SCHEDULE
14A
(RULE
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934
Filed
by
the Registrant x
Filed
by
a Party other than the Registrant o
Check
the
appropriate box:
x |
Preliminary Proxy Statement
|
o |
Confidential, For Use of the Commission
Only
(As
Permitted by Rule 14a-6(e)(2))
|
o |
Definitive
Proxy Statement |
o |
Definitive
Additional Materials |
o |
Soliciting
Material Pursuant to Rule 14a-11(c) or Rule
14a-12 |
EMVELCO.
CORP.
(Name
of
Registrant as Specified In Its Charter)
(Name
of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
o |
Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11. |
(1)
Title
of each class of securities to which transaction applies:
(2)
Aggregate number of securities to which transaction applies:
(3)
Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4)
Proposed maximum aggregate value of transaction:
(5)
Total
fee paid:
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. |
(1)
Amount Previously Paid:
(2)
Form, Schedule or Registration Statement No.:
(3)
Filing Party:
(4)
Date
Filed:
EMVELCO
CORP.
468
North Camden Drive, Suite 315
Beverly
Hills, California 90210
(Tel)
(310) 285-5350
(Fax) (310)
285-5353
TO
THE STOCKHOLDERS OF EMVELCO CORP.
NOTICE
IS
HEREBY GIVEN that the Annual Meeting of Stockholders (the "Meeting") of Emvelco
Corp., a Delaware corporation (the "Company" or "Emvelco"), will be held at
_____ p.m. (Los Angeles, California time), on _____ ________, 2007 at its
corporate offices located at 468 North Camden Drive, Conference Room __, Beverly
Hills, California 90210 for the following purposes:
1.
To
elect five (5) directors of the Company to serve until the 2008 Annual Meeting
of Stockholders or until their successors have been duly elected and qualified;
2.
To
ratify the selection of Robison Hill & Co. as our independent auditors for
the fiscal year ending December 31, 2007;
3.
To
authorize the Board of Directors to terminate
its status as a reporting company; and
4.
To
transact such other business as may properly come before the Meeting and any
adjournment or postponement thereof.
Only
stockholders who own shares of our common stock at the close of business on
________, 2007 are entitled to notice of and to vote at the annual meeting.
You
may vote your shares by:
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· |
marking,
signing and dating the enclosed proxy card as promptly as possible
and
returning it in the enclosed postage-paid envelope;
|
|
· |
dialing
the toll free number on the enclosed proxy card and casting your
vote in
accordance with the instructions given to you on the telephone; or
|
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· |
casting
your vote via the Internet at the website shown on the enclosed proxy
card.
|
You
may
also vote in person at the annual meeting, even if you use one of the three
options listed above.
We
have
enclosed with this Notice of Annual Meeting, a proxy statement, a form of proxy
and a copy of our annual report to stockholders. Our annual report is not a
part
of this proxy statement.
By
Order
of the Board of Directors,
Stewart
Reich, Chairman of the Board of Directors
Beverly
Hills, California
______,
2007
EMVELCO
CORP.
468
North Camden Drive, Suite 315
Beverly
Hills, California 90210
(Tel)
(310) 285-5350
(Fax) (310)
285-5353
PROXY
STATEMENT FOR 2007 ANNUAL MEETING OF STOCKHOLDERS
The
board
of directors is soliciting proxies to be used at our _______, 2007 annual
meeting of stockholders. Please read and carefully consider the information
presented in this proxy statement and vote either by (i) completing, dating,
signing and returning the enclosed proxy in the enclosed postage-paid envelope;
(ii) by dialing the toll free number on the enclosed proxy card and casting
your
vote; or (iii) visiting the website shown on the enclosed proxy card and casting
your vote.
This
proxy statement, the form of proxy and our annual report will be mailed to
all
stockholders on or about _____, 2007. Our annual report is not a part of this
proxy statement.
INFORMATION
ABOUT THE ANNUAL MEETING
WHEN
IS THE ANNUAL MEETING?
_______
______, 2007, ____ P.M. Los Angeles, California time.
WHERE
WILL THE ANNUAL MEETING BE HELD?
The
meeting will be held at its corporate offices located at 468 North Camden Drive,
Conference Room, 2nd
Floor,
Beverly Hills, California 90210.
WHAT
ITEMS WILL BE VOTED UPON AT THE ANNUAL MEETING?
You
will
be voting on the following matters:
1.
ELECTION OF DIRECTORS. To elect five directors to serve until the 2008 Annual
Meeting of stockholders or until their successors are duly elected and
qualified;
2.
RATIFICATION OF AUDITORS. To ratify the selection of Robison Hill & Co.
("Robison ") as independent auditors of the Company for the fiscal year ending
December 31, 2007; and
3.
APPROVAL OF AUTHORIZATION TO DEREGISTER THE COMPANY. To authorize the Board
of
Directors, for a period of one year, to terminate
the Company’s status as a reporting company.
4.
OTHER
BUSINESS. To transact such other business as may properly come before the annual
meeting or any adjournment of the annual meeting.
WHO
CAN VOTE?
Only
holders of record of our common stock at the close of business on ______, 2007
will be entitled to notice of and to vote at the annual meeting and any
adjournments of the annual meeting. You are entitled to one vote for each share
of common stock held on that date. On ___________, 2007, there were ______
shares of our common stock outstanding and entitled to vote.
YOUR
BOARD OF DIRECTORS HAS APPROVED EACH OF THE PROPOSALS SET FORTH HEREIN.
ACCORDINGLY,
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEE DIRECTORS, THE
AUTHORIZATION OF THE BOARD OF DIRECTORS TO TERMINATE THE COMPANY’S STATUS AS
REPORTING COMPANY AND THE RATIFICATION OF THE APPOINTMENT OF ROBISON HILL &
CO. AS AUDITORS.
HOW
DO I VOTE BY PROXY?
You
may
vote your shares by:
· VOTING
BY
MAIL. You may vote by mail by marking, signing and dating the enclosed proxy
card as promptly as possible and returning it in the enclosed postage-paid
envelope. Proxies should not be sent by the stockholder to the Company, but
to
American Stock Transfer and Trust Company, the Company's Registrar and Transfer
Agent, at 59 Maiden Lane, New York, New York 10038. A pre-addressed,
postage-paid envelope is provided for this purpose.
· VOTING
BY
TELEPHONE. You may vote by telephone by dialing the toll free number on the
enclosed proxy card and casting your vote in accordance with the instructions
given to you on the telephone. Telephone voting is available 24 hours a day.
If
you vote by telephone you should not return your proxy card.
· VOTING
VIA THE INTERNET. You may vote via the Internet by visiting the website shown
on
the enclosed proxy card. Internet voting is also available 24 hours a day.
If
you vote via the Internet you should not return your proxy card.
If
you
return your signed proxy card or vote by phone or the Internet before the annual
meeting, we will vote your shares as you direct. For the election of directors,
you may vote for (1) all of the nominees, (2) none of the nominees or (3) all
of
the nominees except those you designate. For each other item of business, you
may vote “FOR" or "AGAINST" or you may "ABSTAIN" from voting.
If
you
return your signed proxy card but do not specify how you want to vote your
shares, we will vote them:
· |
"FOR"
the election of all of our nominees for directors;
and
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· |
"FOR"
the ratification of Robison Hill & Co. as our independent auditors.
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“FOR”
the authorization of the Board of Directors to terminate
the Company’s status as a reporting
company.
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If
any
matters other than those set forth above are properly brought before the annual
meeting, the individuals named in your proxy card may vote your shares in
accordance with their best judgment.
HOW
DO I CHANGE OR REVOKE MY PROXY?
You
can
change or revoke your proxy at any time before it is voted at the annual meeting
by:
1.
Submitting another proxy by mail, telephone or internet with a more recent
date
than that of the proxy first given;
2.
Sending written notice of revocation to American Stock Transfer and Trust
Company, the Company's Registrar and Transfer Agent, at 59 Maiden Lane, New
York, New York 10038; or
3.
Attending the annual meeting and voting in person. If your shares are held
in
the name of a bank, broker or other holder of record, you must obtain a proxy,
executed in your favor, from the holder of record to be able to vote at the
meeting.
WHAT
CONSTITUTES A "QUORUM" FOR THE ANNUAL MEETING?
