies.

If you are a stockholder, you may have received some of the documents attached to this Information Statement as annexes. You may also obtain any of those documents from the appropriate company or the SEC or the SEC’s Internet web site described above. We will provide an addition copy of these documents (excluding their exhibits) at no charge by first class mail or other equally prompt means within one business day of receipt of your request. Requests for such documents should be directed to:

Convera Corporation
1919 Gallows Road, Suite 1050
Vienna, Virginia 22182
Attention: Matthew Jones
Telephone: (703) 761-3700

One Information Statement is mailed to multiple stockholders sharing the same address unless we receive contrary instructions from one or more of the stockholders. Please send requests for additional Information Statements or SEC reports to the person and address noted above. If multiple stockholders sharing the same address are receiving multiple copies of Information Statements or SEC reports and only wish to receive one copy at such address, please send such request to the person and address noted above.

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Annex A

PLAN OF DISSOLUTION AND
LIQUIDATION OF CONVERA CORPORATION

This Plan of Dissolution and Liquidation (the “Plan”) is intended to accomplish the dissolution and liquidation of Convera Corporation, a Delaware corporation (the “Company”), in accordance with Section 275 and other applicable provisions of the General Corporation Law of Delaware (“DGCL”).

1.  Approval and Adoption of Plan.

This Plan shall be effective when all of the following steps have been completed:

(a) Resolutions of the Company’s Board of Directors:  The Company’s Board of Directors (the “Board”) shall have adopted a resolution or resolutions with respect to the following:

(i) Complete Dissolution and Liquidation:  The Board shall deem it advisable for the Company to be dissolved and liquidated completely.

(ii) Adoption of the Plan:  The Board shall approve this Plan as the appropriate means for carrying out the complete dissolution and liquidation of the Company.

(iii) Sale and Distribution of Assets:  The Board shall determine that, as part of the Plan (but not as a separate matter arising under Section 271 of the DGCL), it is deemed expedient and in the best interests of the Company to sell or distribute to stockholders all or substantially all of the Company’s property and assets in order to facilitate liquidation and distribution to the Company’s creditors and stockholders, as appropriate.

(b) Adoption of this Plan by the Company’s Stockholders.  This Plan, including the dissolution of the Company and those provisions authorizing the Board to sell or distribute to stockholders all or substantially all of the Company’s assets in connection therewith, shall have been approved by the holders of a majority of the voting power of the outstanding capital stock of the Company entitled to vote thereon by written consent or at a special meeting of the stockholders of the Company called for such purpose by the Board. The date of such approval shall be referred to in this Plan as the “Approval Date.”

2.  Dissolution and Liquidation Period.

Once the Plan is effective, the steps set forth below shall be completed at such times as the Board, in its absolute discretion, deems necessary, appropriate or advisable:

(a) the filing of a Certificate of Dissolution of the Company (the “Certificate of Dissolution”) pursuant to Section 275 of the DGCL specifying the date (no later than ninety (90) days after the filing) upon which the Certificate of Dissolution shall become effective (the “Effective Date”), and the completion of all actions that may be necessary, appropriate or desirable to dissolve the Company;

(b) the cessation of all of the Company’s business activities and the withdrawal of the Company from any jurisdiction in which it is qualified to do business, except and insofar as necessary for the sale of its assets and for the proper winding up of the Company pursuant to Section 278 of the DGCL;

(c) the negotiation and consummation of sales and conversion of all of the assets and properties of the Company into cash and/or other distribution form, including the assumption by the purchaser or purchasers of any or all liabilities of the Company;

(d) the taking of all actions required or permitted under the dissolution procedures of Section 281(b) of the DGCL;

(e) the (i) payment or making reasonable provision to pay all claims and obligations of the Company, including all contingent, conditional or unmatured claims known to the Company; and (ii) making of such provision as will be reasonably likely to be sufficient to provide compensation for any claim against the Company which is the subject of a pending action, suit or proceeding to which the Company is a party; and (iii) making of such provision as shall be reasonably likely to be sufficient to provide compensation for claims that have not been made known to the Company or that have not arisen but that,

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based on facts known to the Company, are likely to arise or to become known to the Company within 10 years after the date of dissolution. Provided that the Approval Date shall have occurred and a Certificate of Dissolution shall have been filed with respect to the Company as provided in Section 275(d) of the DGCL, any unexpended amounts remaining in the Contingency Reserve (defined below) shall be transferred to the Liquidating Trust described in Section 8 below no later than the third anniversary of the Approval Date (the “Final Distribution Date”); and

(f) the distribution of the remaining funds, assets and properties of the Company, if any, to its stockholders or a liquidating trust pursuant to this Plan and the DGCL.

Without limiting the generality of the foregoing, the Board may instruct the officers of the Company to delay the taking of any of the foregoing steps until the Company has performed such actions as the Board or such officers determine to be necessary, appropriate or advisable for the Company to maximize the value of the Company’s assets upon liquidation; provided, that such steps may not be delayed longer than is permitted by applicable law.

In addition, notwithstanding the foregoing, the Company shall not be required to follow the procedures described in Section 281(b) of the DGCL, and the adoption of the Plan by the stockholder of the Company as provided in Section 1 above shall constitute full and complete authority for the Board and the officers of the Company, without further stockholder action, to proceed with the dissolution and liquidation of the Company in accordance with any applicable provision of the DGCL, including, without limitation, Sections 280 and 281(a) thereof.

3.  Authority of Officers and Directors.

After the Effective Date, the Board and the officers of the Company shall continue in their positions for the purpose of winding up the affairs of the Company as contemplated by Delaware law. The Board may appoint officers, hire employees and retain independent contractors and advisors in connection with the winding up process, and is authorized to pay to the Company’s officers, directors and employees, or any of them, compensation or additional compensation above their regular compensation, in money or other property, in recognition of the extraordinary efforts they, or any of them, shall be required to undertake, or actually undertake, in connection with the successful implementation of this Plan. Adoption of this Plan by the stockholders of the Company as provided in Section 1 above shall constitute the approval by the Company’s stockholders of the Board’s authorization of the payment of any such compensation.

The adoption of the Plan by the stockholders of the Company as provided in Section 1 above shall constitute full and complete authority for the Board and the officers of the Company, without further stockholder action, to do and perform any and all acts and to make, execute and deliver any and all agreements, conveyances, assignments, transfers, certificates and other documents of any kind and character that the Board or such officers deem necessary, appropriate or advisable: (i) to dissolve the Company in accordance with the laws of the State of Delaware and cause its withdrawal from all jurisdictions in which it is authorized to do business; (ii) to sell, dispose, convey, transfer and deliver all of the assets and properties of the Company; (iii) to satisfy or provide for the satisfaction of the Company’s obligations in accordance with Sections 280 and 281 of the DGCL; and (iv) to distribute any properties and assets of the Company and all remaining funds pro rata to the Company’s stockholders of the Class A Common Stock in accordance with the respective number of shares then held of record.

4.  Conversion of Assets Into Cash and/or Other Distributable Form.

Subject to approval by the Board, the officers, employees and agents of the Company shall, as promptly as feasible, proceed to (i) collect all sums due or owing to the Company, (ii) sell and convert into cash and/or other distributable form of all the remaining assets and properties of the Company, if any, and (iii) out of the assets and properties of the Company, pay, satisfy and discharge or make adequate provision for the payment, satisfaction and discharge of all debts and liabilities of the Company pursuant to Section 2 above, including all expenses of the sales of assets and of the dissolution and liquidation provided for by the Plan.

The adoption of the Plan by the stockholders of the Company as provided in Section 1 above shall constitute full and complete authority for any sale, exchange or other disposition of the properties and assets of the Company contemplated by the Plan, whether such sale, exchange or other disposition occurs in one

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transaction or a series of transactions, and shall constitute ratification of all such contracts for sale, exchange or other disposition. The Company may invest in such interim assets as determined by the Board in its discretion, pending conversion to cash or other distributable forms.

5.  Professional Fees and Expenses.

It is specifically contemplated that the Board may authorize the payment of a retainer fee to a law firm or law firms selected by the Board for legal fees and expenses of the Company, including, among other things, to cover any costs payable pursuant to the indemnification of the Company’s officers or members of the Board provided by the Company pursuant to its Certificate of Incorporation and Bylaws, as amended and/or restated, or the DGCL or otherwise.

