CNVR - Convera Corp (Software)

[Shane Burke]

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<table width="741" border="0"><tbody><tr><td width="735" align="center" height="48">Hot Software Stocks - Sunday May 17th, 2009
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<table width="744" border="0"><tbody><tr><td width="137" align="center">Ticker Symbol</td><td width="137" align="center">Company</td><td width="117" align="center">Current Price</td><td width="177" align="center">Buy</td><td width="154" align="center">Sell</td></tr><tr><td align="center">CNVR
</td><td align="center">Convera Corp
</td><td align="center">$0.28</td><td align="center">$0.23 - $0.25
</td><td align="center">$0.47 - $0.49
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<table width="744" border="0"><tbody><tr><td width="738">Shares out: 53.50 million. Convera designs, develops, markets, implements and supports search and categorization software solutions that enable a range of mission critical applications within government agencies and commercial enterprises. These applications include knowledge management, enterprise portals, intelligence gathering and analysis, safety and national security, law enforcement, research and discovery, regulatory compliance and customer service.



Trading Blueprints:


Swing trade: Buying around $0.23 should be easy. Place a stop at $0.14 = 39% loss. Sell at $0.48 = 108% gain. Solid risk/reward ratio with this trade.

Momentum trade: Volume needs to be on pace for a minimum of one million shares. The downtrend line will be snapped in the low $0.30's. Buy at the breakout of $0.31. Sell in the upper $0.30's. Get in, get out, same day. However, the swing trade is preferred on this stock.

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[Shane Burke]

After digging through all of the facts regarding this merger and contacting the CFO it appears to be a solid deal for shareholders. Here is a link to the PR: http://http://www.convera.com/news-and-information/latest-news/convera%C2%AE-corporation-and-firstlight-era-create-new-search-and-adver (http://www.convera.com/news-and-information/latest-news/convera%C2%AE-corporation-and-firstlight-era-create-new-search-and-adver)

The email sent to CFO Matthew Jones is below:

Concern Regarding Press Release

Dear Mr Jones,

We had recently profiled Convera as a stock pick a few weeks ago and this merger has us concerned. Besides the $10,000,000 cash to be distributed among shareholders there does not appear to be any indication of current shareholders receiving stock in the new company. Is this the case? If not, how many shares in the new company would shareholders receive for each Convera share currently held?

Thank you in advance,
Shane Burke

To which he very quickly replied to my satisfaction:

RE: Concern Regarding Press Release

Hi Shane,

Yes, We expect that Convera will ultimately distribute the shares of the new company it holds to the Convera Shareholders on a pro rata basis As of this time, we do not know what the exchange ratio will be, this distribution will make the new Company a publicly traded company.

Thanks,

Matt

So here's the situation. $10,000,000.00 to be divided among the 53,330,000 outstanding shares would be a cash payout of $0.1875 per share. The kicker is the "Yes, We expect that Convera will ultimately distribute the shares of the new company it holds to the Convera Shareholders on a pro rata basis."

The merger makes sense from all standpoints and this new company will be positioned to either compete or be acquired by one of the big boys in online search marketing. It appears to be a solid deal for all parties.

Although it is difficult to assume what the share structure will be for the new company one could assume that you would be receiving 1/3 the number of shares you currently hold in Convera. However, you could also assume the new company will be three times as large and hence a much higher share price therefore they could offset leaving the cash payout of $0.1875 per share as the bonus.

One possible example, if you currently own 1,000 shares of Convera you would receive $187.50 (cash payout) + 333 shares valued at conservatively let's say $0.65 per share equaling $216.45 for a total of $403.95. That gives a real-time intrinsic value of $0.40395 for current Convera Shares. Yes, these numbers are hypothetical but very conservative using the available information.