One-third
of the outstanding shares of the Company common stock entitled to vote at the
annual meeting, present or represented by proxy, constitutes a quorum. A quorum
is necessary to conduct business at the annual meeting. You will be considered
part of the quorum if you have voted by proxy. Abstentions, broker non-votes
and
votes withheld from director nominees count as "shares present" at the annual
meeting for purposes of determining a quorum. However, abstentions and broker
non-votes do not count in the voting results. A broker non-vote occurs when
a
broker or other nominee who holds shares for another does not vote on a
particular item because the broker or nominee does not have discretionary
authority for that item and has not received instructions from the owner of
the
shares.
HOW
MANY VOTES ARE REQUIRED?
· Directors
nominees are elected by a plurality of the votes cast in person or by proxy,
provided that a quorum is present at the Meeting.
· The
ratification of the director's selection of Robison Hill & Co. as the
Company's independent auditors and authorization of the Board of Directors
to
terminate
the Company’s status as a reporting company
will
require an affirmative vote of the majority of the votes cast in person or
by
proxy, provided that a quorum is present at the annual meeting.
WHO
PAYS FOR THE SOLICITATION OF PROXIES?
The
Company will pay the cost of preparing, printing and mailing material in
connection with this solicitation of proxies. We will, upon request, reimburse
brokerage firms, banks and others for their reasonable out-of-pocket expenses
in
forwarding proxy material to beneficial owners of stock or otherwise in
connection with this solicitation of proxies.
WHEN
ARE STOCKHOLDER PROPOSALS FOR THE 2007 ANNUAL MEETING DUE?
Any
stockholder proposals for the 2008 annual meeting must be received by us,
directed to the attention of the Company's secretary, Ms. Robin Ann Gorelick,
Emvelco Corp., 468 North Camden Drive, Suite 315, Beverly Hills, California
90210, USA, no later than _________________. The use of certified mail, return
receipt requested, is advised. To be eligible for inclusion, a proposal must
comply with our bylaws, Rule 14a-8 and all other applicable provisions of
Regulation 14A under the Securities Exchange Act of 1934.
PROPOSAL
1: ELECTION OF DIRECTORS
(ITEM
1
ON THE PROXY CARD)
At
the
Meeting, five (5) directors are to be elected. Pursuant to the Company's
By-laws, all directors are elected to serve for the ensuing year and until
their
respective successors are elected and qualified. Unless otherwise directed,
the
persons named in the enclosed Proxy intend to cast all votes pursuant to proxies
received for the election of Stewart Reich, Ilan Kenig, Yossi Attia, Gerald
Schaffer and Darren C. Dunckel (collectively, the "Nominees"). If any of the
Nominees becomes unavailable for any reason, which event is not anticipated,
the
shares represented by the enclosed proxy will be voted for such other person
designated by the Board.
Vote
required: Directors must be elected by a plurality of all votes cast at the
meeting. Votes withheld for any director will not be counted.
Voting
by
the Proxies: The Proxies will vote your shares in accordance with your
instructions. If you have not given specific instructions to the contrary,
your
shares will be voted to approve the election of the nominees named in the Proxy
Statement. Although the Company knows of no reason why the nominees would not
be
able to serve, if a nominee were not available for election, the Proxies would
vote your Common Stock to approve the election of any substitute nominee
proposed by the Board of Directors. The Board may also choose to reduce the
number of directors to be elected as permitted by our Bylaws.
General
Information about the Nominees: The following information regarding the
Nominees, their occupations, employment history and directorships in certain
companies is as reported by the respective Nominees.
Stewart
Reich,
age 63,
Chairman of the Board since June 2004, was CEO and President of Golden Telecom
Inc., Russia's largest alternative voice and data service provider as well
as
its largest ISP, since 1997. In September 1992, Mr. Reich was employed as Chief
Financial Officer at UTEL (Ukraine Telecommunications), of which he was
appointed President in November 1992. Prior to that, Mr. Reich held various
positions at a number of subsidiaries of AT&T Corp. Mr. Reich have been a
Director of the Company since 2002. Mr. Reich is Chairman of the Board, as
well
as head of the Audit Committee and the Compensation Committee.
Yossi
Attia,
age 45,
has been self employed as a real estate developer since 2000. Mr. Attia was
appointed to the Board of Directors (“Board”) on February 1, 2005, and as the
CEO and President of the Company on August 14, 2006. Prior to entering into
the
real estate development industry, Mr. Attia served as the Senior Vice President
of Investments of Interfirst Capital from 1996 to 2000. From 1994 though 1996,
Mr. Attia was a Senior Vice President of Investments with Sutro & Co. and
from 1992 through 1994. Mr. Attia served as the Vice President of Investments
of
Prudential Securities. Mr. Attia received a Bachelor of Arts (“BA”) in economics
and marketing from Haifa University in 1987 and a Masters of Business
Administration (“MBA”) from Pepperdine University in 1995. Mr. Attia held Series
7 and 63 securities licenses from 1991 until 2002. Effective March 21, 2005,
Mr.
Attia was appointed as a member of the Audit Committee and the Compensation
Committee. In June 2006, Mr. Attia was appointed as the CEO of ERC. Upon his
appointment as the CEO of ERC, Mr. Attia was not considered an independent
Director. Consequently, Mr. Attia resigned from all committees.
Ilan
Kenig, age
46,
has over
20 years of management, legal, venture capital and investment banking experience
with specific emphasis in the technology and telecommunications arena. Mr.
Kenig
was appointed to the Company's Board on February 1, 2005. Mr. Kenig joined
Unity
Wireless Corporation ("Unity"), a designer, developer and manufacturer of
wireless systems, as Vice President of Business Development in December 2001
before assuming the position of President and CEO in April 2002. From January
1999 until December 2001, Mr. Kenig pursued international finance activities
and
mergers and acquisitions in New York. Mr. Kenig was a founder of a law firm
in
Tel-Aviv representing technology and telecommunications interests. Mr. Kenig
holds a law degree from Bar-Ilan University. Effective March 21, 2005, Mr.
Kenig
was appointed as a member of the Audit Committee and the Compensation
Committee.
Gerald
Schaffer,
age 83,
on June 22, 2006, the Board of Directors of the Company appointed unanimously
Mr. Schaffer as director as well as member of the Audit and Compensation
committees. There are no understandings or arrangements between Mr. Schaffer
and
any other person pursuant to which Mr. Schaffer was selected as a director.
Mr.
Schaffer does not have any family relationship with any director, executive
officer or person nominated or chosen by the Company to become a director or
an
executive officer or any major shareholder. Gerald Schaffer has been extensively
active in corporate, community, public, and government affairs for many years,
having served on numerous governmental boards and authorities, as well as public
service agencies, including his current twenty-one year membership on the Board
of Directors for the American Lung Association of Nevada. Additionally, Mr.
Schaffer is a past member of the Clark County Comprehensive Plan Steering
Committee, as well as a former Commissioner for Public Housing on the Clark
County Housing Authority. For many years he served as a Planning Commissioner
for the Clark County Planning Commission, which included the sprawling Las
Vegas
Strip. His tenure on these various governmental entities was enhanced by his
extensive knowledge of the federal government. Mr. Schaffer is Chairman Emeritus
of the Windsor Group and a founding member of both Windsor and its affiliate
-
Gold Eagle Gaming. Over the years the principals of Windsor have developed
shopping and marketing centers, office complexes, hotel/casinos, apartments,
residential units and a wide variety of large land parcels. Mr. Schaffer
continues to have an active daily role in many of these subsidiary interests.
He
is also President of the
Barclay
Corporation, a professional consulting service, as well as the Barclay
Development Corporation, dealing primarily in commercial land acquisitions
and
sales.