In addition, in connection with and for the purpose of implementing and assuring completion of this Plan, the Company may, in the sole and absolute discretion of the Board, pay any brokerage, agency and other fees and expenses of persons rendering services, including accountants and tax advisors, to the Company in connection with the collection, sale, exchange or other disposition of the Company’s property and assets and the implementation of this Plan.

6.  Indemnification.

The Company shall continue to indemnify its officers, directors, employees and agents in accordance with its Certificate of Incorporation and Amended and Restated Bylaws and any contractual arrangements, for actions taken in connection with this Plan and the winding up of the affairs of the Company. The Board, in its sole and absolute discretion, is authorized to obtain and maintain insurance as may be necessary, appropriate or advisable to cover the Company’s obligations hereunder, including without limitation directors’ and officers’ liability coverage.

7.  Liquidating Distributions.

Liquidating distributions shall be made from time to time after the filing of the Certificate of Dissolution as provided in Section 2 above and adoption of this Plan by the stockholders to the stockholders of record, at the close of business on such date, pro rata to stockholders of the Class A Common Stock in accordance with the respective number of shares then held of record; provided that in the opinion of the Board adequate provision has been made for the payment, satisfaction and discharge of all known, unascertained or contingent debts, obligations and liabilities of the Company (including costs and expenses incurred and anticipated to be incurred in connection with the sale and distribution of assets and liquidation of the Company). Liquidation distributions shall be made in cash or in kind, including in stock of, or ownership interests in, subsidiaries of the Company and remaining assets of the Company, if any. Such distributions may occur in a single distribution or in a series of distributions, in such amounts and at such time or times as the Board, in its absolute discretion, and in accordance with Section 281 of the DGCL, may determine; provided, however, that the Company shall complete the distribution of all its properties and assets to its stockholders as provided in this Section 7 or to liquidating trusts as provided in Section 8 below as soon as practicable following the filing of its Certificate of Dissolution with the Secretary of State of the State of Delaware and in any event on or prior to the Final Distribution Date.

If and to the extent deemed necessary, appropriate or desirable by the Board in its absolute discretion, the Company may establish and set aside a reasonable amount of cash and/or property to satisfy claims against the Company and other obligations of the Company (a “Contingency Reserve”), including, without limitations, (i) tax obligations, (ii) all expenses of the sale of the Company’s property and assets, if any, (iii) the salary, fees and expenses of members of the Board, management and employees, (iv) expenses for the collection and defense of the Company’s property and assets, (v) the expenses described in Sections 3, 5 and 6 above and (vi) all other expenses related to the dissolution and liquidation of the Company and the winding-up of its affairs. Any unexpended amounts remaining in a Contingency Reserve shall be transferred to the Liquidating Trust described in Section 8 below no later than the Final Distribution Date.

As provided in Section 12 below, distributions made pursuant to this Plan shall be treated as made in complete liquidation of the Company within the meaning of the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations promulgated thereunder. The adoption of the Plan by the stockholders of the

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Company as provided in Section 1 above shall constitute full and complete authority for the making by the Board of all distributions contemplated in this Section 7.

8.  Liquidating Trusts.

If deemed necessary or advisable by the Board for any reason, the Company may, from time to time, transfer any of its assets to one or more liquidating trusts established for the benefit of the Company’s stockholders, which assets would thereafter be sold or distributed on terms approved by the Liquidating Trustees (as defined below) of such trusts; provided that listed stocks or securities, readily-marketable assets, operating assets of a going business, unlisted stock of a single issuer that represents eighty percent (80%) or more of the stock of such issuer, and general or limited partnership interests (the “Excluded Assets”) shall not be transferred to any liquidating trust and shall instead be sold or distributed to stockholders. In addition, in the event the Company has not completed the distribution of its assets and properties to stockholders as provided in Section 7 above on or prior to the Final Distribution Date, all the remaining funds, properties, and assets of the Company and all interests therein including any Contingency Reserve (other than Excluded Assets which shall be sold or distributed to stockholders no later than on the Final Distribution Date pursuant to Section 7 above) shall be transferred to one or more liquidating trusts. Any liquidating trusts established pursuant to this Section 8 shall exist for the principal purpose of liquidating and distributing the assets and properties transferred to them, and for the sole benefit of the Company’s stockholders. Notwithstanding the foregoing, to the extent that a distribution or transfer of any asset or property cannot be effected without the consent of a governmental authority or third party, no such distribution or transfer shall be effected without such consent.

The liquidating trusts shall be established pursuant to trust agreements to be entered into with one or more directors, officers or third party individuals or entities appointed by the Board on behalf of the stockholders to act as trustees thereunder (the “Liquidating Trustees”) in a form approved by the Board and compliant in all material respects with applicable Internal Revenue Service guidelines treating such liquidating trusts as liquidating trusts for U.S. federal income tax purposes. Any Liquidating Trustee so appointed, in its capacity as trustee, shall assume all of the obligations and liabilities of the Company with respect to the transferred assets, including, without limitation, any unsatisfied claims and unascertained or contingent liabilities relating to these transferred assets, and any such conveyances to the Liquidating Trustees shall be in trust for the stockholders of the Company. Further, any conveyance of assets to the Liquidating Trustee(s) shall be deemed to be a distribution of property and assets by the Company to the stockholders holding a beneficial interest in the liquidating trust for the purposes of Section 7 of this Plan. Any such conveyance to the Liquidating Trustee(s) shall be in trust for the stockholders of the Company holding a beneficial interest in the liquidating trust. Upon a determination by the Liquidating Trustee(s) of such liquidating trust that all of the trust’s liabilities have been satisfied, but in any event, not more than three years from the date of its creation, such liquidating trust shall, to the fullest extent permitted by law, make a final distribution of any remaining assets to the holders of the beneficial interests of the trust.

The adoption of the Plan by approval the stockholders of the Company as provided in Section 1 above shall constitute full and complete appointment of the Liquidating Trustee(s) and the transfer of any assets by the Company to the liquidating trusts as contemplated in this Section 8.

9.  Unlocated Stockholders.

Any cash or other property held for distribution to stockholders of the Company who have not, at the time of the final liquidation distribution, whether made to stockholders pursuant to Section 7 above or to the Liquidating Trustees pursuant to Section 8 above, been located shall be transferred to the official of such state or other jurisdiction authorized by applicable law to receive the proceeds of such distribution. Such cash or other property shall thereafter be held by such person(s) solely for the benefit of and ultimate distribution, but without interest thereon, to such former stockholder or stockholders entitled to receive such assets, who shall constitute the sole equitable owners thereof, subject only to such escheat or other laws as may be applicable to unclaimed funds or property, and thereupon all responsibilities and liabilities of the Company or any Liquidating Trustee with respect thereto shall be satisfied and exhausted. In no event shall any of such assets revert to or become the property of the Company.

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10.  Amendment, Modification or Abandonment of Plan.

If for any reason the Board determines that such action would be in the best interests of the Company, it may amend, modify or abandon the Plan and all actions contemplated thereunder, including the proposed dissolution of the Company, notwithstanding stockholder approval of the Plan, to the extent permitted by the DGCL; provided, however, that the Board shall not abandon the Plan following the filing of the Certificate of Dissolution without first obtaining shareholder consent. Upon the abandonment of the Plan, the Plan shall be void.

11.  Cancellation of Stock and Stock Certificates.

At the time of the final liquidating distribution, whether made to stockholders of the Company pursuant to Section 7 above or to the Liquidating Trustees pursuant to Section 8 above, the Company shall call upon the stockholders to surrender to the Company the certificates that represented their shares of stock. In the event that the final liquidating distribution is made to a Liquidating Trustee pursuant to Section 8 above, at the time of such final liquidating distribution, the Liquidating Trustee shall notify the record holders of shares of stock on the Effective Date of their respective percentage beneficial interests in the assets held by the Liquidating Trustee. Following the Effective Date, the Company shall no longer permit or effect transfers of any of its stock.

12.  Liquidation under Code Sections 331 and 336.

It is intended that this Plan shall be a plan of complete liquidation of the Company in accordance with the terms of Sections 331 and 336 of the Code. The Plan shall be deemed to authorize the taking of such action as, in the opinion of counsel for the Company, may be necessary to conform with the provisions of said Sections 331 and 336 and the regulations promulgated thereunder.

