Convera Corporation










	




Exhibit 10.16  




                    April 1, 2004  




Mr. John R. Polchin

901 Falls Manors
Court Great Falls, Virginia  22066  



Dear John:  



          I
am pleased to offer you the position of Executive Vice President, Chief Financial Officer
and Treasurer of Convera Corporation (the “Company”).  In this position you will report
directly to Patrick Condo, President and Chief Executive Officer. This position will be
located in our Vienna, Virginia office.  Your expected start date of employment is on or
about May 1, 2004. This letter outlines the terms of the offer of employment.  










	 	1.  	Compensation.  






	  	          a.
Base Salary. The Company shall pay you a base salary at an annualized rate of not
less than $250,000 per year, payable on the Company’s normal payroll schedule (the “Base
Salary”). 







	  	          b.
Bonus. In addition to your Base Salary, you will be eligible for a bonus (the
“Bonus”) of up to $100,000 per fiscal year calculated and paid as follows: 20% per
quarter plus 20% for full fiscal year attainment based upon the Company’s actual
operating performance during Fiscal 2005 (defined as February 1, 2004 through January 31,
2005) compared to the Company’s Fiscal 2005 Operating Plan (the “Operating Plan”) as
approved by the Company’s Board of Directors. A copy of the Board approved Fiscal 2005
Operating Plan is attached for your review. Your Bonus will be prorated for your first
year of employment. Further, your Bonus calculation includes an additional component that
affords you the opportunity to earn an amount greater than $100,000 as follows: up to
125% of the Bonus if the Company’s performance during a quarter exceeds the Operating
Plan by 10%; and up to 150% of the Bonus if the Company’s performance during a quarter
exceeds the Operating Plan by 20%. One-half of your Bonus shall be calculated based on
the Company’s revenue attainment versus Operating Plan for each quarter of Fiscal 2005
and for the full fiscal year 2005, as applicable, and one-half of the Bonus shall be
calculated based on the Company’s net income/(loss) versus Operating Plan for each
quarter of Fiscal 2005, and for the full fiscal year 2005, as applicable, in each case,
as set forth in the Company’s consolidated financial statements as filed with the
Securities and Exchange Commission. Therefore, as an example, if for the second quarter
of Fiscal 2005 the Company’s revenues are 120% of the revenue target in the Operating
Plan and the Company’s net loss equals the net loss target in the Operating Plan, the
total Bonus for the quarter will be $25,000 ($15,000 + 







	


       





















	 	$10,000),
pro rata for the portion of the quarter you were employed by the Company (unless your
employment is terminated for Cause (as defined)).   







	  	          c.
Sign-On Bonus. As compensation for certain Restricted Stock shares you hold and
will be forfeiting with your present employer, the Company will provide you with a
$30,000 sign-on bonus. This sign-on bonus will be paid to you following your effective
start date of employment in accordance with the Company’s normal payroll schedule.
Should you voluntarily leave the Company within twelve months of employment, this
signing bonus will be repaid by you to Convera on a prorated basis, one-twelfth per month
remaining, and may be recovered by Convera from any outstanding wages or expenses due you
on the voluntary termination of your employment. 







	 	2.  	Employee
Benefits.  






	  	          a.
Benefits. As a full-time employee you shall be eligible to participate in such of
the Company’s benefit plans as are now generally available or later made generally
available to full time employees of the Company, including 401(k) plan, medical, dental,
vision, life, long-term disability insurance plans, and four weeks vacation per full
calendar year, prorated for your first year of employment, in accordance with Company
standard policies. 







	  	          b.
Expense Reimbursement. The Company agrees to reimburse you for all reasonable,
ordinary and necessary travel and entertainment expenses incurred by you in conjunction
with your services to the Company consistent with the Company’s standard reimbursement
policies. The Company shall pay travel costs incurred by you in conjunction with your
services to the Company consistent with the Company’s standard travel policy. 