Darren
C. Dunckel,
age 39,
was appointed as a director of the Company on September 17, 2007. There are
no
understandings or arrangements between Mr. Dunckel and any other person pursuant
to which Mr. Dunckel was selected as a director. Mr. Dunckel presently does
not
serve on any Company committee. .Mr. Dunckel does not have any family
relationship with any director, executive officer or person nominated or chosen
by the Company to become a director or executive officer. From 2006 to the
present, Mr. Dunckel served as President of Emvelco RE Corp., a Nevada
corporation and former subsidiary of the Company (“ERC”). As President, he
oversees management of real estate acquisitions, development and sales in the
United States and Croatia where ERC holds properties. From 2005 to the present,
Mr. Dunckel has been President of Verge Living Corporation, a Nevada corporation
(“Verge”) and wholly owned subsidiary of ERC (f/k/a The Aquitania Corp. and AO
Bonanza Las Vegas, Inc.). In connection with this position, Mr. Dunckel oversees
management of the Verge Project, a 318 unit and approximately 33,000 sq ft
commercial mixed use building in Las Vegas, Nevada. The Company was the initial
financier of the Verge Project. Concurrently, Mr. Dunckel is the Managing
Director of The International Holdings Group Ltd. (“TIHG”), the sole shareholder
of ERC and as such manages the investment portfolio of this holding company.
Since 2004, Mr. Dunckel is the President of MyDaily Corporation managing the
operations of this financial services company. Prior to 2004, from 2002 through
2004, Mr. Dunckel was Vice President, Regional Director for the Newport Group
managing the territory for financial and consulting services. From 2000 to
2002,
Mr. Dunckel was Vice President, Regional Director for New York Life Investment
Management consulting with financial advisors and corporations with respect
to
investments and financial services.
Mr.
Dunckel has entered into various transactions and agreements with the Company
on
behalf of ERC, Verge and TIHG (all such transactions have been reported on
the
Company filings of Form 8Ks). On December 31, 2006, Mr. Dunckel executed the
Agreement and Plan of Exchange on behalf of TIHG which was issued shares in
ERC
in consideration for the exchange of TIHG’s interest in Verge. Pursuant to that
certain Stock Transfer and Assignment of Contract Rights Agreement dated as
of
May 14, 2007, the Company transferred its shares in ERC in consideration for
the
assignment of rights to that certain Investment and Option Agreement, and
amendments thereto, dated as of June 19, 2006 which gives rights to certain
interests and assets. Mr. Dunckel has represented and executed the foregoing
agreements on behalf of ERC, Verge and TIHG. Mr. Dunckel is to be considered
a
related party upon becoming a director. In the event that the Company completes
its transaction with Appswing Ltd., in connection with the purchase of Kidron
Industrial Holdings Ltd., Mr. Dunckel will execute agreements on behalf of
Verge
to transfer 100% of Verge and a portion of ERC’s interest and assets in Croatia
in consideration of the Company receiving a large percentage equity interest
in
Kidron, as this acquisition of Verge by the Company is based on a written option
granted to the Company on June 19, 2006 as reported on the Company’s Form
8K.
Directors
are elected annually and hold office until the next annual meeting of the
stockholders of the Company and until their successors are elected and
qualified. Officers are elected annually and serve at the discretion of the
Board of Directors.
ROLE
OF THE BOARD
Pursuant
to Delaware law, our business, property and affairs are managed under the
direction of our board of directors. The board has responsibility for
establishing broad corporate policies and for the overall performance and
direction of the Company, but is not involved in day-to-day operations. Members
of the board keep informed of our business by participating in board and
committee meetings, by reviewing analyses and reports sent to them regularly,
and through discussions with our executive officers.
2006
BOARD MEETINGS
In
2006,
the board met 5 times. No director attended less than 80% of all of the combined
total meetings of the board and the committees on which they served in
2006.
BOARD
COMMITTEES
The
Company's board of directors has two standing committees, an Audit Committee
and
a Compensation Committee. The Company does not have a nominating or similar
committee. As the Company does not have a nominating committee, all director
nominees will be either selected, or recommended for selection to the Board
of
Directors by a majority of the Company’s independent members of its Board of
Directors.
Please
refer to Annexes 1 and 2 to this Proxy Statement for additional information
regarding the role, membership and activities of the Company's Audit Committee
and Compensation Committee during the year ended December 31, 2006.
ELECTION
OF DIRECTORS REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF A PLURALITY OF
THE
SHARES OF COMMON STOCK REPRESENTED AT THE ANNUAL MEETING. SHARES OF COMMON
STOCK
REPRESENTED BY PROXY CARDS RETURNED TO US WILL BE VOTED FOR THE NOMINEES LISTED
ABOVE UNLESS YOU SPECIFY OTHERWISE. THE BOARD OF DIRECTORS RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" THE ELECTION OF DIRECTORS.
PROPOSAL
2: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(ITEM
2 ON THE PROXY CARD)
Upon
the
recommendation of the Audit Committee, the Board of Directors has appointed
the
firm of Robison Hill & Co. as independent auditors of the Company for the
year ending December 31, 2007, subject to ratification of the appointment by
the
Company's stockholders.
Additional
information regarding the independence of Robison Hill & Co. and the amount
of audit and other fees paid by the Company to Robison Hill & Co. are
disclosed in Annex 1.
THE
BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE RATIFICATION
OF
THE APPOINTMENT OF ROBISON HILL & CO. AS AUDITORS OF THE COMPANY FOR THE
FISCAL YEAR ENDING DECEMBER 31, 2007.
PROPOSAL
3: AUTHORIZATION
OF THE BOARD OF DIRECTORS FOR A PERIOD OF ONE YEAR TO TERMINATE
THE COMPANY’S STATUS AS A REPORTING COMPANY
(ITEM
4 ON THE PROXY CARD)
Stockholders
are being asked to authorize the Board of Directors to terminate the Company’s
status as a reporting company and allow the Company to terminate its duty to
file reports (“SEC Reporting Obligations”) with the Securities and Exchange
Commission (the “Commission”) under Sections 13(a) and 15(d) of the Securities
Exchange Act of 1934, as amended, and continue future operations as a
non-reporting company, and thus relieving the Company of the costs and
administrative burdens associated with operating as a public company subject
to
the SEC Reporting Obligations.
Following
approval of this proposal by the stockholders, the Board of Directors will
have
the option for a period of one year to implement the deregistration. The
Board of Directors may elect to abandon the deregistration at any
time.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AUTHORIZATION
OF THE BOARD OF DIRECTORS FOR A PERIOD OF ONE YEAR TO TERMINATE
THE COMPANY’S STATUS AS A REPORTING COMPANY.
Purpose
The
purpose of terminating the Company’s SEC Reporting Obligations and continue
future operations as a non-reporting company, is to relieve the Company of
the
costs and administrative burdens associated with operating as a company subject
to the SEC Reporting Obligations.
Background;
Alternatives Considered by the Board
Initial
Actions
The
question of whether the Company should be taken “private” was first briefly
discussed at a meeting of the Board of Directors on September 17, 2007.
The subject was initially raised by our Chairman, in the context of leading
a
discussion of strategic alternatives. The alternative of “going private”
arose in the context of the Board’s consideration of strategic alternatives for
the Company and its capital structure. The Board concluded at its meeting
on September 17, 2007 that the Company should continue to consider strategic
alternatives carefully, bearing in mind the possible risk associated with the
implementation by the Company of possible strategic alternatives.
The
additional consideration of going private, with the shift in the Company’s focus
from Eastern Europe to real estate, the Board of Directors paid increasing
attention to administrative costs. In the course of these efforts, the
question of whether the Company should remain subject to the SEC Reporting
Obligations was discussed by the Board of Directors of the Company. The costs
that would be associated with Sarbanes-Oxley Section 404 compliance effort
and
the possibility of filing with the Commission a Form 15 to relieve the Company
from its SEC Reporting Obligations were the initial discussions. After
reviewing the benefits of reducing costs from ceasing SEC Reporting Obligations
the Board of Directors thought it best to have the shareholders initially
authorize the Board prior to taking any action.
Cost-Savings
The
Company incurs direct and indirect costs associated with its status as a
public-reporting company. Among the most significant are the costs
associated with compliance with the SEC Reporting Obligations. Direct
costs associated with compliance with the SEC Reporting Obligations include,
but
are not limited to:
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financial
printer fees; and
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miscellaneous
clerical and other administrative expenses, such as word processing,
conversion to EDGAR, telephone and fax charges associated with the
filing
of periodic reports with the
Commission.
|
Based
on
the Company’s experience in prior years, the Company’s direct costs of complying
with the SEC Reporting Obligations are estimated to be approximately $1,145,500
annually, based on estimated annual audit and accounting fees of $120,000,
estimated annual legal fees of $314,000, estimated financial printer fees of
$70,000, estimated transfer agent fees of $35,500, estimated costs associated
with filing reports with the Commission (including internal administrative
staff
and Board cost) of $315,000 and estimated miscellaneous costs of $291,000.