[jamaraholdings]

Warning:
We write on behalf of Jamara Holdings, a shareholder in Firstlight Online Limited. The agreement that has been signed between Firstlight and Convera came as a surprise to the shareholders in Jamara as, being a reasonably large shareholder; we would have considered that entering into such a significant transaction would have required both shareholder notification and agreement.
Jamara's legal counsel is currently reviewing its position and will be issuing a statement in due course.

Having read Convera's code of ethics the shareholders of Jamara felt it prudent to write to you as a major shareholder of Convera to ensure that you were aware of a number of outstanding issues between Firstlight New Zealand Limited (FLNZ), Jamara Holding Limited (Jamara) and Firstlight Online UK Limited (FLOL).

1. We are unsure whether Convera is aware that they may have unknowingly (or knowingly) broken or be about to break US disclosure laws as it appears to have announced a major transaction and formation of a joint venture with a UK party which is not in a position to complete such an agreement without notifying and seeking the approval of its shareholders.

2. You should be aware that legal action is pending in New Zealand to recover a
significant debt owed to (FLNZ) a joint venture company between FLOL and Jamara plus damages and costs. (While Jamara is aware that FLOL is now in a position where can wind up FLNZ, under NZ law Jamara has the right to continue the litigation which it fully intends to do.)

3. Please also be aware that former staff of FLNZ have filed proceedings with the
Employment Relations Authority of New Zealand to recover unpaid wages dating back to August 2008. Mr Jeavons had stated that on gaining a summary judgement against Brett Bailey that all staff would be paid. Neither Mr Jeavons nor his legal representatives in New Zealand have implemented this undertaking

4. Jamara also intends petition the UK Courts for an order under s994 of the Companies Act 2006 which protects the interests of minority shareholders. Breaches of minority shareholders rights in terms of the Act include
• Illegal removal of Brett Bailey as a director
• Illegally changing the constitution of the company
• Mr Jeavons running FLOL purely for the benefit of GNN (Mr Jeavons and
Mr Youngs Holding Company).
• Failing to hold board meetings
• Failing to record and file minutes
• Failing to keep proper accounting records
• Hiving off the assets of the company.
• Setting up complex tax avoidance schemes for the sole benefit of GNN.

5. We are well aware how truly diligent Nasdaq listed public companies need to be in investigating all aspects prior to announcing any transactions, such as the ability of any counterparty to treat, future freedom to operate, straight forward disclosure to prevent the future avoidance of conflicts, unrestricted access to code & ip, but especially structure and ownership prior to entering into a material transaction. It is now clear to us that FLOL cannot have been frank in its disclosure to Convera about ownership and structure. Please also be aware that while Jamara may be registered as only a 10% shareholder in FLOL, Mishcon de Reyer (FLOL's legal representatives) in a letter to Jamara's legal counsel claimed that the share transaction that took Jamara from 25% to 10% was in fact void and that the transaction needs to be unwound. This leaves Jamara as a 25% shareholder in FLOL. Again Jamara is pursuing its rights in regard to this. As this was an illegal transaction instigated by Mr Jeavons (the only other valid director at the time) there is the criminal aspect that will need to be addressed. Clearly Jamara was not advised of this transaction with Convera and has insufficient details as to the enterprise value of the new joint venture to currently form a view, so in the circumstances was the announcement by both parties premature? Jamara will be vigorously pursuing all its rights and seeking various remedies given the nature of the transaction has been announced and has been approached by parties close to Jamara offering support including access to contingent litigation specialists in the US.

6. There are unresolved issues surrounding the IP and in particular algorithms and code which was developed by FLNZ. Brett Bailey was a Co-Founder of FLOL and FLNZ.

7. It is Jamara's contention that Mr Jeavons flouted US laws by breaking USA immigration laws (using the 90 day visa waiver to run sales teams from FLOL's US head quarters) He also
Failed to ensure compliance with USA tax laws and with Microsoft licencing agreements .

8. Please also be aware that Mr Jeavons made threats against Brett Bailey that have been formally reported to the New Zealand Police.

On behalf of the shareholders of Jamara Holdings.