13.  Filing of Tax Forms.

The appropriate officers of the Company are authorized and directed, within thirty (30) days after the effective date of the Plan, to execute and file a United States Treasury Form 966 pursuant to Section 6043 of the Code and such additional forms and reports with the Internal Revenue Service as may be necessary or appropriate in connection with this Plan and the carrying out thereof.

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Annex B

AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
  
  
  
BY AND AMONG
  
  
  
CONVERA CORPORATION,
  
B2BNETSEARCH, INC.,
  
CONVERA TECHNOLOGIES, LLC,
  
  
  
VERTICAL SEARCH WORKS, INC.,
  
VSW1, INC.,
  
VSW2, INC.
  
FIRSTLIGHT ONLINE LIMITED
  
AND
  
CERTAIN AFFILIATES
  
  
  
Dated as of September 22, 2009


 
 

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AMENDMENT AND RESTATED AGREEMENT AND PLAN OF MERGER

AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of September 22, 2009 (this “Agreement”), by and among Convera Corporation, a Delaware corporation (“Convera”), B2BNetSearch, Inc., a Delaware corporation and a wholly-owned subsidiary of Convera (“B2B”), Convera Technologies, LLC, a Delaware limited liability company and a wholly-owned subsidiary of Convera (“Technologies”), Vertical Search Works, Inc., a Delaware corporation (“VSW”), VSW1, Inc., a Delaware corporation and a wholly-owned subsidiary of VSW (“VSW1”), VSW2, Inc., a Delaware corporation and a wholly-owned subsidiary of VSW1 (“VSW2”), Firstlight Online Limited, a United Kingdom corporation and a wholly-owned subsidiary of VSW2 (“FL”) and certain affiliates identified on the signature page hereto. VSW, VSW1, VSW2 and FL are collectively referred to as the “VSW Entities” and each, a “VSW Entity”.

RECITALS

WHEREAS, Convera (and its subsidiaries other than Technologies) will contribute prior to the Closing (as defined in Section 1.8) its entire operating business other than Technologies to B2B by assignment of all of the operating assets (other than cash, certain Intellectual Property (as defined in Section 3.17(l)) unrelated to its business and security deposits in connection with real estate leases) and businesses of Convera (and its subsidiaries other than Technologies), plus an amount of cash as described in Section 2.2(a) hereof to Technologies, and B2B’s assumption of all of the liabilities from Convera (and its subsidiaries other than Technologies) pursuant to a contribution agreement to be entered into between Convera and B2B prior to the Closing (the “Convera Contribution Agreement”);

WHEREAS, the VSW Entities, the direct owners of VSW immediately prior to the Closing (the “Parent”), and entities being organized by the VSW Entities or the Parent will have restructured their business and operations to establish the organizational structure and capitalization of the VSW Entities as described in Sections 3.1 and 3.3 hereof (the “VSW Restructuring”);

WHEREAS, the respective Boards of Directors of the parties to this Agreement have each determined that it is advisable and in the best interests of their respective stockholders that B2B and Technologies, on one hand, and VSW2, on the other hand, merge with each other pursuant to the terms and conditions of this Agreement, and, in furtherance of such merger, such Boards of Directors have approved the mergers of B2B and Technologies with and into VSW2 (the “Merger”) in accordance with the terms of this Agreement and the applicable provisions of the General Corporation Law of the State of Delaware (the “DGCL”);

WHEREAS, Convera’s Board of Directors has approved a Plan of Dissolution and Liquidation (the “Plan of Dissolution”), pursuant to which Convera is seeking stockholders’ consent with respect to the dissolution (the “Dissolution”) of Convera; and

WHEREAS, the parties intend for the Merger to be treated for U.S. federal income tax purposes as a taxable transfer of assets by each of B2B and Convera to VSW2 in a transaction not qualifying under Section 368 of the Internal Revenue Code of 1986 (the “Code”), followed by a liquidation of B2B into Convera, with Convera retaining the tax attributes of B2B, Technologies and the Convera affiliated group (including any net operating loss carryovers).

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth below, the parties hereto agree as follows:

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ARTICLE I
THE MERGER

1.1  The Merger.  Subject to the terms and conditions of this Agreement, at the Effective Time (as defined in Section 1.2), each of B2B and Technologies shall merge with and into VSW2in accordance with the DGCL, the separate corporate existence of each of B2B and Technologies shall cease, and VSW2 shall continue as the surviving corporation. VSW2, in its capacity as the corporation surviving the Merger, is hereinafter sometimes referred to as the “Surviving Corporation.”

1.2  Effective Time.  On the Closing Date (as defined in Section 1.8), the parties shall cause the Merger to be consummated by filing duly executed and delivered certificates of merger as required by the DGCL (the “Certificates of Merger”) with the Secretary of State of the State of Delaware, in such form as required by, and executed in accordance with the relevant provisions of, the DGCL (the time of such filing being the “Effective Time”).

1.3  Effect of the Merger.  At the Effective Time, the effect of the Merger shall be as provided in this Agreement, the Certificates of Merger and Section 259 of the DGCL.

1.4  Modification to Structure.  The parties agree that Convera shall have the right to elect to modify the structure of the Merger so as to merge an additional or alternate wholly-owned subsidiary of Convera into VSW2 (and to amend such provisions of this Agreement as appropriate in connection with such modification). In addition, the parties agree, in the event that a party reasonably determines that it is in the best interest of such party or of those benefiting directly or indirectly from ownership of any part of its equity capital, to modify the structuring of the transaction contemplated in this Agreement (and to amend such other provisions of this Agreement as appropriate in connection with such modification, including so as to maintain the same commercial arrangements regarding liability assumption and indemnification) for purposes of tax or financial efficiencies, taking into account all relevant factors, and to cooperate with each other on the implementation of the modification, so long as such modification is at least in aggregate not materially adverse to the other party from the perspective of tax, financial and liquidity of VSW Common Stock (defined below).

1.5  Certificate of Incorporation of the Surviving Corporation.  At and after the Effective Time, the Certificate of Incorporation of VSW2, as in effect immediately prior to the Effective Time and with provisions to be mutually agreed upon by the parties, shall be the Certificate of Incorporation of the Surviving Corporation, until amended in accordance with the DGCL.

1.6  By-Laws of the Surviving Corporation.  At and after the Effective Time, the By-Laws of VSW2, as in effect immediately prior to the Effective Time and with provisions to be mutually agreed upon by the parties, shall be the By-Laws of the Surviving Corporation, until amended in accordance with the Certificate of Incorporation of the Surviving Corporation and the DGCL.

1.7  Directors and Officers of VSW and the Surviving Corporation.

(a) The directors of VSW and the Surviving Corporation immediately subsequent to the Effective Time shall be as set forth on Exhibit 1.7(a) and shall hold office from the Effective Time until their respective successors are duly elected or appointed and qualified in the manner provided in the Certificate of Incorporation or By-Laws of VSW and Surviving Corporation or as otherwise provided by law.

(b) The officers of VSW and the Surviving Corporation immediately subsequent to the Effective Time shall be as set forth on Exhibit 1.7(b) and shall hold office from the Effective Time until their respective successors are duly elected or appointed and qualified in the manner provided in the Certificate of Incorporation or By-Laws of VSW and the Surviving Corporation or as otherwise provided by law.

1.8  Closing.  Subject to the provisions of this Agreement, the closing of the Merger (the “Closing”) shall take place at 10:00 a.m. New York time, at the New York offices of Goodwin Procter LLP, counsel to Convera, B2B and Technologies, on a date to be specified by the parties which shall be no later than the second business day after satisfaction or waiver of each of the conditions set forth in Article VII (other than the delivery of items to be delivered at Closing and other than those conditions that by their nature are to be satisfied at the Closing, it being understood that the occurrence of the Closing shall remain subject to the

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delivery of such items and the satisfaction or waiver of such conditions at the Closing) or on such other date and such other time and place as the parties shall agree. The date on which the Closing shall occur is referred to herein as the “Closing Date.”

