UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment
No. 1)
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to §240.14a-12
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CONVERGENCE
ETHANOL, INC.
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(Name
of Registrant as Specified In Its Charter)
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Daniel
K. Moscaritolo
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(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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THE
NOMINATING SHAREHOLDER
March
29,
2007
Dear
Fellow Shareholders:
Daniel
K.
Moscaritolo, is a current Shareholder (the "Nominating Shareholder") of
Convergence Ethanol, Inc., a Nevada corporation (the "Company"). Mr. Moscaritolo
is asking for your vote at the 2007 Annual Meeting of Shareholders of the
Company in order to elect up to three highly qualified nominees, Daniel K.
Moscaritolo, Charles L. Christensen and Thomas Hemingway, to the Company's
Board
of Directors.
In
the
Nominating Shareholder’s view, the Company's current Directors and senior
management have failed to explore all of the possible methods for maximizing
shareholder value and have instead chosen to perpetuate themselves in
office.
The
Nominating Shareholder feels that the Company's Board should take a new
approach. The Nominating Shareholder believes that the best way to do this
is to
replace the current Board with new Directors who will consider new ways for
enhancing shareholder value.
The
Nominating Shareholder is seeking your support at the 2007 Annual Meeting
of
Shareholders. Please carefully read the enclosed Proxy Statement for more
detailed information about the Nominating Shareholder’s nominees for
Director.
Thank
you
for your support,
THE
NOMINATING SHAREHOLDER
/s/
DANIEL K. MOSCARITOLO
DANIEL
K.
MOSCARITOLO
IF
YOU
HAVE ANY QUESTIONS, REQUIRE ASSISTANCE IN VOTING YOUR PROXY CARD OR NEED
ADDITIONAL COPIES OF THE NOMINATING SHAREHOLDER'S PROXY MATERIALS, PLEASE
CONTACT THE NOMINATING SHAREHOLDER’S PROXY SOLICITOR, THOMAS HEMINGWAY (THE
"PROXY SOLICITOR") AT:
300
S.
HARBOR
SUITE
500
ANAHEIM,
CA 92805
CONVERGENCE
ETHANOL, INC.
ANNUAL
MEETING OF SHAREHOLDERS
TO
BE HELD ON APRIL 16, 2007
PROXY
STATEMENT
OF
THE
NOMINATING SHAREHOLDER
(OPPOSING
THE BOARD OF DIRECTORS OF CONVERGENCE ETHANOL, INC.)
This
Proxy Statement and proxy card are being furnished to the holders (the
"Shareholders") of the common stock, $.001 par value par share (the "Common
Stock"), of Convergence Ethanol, Inc., a Nevada corporation (the "Company"),
in
connection with the solicitation of proxies by one of the Company's current
Shareholders, Daniel K. Moscaritolo, (the "Nominating Shareholder") at the
2007
Annual Meeting of Shareholders of the Company (including any adjournments
or
postponements thereof or any special meeting that may be called in lieu thereof)
(the “Annual Meeting”). The Annual Meeting is scheduled to be held on April 16,
2007, at 7:30 a.m., Pacific Time, at the Company's principal executive offices,
located at 5701 Lindero Canyon Road, Suite 2-100, Westlake Village, California
91362. Shareholders who owned Common Stock on February 15, 2007 (the "Record
Date") are entitled to vote at the Company's Annual Meeting.
At
the
Annual Meeting, the Company will be seeking to elect a Director to hold office
until the year 2010 Annual Meeting or until such Director’s successor is elected
and qualified. The Company will also be seeking the shareholders to ratify
the
selection of Kabani & Company, Inc. as the Company’s independent auditors
for the year ending September 30, 2007.
The
Nominating Shareholder beneficially owns 2,462,887 shares of Common Stock,
which
represents approximately 12.09% of the Company's outstanding Common Stock
as of
the Record Date. The Nominating Shareholder is soliciting the votes of
other
Shareholders at the Annual Meeting to elect Daniel K. Moscaritolo, Charles
L.
Christensen and Thomas Hemingway (the "Shareholder Nominees") to serve
as
Directors of the Company. The Nominating Shareholder is soliciting the
votes in
opposition to the Director or Directors nominated for election by the
Company.
In the event that the Company proposes to elect three Directors at the
Annual
Meeting of Stockholders, the Nominating Shareholder will vote the proxies
solicited by the Nominating Shareholder in favor of electing each of
the
Shareholder Nominees as a Director. To the extent that the Company proposes
to
elect less than three Directors at the Annual Meeting, the Nominating
Shareholder will vote the proxies solicited by the Nominating Shareholder
in
favor of electing the Shareholder Nominees as a Director in the following
order:
(1) Daniel Moscaritolo and (2) Charles L. Christensen. The Nominating
Shareholder is not soliciting proxies to vote on the Company’s proposal to
ratify the selection of Kabani & Company, Inc. as the Company’s independent
auditors for the year ending September 30, 2007.
This
Proxy Statement and proxy card are being first mailed on or about April
16,
2007.
The
name
and address of the Nominating Shareholder is: Daniel K. Moscaritolo, 4010
Lemonberry Place, Thousand Oaks, CA 91362.
The
Nominating Shareholder has been a beneficial owner of the Company's Common
Stock
for over two years. Additional information concerning the Nominating Shareholder
and Shareholder Nominees is set forth on Exhibit A, Exhibit B and Exhibit
C to
this Proxy Statement.
The
Nominating Shareholder's goal is to maximize Shareholder value. The Nominating
Shareholder believes that one of the best ways to accomplish this goal is
through electing new Directors who are willing to explore options that the
current Directors do not appear to have seriously considered.
Your
last
dated proxy is the only one that counts, so return the proxy card in the
enclosed postage-paid envelope even if you have previously delivered a proxy
card to the Company. The Nominating Shareholder urges you not to return any
proxy card sent to you by the Company.
Your
vote
is important, no matter how many or how few shares you hold. If your shares
are
held in the name of a brokerage firm, bank or nominee, only they can vote
your
shares, and only upon receipt of your specific instructions. Accordingly,
please
return the proxy card in the envelope provided by your bank or broker or
contact
the person responsible for your account and give instructions for such shares
to
be voted for the Shareholder Nominees. You should be aware that if your shares
of Common Stock are held through a bank, brokerage firm or other nominee,
you
will be unable to change your vote at the Annual Meeting unless you obtain
a
"legal proxy" from the bank, brokerage firm or other nominee.
If
your
shares are registered in more than one name, the proxy card should be signed
by
all such persons to ensure that all shares are voted for the Shareholder
Nominees.
Holders
of record of shares of Common Stock on the Record Date are urged to submit
a
proxy, even if such shares have been sold after the Record Date.