[Shane Burke]

I've sent an email to CFO Matt Jones of Convera and hope to receive a response early this week regarding these claims. I want to thank Jamara Holdings for the heads up in this matter.

To all Convera investors, I want to remind you that Convera was attractive long before this merger was announced. Don't forget they have $10,000,000 cash on hand with a low float.

[jamaraholdings]

Dear Shane
we assume that you have had no response from Convera?
sincerely
The Shareholders
Jamara Holdings

[Shane Burke]

Thus far, no word. Will continue to update the situation as it develops.

[jamaraholdings]

Dear Shane
we find it very interesting the complete lack of response to both your questions and our concerns to the executive of Convera. We have not had a single response. Below is a summary of the disclosure document filed with the SEC.

WITHOUT PREJUDICE
Warranties made by Firstlight – with Comments from Jamara Holdings
(a) The authorized capital stock of FL consists of 100 ordinary shares, par value £1.0 per share, of FL (“FL Ordinary Shares”). As of the date hereof, 100 FL Ordinary Shares are issued and outstanding, of which 90 shares are owned by Global News Net Ltd and 10 shares are owned by Jamara Holdings Limited. FL does not have any stock purchase right or stock option plan and no FL Ordinary Shares are reserved for issuance upon exercise of such rights or options; no shares of FL Ordinary Shares are issued and held in the treasury of FL. Between December 31, 2008 and the date of this Agreement, FL has not issued any securities (including derivative securities). Immediately before the Closing, 1,000 shares of Company Common Stock will be issued and outstanding, unless otherwise mutually agreed upon the parties in writing. Neither FL 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 FL or any of its Subsidiaries are issued and held in its treasury. Between December 31, 2008 and the date of this Agreement, neither FL nor any of its Subsidiaries have issued any securities (including derivative securities).

It is the contention from both Jamara Holdings shareholders and the advice from Firstlight Online’s legal counsel, Mishcon de Reyer that the 2006 transaction was in fact void and needs to be unwound. This leaves Jamara Holdings as a 25% shareholder. (Please see attached document sharetransfer.pdf). Jamara Holdings intends to pursue its rights in regards to this transaction.

(c) All outstanding shares of capital stock of FL 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 FL 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 FL or any of its Subsidiaries has occurred since its inception. All of the outstanding shares of capital stock of each of FL’s Subsidiaries are duly authorized, validly issued, fully paid and nonassessable, and all such shares are owned by FL or a Subsidiary of FL free and clear of all Liens. There are no accrued and unpaid dividends with respect to any outstanding shares of capital stock of FL or any of its Subsidiaries.


It is Jamara’s contention that the capitalisation of the company has changed without due process and many of the UK laws have been broken in relation to the validity of issue and that there are claims by Jamara Holdings into the exact number of shares it owns.

3.4 Authority Relative to this Agreement. FL 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 FL of this Agreement and each instrument required hereby to be executed and delivered at the Closing and the consummation by FL 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 FL and, assuming the due authorization, execution and delivery of this Agreement by Convera and B2B, constitutes the legal, valid and binding obligation of FL, enforceable against FL 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 FL has unanimously determined that it is fair to, advisable and in the best interests of their respective stockholders for them to enter into a business combination with B2B upon the terms and subject to the conditions of this Agreement, and FL’s stockholders have approved and adopted this Agreement and the Merger, and none of the aforesaid actions by FL’s Board of Directors and FL’s stockholders has been amended, rescinded or modified.

It is the contention of the shareholders of Jamara Holdings that the current make up of the board has been invalidly constituted and that Brett Bailey was illegally removed from the board of directors. Again Jamara Holdings intends to pursue its rights in regards to this.

(d) Neither FL 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;

The former staff of Firstlight New Zealand Limited are owed a substantial sum of money relating to unpaid salaries and holiday pay. Mr Jeavons has indicated that outstanding monies will be paid but neither he nor his legal counsel in New Zealand has undertaken that commitment yet.