ARTICLE II
CONVERSION AND EXCHANGE OF SECURITIES;
ADDITIONAL MERGER CONSIDERATIONS

2.1  Conversion of Capital Stock.  At the Effective Time, by virtue of the Merger and without any action on the part of any holder of any shares of common stock of VSW, par value $0.01 per share (“VSW Common Stock”), any holder of any shares of common stock of B2B (“B2B Common Stock”), or membership interest of Technologies (“Technologies Interest”):

(a) B2B Common Stock and the Technologies Interest.  Subject to this Article II, every one (1) share of B2B Common Stock plus one-thousand (1/1000) of the entire Technologies Interest issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive fifty (50) fully paid and non-assessable share of VSW Common Stock, payable upon the surrender for cancellation of a certificate or certificates which immediately prior to the Elective Time represented all of the outstanding shares of B2B Common Stock and evidence representing Technologies Interest. All such shares of B2B Common Stock and percentages of Technologies Interest, when so converted, shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each holder of a certificate representing any such shares and such membership interest shall cease to have any rights with respect thereto, except the right to receive the shares of VSW Common Stock pursuant to this Section 2.1(a), none of B2B, Technologies or VSW shall effect any stock split, reverse split, reclassification, stock dividend, reorganization, recapitalization or other like change with respect to B2B Common Stock, Technologies Interest or VSW Common Stock after the date of this Agreement and prior to the Effective Time.

(b) VSW Common Stock.  Each share of VSW Common Stock issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding and shall be one (1) fully paid and nonassessable share of VSW Common Stock, immediately after the Effective Time.

(c) Conversion Ratio Adjustment.  The parties agree that their intent is, immediately after the Closing, Convera will own one-third (1/3) of the total issued and outstanding VSW Common Stock and Parent will own two-thirds (2/3) of the total issued and outstanding VSW Common Stock. In the event VSW does not have 100,000 shares of VSW Common Stock issued and outstanding immediately before the Effective Time, the parties agree that they will adjust the conversion ratio in Sections 2.1(a) and 2.1(b) above to carry out the intent of the parties as specified in this Section 2.1(c). In the event that any representation and warranty of any VSW Entity in Section 3.3 is not true or accurate or that any third party other than Convera and Parent claims any VSW Common Stock for reasons with respect to, relating to or arising out of any dispute involving any owner of FL or its affiliates prior to the VSW Restructuring and such claims prevail, Convera will nevertheless own one-third (1/3) of the total issued and outstanding VSW Common Stock, and Parent shall transfer shares of VSW Common Stock it owns to such third party to maintain Convera’s one-third (1/3) ownership interest of VSW. The parties agree and acknowledge that in no event shall the percentage of Convera’s ownership in VSW or the number of total issued and outstanding VSW Common Stock be affected by such third party claims. The parties agree that in connection with the distribution of VSW Common Stock to Convera stockholders as contemplated in Section 6.10, if any, VSW will effect a stock split or another appropriate form of recapitalization to allow a pro rata distribution of VSW Common Stock to Convera stockholders without fractional shares.

2.2  Additional Transactions. In addition the conversion and exchange of stock as set forth in Section 2.1, subject to Section 6.12, Convera will take the following actions:

(a) Convera covenants and agrees to fund Technologies with $3,000,000 in cash prior to the Closing, less $340,000 for the purpose of covering the potential liability described in Section 4.12(e) of Convera Disclosure Schedule, which amount will be subject to an escrow or similar arrangement agreed upon by

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the parties and will be released upon the extinguishment of Convera’s potential obligations (“Cash Funding”), which Cash Funding shall remain assets of Technologies at the Closing; provided, however, that in the event that the Closing occurs later than July 29, 2009 (the “Target Date”) for reasons other than any delay of Convera stockholders to approve the Dissolution, delay of the Closing as a result of review and comment by the SEC of the Information Statement (as defined in Section 5.5(a)), and due to no breach of any representation, warranties, covenant or other obligations under this Agreement by Convera, B2B, or Technologies, the Cash Funding to be provided by Convera will be reduced on a dollar-for-dollar basis by the amount of the operating expenses of Convera and its Subsidiaries in connection with business incurred subsequent to the Target Date, which will be no more than $14,000 per day. In the event the SEC issues comments to the Information Statement, the accrual of the above daily reduction amount shall be suspended for so long as the SEC’s comments have not been resolved to the SEC’s satisfaction. Notwithstanding anything to the contrary above, if the SEC’s comments are not resolved solely because of the failure of any VSW Entity to provide required information with respect or relating to such VSW Entity or its Subsidiaries on a timely basis, the accrual of the daily reduction shall resume.

(b) Convera covenants and agrees to provide VSW with a $1,000,000 line of credit (the “Line of Credit”) effective immediately upon the Closing, subject to the following terms and conditions. VSW will be entitled to draw down the Line of Credit, in whole at any time or in part from time to time, during a period that is six (6) months following the Closing Date (the “Credit Term”). Any portion of the Line of Credit that has been drawn down (the “Draw-down Amount”) by VSW will accrue interest at an interest rate of ten percent (10%) per annum (interest not to be compounded) and will become due and payable by VSW to Convera on the date that is one (1) year anniversary of the date of the Closing Date; provided, however, that if the principal and interest are not repaid in full by VSW when due, the interest rate will increase to fourteen percent (14%) per annum after the due date. VSW may pre-pay the Draw-down Amount in full or in part upon a ten (10) days prior written notice to Convera. Convera will have the right to convert all or any portion of the Draw-down Amount into VSW Common Stock at the following ratio at any time before the repayment of the outstanding principal and interest in full:

(i) If Convera chooses to convert the entire Line of Credit, VSW will issue such additional amount of shares of VSW Common Stock to Convera so that as a result of such issuance, Convera will own 42.5% of the total outstanding VSW Common Stock; provided, however, that Convera’s and Parent’s ownership percentage in VSW will be subject to change upon a private placement or other issuance of VSW Common Stock or options to purchase VSW Common Stock; or

(ii) If Convera chooses to convert less than the entire Line of Credit, VSW will issue such additional amount of shares of VSW Common Stock that equals to 0.0000092% of the total outstanding VSW Common Stock for each dollar of Line of Credit that Convera chooses to convert; provided, however, that Convera’s and Parent’s ownership percentage in VSW will be subject to change upon a private placement or other issuance of VSW Common Stock or options to purchase VSW Common Stock.

(c) The parties agree to treat the conversion of the Line of Credit into VSW Common Stock as a transaction on which no gain or loss is recognized for U.S. federal income tax purposes.

2.3  Taking of Necessary Action; Further Action.  Each party will take all such reasonable and lawful action as may be necessary or appropriate in order to effectuate the Merger in accordance with this Agreement as promptly as possible. If, at any time after the Effective Time, any such further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Corporation with full right, title and possession to all assets, property, rights, privileges, powers and franchises of VSW2, B2B and Technologies, the officers and directors of VSW2, B2B and Technologies immediately prior to the Effective Time are fully authorized in the name of their respective corporations or otherwise to take, and will take, all such lawful and necessary action.

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2.4  Valuation.

(a) The parties hereby agree as to the valuation of shares of VSW Common Stock to be received by Convera from VSW2 as consideration for the Merger set forth hereto as Schedule 2.4(a).

(b) The parties hereby agree as to the valuation of shares of VSW Common Stock to be received by Parent from VSW in exchange for the contribution of all of the Parent’s business and assets to VSW set forth hereto as Schedule 2.4(b).

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE VSW ENTITIES

Each VSW Entity represents and warrants to Convera, B2B and Technologies that, except as set forth in the written disclosure schedule prepared by VSW which is dated as of the date of this Agreement and arranged in sections corresponding to the numbered and lettered sections contained in this Article III and was previously delivered to Convera in connection herewith (the “VSW Disclosure Schedule”) (disclosure in any section of the VSW Disclosure Schedule shall qualify only the corresponding section in this Article III), as of the date of this Agreement and as of the Closing Date, except where another date is specified:

3.1  Organization and Qualification; Subsidiaries.  VSW and each of its Subsidiaries is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has the requisite corporate power and authority necessary to own, lease and operate the properties it owns, leases or operates and the properties that is used for its business and to carry on its business as it is now being conducted or presently proposed to be conducted. VSW and each of its Subsidiaries is duly qualified or licensed as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessary, except for such failures to be so duly qualified or licensed and in good standing that would not reasonably be expected to have a Material Adverse Effect. A true, complete and correct list of all of VSW’s Subsidiaries, together with the jurisdiction of incorporation of each Subsidiary, the authorized capitalization of each Subsidiary immediately prior to the Closing, and the percentage of each Subsidiary’s outstanding capital stock to be owned by VSW or another Subsidiary or affiliate immediately prior to the Closing, is set forth in Section 3.1 of the VSW Disclosure Schedule. Except as set forth in Section 3.1 of the VSW Disclosure Schedule, neither VSW nor any of its Subsidiaries directly or indirectly owns any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for any equity or similar interest in, any corporation, partnership, limited liability company, joint venture or other business association or entity, excluding securities in any publicly traded company held for investment by VSW and any of its Subsidiaries and comprising less than one percent (1%) of the outstanding stock of such company.