THIS
SOLICITATION IS BEING MADE BY THE NOMINATING SHAREHOLDER AND NOT ON BEHALF
OF
THE COMPANY. EXCEPT AS SET FORTH HEREIN, THE NOMINATING SHAREHOLDER IS NOT
AWARE
OF ANY OTHER MATTERS TO BE BROUGHT BEFORE THE ANNUAL MEETING. SHOULD OTHER
MATTERS, WHICH THE NOMINATING SHAREHOLDER IS NOT AWARE OF A REASONABLE TIME
PRIOR TO THE ANNUAL MEETING, BE BROUGHT BEFORE THE ANNUAL MEETING, THE PERSONS
NAMED AS PROXIES IN THE ENCLOSED PROXY CARD WILL VOTE ON SUCH MATTERS IN
THEIR
DISCRETION.
If
you
have any questions or need assistance in voting your shares, please
call:
THE
NOMINATING SHAREHOLDER'S PROXY SOLICITOR at 714-765-0012
REASONS
FOR THE SOLICITATION
The
Nominating Shareholder believes that the Company's current management and
Board
of Directors have not done all they should do to maximize Shareholder value.
The
Nominating Shareholder is concerned that, if the Board's nominee or nominees
for
Director are reelected, the Board will not significantly increase or broaden
its
efforts in this regard.
The Nominating Shareholder has himself witnessed and believes to his
best
knowledge that (1) Dr. James A. Latty, the Company’s current Chief Executive
Officer and a current Director, said he planned to buy a valuable asset
from the
Company with backing from an investment banker and thereby leave the
Company to
join management of the buyer, (2) Dr. Latty expressed his outward pleasure
with
the Common Stock’s declining in price for the explicit reason that Dr. Latty
planned to benefit from the declining price when he received equity
grants upon
his then upcoming contract extension, (3) Dr. Latty caused the Company
to forego
available financing without explanation and suddenly and (4) Dr. Latty
concurrently was forbidding the public disclosure of favorable information
about
the Company. Upon election to the Board, the Shareholder Nominees plan
to
investigate and consider whether Dr. Latty has committed any breach
of any
fiduciary duty and to vote upon a proposal to agree that there is sufficient
cause to immediately terminate Dr. Latty’s employment. The Shareholder Nominees
disagree with the principles that are to be inferred from the alleged
words of
Dr. Latty. The Shareholder Nominees believe that Dr. Latty’s own words, if they
be true to the Nominating Shareholder’s description, would create a strong case
for removing Dr. Latty. There are many possible reasons to do so, not
the least
of which may be that the person most responsible for the moral character
of the
Company cannot be an outspoken advocate for
disloyalty.
PROPOSAL
ONE
ELECTION
OF THE SHAREHOLDER NOMINEES
The
Company's Board of Directors is currently composed of three Directors.
The
Company has filed a notice in First Judicial District Court of the State
of
Nevada indicating that it will propose to elect one Director at the Annual
Meeting. The Nominating Shareholder believes that the Company should
propose to
elect three Directors at the Annual Meeting. The Nominating Shareholder
is
seeking your support at the Annual Meeting to elect the Shareholder Nominees
to
the Company’s Board of Directors. The existing bylaws provide that Directors
will be elected for a three-year term and electing one Director per year.
If one
Director is elected, it would be for a three-year term. If three Directors
are
elected, one would have a three-year term, one would have a two-year
term, and
one would have a one-year term. That would be the legal effect under
the bylaws
as they currently exist, and until the bylaws are amended. The Nominating
Shareholder and the Shareholder Nominees plan to support a change of
that bylaw
upon their election to the board, They are planning to support and approve
a
bylaw amendment to eliminate “classification” of the board or the “staggered
board” and return to electing all Directors annually as soon as reasonably
possible if not immediately upon election.
When
you
return the Nominating Shareholder's proxy card, you will be voting
for Messrs.
Moscaritolo, Christensen and Hemingway to be members of the Company's
Board of
Directors. Each of Messrs. Moscaritolo, Christensen and Hemingway has
consented
to being named in this Proxy Statement and each Nominee has agreed
to serve
whether elected as one of three valid Directors or the nominee is elected
as the
sole valid Director at the Annual Meeting. We have no information concerning
the
Company’s nominees’ intention to serve in any case. Neither Mr. Moscaritolo nor
Mr. Christensen, if elected, would qualify as an independent director
under the
independence standards of the Nasdaq Stock Market. Mr. Hemingway, if
elected,
would qualify as an independent director under the independence standards
of the
Nasdaq Stock Market.
In
the
event that the Company proposes to elect three Directors at the Annual Meeting
of Stockholders, the Nominating Shareholder will vote the proxies solicited
by
the Nominating Shareholder in favor of electing each of the Shareholder Nominees
as a Director. To the extent that the Company proposes to elect less than
three
Directors at the Annual Meeting, the Nominating Shareholder will vote the
proxies solicited by the Nominating Shareholder in favor electing the
Shareholder Nominees as a Director in the following order: (1) Daniel
Moscaritolo and (2) Charles L. Christensen.
The
Company has not called a shareholders’ meeting for several years, and it is
proper that the entire Board should be elected at the Annual Meeting
because the
Nevada law clearly and emphatically requires it. In fairness to the
Shareholders, Nevada law says directors cannot unilaterally extend their
terms
in office to three years by creating a staggered board in the
bylaws.
All
of
the Company’s incumbent directors have already continued in office more than
three years since their terms began.</R>
The
Nominating Shareholder is prepared to nominate and vote for one or three
directors, depending upon the number to be elected according to the official
records of the Annual Meeting. The Company feels as though it only needs
to hold
an election of one director, so that James A. Latty and John C. Fitzgerald
continue in office for at lest one or two more years with no vote.
In
the
State of Nevada, the Nominating Shareholder has asked the court of the
appropriate jurisdiction to rule on a motion to require the Company to
hold an
election for all three directors. If the Nominating Shareholder succeeds,
and
the court orders the Company to hold an election for all three directors,
we
will nominate all three nominees, and in the alternative situation we
shall also
nominate all three directors, in order to preserve our rights.
The
Nominating Shareholder seeks to remove the incumbent board members, who
have
invalidly extended their own terms as directors and have opposed holding
this
Annual Meeting, and to replace them with the Shareholder Nominees.
The
Company’s Board itself adopted a staggered board of directors simply by amending
the bylaws. The adoption of the bylaws, according to the Company extends
the
directors terms from one year to three years. However, the Company’s position
directly violates Nevada law. The entire Board should have been up for
election
(ever since 2005 in fact) because Nevada Revised Statutes 78.330.2, provides
"If
an amendment reclassifying the directors would otherwise increase the
term of a
director, unless the amendment is to the articles of incorporation and
otherwise
provides, the term of each incumbent director on the effective date of
the
amendment terminates on the date it would have terminated had there been
no
reclassification.” The Nominating Shareholder hopes that the Board of the
Company does not succeed in fooling the Shareholders any
longer.</R>
Moreover,
the terms of office of the incumbent directors have already been at least
three
years. The bylaws were reclassified in 2004, and the "three-year terms"
would
have already started before that. They would have expired by now even
if they
were three years, so it seems quite remarkable that the law requires
Mr. Latty’s
position to be up for reelection, yet despite this Mr. Latty does not
stand for
reelection, he offers up another person who has served a much shorter
time.