Indirect
costs associated with compliance with the SEC Reporting Obligations include,
among other things, the time the Company’s executive officers expend to prepare
and review the Company’s periodic reports, which the Company estimates requires
20% of the total time the executive officers expend in the management of the
Company. Because the Company has only 2 executive personnel and only a
total of 5 full-time employees, these indirect costs are substantial. For
the calendar year ending December 31, 2007, the Company will be subject to
additional regulations and compliance procedures required of public companies
under Section 404 of the Sarbanes-Oxley Act of 2002. The Company estimates
that the direct and indirect costs in the categories identified above necessary
to comply with Section 404 would range between $750,000 and $1.0 million in
the
initial year of compliance and would range between $250,000 and $500,000 in
each
subsequent year. These costs would include the hiring of additional
personnel dedicated to regulatory compliance, consultants to assist in the
implementation of new procedures and additional audit fees. Because the
Company would anticipate hiring additional dedicated compliance personnel as
well as a significant increase in audit fees, the Company estimates that ongoing
costs of compliance could amount to as much as $500,000, annually. These
costs are substantial when compared to the Company’s total general and
administrative expenses for 2006 of $4,374,609 (which include a one time expense
of $750,000).
The
Company anticipates that it will continue to incur some costs associated with
soliciting proxies for purposes of its annual meeting as required under Delaware
law, as well as meeting other state corporate law requirements. However,
these costs should be significantly less than the direct and indirect costs
of
complying with the SEC Reporting Obligations as described above.
The
Board
of Directors considered the cost to the Company of continuing to file periodic
reports with the Commission and complying with the proxy and annual report
requirements under the Exchange Act compared to the benefits to the Company
and
its stockholders of continuing to operate as a public company. Under the
circumstances, for the reasons discussed below under “Lack of Capital from
Public Sector”, the Board determined that the benefits that the Company and its
stockholders would typically expect to derive from the Company’s status as a
public company are not being realized and are not likely to be realized in
the
foreseeable future. As discussed below under “Lack of Capital from Public
Sector”, the benefits of being a public company not likely to inure to the
benefit of the Company include raising capital in the public markets and using
Common Stock for acquisition purposes. As a result, the Board of Directors
concluded that the elimination of the costs of complying with the Company’s SEC
Reporting Obligations outweighed the benefits of continuing to incur such
costs.
Lack
of Capital from Public Sector
The
Company’s circumstances are such that management believes that it is not likely
to be able to take advantage of the capital available through the public
markets. The Company’s Board of Directors does not have any present intention to
raise capital through sales of the Company’s securities in a public offering or
to acquire other business entities using the Company’s Common Stock as the
consideration for such acquisition. Accordingly, the Company has not and is
not likely to make use of, or benefit from, the advantages generally associated
with operating as a public company.
For
each
of the reasons set forth above, the Company’s Board of Directors does not
believe the costs associated with maintaining the Company’s SEC Reporting
Obligations are justified. The Company’s Board of Directors believes that
it is in the Company’s best interests and the best interests of the Company’s
stockholders as a whole to eliminate the administrative burden and costs
associated with maintaining the Company’s SEC Reporting Obligations.
Factors
Disfavoring the Deregistration
Limitation
of Public Sale Opportunities.
If the Board of Directors elects to apply for the termination of its SEC
Reporting Obligations, it is expected that Nasdaq will move to delist the
Company’s shares of common stock. The Company may then pursue to list on an
alternative market such as the Pinksheets or remain unlisted. It is possible
that the public market for shares of the Company’s Common Stock could be
substantially less active, particularly due to the lack of publicly-available
information that will be available and the lack of a trading market.
Cessation
of Publicly Available Information
.
Upon terminating the Company’s SEC Reporting Obligations, the Company will no
longer file, among other things, annual or quarterly reports with the
Commission. Information regarding the Company’s business, results of
operations and financial condition that is currently available to the general
public and the Company’s investors will not be available once the Company
terminates the registration of the Company’s securities and the Company’s SEC
Reporting Obligations. As a result of termination of the Company’s SEC
Reporting Obligations, the stockholders will not receive the benefit of the
protections provided to stockholders of a company subject to SEC Reporting
Obligations, including, but not limited to, certain corporate governance,
reporting, and management certifications required under the Sarbanes-Oxley
Act
of 2002 and disclosure and liability applicable to reports and statements made
pursuant to the requirements of the Exchange Act. The Company intends to
continue to report to its stockholders in accordance with Delaware law.
The Company will continue to hold annual meetings of stockholders as required
under Delaware law and in conjunction with such meetings plans to distribute
proxy materials and an annual report that are similar to, but likely not as
extensive as, those that would be required if the Company remained subject
to
the SEC Reporting Obligations. As a matter of Delaware law, the Company
will not be required to mail or otherwise distribute quarterly or annual reports
to stockholders.
THE
BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" AUTHORIZING THE
BOARD
OF DIRECTORS FOR A PERIOD OF ONE YEAR TO TERMINATE THE COMPANY’S STATUS AS A
REPORTING COMPANY.
BENEFICIAL
OWNERSHIP OF EMVELCO COMMON STOCK OF PRINCIPAL
STOCKHOLDERS,
DIRECTORS AND MANAGEMENT
The
following table sets forth information with respect to the beneficial ownership
of the Common Stock as of October 1, 2007 by (i) each person known by the
Company to own beneficially more than 5% of the outstanding Common Stock;
(ii) each director of the Company; (iii) each officer of the Company and
(iv) all executive officers and directors as a group. Except as otherwise
indicated below, each of the entities or persons named in the table has sole
voting and investment powers with respect to all shares of Common Stock
beneficially owned by it or him as set forth opposite its or his
name.
|
|
Shares
Beneficially
Owned(1)
|
|
Percent
Owned (1)
|
|
KPN
Telecom B.V. (4)
|
|
|
820,399
|
|
|
28.15
|
%
|
Maanplein
5
|
|
|
|
|
|
|
|
The
Hague, The Netherlands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CORCYRA
d.o.o.(3)
|
|
|
2,326,043
|
|
|
40.88
|
%
|
Valdabecki
put 118
|
|
|
|
|
|
|
|
Pula
Croatia 52100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Graeton
Holdings Limited
|
|
|
441,566
|
|
|
7.76
|
%
|
256
Makarios Avenue, Eftapaton
|
|
|
|
|
|
|
|
Court,
CY3105 Limassol, Cyprus;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stewart
Reich (6)(7)
|
|
|
100,000
|
|
|
1.32
|
%
|
18
Dorset Lane,
|
|
|
|
|
|
|
|
Bedminister,
NJ 07921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yossi
Attia (3)(5)(6)(8)
|
|
|
2,376,043
|
|
|
41.76
|
%
|
1061
1/2 Spalding Ave.
|
|
|
|
|
|
|
|
West
Hollywood, CA 90046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
_________Ilan
Kenig (6)(8)
|
|
|
50,000
|
|
|
*
|
|
_________7438
Fraser Park Drive
|
|
|
|
|
|
|
|
_________Burnaby,
BC Canada V5J 5B9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robin
Gorelick (5)(6)
|
|
|
0
|
|
|
*
|
|
Law
Offices of Gorelick & Associates
468
N. Camden Dr. Ste 361D
Beverly
Hills, CA 90210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gerald
Schaffer (6)
|
|
|
0
|
|
|
*
|
|
10120
West Flamingo, #4-167
Las
Vegas, NV 89147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Officers and Directors as a
|
|
|
2,526,043
|
|
|
44.40
|
%
|
Group
(6 Persons)
|
|
|
|
|
|
|
|
*
Less
than one percent
(1)
Unless otherwise indicated, each person has sole investment and voting power
with respect to the shares indicated. For purposes of this table, a person
or
group of persons is deemed to have "beneficial ownership" of any shares which
such person has the right to acquire within 60 days after October 1, 2007.