3.2  Certificate of Incorporation and By-Laws.  VSW has heretofore made available to Convera a true, complete and correct copy of VSW’s Articles of Association, as amended to date (the “VSW Charter”), and By-Laws (or equivalent organizational documents), as amended to date (the “VSW By-Laws”), and has made available to Convera true, complete and correct copies of the charter and By-Laws (or equivalent organizational documents), each as amended to date, of each of VSW’s Subsidiaries (the “VSW Subsidiary Documents”). The VSW Charter, VSW By-Laws and the VSW Subsidiary Documents are in full force and effect. VSW is not in violation of any of the provisions of the VSW Charter or VSW By-Laws and VSW’s Subsidiaries are not in violation of their respective VSW Subsidiary Documents.

3.3  Capitalization.

(a) Immediately prior to the Closing, the authorized capital stock of VSW shall consist of 300,000 shares of VSW Common Stock. Immediately prior to the Closing, 100,000 VSW Common Stock shall be issued and outstanding, of which 49,950 shares shall be owned by Mr. Colin Jeavons, 50,030 shares shall be owned by Mr. Keith Young, and 20 shares shall be owned by Mr. Nicholas Kittoe, unless otherwise mutually agreed upon the parties in writing. VSW does not have any stock purchase right or stock option plan and no VSW Common Stock are reserved for issuance upon exercise of such rights or options. Neither VSW or any of its Subsidiaries has any stock purchase right or stock option plan and no share of their capital stock are reserved for issuance upon exercise of such rights or options; no shares of capital stock of VSW or any of its Subsidiaries are issued and held in its treasury. Between December 31, 2008

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and the date of this Agreement, neither VSW nor any of its Subsidiaries have issued any securities (including derivative securities) other than described in this Section 3.3(a).

(b) Except as described in Section 3.3(a) of this Agreement and Section 3.3(b) of the VSW Disclosure Schedule, no capital stock of VSW or any of its Subsidiaries or any security convertible or exchangeable into or exercisable for such capital stock, is issued, reserved for issuance or outstanding as of the date of this Agreement. Except as described in Section 3.3(b) of the VSW Disclosure Schedule, there are, or at the Closing there will be, no options, preemptive rights, warrants, calls, rights, commitments or agreements of any kind to which VSW or any of its Subsidiaries is a party, or by which VSW or any of its Subsidiaries is bound, obligating VSW or any of it Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock of VSW or any of its Subsidiaries or obligating VSW or any of its Subsidiaries to grant, extend or accelerate the vesting of or enter into any such option, warrant, call, right, commitment or agreement. There are no stockholder agreements, voting trusts, proxies or other similar agreements or understandings to which VSW or any of its Subsidiaries is a party or by which it or they are bound with respect to the shares of capital stock of VSW or any of its Subsidiaries. Except as set forth in Section 3.3(b) of the VSW Disclosure Schedule, there are no rights or obligations, contingent or otherwise (including without limitation rights of first refusal in favor of VSW or any of its Subsidiaries), of VSW or any of its Subsidiaries, to repurchase, redeem or otherwise acquire any shares of capital stock of VSW or any of its Subsidiaries or to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any such Subsidiary or any other entity. There are no registration rights or other agreements or understandings to which VSW or any of its Subsidiaries is a party or by which it or they are bound with respect to any capital stock of VSW or any of its Subsidiaries.

(c) All outstanding shares of capital stock of VSW and each of its Subsidiaries, are duly authorized, validly issued, fully paid and nonassessable and not subject to or issued in violation of any purchase option, call option, right of first refusal, pre-emptive right, subscription right or any similar right under any provision of the applicable law, its respective charter or bylaw documents or any agreement to which it is a party or otherwise bound; free and clear of all security interests, liens, claims, pledges, agreements, limitations in voting rights, charges or other encumbrances of any nature whatsoever (collectively, “Liens ”). None of the outstanding shares of capital stock of VSW or any of its Subsidiaries have been issued in violation of any federal, state or foreign securities laws. No material change in the capitalization of VSW or any of its Subsidiaries has occurred since its inception. All of the outstanding shares of capital stock of each of VSW’s Subsidiaries are duly authorized, validly issued, fully paid and nonassessable, and all such shares are owned by VSW or a Subsidiary of VSW free and clear of all Liens. There are no accrued and unpaid dividends with respect to any outstanding shares of capital stock of VSW or any of its Subsidiaries.

3.4  Authority Relative to this Agreement.  Each VSW Entity has all necessary corporate power and authority to execute and deliver this Agreement and each instrument required hereby to be executed and delivered by it at the Closing and to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery by each VSW Entity of this Agreement and each instrument required hereby to be executed and delivered at the Closing and the consummation by each VSW Entity of the transactions contemplated hereby have, or will have been upon the Closing, duly and validly authorized by all necessary corporate action on its part. This Agreement has been duly and validly executed and delivered by each VSW Entity and, assuming the due authorization, execution and delivery of this Agreement by Convera, B2B and Technologies, constitutes the legal, valid and binding obligation of each VSW Entity, enforceable against each VSW Entity in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors’ rights generally and by general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law). As of the date of this Agreement, the Board of Directors of each VSW Entity has unanimously determined that it is fair to, advisable and in the best interests of its stockholders for it to enter into a business combination with B2B and Technologies upon the terms and subject to the conditions of this Agreement, and the stockholders of each VSW Entity have

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approved and adopted this Agreement and the Merger, and none of the aforesaid actions by the Boards of Directors and stockholders of the VSW Entities has been amended, rescinded or modified.

3.5  Anti-Takeover Statute Not Applicable.  No “business combination,” “price,” “moratorium,” “control share acquisition” or other similar anti-takeover statute or regulation under the laws of the State of Delaware (each a “Takeover Statute”) is applicable to the VSW Entities, the shares of VSW Common Stock, the Merger or any of the other transactions contemplated by this Agreement.

3.6  Agreements, Contracts and Commitments.

(a) Except as set forth in Section 3.6(a) of the VSW Disclosure Schedule, neither VSW nor any of its Subsidiaries has any agreements, contracts or commitments (including but not limited to end user license agreements) that (i) resulted in or will result in (A) payments by VSW or its Subsidiaries during fiscal years 2007, 2008 or 2009 (up to the date of this Agreement) or (B) payments to VSW or its Subsidiaries during the period beginning in fiscal year 2007 and ending as of the date of this Agreement, in either case in excess of $25,000; or (ii) which require the making of any charitable contribution in excess of $25,000;

(b) No purchase contracts or commitments of VSW or any of its Subsidiaries continue for a period of more than ninety (90) days or are in excess of its normal, ordinary and usual requirements of the business;

(c) Except for agreements: (i) for the purchase, sale, license, distribution, maintenance or support of products of VSW or any of its Subsidiaries entered into in the ordinary course; (ii) under which VSW or any of its Subsidiaries made or received payments of less than $25,000 during any 12 months period; or (iii) which do not provide for any term extension or expansion of the rights granted with respect to VSW Intellectual Property as a result of the Merger, there are no contracts or agreements to which VSW or any of its Subsidiaries is a party that (a) do not expire or that VSW or any Subsidiary of VSW may not terminate within one year after the date of this Agreement or (b) may be renewed at the option of any person other than VSW or any of its Subsidiaries so as to expire more than one year after the date of this Agreement.