Furthermore,
another separate, independent and sufficient reason why all three of
the
incumbent directors should be standing for reelection at the Annual Meeting
is
that the staggered board provision was in the Company’s bylaws, but not the ones
actually in effect. The Company filed amended bylaws with the Securities
and
Exchange Commission on March 1, 2007 as Exhibit 3.2 to its Periodic Report
on
Form 10-QSB/A. The amended bylaws do not provide for a staggered board.
Rather,
those bylaws provide that the directors shall hold office for the terms
specified in the Company’s Articles of Incorporation. The Company’s Articles of
Incorporation do not have a provision for a staggered board and cannot
be
amended to add such a provision without shareholder approval.
The
law
is plain, and it should be plain to you also that Mr. Latty is cleverly
masquerading as a director with a continuing term, which is a shameless
refusal
to let go the reigns of power.
Information
With Respect to the Shareholder Nominees
Listed
below are the Shareholder Nominees, with information showing the principal
occupation or employment of the Shareholder Nominees, the principal business
of
the corporation or other organization in which such occupation or employment
is
carried on, and such nominees' business experience during the past five years.
Such information has been furnished to the Company by the Nominating
Shareholder:
Daniel
K. Moscaritolo,
age 54,
is a Master Degreed-Mechanical Engineer, inventor, technical businessman
and an
expert in advanced backflushable filtration systems and New Product Development.
Mr. Moscaritolo recently served as a Director of the Company from July 1,
2002
through November 14, 2006. He also served as the Chief Operating Officer
and
Chief Technology Officer of the Company from July 1, 2002 through November
17,
2006 and the Chief Human Resources Officer and Ombudsman of the Company from
September/October of 2004 to November 17, 2006. Mr. Moscaritolo served as
the
Director of Hearst Ethanol One (“HEO”), a Canadian Subsidiary of which the
Company owns an 87.3% interest, from December 21, 2005 to at least November
17,
2006 (the termination date is unknown), and served as President of HEO from
October 10, 2006 to at least November 17, 2006 (the termination date is
unknown). Mr. Moscaritolo previously worked for 14 years at various divisions
of
ESCO Technologies, including his last position as Vice President of Technology
and New Product Development for PTI Technologies Inc. Mr. Moscaritolo’s business
address is 4010 Lemonberry Place, Thousand Oaks, CA 91362.
Charles
L. Christensen, age
50,
currently serves as the President and Director of Recycled Energy Corporation
and has held those positions since September 1, 2006. Mr. Christensen served
as
the Director of Company from June 2004 to August 20, 2004, the President
of MEMS
USA Applied Technology, a division of the Company from September 8, 2003
to June
23, 2006 and the President of Bott Equipment, a division of the Company,
from
November 1, 2004 to June 23, 2006. He previously served as Vice President
and
General Manager of Kaydon Custom Filtration Corp. from August 30, 1999 to
September 5, 2003. Mr. Christensen’s business address is Recycled Energy
Corporation, 3040 Saturn Street, Suite 104, Brea, CA 92821
Thomas
Hemingway, age
50,
currently serves as Chairman and COO of NextPhase Wireless, Inc. (since 2006),
Director of Financial Media Group (since 2004) and Director of Great American
Coffee Company (since 2006). He previously served as Chairman and CEO of
Oxford
Media from August 2004 to May 2006 and Chief Executive Officer and Chairman
of
the Esynch Corporation from 1998 to 2004. He also was the Chairman and CEO
of
Intermark Corporation, a software developer and publisher in the entertainment
markets, from 1995 to 1998 and previously was the President and CEO of Omni
Advanced Technologies and Intellinet Information Systems. Mr. Hemingway’s
business address is 300 S. Harbor, Suite 500, Anaheim, CA 92805.
Daniel
K.
Moscaritolo tendered his “noisy” resignation from the Board of Directors of the
Company on November 14, 2006. A copy of Mr. Moscaritolo’s resignation letter is
attached as Exhibit C to this Proxy Statement. Mr. Moscaritolo’s employment as
the Chief Operating Officer, Chief Technology Officer, Chief Human Resources
Officer and Ombudsman of the Company was subsequently terminated by the
Company
on November 17, 2006.
Mr.
Moscaritolo received full time compensation for services rendered to
the Company
during the fiscal years ended September 30, 2006, 2005 and 2004, as set
forth
below:
Summary
Compensation Table
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Annual
Compensation
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Long-Term
Compensation
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Name
and Principal Position
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Year
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Salary
($)
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Bonus
($)
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Other
Annual
Compensation
($)
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Securities
Underlying
Options
(#)
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All
Other
Compensation
($)
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Daniel
K. Moscaritolo
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2006
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240,000
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-
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9,350
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-
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-
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Chief
Operations Officer and
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2005
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240,000
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-
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10,200
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-
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-
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Chief
Technical Officer
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2004
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240,000
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-
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94,770
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1,284,343
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-
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| (1) |
Mr.
Moscaritolo was terminated as COO and CTO on November 17,
2006.
|
Aggregated
Option/SAR Exercises in 2006 Fiscal Year
and
FY-End Option/SAR Values
|
Name
|
Shares
Acquired
On
Exercise
(#)
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Value
Realized
($)
|
Number
of Securities
Underlying
Options/SARS
At
FY-End (#)
Exercisable/
Unexercisable
|
Value
of Unexercised
In-the-Money
Options/ SARS
at
FY-End ($)
Exercisable/
Unexercisable
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|
Daniel
K.
Moscaritolo
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-
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-
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-0-
/ -0-
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$0/$0
|
Mr.
Moscaritolo entered into an employment agreement with the Company dated
as of
July 1, 2002 with an initial term of four years which provided that Mr.
Moscaritolo would receive a salary at a rate of $20,000 per month for
full-time
employment. The Company terminated Mr. Moscaritolo on November 17, 2006.
In his
Whistleblower Action (defined below) Mr. Moscaritolo alleges that he
should be
reinstated and that the Company had approved an increase to his salary
and that
he was entitled to receive additional compensation at a rate of $7,500
each
month effective November 6, 2004.
In
September 2005 Mr. Moscaritolo loaned the Company approximately $105,800.