For
purposes of computing the percentage of outstanding shares held by each person
or group of persons named above on October 1, 2007, any security which such
person or group of persons has the right to acquire within 60 days after such
date is deemed to be outstanding for the purpose of computing the percentage
ownership for such person or persons, but is not deemed to be outstanding for
the purpose of computing the percentage ownership of any other
person.
(2)
Intentionally left blank.
(3)
Pursuant to a Stock Purchase Agreement dated as of January 28, 2005, by and
between KPN Telecom B.V. ("KPN Telecom"), a company incorporated under the
laws
of the Netherlands, and CORCYRA d.o.o., a Croatian company ("CORCYRA"), (the
"Purchase Agreement"), KPN Telecom sold to CORCYRA (i) 289,855 shares (the
"Initial Shares") of our common stock for US $1,000,000 (the "Initial Closing"),
(ii) 434,783 shares (the "Secondary Shares") of our common stock for US
$1,500,000 on April 28, 2006 and (iii) 781,006 shares of the Company’s common
stock pursuant to the Second Special Closing of our common stock on January
26,
2007. The Initial Closing occurred on February 1, 2005. Pursuant to the Purchase
Agreement, CORCYRA also agreed to purchase and, KPN agreed to sell, KPN
Telecom's remaining 1,604,405 shares of our common stock (the "Final Shares")
on
December 1, 2006 (the "Final Closing"); provided, however, that upon 14 days'
prior written notice to KPN Telecom, CORCYRA may accelerate the Final Closing
to
an earlier month-end date as specified in such notice; provided, further, that
the Final Closing is subject to the satisfaction or waiver of all of the
conditions to closing set forth in the Purchase Agreement. Assuming the final
closing occurred on December 1, 2006, the purchase price to be paid by CORCYRA
at the final closing shall be equal to $5,801,817 (“Base Price”) plus the
product of 1,601,405 multiplied by .35, which in turn is multiplied by the
difference of the average closing price for 60 trading days prior to the closing
date less $3.45 (the “Additional Payment”). In addition, CORCYRA will be
required to pay a premium of $28,560 per month. The Base Price to be paid
decreases in the event that Corcyra closes prior to December 1, 2006. KSD
Pacific, LLC, a Nevada limited liability company ("KSD") purchased from Moshe
Har Adir all of the issued and outstanding shares of capital stock of CORCYRA
in
exchange for $10,830,377. Yossi Attia, sole officer and director of CORCYRA
and
sole member of KSD is chief executive officer and a director of the Company.
Pursuant to Amendment No. 2 dated as of December 1, 2006, to the Purchase
Agreement, CORCYRA and KPN agreed to split the purchase of the remaining
1,601,405 shares of Common Stock into two tranches rather than purchasing all
of
the remaining stock in one tranche on December 1, 2006. In accordance with
the
terms of Amendment No. 2 781,006 shares of the Remaining Stock were purchased
by
CORCYRA from KPN on December 1, 2006 paying $3.85 per share. The balance of
the
Remaining Stock of 820,399 shares was scheduled to be purchased by CORCYRA
from
KPN on or before July 2, 2007; however, CORCYRA has requested an extension
to
pay for the purchase of the Remaining Stock. . Accordingly, CORCYRA, and Mr.
Attia through his ownership of KSD and CORCYRA, presently owns
1,505,644 shares of common stock and is deemed to own, pursuant to Rule
13d-3(d), promulgated under the Securities Exchange Act of 1934, as amended,
the
remaining 820,399 shares held by KPN Telecom. Mr. Attia is entitled to
additional 111,458 shares of the Company per his employment agreement with
the
Company - No shares have been issued to Mr. Attia to date. CORCYRA did finalize
the closing of the Remaining Stock on July 2, 2007 without admitting default
of
the KPN Telecom Purchase Agreement. The parties are negotiating additional
terms. The Company is not a party to the agreements or
negotiations.
(4)
KPN
Telecom B.V. is a subsidiary of Royal KPN N.V.
(5)
An
officer of the Company.
(6)
A
director of the Company.
(7)
Includes an option to purchase 100,000 shares of common stock at an exercise
price of $4.21 per share. 25,000 options vest on April 13, 2004, 25,000 options
vest on April 13, 2005, 25,000 options vest on April 13, 2006, while 25,000
options vest on April 13, 2007
(8)
Effective March 22, 2005 the Board of Directors granted Mr. Attia and Mr. Kenig,
100,000 options at an exercise price of $3.40 per share under the 2004 Incentive
Plan. Each options vests in four equal installments of 25,000 shares on
September 22, 2005, September 22, 2006, September 22, 2007 and September 22,
2008.
The
foregoing table is based upon 4,609,181 shares of common stock outstanding
as of
October 1, 2007.
SECTION
16(A) BENEFICIAL OWNERSHIP COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934 requires the Company’s directors
and executive officers, and persons who own more then 10 percent of the
Company’s Common Stock, to file with the SEC the initial reports of ownership
and reports of changes in ownership of common stock. Officers, directors and
greater than 10 percent stockholders are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file.
Specific
due dates for such reports have been established by the Commission and the
Company is required to disclose in this Proxy Statement any failure to file
reports by such dates during fiscal 2003. Based solely on its review of the
copies of such reports received by it, or written representations from certain
reporting persons that no Forms 5 were required for such persons, the Company
believes that during the fiscal year ended December 31, 2006, there was no
failure to comply with Section 16(a) filing requirements applicable to its
officers, directors and ten percent stockholders.
POLICY
WITH RESPECT TO SECTION 162(m)
Section
162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), provides
that, unless an appropriate exemption applies, a tax deduction for the Company
for compensation of certain executive officers named in the Summary Compensation
Table will not be allowed to the extent such compensation in any taxable
year
exceeds $1 million. As no executive officer of the Company received compensation
during 2005 approaching $1 million, and the Company does not believe that
any
executive officer’s compensation is likely to exceed $1 million in 2005, the
Company has not developed an executive compensation policy with respect to
qualifying compensation paid to its executive officers for deductibility
under
Section 162(m) of the Code.
EXECUTIVE
COMPENSATION
SUMMARY
COMPENSATION TABLE
Name
& Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
Awards($)
|
|
|
Option
Awards ($)
|
|
Non-Equity
Incentive Plan Compensation ($)
|
|
Change
in Pension Value and Non-Qualified Deferred Compensation Earnings
($)
|
|
All
Other Compensation ($)
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yossi
Attia
|
|
|
2006
|
|
$
|
149,396
|
|
|
—
|
|
$
|
93,750
|
(2) |
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Chief
Executive Officer (1)
|
|
|
2005
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
(1) |
Mr.
Attia was appointed as CEO of the Company on August 14,
2006.
|
(2) |
In
accordance with Mr. Attia’s employment agreements, Mr. Attia is entitled
to receive 111,458 shares of common stock for the period from August
14, 2006 to August 13, 2007 representing a compensation of $250,000
to be
paid in the form of Company shares of common stock. On May 31, 2007
the
Company, ERC and Mr. Attia entered into a Memorandum of Understanding,
pursuant to which, the August 14, 2006 amendment to Mr. Attia’s employment
agreement was terminated, and effective as of January 1, 2007, ERC’s
rights and obligations under Mr. Attia’s employment agreement were
transferred to the Company - No shares have been issued to date.
|
OUTSTANDING
EQUITY AWARDS
Option
Awards
|
|
Stock
Awards
|
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
Number
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
(#)
|
|
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)
|
|
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
(#)
|
|
Equity
Incentive
Plan
Awards:
Market
or Payout
Value
of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
($)
|
|
Yossi
Attia (1)
|
|
|
100,000(2
|
)
|
|
—
|
|
|
—
|
|
$
|
3.40
|
|
|
03/12/2011
|
|
|
50,000
(3
|
)
|
$
|
92,500
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
(1) |
Mr.
Attia was appointed as Chief Executive Officer of the Company on
August
14, 2006.
|
(2) |
On
March 22, 2005, the Company granted 100,000 options to Yossi Attia.