(e) Neither FL 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;

As above.

(i) Except as set forth in Section 3.6(i) of the FL Disclosure Schedule, neither FL 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;

The shareholders of Jamara have not been privy to the FL Disclosure Schedule but assume this covers the debt to FLNZ of approximately NZD$530,000 and the unpaid salaries of approximately NZD$130,000

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

If there has been a capitalisation of loans by shareholders, Jamara has not been made aware of this. In addition to this all shareholder loans have been done on a handshake and at the point that the relationship between FLOL and Mr Bailey broke down, no loans had been documented, the terms and conditions were not laid out and the loans could not be substantiated in any financial documentation.

(l) Neither FL 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 UK Restructuring or the Second Restructuring

Jamara Holdings has not been advised of any restructuring or second restructuring.

(o) Neither FL 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;

Jamara is unsure how FL can warrant the above clause particularly in relation to agreements entered into on behalf of FL by FLNZ

[jamaraholdings]

(p) Neither FL 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;

As above

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

(r) (i) Neither FL 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 FL Material Contract and such breach or default remains uncured, (ii) to the knowledge FL, no other party to any FL Material Contract has materially breached or is in material default of any of its obligations thereunder which breach or default remains uncured, (iii) each FL Material Contract is in full force and effect and (iv) each FL Material Contract is a legal, valid and binding obligation of FL or any of its Subsidiaries and, to the knowledge of FL, 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).

Again Jamara is unsure how FL can represent any agreements entered into on behalf of FL by FLNZ.

(a) The execution and delivery by FL of this Agreement do not, the execution and delivery by FL 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 FL will not, (i) conflict with or violate the FL Charter or FL By-Laws or any FL Subsidiary Documents, (ii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to FL 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 FL’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 FL 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 FL or any of its Subsidiaries is a party or by which FL 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.

There are a number of agreements between Jamara Holdings, FLNZ and the former Director and FLOL and FLNZ where conflicts and violations are present.

3.8 Compliance; Permits.

(a) FL 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 FL or any of its Subsidiaries or by which any of their respective properties is bound or affected, and FL is not 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.

Again Jamara is unsure how FL can represent any agreements entered into on behalf of FL by FLNZ.

[jamaraholdings]

3.9 Financial Statements. Each of the unconsolidated financial statements of FL and its Subsidiaries (including, in each case, any related notes and schedules) provided by FL 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 FL and its Subsidiaries as of the dates thereof and the unconsolidated results of its operations and cash flows for the periods 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 FL and its Subsidiaries for the fiscal year ended December 31, 2008, as audited by Hedley Dunk Limited is referred to herein as the “FL Balance Sheet.”

It is Jamara’s contention that FLOL failed to record & circulate (if they were indeed kept), proper accounting records for a number of years in its operation. Given this disclosure that the accounts have been presented for audit, then the audit report for the years 2006, 2007, 2008, and the opinion of the auditors on each year need to be circulated to all shareholders in accordance with the UK companies act.

3.11 No Undisclosed Liabilities.

(a) Except as reflected in the FL Balance Sheet, neither FL 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 FL 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.

FL has liabilities to FLNZ and FLNZ staff as per previous comments

3.12 Absence of Litigation. Except set forth in Section 3.12 of the FL Disclosure Schedule, there are no claims, actions, suits, proceedings or, to the knowledge of FL, 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 FL or any of its Subsidiaries or any properties or assets of FL or of any of its Subsidiaries, (b) to the knowledge of FL, threatened against FL or any of its Subsidiaries, or any properties or assets of FL or of any of its Subsidiaries, or (c) whether filed or threatened, that have been settled or compromised by FL 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 FL nor any Subsidiary of FL 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.

Jamara assume that as set forth in section 3.12 of the FL Disclosure Schedule the points below would have been covered. In the event that one or two may have been left out we summarize for your benefit.