The
terms of the note required payment of principal and interest, which
accrued at a
rate of ten percent (10%) per annum. The note was accompanied by a
security
agreement that granted Mr. Moscaritolo a security interest in all personal
property belonging to the Company, as well as granting an undivided
1/2 security
interest in all of the Company’s right title and interest to any trademarks,
trade names, contract rights, and leasehold interests. On October 31,
2006 the
Company paid Mr. Daniel Moscaritolo a sum of $54,358 of which $8,558
was for
accrued interest. As of October 31, 2006 Mr. Moscaritiolo’s loan was paid in
full.
On
December 13, 2006, Mr. Moscaritolo presented the Company’s management with a
purported action by written consent of the Shareholders of the Company
indicating that the Shareholders had elected to remove the current
board of
directors and elect Messrs. Moscaritolo and Hemingway as directors
in their
place. Mr. Moscaritolo also presented the Company’s management with two separate
purported actions by written consent of the new purported board of
directors
indicating that the Company's current officers, James A. Latty and
Richard W.
York, were terminated and that Mr. Moscaritolo was elected to serve
as Secretary
of the Company and Mr. Hemingway was elected to serve as President
and Chief
Executive Officer of the Company. The Company rejected the purported
shareholder
action on the grounds that, on its face, the purported action showed
an
insufficient number of votes had been obtained to approve the requested
action,
and on the further grounds that the consent of shareholders was solicited
and
obtained in violation of the proxy rules set forth in Section 14
of the
Securities Exchange Act of 1934, as amended (the “Act”). As a consequence of the
invalidity of the purported shareholder action, the Company also
rejected the
actions of the new purported board of directors terminating and replacing
the
officers of the Company.
On
December 14, 2006, the Company filed a lawsuit in the United States
District
Court, Central District of California, Western Division (Case No.:
CV06-07971)
against Mr. Moscaritolo for violations of the Act, declaratory
relief, breach of
fiduciary duty, intentional interference with contract, and conversion
(the
“Company Action”). Specifically, the Company alleged that Mr. Moscaritolo's
actions to replace the incumbent board of directors were invalid
and unlawful.
On February 8, 2007, a default was entered against Mr. Moscaritolo
and on
February 12, 2007, the Court entered an Order granting the Company’s Motion for
a Preliminary Injunction. Pursuant to the Order, the Court ruled
that: (1) the
attempted shareholder action initiated by Mr. Moscaritolo and his
purported
proxies was void as the proxies were solicited and obtained in
violation of
federal securities laws; (2) Mr. Moscaritolo and those acting in
his control or
direction were enjoined from (a) attempting to vote any of the
illegally
obtained proxies; (b) purporting to act as directors of officers
of the Company
or its subsidiaries; (c) further soliciting shareholder proxies
in violation of
federal securities laws; and (d) disclosing any confidential or
proprietary
information of the Company.
On
December 15, 2006, Mr. Moscaritolo and Mr. Hemingway, individually,
and on
behalf of the Shareholders of the Company, filed a lawsuit in
Nevada State
Court, County of Washoe (Case No.: CV0603002) against Mr. Latty
and Mr. York for
injunctive relief, declaratory relief, receivership, and accounting
relating to
the failed effort to remove them from the Board of Directors
of the Company and
seeking a court order approving their removal (the “Moscaritolo Action”). In
January 2007, Mr. Moscaritolo and Mr. Hemingway voluntarily dismissed
the
Moscaritolo Action.
On
January 10, 2007, Mr. Moscaritolo and Mr. Christensen filed a
lawsuit in the
First Judicial District Court of the State of Nevada in and for
Carson City
(Case No.: 07-00035A) against the Company, Dr. Latty, and Steven
Newsom, a
current director, for injunctive relief to hold an Annual Shareholders
Meeting
(the “Second Moscaritolo Action”). On February 23, 2007 the court in the Second
Moscaritolo Action issued an order that the Company give notice
and hold its
Annual Meeting on or before April 15, 2007.
On
January 29, 2007, Mr. Moscaritolo filed a Sarbanes-Oxley Whistleblower
complaint
(No. 9-3290-07-019) for discrimination with the Occupational
Safety and Health
Administration (“OSHA”) under Section 806 of the Corporate and Criminal Fraud
Accountability Act of 2002, Title VIII of the Sarbanes-Oxley
Act of 2002, 18
U.S.C. 1514A (“SOX”) (the “Whistleblower Action”). In the complaint Mr.
Moscaritolo alleges he was constructively demoted, retaliated
against,
intimidated with punitive threats, and ultimately terminated
after continuing a
third-party independent ethics investigation of alleged fraud,
theft and SEC
violations allegedly committed by Mr. Latty. Mr. Moscaritolo
is seeking relief
in the form of back pay owed immediately due upon termination,
back pay owed if
and when he is reinstated, and reinstatement.
Mr.
Moscaritolo’s termination from the Company may form the basis for additional
litigation by Mr. Moscaritolo against the Company or its
management.
Mr.
Christensen previously served as the Director of Company from June 2004 to
August 20, 2004, President of MEMS USA Applied Technology, a division of
the
Company, from September 8, 2003 to June 30, 2003 and President of Bott
Equipment, a division of the Company, from November 1, 2004 to June 23,
2006.
Mr.
Moscaritolo filed one late Form 3 on December 29, 2006, and four late Forms
4,
with each Form 4 reporting a single transaction, on March 28, 2007 pursuant
to
Section 16(a) of the Securities Exchange Act of 1934, as amended (“Section
16(a)”). Mr. Christensen filed one late Form 3 on March 28, 2007 pursuant to
Section 16(a).
Daniel
K.
Moscaritolo, Thomas Hemingway and Donald Hejmanowski have a verbal agreement
that Mr. Moscaritolo will be appointed Chief Technology Officer of the
Company
if the Shareholder Nominees are elected Directors. Mr. Hejmanowski is
a
shareholder of Convergence to whom Mr. Moscaritolo had expressed his
potential
intentions regarding Convergence. Although the parties discussed the
concept in
terms of an agreement, no implication is intended from that usage of
the word
agreement that there was any agreement whatsoever in the legal sense.
The
characterization of the matter as an agreement is purely intended to
convey the
express phraseology used at the time among three individuals involved.
The
agreement would be colloquially called a “gentlemen’s agreement.” The plan only
entailed Mr. Hejmanowski’s support for the general principle presented by Mr.
Moscaritolo and for a slate that Mr. Moscaritolo planned to assemble.
This is
disclosed out of an abundance of caution. Mr. Hejmanowski beneficially
owns less
than 5 percent of the outstanding Common Stock of the Company.
There
are
no other current plans for the Shareholder Nominees to appoint themselves
as
officers upon election to the board. If the Shareholder Nominees are
elected,
the Shareholder Nominees plan to consider and vote upon a proposal
to terminate
each and all of the current executive officers of the Company. The
existing
succession planning for some of these offices might be adequate and
sufficient.