	 	3.  	Equity
Award. 






	  	          a.
Stock Option. Subject to Board approval, upon the start of your employment, you
will be granted options under the Convera Incentive Stock Option Plan to purchase 300,000
shares of Convera common stock. These stock option grants will be made at the market
price at the time of grant, as determined under the Plan, and vest 12.5% every six
months. The Option will be an incentive stock option to the maximum extent allowed by
the tax code and will be subject to the terms of the Company’s 2000 Stock Option Plan
(the “Plan”) and the Stock Option Agreement between you and the Company, which will
contain the standard terms and provisions applicable to employees generally. Copies of
both the 2000 Stock Option Plan and the Stock Option Agreement are attached for your
review. 







	  	          b.
Acceleration Benefit. Notwithstanding the immediately preceding paragraph, the
Stock Option Agreement shall also provide that if the Company is subject to a Change of
Control, then 100% of the unvested portion of your Options as of the Change of Control
date will accelerate. For purposes of this letter, a “Change in Control” means the
occurrence of either of the following: 







	


       





















	  	          i.
      The consummation of the sale or disposition by the Company of all or substantially
all of the Company’s assets to another corporation, entity or person; or  







	  	          ii.
     The Company combines or is consolidated with, or merges with or into, any other
corporation, entity or person and the holders of all of the total voting power
represented by the outstanding voting securities of the Company immediately prior to such
transaction become in total the beneficial owner or owners of less than fifty percent
(50%) of the total voting power represented by the outstanding voting securities of the
Company or the surviving entity or its parent immediately after such transaction, and a
majority of the Board of Directors immediately after such transaction consists of
individuals other than individuals who served as directors immediately prior to such
transaction.  







	 	4.  	Pre-Employment
Conditions.  






	  	          a.
Proprietary Information Agreement. Your acceptance of this offer and commencement
of employment with the Company is contingent upon the execution, and delivery to an
officer of the Company, of the Company’s Employee Proprietary Information and Investors
Agreement, a copy of which is enclosed for your review and execution (the
“Confidentiality Agreement”), prior to or on your Start Date. 







	  	          b.
Right to Work. For purposes of federal immigration law, you will be required to
provide to the Company documentary evidence of your identity and eligibility for
employment in the United States. Such documentation must be provided to us within three
(3) business days of your Start Date, or our employment relationship with you may be
terminated. 







	  	          c.
Verification of Information. This offer of employment is also contingent upon the
successful verification of the information you provided to the Company during your
application process, as well as a general background check performed by the Company to
confirm your suitability for employment. By accepting this offer of employment, you
warrant that all information provided by you is true and correct to the best of your
knowledge, and you expressly release the Company from any claim or cause of action
arising out of the Company’s verification of such information. 







	 	5.  	No
Conflicting Obligations.  






	


          You
understand and agree that by accepting this offer of employment, you represent to the
Company that your performance will not breach any other enforceable agreement to which
you are a party and that you have not, and will not during the term of your employment
with the Company, enter into any oral or written agreement in conflict with any of the
provisions of this letter or the Company’s policies.  You are not to bring with you to
the Company, or use or disclose to any person associated with the Company, any
confidential or proprietary information belonging to any former employer or other person
or entity with respect to which you owe an obligation of confidentiality under any
agreement or otherwise.  The Company does not need and will not use such information and
we will assist you in any way possible to preserve and protect the confidentiality of
proprietary information belonging to third parties.  Also, we expect you to abide by any
obligations to refrain from soliciting any person employed by or otherwise associated   



       


















	




with any former employer and suggest
that you refrain from having any contact with such persons until such time as any
non-solicitation obligation expires.  










	 	6.  	At-Will
Employment.  






	


          Your
employment with the Company will be on an “at will” basis, meaning that either you or the
Company may terminate your employment at any time for any reason or no reason, without
further obligation or liability except as expressly set forth herein. This policy of
at-will employment is the entire agreement as to the duration of your employment and may
only be modified in an express written agreement duly authorized by the Company’s Board
of Directors.  