You should be aware that legal action is pending in New Zealand to recover a significant debt owed to (FLNZ) a joint venture company between FLOL and Jamara plus damages and costs. (While Jamara is aware that FLOL is now in a position where can wind up FLNZ, under NZ law Jamara has the right to continue the litigation which it fully intends to do.)

The former staff of FLNZ has filed proceedings with the Employment Relations Authority of New Zealand to recover unpaid wages dating back to August 2008. Mr Jeavons had stated that on gaining a summary judgement against Brett Bailey that all staff would be paid. Neither Mr Jeavons nor his legal representatives in New Zealand have implemented this undertaking.

Mr Brett bailey has been materially & reputationally damaged by vexatious legal actions launched against him in the UK legal jurisdiction and has been taking on going advice to appeal the unfairly gained UK summary judgement. With the co operation of certain New Zealand authorities and support from a number of his supporters in New Zealand & Australia, Convera & FLOL is to be on notice that actions will be launched which will be seeking legal redress and substantial compensation in damages. The case against Mr Bailey was never about Justice but that of corporate greed and deep pockets. Mr Bailey’s entire defence was funded by family, friends, supporters and many hours of peoples time given for nothing.
It is clear that the negotiations leading up to the announcement of the merger have been happening for some time. These negotiations are materially significant in regards to the aggressive litigation taken against Mr Bailey and FLNZ. It is the contention of Jamara’s shareholders that the Convera agreement should have been disclosed to all shareholders and that had this been known, Jamara’s, FLNZ’s and Mr Bailey’s strategy would have been significantly different in regards to the litigation and the funding available to the defence would have channelled accordingly.

It appears that agreement was reached in regards to the agreement on the 31st of December or some time prior to that. At what point were Convera’s shareholders made aware of the agreement? It seems a little more than a coincidence that the announcement was made so soon after summary Judgement against Bailey and FLNZ. It is even more apparent why FLOL’s refused to allow Bailey and FLNZ more time to prepare its case (a request made by Bailey on being forced into defending himself) and why FLOL refused to release any financial information to Jamara or Bailey.

It is Jamara’s contention that the lead up to the litigation was a pre meditated attempt to get rid of Bailey and the costs associated with FLNZ without having to follow due process under NZ law. FLOL did not count on Bailey taking such an aggressive stance in protecting all the shareholders and staff of FLNZ. There is a clear build up to the dispute which ended in litigation.

Jamara intends petition the UK Courts for an order under s994 of the Companies Act 2006 which protects the interests of minority shareholders. Breaches of minority shareholders rights in terms of the Act include
• Illegal removal of Brett Bailey as a director
• Illegally changing the constitution of the company
• Mr Jeavons running FLOL purely for the benefit of GNN (Mr Jeavons and
Mr Young’s Holding Company).
• Failing to hold proper board meetings
• Failing to record and file minutes
• Failing to keep proper accounting records
• Failing to distribute proper accounts and if kept have them audited in a timely fashion
• Hiving off the assets of the company.
• Oppression of minority shareholders as defined in the UK companies act.
• Vexatious litigation designed to disadvantage & damage minority shareholders.
• Setting up complex tax avoidance schemes for the sole benefit of GNN.

Jamara is unsure in regards to the non disclosure of entering into a significant transaction to its shareholders and is taking legal advice.

(g) There is no action, suit, proceeding, claim, arbitration, audit or, to the knowledge of FL, investigation pending or, to the knowledge of FL, threatened, with respect to any FL Employee Plan, other than claims for benefits in the ordinary course, that would reasonably be expected to result in material liability to FL, to any of its Subsidiaries, or to such FL Employee Plan. No FL Employee Plan is or, to the knowledge of 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 FL 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.