(d) Neither VSW nor any of its Subsidiaries has any outstanding contract (i) with any officer, employee, agent, consultant, advisor, salesman or sales representative (other than the employment agreements in the ordinary course of business), or (ii) other than with respect to any reseller, distribution, OEM or end user license agreement for its products entered into in the ordinary course of business, with any distributor or dealer that is not cancelable by it on notice of 30 days or less and without material liability, penalty or premium;

(e) Neither VSW nor any of its Subsidiaries is in default, nor is there any known basis for any valid claim of default, under any contract made or obligation owed by it except for such defaults that would not reasonably be likely to have a Material Adverse Effect;

(f) Except as set forth in Section 3.6(f) of the VSW Disclosure Schedule, neither VSW nor any of its Subsidiaries has any employee to whom it is paying compensation at an annual rate of more than $100,000 for services rendered;

(g) Neither VSW nor any of its Subsidiaries is restricted from carrying on its business in any material respect anywhere in the world by any material agreement under which it (i) is restricted from selling, licensing or otherwise distributing any of its technology or products or providing services to customers or potential customers or any class of customers, including without limitation resellers or other distributors, in any geographic area, during any period of time, or in segment of any market or line of business, (ii) is required to give favored pricing to any customers or potential customers or any class of customers or to provide exclusive or favored access to any product features to any customers or potential customers or any class of customers, or (iii) has agreed to purchase a minimum amount of goods or services or has agreed to purchase goods or services exclusively from a certain party;

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customers or cancellation of services already prescribed and paid for by customers, except for such obligations or liabilities that would not reasonably be likely to have a Material Adverse Effect;

(i) Except as set forth in Section 3.6(i) of the VSW Disclosure Schedule, neither VSW nor any of its Subsidiaries has any debt obligation for borrowed money, including guarantees of or agreements to acquire any such debt obligation of others;

(j) All the indebtednesses, if any, from a shareholder of or otherwise an affiliate to VSW or any of its Subsidiaries have been converted into equity of VSW or any of its Subsidiaries, as the case may be, and each of VSW and its Subsidiaries is free of such indebtedness;

(k) Except as set forth in Section 3.6(k) of the VSW Disclosure Schedule, neither VSW nor any of its Subsidiaries has any contract for capital expenditures in excess of $25,000, individually, or such contracts representing in excess of $100,000 in the aggregate;

(l) Neither VSW nor any of its Subsidiaries has any contract, agreement or commitment currently in force relating to the disposition or acquisition of assets not in the ordinary course of business other than in connection with the VSW Restructuring;

(m) Neither VSW nor any of its Subsidiaries has any contract, agreement or commitment for the purchase of any ownership interest in any corporation, partnership, joint venture or other business enterprise;

(n) Neither VSW nor any of its Subsidiaries has any outstanding loan to any person other than to VSW or a wholly owned Subsidiary of VSW;

(o) Neither VSW nor any of its Subsidiaries has any power of attorney outstanding or any obligations or liabilities (whether absolute, accrued, contingent or otherwise), as guarantor, surety, co-signer, endorser, co-maker, indemnitor (other than indemnities contained in agreements for the purchase, sale, license, distribution, maintenance or support of products entered into in the ordinary course of business) or otherwise in respect of any obligation of any person, corporation, partnership, joint venture, association, organization or other entity, or any capital maintenance, keep-well or similar agreements or arrangements;

(p) Neither VSW nor any of its Subsidiaries has any agreements, contracts or arrangements containing any provision requiring it to indemnify another party (other than indemnities contained in agreements for the purchase, sale, license, distribution, maintenance or support of products entered into in the ordinary course of business) or containing any covenant not to bring legal action against any third party;

(q) VSW has made available to Convera true, complete and correct copies of each contract listed in Section 3.6(a) of the VSW Disclosure (collectively, the “VSW Material Contracts”); and

(r) (i) Neither VSW nor any of its Subsidiaries has materially breached, is in material default under, or has received written notice of any material breach of or material default under, any VSW Material Contract and such breach or default remains uncured, (ii) to the knowledge the VSW Entities, no other party to any VSW Material Contract has materially breached or is in material default of any of its obligations thereunder which breach or default remains uncured, (iii) each VSW Material Contract is in full force and effect and (iv) each VSW Material Contract is a legal, valid and binding obligation of VSW or any of its Subsidiaries and, to the knowledge of the VSW Entities, each of the other parties thereto, enforceable in accordance with its terms, except that the enforcement thereof may be limited by (A) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors’ rights generally and (B) general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law).

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3.7  No Conflict; Required Filings and Consents.

(a) The execution and delivery by the VSW Entities of this Agreement do not, the execution and delivery by the VSW Entities of any instrument required hereby to be executed and delivered by it at the Closing will not, and the performance of its agreements and obligations under this Agreement by the VSW Entities will not, (i) conflict with or violate the VSW Charter or VSW By-Laws or any VSW Subsidiary Documents, (ii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to VSW or any of its Subsidiaries or by which its or any of their respective properties is bound or affected, or (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default), or impair VSW’s or any of its Subsidiaries’ rights or alter the rights or obligations of any third party under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on any of the properties or assets (including intangible assets) of VSW or any of its Subsidiaries pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which VSW or any of its Subsidiaries is a party or by which VSW or any of its Subsidiaries or its or any of their respective properties is bound or affected, other than, in the case of (iii) above, such conflict, violation, breach, default, impairment, rights of termination, amendment, acceleration or cancellation, or Liens that would not be reasonably expected to have a Material Adverse Effect.

(b) The execution and delivery by the VSW Entities of this Agreement do not, the execution and delivery by the VSW Entities of any instrument required hereby to be executed and delivered by the VSW Entities at the Closing will not, and the performance of agreements and obligations under this Agreement by the VSW Entities will not, require any consent, approval, order, license, authorization, registration, declaration or permit of, or filing with or notification to, any court, arbitrational tribunal, administrative or regulatory agency or commission or other governmental authority or instrumentality (whether domestic or foreign, a “ Governmental Entity”), except (i) the filing of the Certificates of Merger or other documents as required by the DGCL, (ii) the consent as set forth in Section 3.7(b) of VSW Disclosure Schedule and (iii) such other consents, approvals, orders, licenses, authorizations, registrations, declarations, permits, filings and notifications which, if not obtained or made, would not reasonably be expected to have a Material Adverse Effect.

3.8  Compliance; Permits.

(a) VSW and its Subsidiaries are and have been in compliance with and are not in default or violation of (and have not received any notice of non-compliance, default or violation with respect to) any law, rule, regulation, order, judgment or decree applicable to VSW or any of its Subsidiaries or by which any of their respective properties is bound or affected, and no VSW Entity is aware of any such non-compliance, default or violation thereunder, where such non-compliance, default or violation would be reasonably expected to have a Material Adverse Effect.

(b) Each of VSW and its Subsidiaries holds all permits, licenses, easements, variances, exemptions, consents, certificates, authorizations, registrations, orders and other approvals from Governmental Entities that are material to the operation of the respective business of VSW and its Subsidiaries taken as a whole as currently conducted (collectively, the “VSW Permits”) where the failure to hold such VSW Permits would be reasonably be expected to have a Material Adverse Effect. The VSW Permits are in full force and effect and, to the best knowledge of the VSW Entities, have not been violated in any material respect and no suspension, revocation or cancellation thereof has been threatened, and there is no action, proceeding or investigation pending or, to the knowledge of the VSW Entities, threatened, seeking the suspension, revocation or cancellation of any VSW Permits. No VSW Permit shall cease to be effective as a result of the consummation of the transactions contemplated by this Agreement.

3.9  Financial Statements.  Each of the unconsolidated financial statements of VSW and its Subsidiaries (including, in each case, any related notes and schedules) provided by VSW and audited by Hedley Dunk Limited, UK chartered accountants and registered auditors, complies in all material respects with all applicable accounting requirements and the published rules and regulations of the relevant government authorities in their jurisdictions of organization, and fairly presents the unconsolidated financial position of VSW and its Subsidiaries as of the dates thereof and the unconsolidated results of its operations and cash flows for the periods

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indicated, except that any interim financial statements are subject to normal and recurring year-end adjustments which have not been and are not expected to be material in amount, individually or in the aggregate. The unconsolidated balance sheets of VSW and its Subsidiaries for the fiscal year ended December 31, 2008, as audited by Hedley Dunk Limited is referred to herein as the “VSW Balance Sheet.”