The
stock options granted vest at the rate of 25,000 options on each
September
22 of 2005, 2006, 2007 and 2008, respectively. The exercise price
of the
options ($3.40) is equal to the market price on the date the options
were
granted.
|
(3) |
In
accordance with Mr. Attia’s employment agreement, Mr. Attia is entitled to
receive 111,458 shares of common stock for the first year. No shares
have
been issued. The 50,000 option represents the shares of common stock
that
have not vested to date. The value of such shares is based on the
closing
price for the Company’s common stock of $1.85 as of December 29, 2006 (the
last trading day of 2006).
|
Except
as
set forth above, no other named executive officer has received an equity
award.
DIRECTOR
COMPENSATION
The
following table sets forth with respect to the named Director, compensation
information inclusive of equity awards and payments made in the year end
December 31, 2006.
Name
|
|
Fees
Earned or Paid in Cash
|
|
Stock
Awards
|
|
Option
Awards
|
|
Non-Equity
Incentive Plan Compensation
|
|
Change
in Pension Value and Nonqualified Deferred Compensation Earnings
|
|
All
Other Compensation
|
|
Total
|
|
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
|
|
($)
|
|
($)
|
|
Stewart
Reich
|
|
$
|
36,502
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
$
|
36,502
|
|
Ilan
Kenig
|
|
$
|
29,002
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
$
|
29,002
|
|
Robin
Ann Gorelick
|
|
$
|
59,500
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
$
|
59,500
|
|
Gerald
Schaffer
|
|
$
|
25,002
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
$
|
25,002
|
|
OPTIONS/SAR
GRANTS IN LAST FISCAL YEAR
There
were other grants of Stock Options/SAR made to the named Executive and President
during the fiscal year ended December 31, 2006.
AGGREGATED
OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION/SAR
VALUES
Name
|
|
Shares
acquired on exercise (#)
|
|
Value
realized ($)
|
|
Number
of securities underlying unexercised options/SARs at FY-end (#)
Exercisable/Unexercisable
|
|
Value
of the unexercised in the money options/SARs at FY-end
($)*
Exercisable/Unexercisable
|
|
Yossi
Attia, CEO, Director
|
|
|
None
|
|
|
None
|
|
|
100,000
|
|
$
|
0.00
|
|
*
Fair
market value of underlying securities (calculated by subtracting the exercise
price of the options from the closing price of the Company's common stock quoted
on the NASDAQ as of December 29, 2006, which was $1.85 per share. None of Mr.
Yossi's options are presently in the money.
EMPLOYMENT
AND MANAGEMENT AGREEMENTS
Effective
July 1, 2006, the Company entered into a five-year employment agreement with
Yossi Attia as the President of ERC which commenced on July 1, 2006 and provides
for annual compensation of $240,000 and an annual bonus of not less than
$120,000 per year, as well as an annual car allowance for the same period.
Mr.
Attia will be entitled to a special bonus equal to 10% of the EBITDA of ERC,
which such bonus is payable in shares of common stock of the Company; provided,
however, the special bonus is only payable in the event that Mr. Attia remains
continuously employed by ERC and Mr. Attia shall not have sold shares of common
stock of the Company on or before the payment date of the special bonus unless
such shares were received in connection with the exercise of an option that
was
scheduled to expire within one year of the date of exercise. In addition, on
August 14, 2006, the Company amended the Agreement to provide that Mr. Attia
shall serve as the CEO of the Company for a term of two years commencing August
14, 2006 and granting annual compensation of $250,000 to be paid in the form
of
Company shares of common stock. The number of shares to be received by Mr.
Attia
is calculated based on the average closing price 10 days prior to the
commencement of each employment year. Mr. Attia will receive 111,458 of the
Company shares of common stock for his first year service. No shares have been
issue to Mr. Attia in 2006.
The
employment agreements mentioned above further provide that, if employment is
terminated other than for willful breach by the employee, for cause or in event
of a change in control of the Company, then the employee has the right to
terminate the agreement. In the event of any such termination, the employee
will
be entitled to receive the payment due on the balance of his employment
agreement.
On
May
31, 2007 the Company, ERC and Mr. Attia entered into a Memorandum of
Understanding, pursuant to which, the August 14, 2006 amendment to Mr. Attia’s
employment agreement was terminated, and effective as of January 1, 2007, ERC’s
rights and obligations under Mr. Attia’s employment agreement were transferred
to the Company
The
Company has no pension or profit sharing plan or other contingent forms of
remuneration with any officer, Director, employee or consultant, although
bonuses are paid to some individuals.
DIRECTOR
COMPENSATION
Before
June 11, 2006, Directors who are also officers of the Company were not
separately compensated for their services as a Director. Directors who were
not
officers received cash compensation for their services: $2,000 at the time
of
agreeing to become a Director; $2,000 for each Board Meeting attended either
in
person or by telephone; and $1,000 for each Audit and Compensation Committee
Meeting attended either in person or by telephone. Non-employee Directors were
reimbursed for their expenses incurred in connection with attending meetings
of
the Board or any committee on which they served and were eligible to receive
awards under the Company’s 2004 Incentive Plan.
The
Board
has approved the modification of Directors' compensation on its special meeting
held on June 11, 2006. Directors who are also officers of the Company are not
separately compensated for their services as a Director. Directors who are
not
officers receive cash compensation for their services as follows: $40,000 per
year and an additional $5,000 if they sit on a committee and an additional
$5,000 if they sit as the head of such committee. Non-employee directors are
reimbursed for their expenses incurred in connection with attending meetings
of
the Board or any committee on which they serve and are eligible to receive
awards under our 2004 Incentive Plan.
STOCK
OPTION PLAN
2004
Incentive Plan
General
The
2004
Incentive Plan was adopted by the Board. The Board initially reserved 800,000
shares of common stock for issuance under the 2004 Incentive Plan. In 2005,
the
Plan was adjusted to increase the number of shares of common stock issuable
under such plan from 800,000 shares to 1,200,000 shares. Under the Plan, options
may be granted which are intended to qualify as Incentive Stock Options ("ISOs")
under Section 422 of the Internal Revenue Code of 1986 (the "Code") or which
are
not ("Non-ISOs") intended to qualify as Incentive Stock Options thereunder.
The
2004
Incentive Plan and the right of participants to make purchases thereunder are
intended to qualify as an "employee stock purchase plan" under Section 423
of
the Internal Revenue Code of 1986, as amended (the "Code"). The 2004 Incentive
Plan is not a qualified deferred compensation plan under Section 401(a) of
the
Internal Revenue Code and is not subject to the provisions of the Employee
Retirement Income Security Act of 1974 ("ERISA").
Purpose
The
primary purpose of the 2004 Incentive Plan is to attract and retain the best
available personnel for the Company in order to promote the success of the
Company's business and to facilitate the ownership of the Company's stock by
employees.
Administration
The
2004
Incentive Plan is administered by the Company's Board, as the Board may be
composed from time to time. All questions of interpretation of the 2004
Incentive Plan are determined by the Board, and its decisions are final and
binding upon all participants. Any determination by a majority of the members
of
the Board at any meeting, or by written consent in lieu of a meeting, shall
be
deemed to have been made by the whole Board.
Notwithstanding
the foregoing, the Board may at any time, or from time to time, appoint a
committee (the "Committee") of at least two members of the Board, and delegate
to the Committee the authority of the Board to administer the Plan. Upon such
appointment and delegation, the Committee shall have all the powers, privileges
and duties of the Board, and shall be substituted for the Board, in the
administration of the Plan, subject to certain limitations.
Members
of the Board who are eligible employees are permitted to participate in the
2004
Incentive Plan, provided that any such eligible member may not vote on any
matter affecting the administration of the 2004 Incentive Plan or the grant
of
any option pursuant to it, or serve on a committee appointed to administer
the
2004 Incentive Plan. In the event that any member of the Board is at any time
not a "disinterested person", as defined in Rule 16b-3(c)(3)(i) promulgated
pursuant to the Securities Exchange Act of 1934, the Plan shall not be
administered by the Board, and may only by administered by a Committee, all
the
members of which are disinterested persons, as so defined.
Eligibility
Under
the
2004 Incentive Plan, options may be granted to key employees, officers,
Directors or consultants of the Company, as provided in the 2004 Incentive
Plan.