The former staff of FLNZ has filed proceedings with the Employment Relations Authority of New Zealand to recover unpaid wages dating back to August 2008. Mr Jeavons had stated that on gaining a summary judgement against Brett Bailey that all staff would be paid. Neither Mr Jeavons nor his legal representatives in New Zealand have implemented this undertaking

[jamaraholdings]

(g) There is no action, suit, proceeding, claim, arbitration, audit or, to the knowledge of FL, investigation pending or, to the knowledge of FL, threatened, with respect to any FL Employee Plan, other than claims for benefits in the ordinary course, that would reasonably be expected to result in material liability to FL, to any of its Subsidiaries, or to such FL Employee Plan. No FL Employee Plan is or, to the knowledge of 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 FL 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.

The former staff of FLNZ has filed proceedings with the Employment Relations Authority of New Zealand to recover unpaid wages dating back to August 2008. Mr Jeavons had stated that on gaining a summary judgement against Brett Bailey that all staff would be paid. Neither Mr Jeavons nor his legal representatives in New Zealand have implemented this undertaking

h) Section 3.13(h) of the FL 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 FL and its Subsidiaries. To the knowledge of FL, after due inquiry of the appropriate individuals, each individual who has received compensation for the performance of services on behalf of FL or any of FL’s Subsidiaries has been properly classified as an employee or independent contractor in accordance with applicable law.

There are a number of creditors, subcontractors and others who remain unpaid in New Zealand.

3.14 Labor Matters. (a) FL 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 FL, threatened, between FL 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 FL nor any of its Subsidiaries is a party to any collective bargaining agreement or other labor union contract applicable to persons employed by FL or its Subsidiaries, nor does FL 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 FL 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, FL or any of its Subsidiaries. To the knowledge of FL, no employee of FL 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 FL or any of its Subsidiaries because of the nature of the business conducted or presently proposed to be conducted by FL 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 FL or any of its Subsidiaries that such employee or any employee in a group of key employees intends to terminate his or her employment.

The former staff of FLNZ has filed proceedings with the Employment Relations Authority of New Zealand to recover unpaid wages dating back to August 2008. Mr Jeavons had stated that on gaining a summary judgement against Brett Bailey that all staff would be paid. Neither Mr Jeavons nor his legal representatives in New Zealand have implemented this undertaking

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3.15 Properties; Encumbrances. Except as set forth in Section 3.15 of the FL Disclosure Schedule, each of FL 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 FL or any of its Subsidiaries (real, personal and mixed, tangible and intangible), including, without limitation, all the properties and assets reflected in FL Balance Sheet (except for personal property sold since the date of the FL Balance Sheet in the ordinary course of business consistent with past practice). All properties and assets reflected in the FL Balance Sheet are free and clear of all Liens, except for Liens reflected on the FL 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 FL Disclosure Schedule sets forth a true, complete and correct list of all real property owned, leased, subleased or licensed by FL and the location of such premises. Each of FL 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 FL Disclosure Schedule.

FLNZ has a lease with Michael Pitt for the property at level 6 Anvil House 138 Wakefield Street Wellington, New Zealand. This is currently significantly in arrears and has approximately 18months to run.

b) FL 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 FL and its Subsidiaries have been timely paid. There are no Tax Liens on any assets of FL or any Subsidiary thereof other than liens relating to Taxes not yet due and payable. Neither FL 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 FL 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 FL Balance Sheet were incurred in the ordinary course of business and are consistent in type and amount with Taxes attributable to similar prior periods.

FLNZ has not filed a tax return for y/e March 31st 2009.

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

FLNZ is in breach of a number of NZ tax laws.

3.17 Intellectual Property.


(d) There is no pending or, to the knowledge of FL, 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 the activities or the conduct of FL’s or any of its Subsidiaries’ business infringe or misappropriate any Intellectual Property owned by any third party (“Third Party Intellectual Property”), or challenging the ownership, validity, enforceability or registerability of any FL Intellectual Property. Neither FL nor any of its Subsidiaries is, as a result of any suits, actions or similar legal proceedings, a party to any settlements, covenants not to sue, consents, decrees, stipulations, judgments, or orders which (i) materially restrict FL’s or any of its Subsidiaries’ rights to use any FL Intellectual Property, (ii) materially restrict FL or any of its Subsidiaries from conducting its business as currently conducted in order to avoid infringement of any Third Party Intellectual Property, or (iii) permit third parties to use any FL Intellectual Property.