However, there are numerous vacancies anticipated in the executive
officer
ranks. For purposes of transition, the Nominating Shareholder may feel
it is
necessary to serve in other offices on an interim basis or to ask other
directors to volunteer their services. In any event, the Nominating
Shareholder
plans to recommend to the board that it remove the executive officers
of the
Company then to methodically replace them with the best permanent candidates
available.
For
information regarding ownership of the Company's stock by the Shareholder
Nominees and the Nominating Shareholder, see Exhibit A. For information
regarding purchases and sales of the Company's securities during the past
two
years by the Shareholder Nominees and the Nominating Shareholder, see Exhibit
B.
The
Nominating Shareholder is seeking the authority to vote for the Shareholder
Nominees. Directors of the Company are elected by a plurality of the
votes cast
with a quorum present. At the Annual Meeting, the three persons who receive
the
greatest number of votes of the Shareholders represented in person or
by proxy
at the Annual Meeting will be elected Directors. Shareholders may not
vote their
shares cumulatively for the election of Directors. Abstentions are considered
in
determining the presence of a quorum, but will not affect the plurality
vote
required for the election of Directors. If the three Shareholder Nominees
are
elected to the Board, they will replace the incumbent Directors.
The
proxy
card being furnished to you by the Nominating Shareholder provides you with
an
opportunity to withhold authority with respect to any of the Shareholder
Nominees by marking the appropriate box.
The
Shareholder Nominees understand that, if elected as Directors of the Company,
each of them will have an obligation under Nevada law to discharge his duties
as
a Director in good faith, consistent with his fiduciary duties to the Company
and its Shareholders.
The
Nominating Shareholder does not expect that the Shareholder Nominees will
be
unable to stand for election, but, in the event that such persons are unable
to
serve or for good cause will not serve, the shares of Common Stock represented
by the enclosed proxy card will be voted for substitute nominees. In addition,
the Nominating Shareholder reserves the right to nominate substitute persons
if
the Company makes or announces any changes to the Company's bylaws or articles
of incorporation or takes or announces any other action that has, or if
consummated would have, the effect of disqualifying the Shareholder Nominees.
In
any such case, shares of Common Stock represented by the enclosed proxy card
will be voted for such substitute.
THE
NOMINATING SHAREHOLDER STRONGLY RECOMMENDS THAT YOU VOTE
"FOR"
THE
ELECTION OF THE SHAREHOLDER NOMINEES.
OTHER
PROPOSALS
The
Company has proposed that the shareholders ratify the selection of Kabani
&
Company, Inc. as the Company’s independent auditors for the year ending
September 30, 2007. The Nominating Shareholder is not soliciting proxies
to vote
on that proposal. The Nominating Shareholder is neither for nor against
the
ratification of the accountants (proposal 2). The enclosed proxy card
gives you
no opportunity to indicate your own preference. If you return the enclosed
proxy
card, you will not be voting at all on proposal 2. Your nonvote on that
matter
has no effect whatsoever on the outcome. If you want to vote for the
Shareholder
Nominees and also for ratifying (or voting against) the ratification
of
accountants, the Nominating Shareholder will, upon your request, assist
you
administratively to obtain a form proxy to vote on that matter.
The
Nominating Shareholder is not aware of any other proposals to be brought
before
the Annual Meeting. However, the Nominating Shareholder intends to bring
before
the Annual Meeting such business as may be appropriate or make other proposals
as may be appropriate to address any action of the Company's Board of Directors
not publicly disclosed prior to the date of this Proxy Statement. Should
other
proposals be brought before the Annual Meeting, the persons named as proxies
in
the enclosed proxy card will vote on such matters in their discretion. The
persons named as proxies may exercise discretionary authority only as to
matters
unknown to the Nominating Shareholder a reasonable time before this proxy
solicitation.
RECORD
DATE AND VOTING
At
the
close of business on the Record Date the Company had outstanding 20,367,593
shares of voting common stock. Each share outstanding as of the Record
Date is
entitled to one vote on each matter submitted to a vote of Shareholders.
Only
Shareholders of record at the close of business on the Record Date will
be
entitled to vote at the Annual Meeting. If your shares are registered
directly
in your name with the Company's transfer agent, you are considered with
respect
to those shares the Shareholder of record, and these proxy materials
are being
sent directly to you. As the Shareholder of record, you have the right
to submit
your voting proxy directly to the Company using the enclosed proxy card
or to
vote in person at the Annual Meeting.
If
your
shares are held in a stock brokerage account or by a bank or other nominee,
you
are considered the beneficial owner of shares held in "street name." These
proxy
materials are being forwarded to you by your broker who is considered, with
respect to those shares, the Shareholder of record. As the beneficial owner,
you
have the right to direct your broker to vote your shares, and your broker
or
nominee has enclosed a voting instruction card for you to use. If your shares
are held by a broker or nominee, please return your voting card as early
as
possible to ensure that your shares will be voted in accordance with your
instructions. You are also invited to attend the Annual Meeting; however,
since
you are not the Shareholder of record, you may not vote these shares in person
at the Annual Meeting unless you specifically request a document called a
"legal
proxy" from your broker and bring it to the Annual Meeting.
Under
Nevada law and the Company's bylaws, the presence of a quorum is required
to
transact business at the Annual Meeting. At the Annual Meeting, a quorum
will
require the presence, either in person or by proxy, of a majority of the
shares
entitled to vote.
Brokerage
firms have the authority to vote clients' unvoted shares on some "routine"
matters under applicable stock exchange rules. When a brokerage firm votes
its
clients' unvoted shares on routine matters, these shares are counted to
determine if a quorum exists to conduct business at the meeting. A brokerage
firm cannot vote clients' unvoted shares on non-routine matters, which results
in a broker non-vote. Since there is a contested election for Directors,
the
election should be treated as a non-routine matter. Thus, if you do not give
your broker specific instructions, your shares will not be considered to
be
present or votes cast and will have no effect on the election of Directors
at
the Annual Meeting.
Shares
of
Common Stock represented by a valid, unrevoked proxy card will be voted as
specified. You may vote for the Shareholder Nominees or withhold authority
to
vote for the Shareholder Nominees by marking the proper box on the proxy
card.
Shares represented by a properly executed proxy card where no specification
has
been made will be voted for the Shareholder Nominees and in the discretion
of
the persons named as proxies on all other matters as may properly come before
the Annual Meeting. The persons named as proxies in the enclosed proxy card
may
exercise discretionary authority only as to matters unknown to the Nominating
Shareholder a reasonable time before the Annual Meeting.
If
your
shares are held in the name of a custodian and you want to vote in person
at the
Annual Meeting, you may specially request a document called a "legal proxy"
from
the custodian and bring it to the Annual Meeting.
IF
YOU
NEED ASSISTANCE, PLEASE CONTACT THE NOMINATING SHAREHOLDER’S PROXY
SOLICITOR
You
are
being asked to elect the Shareholder Nominees named in this Proxy
Statement.