Terms
of Options
The
term
of each option granted under the Plan shall be contained in a stock option
agreement between the optionee and the Company and such terms shall be
determined by the Board consistent with the provisions of the Plan, including
the following:
(a)
PURCHASE PRICE. The purchase price of the common shares subject to each ISO
shall not be less than the fair market value (as set forth in the 2004 Incentive
Plan), or in the case of the grant of an ISO to a principal stockholder, not
less that 110% of fair market value of such common shares at the time such
option is granted. The purchase price of the common shares subject to each
Non-ISO shall be determined at the time such option is granted, but in no case
less than 85% of the fair market value of such common shares at the time such
option is granted.
(b)
VESTING. The dates on which each option (or portion thereof) shall be
exercisable and the conditions precedent to such exercise, if any, shall be
fixed by the Board, in its discretion, at the time such option is granted.
(c)
EXPIRATION. The expiration of each option shall be fixed by the Board, in its
discretion, at the time such option is granted; however, unless otherwise
determined by the Board at the time such option is granted, an option shall
be
exercisable for ten (10) years after the date on which it was granted (the
"Grant Date"). Each option shall be subject to earlier termination as expressly
provided in the 2004 Incentive Plan or as determined by the Board, in its
discretion, at the time such option is granted.
(d)
TRANSFERABILITY. No option shall be transferable, except by will or the laws
of
descent and distribution, and any option may be exercised during the lifetime
of
the optionee only by him. No option granted under the Plan shall be subject
to
execution, attachment or other process.
(e)
OPTION ADJUSTMENTS. The aggregate number and class of shares as to which options
may be granted under the Plan, the number and class shares covered by each
outstanding option and the exercise price per share thereof (but not the total
price), and all such options, shall each be proportionately adjusted for any
increase decrease in the number of issued common shares resulting from split-up
spin-off or consolidation of shares or any like capital adjustment or the
payment of any stock dividend.
Except
as
otherwise provided in the 2004 Incentive Plan, any option granted hereunder
shall terminate in the event of a merger, consolidation, acquisition of property
or stock, separation, reorganization or liquidation of the Company. However,
the
optionee shall have the right immediately prior to any such transaction to
exercise his option in whole or in part notwithstanding any otherwise applicable
vesting requirements.
(f)
TERMINATION, MODIFICATION AND AMENDMENT. The 2004 Incentive Plan (but not
options previously granted under the Plan) shall terminate ten (10) years from
the earlier of the date of its adoption by the Board or the date on which the
Plan is approved by the affirmative vote of the holders of a majority of the
outstanding shares of capital stock of the Company entitled to vote thereon,
and
no option shall be granted after termination of the Plan. Subject to certain
restrictions, the Plan may at any time be terminated and from time to time
be
modified or amended by the affirmative vote of the holders of a majority of
the
outstanding shares of the capital stock of the Company present, or represented,
and entitled to vote at a meeting duly held in accordance with the applicable
laws of the State of Delaware.
THE
FOLLOWING IS A BRIEF SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION UPON
THE
PARTICIPANTS AND THE COMPANY WITH RESPECT TO THE PURCHASE OF SHARES UNDER THE
2004 INCENTIVE PLAN. THIS SUMMARY DOES NOT PURPORT TO BE COMPLETE AND DOES
NOT
ADDRESS THE FEDERAL INCOME TAX CONSEQUENCES TO TAXPAYERS WITH SPECIAL TAX
STATUS. IN ADDITION, THIS SUMMARY DOES NOT DISCUSS THE PROVISIONS OF THE INCOME
TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE PARTICIPANT
MAY RESIDE, AND DOES NOT DISCUSS ESTATE, GIFT OR OTHER TAX CONSEQUENCES OTHER
THAN INCOME TAX CONSEQUENCES. THE COMPANY ADVISES EACH PARTICIPANT TO CONSULT
HIS OR HER OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF PARTICIPATION
IN
THE 2004 Incentive Plan AND FOR REFERENCE TO APPLICABLE PROVISIONS OF THE CODE.
The
2004
Incentive Plan and the right of participants to make purchases thereunder are
intended to qualify under the provisions of Sections 421, 422 and 423 of the
Code. Under these provisions, no income will be recognized by a participant
prior to disposition of shares acquired under the 2004 Incentive Plan.
If
the
shares are sold or otherwise disposed of (including by way of gift) more than
two years after the first day of the offering period during which shares were
purchased (the "Offering Date"), a participant will recognize as ordinary income
at the time of such disposition the lesser of (a) the excess of the fair market
value of the shares at the time of such disposition over the purchase price
of
the shares or (b) 15% of the fair market value of the shares on the first day
of
the offering period. Any further gain or loss upon such disposition will be
treated as long-term capital gain or loss. If the shares are sold for a sale
price less than the purchase price, there is no ordinary income and the
participant has a capital loss for the difference.
If
the
shares are sold or otherwise disposed of (including by way of gift) before
the
expiration of the two-year holding period described above, the excess of the
fair market value of the shares on the purchase date over the purchase price
will be treated as ordinary income to the participant. This excess will
constitute ordinary income in the year of sale or other disposition even if
no
gain is realized on the sale or a gift of the shares is made. The balance of
any
gain or loss will be treated as capital gain or loss and will be treated as
long-term capital gain or loss if the shares have been held more than one year.
In
the
case of a participant who is subject to Section 16(b) of the Exchange Act,
the
purchase date for purposes of calculating such participant's compensation income
and beginning of the capital gain holding period may be deferred for up to
six
months under certain circumstances. Such individuals should consult with their
personal tax advisors prior to buying or selling shares under the 2004 Incentive
Plan.
The
ordinary income reported under the rules described above, added to the actual
purchase price of the shares, determines the tax basis of the shares for the
purpose of determining capital gain or loss on a sale or exchange of the shares.
The
Company is entitled to a deduction for amounts taxed as ordinary income to
a
participant only to the extent that ordinary income must be reported upon
disposition of shares by the participant before the expiration of the two-year
holding period described above.
Restrictions
on Resale
Certain
officers and directors of our company may be deemed to be "affiliates" of our
company as that term is defined under the Securities Act. The Common Stock
acquired under the 2004 Incentive Plan by an affiliate may be reoffered or
resold only pursuant to an effective registration statement or pursuant to
Rule
144 under the Securities Act or another exemption from the registration
requirements of the Securities Act.
ANNUAL
REPORT ON FORM 10-KSB
The
Company will provide upon request and without charge to each stockholder
receiving this Proxy Statement a copy of the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 2006, including the financial
statements and financial statement schedule information included therein, as
filed with the SEC.
OTHER
BUSINESS
The
Board
of Directors is not aware of any matter other than the matters described above
to be presented for action at the Meeting. However, if any other proper items
of
business should come before the Meeting, it is the intention of the individuals
named on your proxy card as the proxy holders to vote in accordance with their
best judgment on such matters.
|
By
Order of the Board of Directors
By:
/s/Yossi
Attia
Yossi
Attia, Director and
President
|
Dated:
____________, 2007
Beverly
Hills, California
ANNEX
1
REPORT
OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
Membership
and role of the Audit Committee
The
Audit
Committee of the board of directors reviews the internal accounting procedures
of the company and consults with and reviews the services provided by our
independent accountants. During 2006, the audit committee consisted of Messrs.
Stewart Reich, Gerald Schaffer and Ilan Kenig_____.
As
at
December 31, 2006, a majority of the members of the Audit Committee (Messrs.
Reich, Kenig and Schaffer) were "independent" for purposes of the National
Association of Securities Dealers' listing standards. The Audit Committee
operates under a written charter adopted by the Board of Directors which is
included in the Company's Proxy Statement dated April 18, 2001.
The
Audit
Committee reviews the Company's financial reporting process on behalf of the
Board of Directors. Management has the primary responsibility for the financial
statements and the reporting process, including the system of internal controls.
The independent auditors are responsible for performing an independent audit
of
the Company's consolidated financial statements in accordance with generally
accepted accounting principles and to issue a report thereon. The Committee
monitors these processes.
Review
of the Company's audited financial statements for the fiscal year ended December
31, 2006
In
this
context, the Committee met and held discussions with management and the
independent auditors. Management represented to the Committee that the Company's
consolidated financial statements were prepared in accordance with accounting
principles generally accepted in the United States, and the Committee reviewed
and discussed the consolidated financial statements with management and the
independent auditors. The Committee also discussed with the independent auditors
the matters required to be discussed by Statement on Auditing Standards No.