Jamara Holdings intends to explore its rights under the agreements set out between FLNZ and FL.

(e) The conduct of the business of FL and its Subsidiaries as currently conducted does not infringe in any material respect upon any Third Party Intellectual Property. To the knowledge of FL, no third party is misappropriating, infringing, diluting or violating any FL Intellectual Property that is material to the conduct of the business of FL and its Subsidiaries as currently conducted, and no intellectual property misappropriation, infringement dilution or violation suits, arbitrations or other adversarial proceedings have been brought before any court, government agency or arbitral tribunal against any third party by FL or any of its Subsidiaries which remain unresolved.

FLOL is not in a position to warranty this without the co-operation of FLNZ and it former CEO and director Brett Bailey

(f) FL and its Subsidiaries have taken reasonable measures to protect the proprietary nature of FL Intellectual Property that is material to the business of FL or any of its Subsidiaries as currently conducted. To the knowledge of FL, there has been no disclosure to any third party by FL or any of its Subsidiaries of material confidential information or trade secrets of FL or any of its Subsidiaries related to any material proprietary product currently being marketed, sold, licensed or developed by FL or any of its Subsidiaries (each such product, a “FL Proprietary Product”) other than disclosures made pursuant to nondisclosure or confidentiality agreements entered into by FL or any of its Subsidiaries in the ordinary course of business.

FLOL is not in a position to warranty this without the co-operation of FLNZ and it former CEO and director Brett Bailey


(g) All employees of FL and its Subsidiaries who have made material contributions to the development of any FL Proprietary Product (including without limitation all employees who have designed, written, tested or worked on any software code contained in any FL Proprietary Product) have signed confidentiality, non-competition (unless prohibited by applicable law) and assignment of proprietary rights agreements substantially in one of the forms attached to Section 3.17(g) of the FL Disclosure Schedule, or will make such assignment as of the Closing Date. All consultants and independent contractors who have made material contributions to the development of any FL Proprietary Product (including without limitation all consultants and independent contractors who have designed, written, tested or worked on any software code contained in any FL Proprietary Product) have assigned to FL or one or more of its Subsidiaries (or a third party that previously conducted any business currently conducted by FL or one or more of its Subsidiaries and that has assigned its rights in such FL Proprietary Product to FL or one or more of its Subsidiaries) all of their right, title and interest (other than moral rights, if any) in and to the portions of such FL Proprietary Product developed by them in the course of their work for FL or one or more of its Subsidiaries (or applicable third party) or will make such assignment as of the Closing Date. Assignments of the patents and patent applications listed in Section 3.17(a) of the FL Disclosure Schedule to FL or one or more of its Subsidiaries have been duly executed and filed with the United States Patent and Trademark Office or will be duly executed and filed with the United States Patent and Trademark Office as of the Closing Date.

FLOL is not in a position to warranty this without the co-operation of FLNZ and it former CEO and director Brett Bailey

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(h) Neither FL nor any of its Subsidiaries has granted or is obligated to grant access to any of its source code (including without limitation in any such case any conditional right to access or under which FL or any of its Subsidiaries has established any escrow arrangement for the storage and conditional release of any of its source code).

FLOL is not in a position to warranty this without the co-operation of FLNZ and it former CEO and director Brett Bailey

(i) None of the FL Proprietary Products contains any software code that is, in whole or in part, subject to the provisions of any license to software that is made generally available to the public without requiring the payment of any fees or royalties (including but not limited to the GNU General Public License (“GPL”), GNU Lesser General Public License (“LGPL”), Mozilla Public License (“MPL”, BSD licenses, and any other similar “free software” or “open source” licenses), including but not limited to any such license under which FL or any of its Subsidiaries is obligated to make the source code for such FL Proprietary Product generally available to the public free of charge.