3.10  Absence of Certain Changes or Events.  From the December 31, 2008 to the Closing, VSW and its Subsidiaries have and will have upon the Closing, conducted their business in the ordinary course consistent with past practice and, since such date, there has not occurred: (i) any change, development, event or other circumstance, situation or state of affairs that has had or would reasonably be expected to have a Material Adverse Effect; (ii) any amendments to or changes in the VSW Charter, VSW By-Laws or VSW Subsidiary Documents; (iii) any damage to, destruction or loss of any asset of VSW or any of its Subsidiaries (whether or not covered by insurance) that would reasonably be expected to have Material Adverse Effect; (iv) any sale or disposal of a material amount of assets (tangible or intangible) of VSW or any of its Subsidiaries except as contemplated in or by the VSW Restructuring; or (v) any other action or event that would have required the consent of Convera, B2B and Technologies pursuant to Section 5.1 had such action or event occurred after the date of this Agreement.

3.11  No Undisclosed Liabilities.

(a) Except as set forth in Schedule 3.12 or reflected in the VSW Balance Sheet, neither VSW nor any of its Subsidiaries has any liabilities (absolute, accrued, contingent or otherwise) which would be required by the generally accepted accounting principles of United States (“GAAP”) to be set forth on a consolidated balance sheet of VSW and its consolidated subsidiaries or in the notes thereto, other than (i) any liabilities and obligations incurred since fiscal year 2008 in the ordinary course of business consistent with past practice, and (ii) liabilities that would not reasonably be expected to have a Material Adverse Effect.

(b) Neither VSW nor any of its Subsidiaries is a party to, or has any commitment to become a party to, any joint venture, partnership agreement or any similar contract (including without limitation any contract relating to any transaction, arrangement or relationship between or among VSW or any of its Subsidiaries, on the one hand, and any unconsolidated affiliate, including without limitation any structured finance, special purpose or limited purpose entity or person, on the other hand) where the purpose or intended effect of such arrangement is to avoid disclosure of any material transaction involving VSW or any of its Subsidiaries in the VSW Balance Sheet.

3.12  Absence of Litigation.  Except set forth in Section 3.12 of the VSW Disclosure Schedule, there are no claims, actions, suits, proceedings or, to the knowledge of the VSW Entities, governmental investigations, inquiries or subpoenas (other than any actions, suits, proceedings, investigations, inquiries or subpoenas challenging or otherwise arising from or relating to the Merger or any of the other transactions contemplated by this Agreement) (a) pending against VSW or any of its Subsidiaries or any properties or assets of VSW or of any of its Subsidiaries, (b) to the knowledge of the VSW Entities, threatened against VSW or any of its Subsidiaries, or any properties or assets of VSW or of any of its Subsidiaries, or (c) whether filed or threatened, that have been settled or compromised by VSW or any of its Subsidiaries within the three (3) years prior to the date of this Agreement and at the time of such settlement or compromise were material, other than, in the case of (i) through (iii) above, such claims, actions, suits, proceedings, investigations, inquiries or subpoenas that would not be reasonably likely to have a Material Adverse Effect. Neither VSW nor any Subsidiary of VSW is subject to any outstanding order, writ, injunction or decree that would reasonably be expected to be material or would reasonably be expected to prevent or delay the consummation of the transactions contemplated by this Agreement.

3.13  Employee Benefit Plans, Options and Employment Agreements

(a) Section 3.13(a) of the VSW Disclosure Schedule sets forth a complete and accurate list of all Employee Benefit Plans maintained, or contributed to, by VSW or any of VSW’s Subsidiaries or to which VSW or any of VSW’s Subsidiaries is obligated to contribute, or under which any of them has or may have any liability for premiums or benefits (collectively, the “VSW Employee Plans”). For purposes of this Agreement, “Employee Benefit Plan” means any employee benefit plan, employee pension plan or

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employee welfare benefit plan, and any other written or oral plan, agreement or arrangement involving direct or indirect compensation, including insurance coverage, severance benefits, disability benefits, deferred compensation, bonuses, stock options, stock purchase, phantom stock, stock appreciation or other forms of incentive compensation or post-retirement compensation and all severance agreements, written or otherwise, for the benefit of, or relating to, any current or former employee of an entity or any of its subsidiaries.

(b) With respect to each VSW Employee Plan, VSW has made available to Convera complete and accurate copies of such VSW Employee Plan (or a written summary of any unwritten plan) together with all amendments and related documents.

(c) Each VSW Employee Plan has been administered in all material respects in accordance with applicable laws and the regulations thereunder and in accordance with its terms and each of VSW and VSW’s Subsidiaries have in all material respects met their obligations with respect to each VSW Employee Plan and have timely made all required contributions thereto.

(d) With respect to VSW Employee Plans, there are no material benefit obligations for which contributions have not been made or properly accrued and there are no benefit obligations which have not been accounted for by reserves, or otherwise properly footnoted in accordance with the applicable accounting rules and standards, on the financial statements of VSW. Neither VSW or any of its Subsidiaries has any liability for benefits (contingent or otherwise) under any VSW Employee Plan, except as set forth in VSW Balance Sheet. The assets of each VSW Employee Plan which is funded are reported at their fair market value on the books and records of such Employee Benefit Plan.

(e) No VSW Employee Plan has assets that include securities issued by VSW or any of VSW’s Subsidiaries.

(f) Each VSW Employee Plan is amendable and terminable unilaterally by VSW and any of VSW’s Subsidiaries party thereto or covered thereby at any time without liability to VSW or any of its Subsidiaries as a result thereof, and no VSW Employee Plan or related plan documentation or agreement, summary plan description or other written communication distributed generally to employees by its terms prohibits VSW or any of VSW’s Subsidiaries party thereto or covered thereby from amending or terminating any such VSW Employee Plan, or in any way limits such action.

(g) There is no action, suit, proceeding, claim, arbitration, audit or, to the knowledge of the VSW Entities, investigation pending or, to the knowledge of the VSW Entities, threatened, with respect to any VSW Employee Plan, other than claims for benefits in the ordinary course, that would reasonably be expected to result in material liability to VSW, to any of its Subsidiaries, or to such VSW Employee Plan. No VSW Employee Plan is or, to the knowledge of the VSW Entities, within the last three calendar years has been, the subject of, examination by a government agency or a participant in a government sponsored amnesty, voluntary compliance or similar program, nor has VSW or any of its Subsidiaries received notice that it is the subject of, examination by a government agency or a participant in a government sponsored amnesty, voluntary compliance or similar program.

(h) Section 3.13(h) of the VSW Disclosure Schedule contains (i) a true, complete and current list of all independent contractors, and (ii) a description of the services each independent contractor performs, and a copy of the agreement between each independent contractor and VSW and its Subsidiaries. To the knowledge of the VSW Entities, after due inquiry of the appropriate individuals, each individual who has received compensation for the performance of services on behalf of VSW or any of VSW’s Subsidiaries has been properly classified as an employee or independent contractor in accordance with applicable law.

(i) Each VSW Employee Plan maintained in and outside the United States is in compliance, and the books and records thereof are maintained in compliance, with all applicable laws, rules and regulations of the jurisdiction in which such VSW Employee Plan is maintained. Section 3.13(i) of the VSW Disclosure Schedule lists each country in which VSW or any of its affiliates has operations and the number of employees in each such country.

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(j) Section 3.13(j) of the VSW Disclosure Schedule sets forth a true, complete and correct list of (i) all employment or consulting agreements with employees of VSW or any of its Subsidiaries obligating VSW or any of its Subsidiaries to make annual cash payments in an amount equal to or exceeding $100,000 on an annual basis or $25,000 in any one payment; (ii) all employees of VSW or any of its Subsidiaries who have executed a non-competition agreement with VSW or any of its Subsidiaries; (iii) all severance agreements, programs and policies of VSW or any of its Subsidiaries with or relating to its employees, in each case with potential outstanding obligations equal to or exceeding $100,000 on an annual basis or $25,000 in any one payment, excluding programs and policies required to be maintained by law; and (iv) all plans, programs, agreements and other arrangements of VSW or any of its Subsidiaries with or relating to its employees which contain change in control provisions including any such plans or agreements providing for an increase in vesting of benefits by reason of the transactions contemplated by this Agreement. True, complete and correct copies of each of the foregoing agreements to which any employee of VSW or any of VSW’s Subsidiaries is a party have been furnished to Convera.