IF
YOU
WISH TO VOTE FOR THE ELECTION OF THE SHAREHOLDER NOMINEES TO THE COMPANY'S
BOARD, PLEASE SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED PROXY CARD IN THE
POSTAGE-PAID ENVELOPE PROVIDED.
REVOCATION
OF PROXIES
Shareholders
may revoke their proxies at any time prior to exercise by attending the Annual
Meeting and voting in person (although attendance at the Annual Meeting will
not
in and of itself constitute revocation of a proxy) or by delivering a written
notice of revocation. The delivery of a subsequently dated proxy which is
properly completed will constitute a revocation of any earlier proxy. The
revocation may be delivered to the Secretary of Convergence Ethanol, Inc.,
Richard W. York, Corporate Secretary, 5701 Lindero Canyon Road, Suite 2-100,
Westlake Village, California 91362. Although a revocation is effective if
delivered to the Company, the Nominating Shareholder requests that either
the
original or photostatic copies of all revocations be mailed to Thomas Hemingway
(the "Proxy Solicitor"), so that the Proxy Solicitor will be aware of all
revocations and can more accurately determine if and when proxies have been
received from the holders of record on the Record Date of a majority of the
outstanding shares of Common Stock. Additionally, the Proxy Solicitor may
use
this information to contact Shareholders who have revoked their proxies in
order
to solicit later dated proxies for the election of the Shareholder Nominees
and
approval of the other proposal described herein.
Any
shareholder who intends to present a proposal pursuant to Rule 14a-8
of
Regulation 14A of the Securities Exchange Act of 1934, as amended, at
the
Company’s 2008 Annual Meeting of Shareholders must ensure that the proposal is
received by the Company’s Chief Executive Officer at Convergence Ethanol, Inc.,
5701 Lindero Canyon Road, Suite 2-100, Westlake Village, California 91362
no
later than November 20, 2007 in order to be considered for inclusion
in the
Company’s proxy materials for the 2008 Annual Meeting.
ADDITIONAL
INFORMATION
The
principal executive offices of the Company are located at 5701 Lindero
Canyon
Road, Suite 2-100, Westlake Village, California 91362. Except as otherwise
noted
herein, the information concerning the Company has been taken from or
is based
upon documents and records on file with the SEC and other publicly available
information.
Additional
information concerning the Nominating Shareholder and Shareholder Nominees
is
also contained in Exhibits A, B and C to this Proxy Statement and in
the
Schedule 13D filed by Mr. Moscaritolo with the SEC on March 22, 2007,
available
at the SEC's website at www.sec.gov.
PROXY
SOLICITATION; EXPENSES
Proxies
may be solicited by the Nominating Shareholder by mail, advertisement,
telephone, facsimile, electronic and personal solicitation. Phone calls will
be
made to individual Shareholders by the Nominating Shareholder and his affiliates
and employees of the Proxy Solicitor. Certain of the employees of affiliates
of
the Nominating Shareholder may perform secretarial work in connection with
the
solicitation of proxies, for which no additional compensation will be paid.
Banks, brokerage houses and other custodians, nominees and fiduciaries will
be
requested to forward the Nominating Shareholder's solicitation material to
their
customers for whom they hold shares and the Nominating Shareholder will
reimburse them for their reasonable out-of-pocket expenses. The Nominating
Shareholder has retained the Proxy Solicitor to assist in the solicitation
of
proxies and for related services. The Nominating Shareholder will pay the
Proxy
Solicitor a fee of approximately $5,000 and have agreed to reimburse it for
its
reasonable out-of-pocket expenses. In addition, the Nominating Shareholder
has
agreed to indemnify the Proxy Solicitor against certain liabilities and
expenses, including liabilities and expenses under the federal securities
laws.
The Securities and Exchange Commission deems such an indemnification to be
against public policy. Approximately five (5) persons will be used by the
Proxy
Solicitor in its solicitation efforts.
The
entire expense of preparing, assembling, printing and mailing this Proxy
Statement and related materials and the cost of soliciting proxies will be
borne
by the Nominating Shareholder. The Nominating Shareholder does not intend
to
solicit proxies using Internet voting. Although no precise estimate can be
made
at the present time, the Nominating Shareholder currently estimates that
the
total expenditures relating to the Proxy Solicitation incurred by the Nominating
Shareholder will be approximately $25,000 of which $0 has been incurred to
date.
The Company has informed the Nominating Shareholder that Company estimates
that
the cost of mailing this Proxy Statement will be approximately $60,000. The
Nominating Shareholder intends to seek reimbursement from the Company for
those
expenses incurred by the Nominating Shareholder, if any Shareholder Nominees
are
elected, but does not intend to submit the question of such reimbursement
to a
vote of the Shareholders.
For
the
proxy solicited hereby to be voted, the enclosed proxy card must be signed,
dated and returned to the Nominating Shareholder, c/o Proxy Solicitor, in
the
enclosed envelope in time to be voted at the Annual Meeting. If you wish
to vote
for the Shareholder Nominees, you must submit the enclosed proxy card. Do
NOT
submit the Company's proxy card. If you have already returned the Company's
proxy card, you have the right to revoke it as to all matters covered thereby
and may do so by subsequently signing, dating and mailing the enclosed proxy
card. ONLY YOUR LATEST DATED PROXY WILL COUNT AT THE ANNUAL
MEETING.
Only
holders of record of the Common Stock on the Record Date will be entitled
to
vote at the Annual Meeting. If you are a Shareholder of record on the Record
Date, you will retain the voting rights in connection with the Annual Meeting
even if you sell such shares after the Record Date. Accordingly, it is important
that you vote the shares of Common Stock held by you on the Record Date,
or
grant a proxy to vote such shares on the proxy card, even if you sell such
shares after such date.
Proxies
solicited by this Proxy Statement may be exercised only at the Annual Meeting
and any adjournment or postponement of the Annual Meeting and will not be
used
for any other meeting.
CERTAIN
INFORMATION CONCERNING THE PARTICIPANTS
The
Nominating Shareholder and each of the Shareholder Nominees is a participant
in
this solicitation.
For
information regarding ownership of the Company's stock by the Nominating
Shareholder and Shareholder Nominees, see Exhibit A.
For
information regarding purchases and sales of the Company's securities during
the
past two years by the Nominating Shareholder and the Shareholder Nominees,
see
Exhibit B.
Except
as
set forth in this Proxy Statement, no Shareholder Nominee or the Nominating
Shareholder is involved in any material pending legal proceedings with respect
to the Company. Except as set forth in this Proxy Statement, there is no
other
arrangement or understanding between any Shareholder Nominee and any other
person pursuant to which he was or is to be selected as a Shareholder Nominee
or
Director.
The
Nominating Shareholder reserves the right to retain one or more financial
advisors and proxy solicitors, who may be considered participants in a
solicitation under Regulation 14A of the Securities Exchange Act of 1934.