	 	7.  	Severance
Benefits.  






	  	          a.
General Terms. In no way limiting the Company’s policy of employment at-will, if
your employment is (i) terminated by the Company without Cause (as defined below) or (ii)
terminated by you for Good Reason (as defined below), in either case, whether or not
following or in connection with a Change in Control and other than as a result of your
death or disability, the Company will pay you (A) a lump sum amount equal to any unpaid
Base Salary and/or accrued vacation pay through the termination date, (B) a lump sum
amount equal to any Bonus earned but not yet paid under any Bonus plan then in effect at
the time of termination, (C) a lump sum amount equal to one year of your then-current
Base Salary, and (D) a lump sum equal to an amount of any eligible and unreimbursed
travel and entertainment expenses incurred on behalf of the Company as stated in the
Company’s respective policies for such reimbursements. As a condition to your receipt of
such benefits you are required to comply with your continuing obligations (including the
return of any Company property), resign from all positions you hold with the Company, and
execute the Company’s standard form of release agreement, which provides for among other
matters, the release of any claims you may have against the Company and your agreement
not to solicit employees and customers and not to compete. 







	  	          b.
Cause. For the purposes of this letter, “Cause” shall mean: (i) your repeated
failure to perform one or more of your essential duties and/or responsibilities to the
Company that remains unremedied for 10 days after written notice to you; (ii) your
failure to follow the lawful directives of the Company’s Board of Directors; (iii) your
material violation of any Company policy, including any provision of a Code of Conduct
or Code of Ethics adopted by the Company; (iv) your commission of any act of fraud,
embezzlement, dishonesty or any other willful misconduct that in the reasonable judgment
of the Board of Directors has caused or is reasonably expected to result in material
injury to the Company; (v) your unauthorized use or disclosure of any proprietary
information or trade secrets of the Company or any other party to whom you owe an
obligation of nondisclosure as a result of your relationship with the Company; (vi) your
conviction of a felony or plea of “nolo contendre” or; (vii) your willful breach of any
of your obligations under any written agreement with the Company that remains unremedied
for 10 days after written notice to you. 







	  	          c.
Good Reason. For purposes of this letter, “Good Reason” shall mean (i) the
Company’s failure to make any required payment to you hereunder that remains unremedied
for 10 days after you have provided written notice of such failure to the Chief Executive
Officer or 







	


       


















	




the Board of Directors, (ii) upon a
Change of Control and (a) a substantial diminution of your duties and/or responsibilities
compared to your duties and responsibilities immediately prior to the change of control,
or (b) a relocation of more than 50 miles from the Company’s primary place of business
presently established as Vienna, Virginia, or (iii) the Company’s willful breach of any
of its obligations under any written agreement with you that remains unremedied for 10
days after you have provided notice of such breach to the Chief Executive Officer or the
Board of Directors.  



          To
indicate your acceptance of the Company’s offer, please sign and date this letter in the
space provided below and return it to me, along with a signed and dated original copy of
the Employee Proprietary Information and Inventions Agreement. This letter, together with
the Confidentiality Agreement, set forth the terms of your employment with the Company
and supersede any prior representations or agreements, whether written or oral.  This
letter will be governed by the laws of Virginia, without regard to its conflict of laws
provisions, and may only be amended or modified by a writing signed by both parties and
approved by the Board of Directors.  



          We
are all delighted to be able to extend you this offer and look forward to working with
you.  











	 	Very truly yours,



CONVERA CORPORATION



By: /s/ PATRICK C. CONDO

       ———————————

Title: President and Chief Executive Officer 








	


ACCEPTED AND AGREED:  






JOHN R. POLCHIN  



/s/ John R Polchin

—————————————

                          Signature  



April 2, 2004

—————————————

Date  



Anticipated Start Date: 5/1/04  






Attachment A:  Employee Proprietary
Information and Invention Agreement 
Attachment B: Convera Summary of Benefits