61
(Codification of Statements on Auditing Standards, AU 380), as amended.
In
addition, the Committee discussed with the independent auditors the auditors'
independence from the Company and its management, and the independent auditors
provided to the Committee the written disclosures and letter required by the
Independence Standards Board Standard No. 1 (Independence Discussions With
Audit
Committees).
The
Committee discussed with the Company's internal and independent auditors the
overall scope and plans for their respective audits. The Committee met with
the
internal and independent auditors, with and without management present, to
discuss the results of their examinations, the evaluation of the Company's
internal controls, and the overall quality of the Company's financial reporting.
Based
on
the reviews and discussions referred to above, the Committee recommended to
the
Board of Directors, and the Board has approved, that the audited financial
statements be included in the Company's Annual Report on Form 10-KSB for the
year ended December 31, 2006, for filing with the Securities and Exchange
Commission.
Audit
Fees
The
following table presents aggregate fees for professional audit services rendered
by Deloitte Auditing and Consulting Kft. and Robison Hill & Co and
affiliates for the audit of the Company’s annual financial statements for the
fiscal years ended December 31, 2006 and 2005, respectively, and fees
billed for other services rendered.
|
|
2006
|
|
2005
|
|
Audit
Fees (1)
|
|
$
|
160,000
|
|
$
|
192,000
|
|
Audit-Related
Fees (2)
|
|
$
|
46,000
|
|
$
|
127,000
|
|
Tax
Fees (3)
|
|
$
|
—
|
|
$
|
—
|
|
All
Other Fees (4)
|
|
$
|
21,500
|
|
$
|
67,200
|
|
(1)
Audit
Fees. The aggregate fees billed by our auditors for professional services
rendered for the audit of the Company's annual financial statements for the
years ended December 31, 2006 and 2005, and for the reviews of the financial
statements included in the Company's Quarterly Reports on Form 10-QSB during
the
fiscal years were $160,000 and $192,000, respectively.
(2)
Audit
Related Fees: In 2006 for replacement of auditors due to Deloitte resignation.
In 2005, fees for the audit of the 2004 US GAAP financials statements of
Navigator (for 8-K filing purposes) were $127,000. In 2006, no such fees were
paid.
(3)
Tax
fees: There were no tax services provided in fiscal year 2006 and
2005.
(4)
All
Other Fees: The aggregate fees billed by auditors for services rendered to
the
Company, other than the services covered in "Audit Fees" and “Audit related
fees” and for the fiscal years ended December 31, 2006 and 2005 were $21,500 and
$67,200. The 2006 and 2005 fees relate to the SB-2 registration statement
costs.
(5)
During April 2007, the Company was invoiced by the former auditors for $124,661
as a result of over run fees, which exceed the written agreement.
The
Company’s Audit Committee’s policy is to pre-approve all audit and permissible
non-audit services provided by the independent auditors. These services may
include audit services, audit-related services, tax services and other services.
All services rendered have been approved by the Audit Committee.
Upon
resignation of former auditors, the Company was presented with overrun fees
by
its former auditors, as well as open balances aggregate to $175,281 for audit
works NOT performed in the US. The Company investigates such charges, and demand
breakdown of fees from its former auditors which was provided and open balances
with Deloitte were brought current.
The
Board
of Directors has considered whether the provision of non-audit services is
compatible with maintaining the principal accountant's
independence.
Auditor
Independence
The
Audit
Committee has considered whether, and has determined that, the provision of
services described under "All Other Fees" was compatible with maintaining the
independence of Robison as the Company's principal accountants.
MEMBERS
OF THE AUDIT COMMITTEE
Independent
Members:
/s/Stewart
Reich
Stewart
Reich
/s/Ilan
Kenig
Ilan
Kenig
/s/Gerald
Schaffer
Gerald
Schaffer
ANNEX
2
REPORT
OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON
EXECUTIVE COMPENSATION
The
Compensation Committee of the board of directors i) reviews and recommends
to
the board the compensation and benefits of our executive officers; ii)
administers our stock option plans and employee stock purchase plan; and iii)
establishes and reviews general policies relating to compensation and employee
benefits.
In
2006,
the compensation committee consisted of Messrs. Reich, Schaffer and Kenig all
of
which are independent. No interlocking relationships exist between the board
of
directors or compensation committee and the board of directors or compensation
committee of any other company. During the past fiscal year the Compensation
Committee had two (2) meetings.
MEMBERS
OF THE COMPENSATION COMMITTEE
Independent
Members:
/s/Stewart
Reich
Stewart
Reich
/s/Ilan
Kenig
Ilan
Kenig
/s/Gerald
Schaffer
Gerald
Schaffer
PROXY
EMVELCO
CORP.
ANNUAL
MEETING OF STOCKHOLDERS - TO BE HELD
______,
2007
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The
undersigned, revoking all prior proxies, hereby appoints ROBIN ANN GORELICK
(Company counsel) and YOSSI ATTIA (Company CEO) and each of them, with full
power of substitution in each, as proxies for the undersigned, to represent
the
undersigned and to vote all the shares of Common Stock of the Company which
the
undersigned would be entitled to vote, as fully as the undersigned could vote
and act if personally present, at the Annual Meeting of Stockholders (the
"Meeting") to be held on ______ __________, 2007, at ______ P.M., local time,
at
its corporate offices located at 468 North Camden Drive, Conference Room __,
Beverly Hills, California 90210, or at any adjournments or postponements
thereof.
Should
the undersigned be present and elect to vote at the Meeting or at any
adjournments or postponements thereof, and after notification to the Secretary
of the Company at the Meeting of the stockholder's decision to terminate this
proxy, then the power of such attorneys or proxies shall be deemed terminated
and of no further force and effect. This proxy may also be revoked by filing
a
written notice of revocation with the Secretary of the Company or by duly
executing a proxy bearing a later date.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES FOR DIRECTOR
AND
EACH OF THE LISTED PROPOSALS.
Proposal
(1) The election as directors of all nominees listed below to serve until the
2007 Annual Meeting of Stockholders or until their successors have been duly
elected and qualified (except as marked to the contrary).
Nominees: |
|
|
01) Ilan
Kenig |
02) Stewart
P. Reich |
|
03) Darren
C. Dunckel |
04) Yossi
Attia |
05) Gerald
Schaffer |
FOR ALL o |
WITHHOLD
ALL o
|
FOR ALL EXCEPT o |
To
withhold authority to vote, mark "For All Except" and write the nominee's number
on the line below.
Proposal
(2) Ratification of the appointment of ROBISON HILL & CO. as auditors of the
Company for the fiscal year ending December 31, 2006.
FOR
o AGAINST
o ABSTAIN
o
Proposal
(3) Authorization of the Board of Directors for a period of one year to
terminate
the Company’s status as a reporting company
FOR
o AGAINST
o ABSTAIN
o
The
shares represented by this proxy will be voted as directed by the stockholder,
but if no instructions are specified, this proxy will be voted for the election
of the Board nominees and for proposals (1), (2) and (3). If any other business
is presented at the Meeting, this proxy will be voted by those named in this
proxy in their best judgment. At the present time, the Board of Directors knows
of no other business to be presented at the Meeting.
The
undersigned acknowledges receipt from the Company, prior to the execution of
this proxy, of the Notice of Annual Meeting and accompanying Proxy Statement
relating to the Meeting and an Annual Report to Stockholders for fiscal year
ended December 31, 2006.
NOTE:
PLEASE MARK, DATE AND SIGN AS YOUR NAME(S) APPEAR(S) HEREON AND RETURN IN THE
ENCLOSED ENVELOPE. IF ACTING AS AN EXECUTORS, ADMINISTRATORS, TRUSTEES,
GUARDIANS, ETC., YOU SHOULD SO INDICATE WHEN SIGNING. IF THE SIGNER IS
CORPORATION, PLEASE SIGN THE FULL CORPORATE NAME, BY DULY AUTHORIZED OFFICER.
IF
SHARES ARE HELD JOINTLY, EACH SHAREHOLDER SHOULD SIGN.
Signature (Please sign within the box)
[
________ ] |
DATE: _______, 2007 |
Signature (Joint owners) [_________
]
|
DATE: _______, 2007
|