The
Nominating Shareholder will pay the expenses of any such
solicitation.
Except
as
set forth in this Proxy Statement (including Exhibits A, B and C), (i) during
the past 10 years, no participant in this solicitation has been convicted
in a
criminal proceeding (excluding traffic violations or similar misdemeanors);
(ii)
no participant in this solicitation directly or indirectly beneficially owns
any
of the Company's securities; (iii) no participant in this solicitation owns
any
of the Company's securities which are owned of record but not beneficially;
(iv)
no participant in this solicitation has purchased or sold any of the Company's
securities during the past two years; (v) no part of the purchase price or
market value of the Company's securities owned by any participant in this
solicitation is represented by funds borrowed or otherwise obtained for the
purpose of acquiring or holding such securities; (vi) no participant in this
solicitation is, or within the past year was, a party to any contract,
arrangements or understandings with any person with respect to any of the
Company's securities, including, but not limited to, joint ventures, loan
or
option arrangements, puts or calls, guarantees against loss or guarantees
of
profit, division of losses or profits, or the giving or withholding of proxies;
(vii) no associate of any participant in this solicitation owns beneficially,
directly or indirectly, any of the Company's securities; (viii) no participant
in this solicitation owns beneficially, directly or indirectly, any securities
of any parent or subsidiary of the Company; (ix) no participant in this
solicitation or any of his/its associates was a party to any transaction,
or
series of similar transactions, since the beginning of the Company's last
fiscal
year, or is a party to any currently proposed transaction, or series of similar
transactions, to which the Company or any of its subsidiaries was or is to
be a
party, in which the amount involved exceeds $120,000; (x) no participant
in this
solicitation has, nor do any of their associates have, any arrangement or
understanding with any person with respect to any future employment by the
Company or its affiliates; (xi) no participant in this solicitation has,
nor do
any of their associates have, any arrangement or understanding with any person
with respect to any future transactions to which the Company or any of its
affiliates will or may be a party; (xii) no person, including the participants
in this solicitation, who is a party to an arrangement or understanding pursuant
to which the Shareholder Nominees are proposed to be elected has a substantial
interest, direct or indirect, by security holdings or otherwise in any matter
to
be acted on at the Annual Meeting; (xiii) no participant in this solicitation
is
aware of any arrangement (including any pledge, voting trust, or contract
for
sale) which may at a subsequent date result in a change in control of the
Company; (xvi) no participant in this solicitation is aware of any arrangement,
or has reason to believe that any arrangement exists, under which 5% or more
of
any class of the Company’s voting securities is held or is to be held subject to
any voting agreement, voting trust or other similar agreement; (xv) no
participant in this solicitation is aware of any person or group that holds
beneficial ownership of more than 5% of the outstanding shares of the Company
or
has the right to acquire beneficial ownership of more than 5% of such
outstanding voting securities, except for persons or groups who may be
identified through a review of publicly available information regarding the
beneficial ownership of the Company.
IMPORTANT
If
your
shares are held in "street name," only your bank or broker can vote your
shares
and only upon receipt of your specific instructions. Please return the proxy
provided to you or contact the person responsible for your account and instruct
them to vote for the Shareholder Nominees on the proxy card.
If
you
have any questions, or need further assistance, please contact the Nominating
Shareholder’s proxy solicitor: Thomas Hemingway, at 300 S. Harbor, Suite
500, Anaheim, CA 92805, Phone: 714-765-0012.
THE
NOMINATING SHAREHOLDER URGES YOU TO SIGN, DATE AND RETURN THE PROXY CARD
IN
FAVOR OF THE ELECTION OF THE SHAREHOLDER NOMINEES.
Dated:
March 29, 2007
Sincerely,
THE
NOMINATING SHAREHOLDER
/s/
Daniel K. Moscaritolo
Daniel
K.
Moscaritolo
EXHIBIT
A
INFORMATION
CONCERNING THE NOMINATING SHAREHOLDER
AND
SHAREHOLDER NOMINEES
The
following sets forth the name and the number of shares of Common Stock
of the
Company beneficially owned as of March 29, 2007, by the Nominating Shareholder
and each of the Shareholder Nominees.
|
Name
of Beneficial Owner
|
|
Number of Shares
Beneficially
Owned
|
|
Percent
of Class (1)
|
|
|
|
|
|
|
|
Daniel
K. Moscaritolo
|
|
2,462,887
|
|
12.08
|
|
|
|
|
|
|
|
Charles
L. Christensen
|
|
345,917
|
|
1.70
|
|
|
|
|
|
|
|
Thomas
Hemingway
|
|
--
|
|
*
|
*Less
than 1%.
(1)
Calculated based on 20,367,593 shares of Common Stock of the Company
outstanding
as of the Record Date.
EXHIBIT
B
PURCHASES
AND SALES OVER PAST TWO YEARS BY THE NOMITATING SHAREHOLDER AND SHAREHOLDER
NOMINEES
The
following table sets forth for the Nominating Shareholder and each of the
Shareholder Nominees their purchases and sales (indicated in parenthesis)
of
Common Stock (including put options and call options) within the previous
two
years, the dates of the transactions and the amounts purchased or
sold:
|
Account
Name
|
|
Trade
Date
|
|
Quantity
|
|
Daniel
K. Moscaritolo
|
|
04-10-2005
|
|
32,782
|
|
Daniel
K. Moscaritolo
|
|
04-15-2005
|
|
(17,500)
|
|
Daniel
K. Moscaritolo
|
|
05-10-2005
|
|
(15,282)
|
|
Daniel
K. Moscaritolo
|
|
09-10-2005
|
|
(105,800)
|
EXHIBIT
C
LETTER
of RESIGNATION
Date:
Tuesday November 14, 2006
To:
Dr.
James A. Latty, Chairman of the Board, CEO and President, MEMS USA Inc. Steven
S. Newsom, BOD, MEMS USA Inc.
Gentlemen:
I
write
to inform you of my decision to resign from the Board of Directors of MEMS
USA.
I understand that you must report my departure within 5 days and I request
that
this letter, with its attachment, be included as an exhibit to the Form 8-K
you
file.
As
you
know, the law firm of Moscarino & Connolly performed an investigation
arising from the allegation of Chuck Christensen that Dr. James A. Latty
had
committed ethics violations. On October 11, 2006, the law firm issued its
report, and I attach a copy of the report to this letter. The report
concluded that there is reasonable cause to believe that Dr. Latty (1) had
a
conflict of interest in connection with the Accelon blending skid project;
(2)
willfully failed to disclose his conflict of interest; (3) actively influenced
company policy with respect to Mems’ financial dealings with Accelon without
disclosing the conflicts of interest. Further, the report concluded that
the nature of the conflicts likely interfered with Dr. Latty’s ability to fairly
and impartially make business decisions on behalf of the company, and that
had
Dr. Latty disclosed his conflicts of interest, the company might have arrived
at
different conclusions about its business relationship with Accelon, including
different terms and conditions in the contract and different decisions
about the company’s response to cost overruns.