FLOL is not in a position to warranty this without the co-operation of FLNZ and it former CEO and director Brett Bailey



(j) Except as set forth in Section 3.17(j) of the FL Disclosure Schedule, neither FL nor any of its Subsidiaries has any obligation to pay any third party any royalties or other fees in excess of $25,000 in one payment or for any three-month period for the use of FL Intellectual Property or otherwise and no obligation to pay such royalties or other fees will result from the consummation of the transactions contemplated by this Agreement.

FLOL is not in a position to warranty this without the co-operation of FLNZ and it former CEO and director Brett Bailey


(k) (i) Neither FL nor any of its Subsidiaries is in violation of any license, sublicense or other agreement or instrument related to the FL Intellectual Property to which FL or any of its Subsidiaries is a party or is otherwise bound; (ii) the consummation by FL of the transactions contemplated hereby will not result in any loss or impairment of ownership by FL or any of its Subsidiaries of, or the right of any of them to use (or result in any term extension or expansion of the rights granted to any third party in or to), any FL Intellectual Property that is material to the business FL or any of its Subsidiaries as currently conducted; (iii) the consummation by FL of the transactions contemplated hereby will not require the consent of any third party or any Governmental Entity, with respect to any such Intellectual Property.

FLOL is not in a position to warranty this without the co-operation of FLNZ and it former CEO and director Brett Bailey


3.24 Firstlight Restructuring Documents. At the time of execution of the documents to affect the UK Restructuring and the Second Restructuring, the Joinder Agreement and each instrument required thereby to be executed and delivered by FL, the UK Surviving Company and FL Subs at the closing of the transaction contemplated thereby (the “Firstlight Restructuring Documents”), each of FL, the UK Surviving Company and FL Subs will have all necessary corporate power and authority to execute and deliver the Firstlight Restructuring Documents and to perform their respective obligations hereunder and to consummate the transactions contemplated thereby. Upon its execution and delivery, the execution and delivery by FL, the UK Surviving Company and the Firstlight Restructuring Documents and the consummation by them of the transactions contemplated thereby will have been duly and validly authorized by all necessary corporate action on the part of FL, the UK Surviving Company and FL Subs. Upon their execution and delivery, the Firstlight Restructuring Documents will have been duly and validly executed and delivered by FL, the UK Surviving Company and FL Subs and execution and delivery of the Firstlight Restructuring Documents will constitute the legal, valid and binding obligation of FL, the UK Surviving Company and FL Subs, enforceable against FL, the UK Surviving Company and FL Subs 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).

There are a number of issues around the 2002 shareholders agreement which clearly states that the only valid directors of FLOL are Brett Bailey and Colin Jeavons. Jamara Holdings is pursuing its rights in regards to the shareholders agreement which is likely to impact the above clause.

(a) Representations and Warranties. Disregarding all “Material Adverse Effect” qualifications and other qualifications based on the word “material” or similar phrases contained herein, each of the representations and warranties of FL (and the UK Surviving Company and FL Subs upon their execution and delivery of the Joinder Agreement) contained in this Agreement shall be true, complete and correct in all material respects, in each case as of the date of this Agreement and as of the Closing Date (except to the extent such representations and warranties speak as of a different date) as though made on and as of the Closing Date, except for changes contemplated by this Agreement and breaches or inaccuracies of such representations and warranties which have neither had nor reasonably would be expected to have a Material Adverse Effect; and Convera shall have received a certificate signed on behalf of FL, the UK Surviving Company and FL Subs by their respective chief executive officer and chief financial officer to such effect;

It is the contention of the shareholders of Jamara Holdings that many of the warranties cannot be made without the input of FLNZ its former CEO and Director.