(k) Section 3.13(k) of the VSW Disclosure Schedule sets forth a true, complete and correct list of all agreements pursuant to which the consummation of the transactions contemplated by this Agreement will, either alone or in combination with another event, (i) entitle any current or former employee or officer of VSW or any Subsidiary of VSW to severance pay, unemployment compensation or any other payment to which such employee or officer would not otherwise be or have been entitled, or (ii) accelerate the time of payment or vesting, or increase the amount of compensation due any such employee or officer.

3.14  Labor Matters.  (a) VSW and each of its Subsidiaries are in compliance in all material respects with all applicable laws respecting employment, employment practices and occupational safety and health, terms and conditions of employment and wages and hours, and are not engaged in any unfair labor practices; (b) there are no controversies pending or, to the knowledge of the VSW Entities, threatened, between VSW or any of its Subsidiaries and any of their respective employees, consultants or independent contractors, which controversies would reasonably be expected to have a Material Adverse Effect; (c) neither VSW nor any of its Subsidiaries is a party to any collective bargaining agreement or other labor union contract applicable to persons employed by VSW or its Subsidiaries, nor does VSW or any of its Subsidiaries know of any activities or proceedings of any labor union to organize any such employees; and (d) there are no and neither VSW nor any of its Subsidiaries has any knowledge of any labor disputes, strikes, slowdowns, work stoppages, lockouts, or threats thereof, by or with respect to any employees of, or consultants or independent contractors to, VSW or any of its Subsidiaries. To the knowledge of the VSW Entities, no employee of VSW or any of its Subsidiaries is in violation of any term of any patent disclosure agreement, non-competition agreement, or any restrictive covenant to a former employer relating to the right of any such employee to be employed by VSW or any of its Subsidiaries because of the nature of the business conducted or presently proposed to be conducted by VSW or any of its Subsidiaries or to the use of trade secrets or proprietary information of others or, in the case of any key employee or group of key employees, has given notice as of the date of this Agreement to VSW or any of its Subsidiaries that such employee or any employee in a group of key employees intends to terminate his or her employment.

3.15  Properties; Encumbrances.  Except as set forth in Section 3.15 of the VSW Disclosure Schedule, each of VSW and each of its Subsidiaries has good, valid and marketable title to, or a valid leasehold interest in, all the properties and assets which it purports to own or lease and all the properties and assets which are used for the business of VSW or any of its Subsidiaries (real, personal and mixed, tangible and intangible), including, without limitation, all the properties and assets reflected in VSW Balance Sheet (except for personal property sold since the date of the VSW Balance Sheet in the ordinary course of business consistent with past practice). All properties and assets reflected in the VSW Balance Sheet are free and clear of all Liens, except for Liens reflected on the VSW Balance Sheet and Liens for current taxes not yet due and other Liens that do not materially detract from the value or impair the use of the property or assets subject thereto. Section 3.15 of the VSW Disclosure Schedule sets forth a true, complete and correct list of all real property owned, leased, subleased or licensed by VSW and the location of such premises. VSW and each of its Subsidiaries is and has been in compliance with the material provisions of each lease or sublease for the real property which is set forth in Section 3.15 of the VSW Disclosure Schedule.

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3.16  Taxes.

(a) For purposes of this Agreement, “Tax” or “Taxes” shall mean taxes, fees, assessments, liabilities, levies, duties, tariffs, imposts and governmental impositions or charges of any kind in the nature of (or similar to) taxes, payable to any federal, state, local or foreign taxing authority, or any agency or subdivision thereof, including without limitation (i) income, franchise, profits, gross receipts, ad valorem, net worth, value added, sales, use, service, real or personal property, special assessments, capital stock, license, payroll, withholding, employment, social security, workers’ compensation, unemployment compensation, utility, severance, production, excise, stamp, occupation, premiums, windfall profits, transfer and gains taxes, and (ii) interest, penalties, fines, additional taxes and additions to tax imposed with respect thereto; and “Tax Returns” shall mean returns, reports and information statements with respect to Taxes required to be filed with a taxing authority, domestic or foreign, including without limitation, consolidated, combined or unitary tax returns and any amendments to any of the foregoing.

(b) VSW and each of its Subsidiaries have filed with the appropriate taxing authorities all Tax Returns required to be filed by them. All Taxes due and owing by VSW and its Subsidiaries have been timely paid. There are no Tax Liens on any assets of VSW or any Subsidiary thereof other than liens relating to Taxes not yet due and payable. Neither VSW nor any of its Subsidiaries has granted any waiver of any statute of limitations with respect to, or any extension of a period for the assessment of, any Tax. The accruals and reserves for Taxes (exclusive of any accruals for “deferred taxes” or similar items that reflect timing differences between tax and financial accounting principles) reflected in the VSW Balance Sheet are adequate to cover all Taxes accruable through the date thereof (including interest and penalties, if any, thereon and Taxes being contested). All liabilities for Taxes attributable to the period commencing on the date following the date of the VSW Balance Sheet were incurred in the ordinary course of business and are consistent in type and amount with Taxes attributable to similar prior periods.

(c) VSW and each of its Subsidiaries have withheld with respect to its employees all Taxes required to be withheld by applicable law, and neither VSW nor any of its Subsidiaries has been delinquent in the payment of any Tax. Neither VSW nor any of its Subsidiaries has received any written notice of any Tax deficiency outstanding, proposed or assessed against VSW or any of its Subsidiaries. Neither VSW nor any of its Subsidiaries has received any written notice of any audit examination, deficiency, refund litigation, proposed adjustment or matter in controversy with respect to any Tax Return of VSW or any of its Subsidiaries. Neither VSW nor any of its Subsidiaries is a party to or bound by any tax indemnity, tax sharing or tax allocation agreements. Neither VSW nor any of its Subsidiaries is liable for the Taxes of any person (other than those of VSW and its Subsidiaries) by contract or otherwise.

(d) VSW has made available to Convera (i) complete and correct copies of all Tax Returns, examination reports and statements of deficiencies assessed against or agreed to by VSW or any of its Subsidiaries with respect to the prior five (5) taxable years, and (ii) written schedules of (A) the taxable years of VSW and each Subsidiary for which the statute of limitations with respect to income Taxes have not expired, (B) with respect to income Taxes of VSW and each Subsidiary, those years for which examinations have been completed, those years for which examinations are presently being conducted, those years for which examinations have not yet been initiated and those years for which required Tax Returns have not yet been filed, and (C) the foreign countries in which VSW or any of its Subsidiaries is subject to income tax.

3.17  Intellectual Property.

(a) Section 3.17(a) of the VSW Disclosure Schedule sets forth a true, complete and correct list of all U.S. and foreign (i) patents and pending patent applications, including any utility models and similar patents, owned by VSW or any of its Subsidiaries as of the date of this Agreement (ii) trademark registrations (including internet domain registrations) and pending trademark applications owned by VSW or any of its Subsidiaries as of the date of this Agreement; and (iii) copyright registrations and pending copyright applications owned by VSW or any of its Subsidiaries as of the date of this Agreement (collectively the “Registered VSW Intellectual Property”).

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(b) Immediately before the Closing, VSW or one or more of its Subsidiaries will own, or will have a valid right to use, all of the Intellectual Property that is used in the business of VSW and its Subsidiaries as currently conducted (the “VSW Intellectual Property”). The VSW Intellectual Property is all the intellectual property that is used and useful in the business of VSW or any of its Subsidiaries, and all the VSW Intellectual Property is owned solely by VSW or one of its Subsidiaries and will be solely owned by VSW or one of its Subsidiaries at the Closing.

(c) The Registered VSW Intellectual Property is valid and subsisting (except with respect to applications), and has not expired or been cancelled, or abandoned.

(d) There is no pending or, to the knowledge of the VSW Entities, threatened (and at no time within the three (3) years prior to the date of this Agreement has there been pending any) material suit, arbitration or other adversarial proceeding before any court, government agency or arbitral tribunal or in any jurisdiction alleging that th