Upon
receipt of the report, I told the Board that the report’s conclusions demanded
further action by the Board. The response I received was from Board member
Steve Newsom, who told me after 3 days of private closed door meetings with
Dr.
Latty that, “this was old information…that they just wanted to put this all
behind them.”
Approximately
two weeks ago, I again told the Board that Dr. Latty apparently breached
his
fiduciary duties and that it was serious enough that the information should
be
provided to investors in an 8K. The Board did not respond. I then told the
Board
that we could not ignore the findings as they raised matters that needed
to be
disclosed and corrected, and, at the least, there should be a thorough
evaluation of the steps necessary to correct the problems identified. I said
that if this was not done there could be liability on the part of the company
or
the Board. They told me nothing was to be disclosed.
On
November 1, 2006, Mr. Newsom proposed a Board resolution under which Dr.
Latty would agree to personally obtain ownership of the blending skid from
Accelon and then sell the blending skid and all intellectual property related
to
the design or manufacture or sale or lease of the skid to the company for
the
amount that the company was paid to build the blending skid and for a settlement
agreement that would serve as a general release of all the company’s claims
against him from the violations identified in the investigative report. I
disagreed vehemently and voted “NO”, but Mr. Newsom voted “YES” and
allowed Dr Latty to vote “YES”,
which
was in my mind clearly a conflict of interest. The resolution passed because
Dr.
Latty was allowed to vote.
Subsequently,
I sent Dr. Latty and Mr. Newsom a very strongly worded response to what I
perceived as a clear breach of their fiduciary duty to our shareholders.
I also
made a proposal that I thought would resolve the conflicts in the best interests
of the company. The proposal was rejected out of hand. I understand that
since
that time a Board meeting was called for on Sunday
November
12, 2006, without proper notice, without an agenda, and at which the Board
presumably took some type of action adverse to me. I understand this because,
since then, I have been locked out of the office and told that an armed security
guard was present to prevent my entry into the office. I have been blocked
in
every sense of the word from performing my duties as chief ethics officer
and
ombudsman, not to mention my duties as chief technology officer and chief
operating officer. However, I have not been notified that I have been
terminated nor have I resigned my officer or ombudsman positions. I intend
to fulfill those duties unless I am terminated.
However,
I can no longer participate as a member of the Board, as I believe it is
now
operating in complete disregard of its duties to shareholders. I will not
participate in any effort that could block shareholders’ rights to view the
conduct of their company. I also have information I believe could show that
Dr.
Latty has participated in fabricating documents for purposes of defrauding
potential company investors, as well as information that I believe could
show
that Dr. Latty purposely delayed renewing his MEMS employment contract
which
expired on July 1, 2006 so
that
he could manipulate company stock prices to their lowest point to obtain
the
lowest, most favorable strike price on his new stock options package. Based
upon
the way my complaints concerning this conduct have been handled as well as
Mr.
Newsom’s turning a blind eye to the matters raised by the investigative report,
I believe it would be futile to move the Board to take action on this
information. I thus really have no choice but to resign.
I
am
submitting a copy of this letter to company counsel Richardson Patel, knowing
that I had previously asked that the information concerning Dr. Latty’s conduct
be disclosed and corrected, or at least that the company conduct a thorough
vetting of the proper response to the report. To make matters worse, on or
about
September 21, 2006 counsel from Richardson Patel apparently had assisted
Dr.
Latty in an attempt to “buy me out” of the company. Specifically, Mark Abdou of
Richardson Patel, apparently on behalf of Dr. Latty, assisted Chuck Rosenblum
of
Rosenblum Partners, LLC, in preparing a proposed term sheet whereby I would
sell
1.6 million of my shares to Rosenblum, requiring that I resign from all Officer
and Board positions that I held. I see this apparent representation
of Dr. Latty as a conflict of interest with the company and I question the
law
firm’s willingness to fulfill its duties to shareholders as company
counsel.
Sincerely,
/s/ D.
K. Moscaritolo
Daniel
K.
Moscaritolo
Cc:
Mark Abdou, Richardson Patel (By US Post Office only)
Enclosure
[FRONT
OF PROXY CARD]
CONVERGENCE
ETHANOL, INC.
NOMINATING
SHAREHOLDER’S PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS
AT
7:30
A.M., MONDAY, APRIL 16, 2007
The
undersigned shareholder of Convergence Ethanol, Inc. (the “COMPANY”) hereby
appoints Daniel K. Moscaritolo and Charles L. Christensen, or either of them,
as
proxies, each with full powers of substitution, to vote the shares of the
undersigned at the above-stated Annual Meeting and at any adjournment(s)
or
postponement(s) thereof:
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1.
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TO
APPROVE THE ELECTION OF ANY OR ALL OF THE FOLLOWING NOMINEES FOR
DIRECTOR
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Daniel
K. Moscaritolo
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o FOR
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o WITHOLD
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Charles
L. Christensen
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o FOR
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o WITHOLD
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Thomas
Hemingway
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o FOR
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o WITHOLD
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THE
PROXIES SHALL BE AUTHORIZED TO ACT IN THEIR DISCRETION ON ANY OTHER
BUSINESS THAT MAY PROPERLY COME BEFORE THE MEETING.
THIS
PROXY HEREBY REVOKES ANY PROXY OR PROXIES HERETOFORE GIVEN BY THE
UNDERSIGNED:
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(Please
sign on the reverse side)
[BACK
OF PROXY CARD]
(Continued
from reverse side)
THIS
PROXY IS SOLICITED IN OPPOSITION TO THE BOARD OF DIRECTORS OF CONVERGENCE
ETHANOL, INC. BY THE NOMINATING SHAREHOLDER AND FOR THE SHAREHOLDER NOMINEES
LISTED BELOW. THIS PROXY IS NOT BEING SOLICITED BY THE BOARD OF DIRECTORS
OF
CONVERGENCE ETHANOL, INC.
Receipt
herewith of the Nominating Shareholder’s Proxy Statement, dated March 29, 2007
is hereby acknowledged.
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Dated:
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,
2007
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(Signature
of Shareholder)
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(Signature
if held jointly)
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IMPORTANT:
Please date this proxy and sign exactly as your name or names appear(s)
on
your stock certificate. All joint owners whose names appear should
sign.
Executors, administrators, trustees, guardians, attorneys and others
holding stock in a representative or fiduciary capacity, should
sign and
also give their title. If a corporation, please sign in corporate
name by
the president or other authorized officer. If a partnership, please
sign
in partnership name by an authorized
person.
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PLEASE
SIGN, DATE AND MAIL TODAY.