SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
Check the appropriate box:
[_] Preliminary Information Statement
[_] Confidential, for Use of the Commission Only
(as permitted by Rule 14c-5(d)(2))
[X] Definitive Information Statement
DEUCALION RESEARCH, INC.
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(name of Registrant as Specified in Its Charter)
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DEUCALION RESEARCH, INC.
6601 East Grant Road, Suite 101
Tucson, Arizona 85715
(520) 886-5354
_________________________________________________________________
INFORMATION STATEMENT
Special Meeting of Shareholders
To Be Held on June 1, 2000
_________________________________________________________________
May 12, 2000
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND A PROXY
TO ALL SHAREHOLDERS OF DEUCALION RESEARCH, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "Meeting")
of Deucalion Research, Inc., a North Dakota corporation (the "Company") will be
held at the offices of Friedlob Sanderson Paulson & Tourtillott, LLC, 1400
Glenarm Place, Suite 300, Denver, CO 80202, on June 1, 2000, at 10:00 a.m.
Mountain Daylight Time. Management of the Company will conduct and participate
in the Meeting by conference telephone. An Information Statement for the
Meeting is enclosed. The purpose of the meeting is to consider and take action
on the proposals summarized below:
1. To change the domicile of the Company from the State of North Dakota to the
State of Delaware by merging the Company with and into its recently formed
and wholly owned Delaware subsidiary, Digital Fuel, Inc.; to effect a one-
for-6,800 reverse stock split with all fractional shares being rounded to
the nearest whole share, reducing the authorized capital from 1,500,000,000
shares to 30,000,000, increasing the par value from $.0001 to $.01 per
share and authorizing the Board of Directors to issue blank check preferred
stock; and
2. Such other business as may properly come before the meeting, or any
adjournment or adjournments thereof.
The close of business on April 12, 2000, has been fixed as the record date for
determining shareholders entitled to notice of and to vote at the Meeting and
any adjournments thereof. For a period of at least ten days prior to the
Meeting, a complete list of shareholders entitled to vote at the Meeting will be
open to the examination of any shareholder during ordinary business hours at the
offices of Friedlob Sanderson Paulson & Tourtillott, LLC, 1400 Glenarm Place,
Suite 300, Denver, CO 80202.
The discussion of the proposals set forth above is intended only as a summary.
Information concerning the matters to be acted upon at the Meeting is set forth
in the accompanying Information Statement.
The shareholders of approximately 66.9% of the shares entitled to vote at the
special meeting have agreed to vote in favor of the proposals summarized above.
Therefore, we are not asking you for a proxy and you are requested not to send
us a proxy.
By Order of the Board of Directors:
Michael R. Farley, Chief Executive Officer
___________________________________
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY
___________________________________
DEUCALION RESEARCH, INC.
6601 East Grant Road, Suite 101
Tucson, Arizona 85715
(520) 886-5354
INFORMATION STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
June 1, 2000
This Information Statement of Deucalion Research, Inc., a North Dakota
corporation (the "Company"), is being furnished to the shareholders of the
Company in connection with a Special Meeting of the Shareholders of the Company
to be held at the offices of Friedlob Sanderson Paulson & Tourtillott, LLC, 1400
Glenarm Place, Suite 300, Denver, CO 80202, on June 1, 2000, at 10:00 a.m.
Mountain Daylight Time (the "Meeting"). Management of the Company will conduct
and participate in the Meeting by conference telephone.
At the Meeting, the Company's shareholders will consider and take action on
the following Proposals:
1. To change the domicile of the Company from the State of North Dakota to the
State of Delaware by merging the Company with and into its recently formed
and wholly owned Delaware subsidiary, Digital Fuel, Inc.; to effect a one-
for-6,800 reverse stock split, with all fractional shares being rounded up
to the nearest whole share; reducing the authorized capital from
1,500,000,000 shares to 30,000,000, increasing the par value from $.0001 to
$.01 per share and authorizing the Board of Directors to issue blank check
preferred stock; and
2. Such other business as may properly come before the meeting, or any
adjournment or adjournments thereof.
The Company currently has no business operations other than seeking the
acquisition of assets, property or business that may benefit the Company and its
shareholders.
The North Dakota statutes require the approval of shareholders who hold at
least a majority of the outstanding shares entitled to vote to approve a merger,
change the domicile of the Company and to effect a reverse stock split.
Michael R. Farley, a director and the chief executive officer of the Company,
and Forrest L. Metz, a director and the president of the Company, both of whom
are deemed to be "affiliates" of the Company, own or have voting power over
approximately 66.9% of the issued and outstanding voting securities of the
Company as of the Record Date, have consented to vote for and adopt the
resolutions of the Board of Directors to change the Company's domicile to the
State of Delaware and to effectuate a reverse split on the Company's common
stock. No further votes are required, and none will be solicited. See the
caption "Voting Securities and Principal Holders Thereof," herein.
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY
The date of this Information Statement is May 12, 2000.
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VOTING SECURITIES AND RECORD DATE
The Company's common stock is the only class of voting securities
outstanding. All shareholders at the close of business on April 12, 2000 (the
"Record Date") are entitled to vote on the Proposals being presented to the
shareholders.
On the Record Date, there were 1,499,610,127 shares of Common Stock
outstanding. In accordance with the Company's Articles of Incorporation, a
majority of the shares of the Common Stock issued and outstanding at the Record
Date, represented in person or by proxy, will constitute a quorum at this
special shareholders' meeting. The vote of a majority of all outstanding shares
is necessary to approve each of the Proposals. The Board of Directors of the
Company, Messrs. Farley and Metz, have enough votes to approve the Proposals
outlined herein and have indicated that they will approve the Proposals at the
Special Meeting. The following table sets forth information as of April 3, 2000
with respect to the ownership of the common stock for all persons who own or
have voting control over more than five percent of the common stock. The
following shareholders have sole voting and investment power with respect to the
shares, unless it has been indicated otherwise.
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Name Number of Shares Percent of
Owned Beneficially Class
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Michael R. Farley 499,000,000 33.4%
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Forrest L. Metz/1/ 499,000,000 33.4%
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Officers and Directors as a 998,000,000 66.9%
Group/2/
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_____________________
(1) Includes shares held in the Metz Trust, of which Mr. Metz is the trustee,
for the benefit of D. Kim Metz, Forrest L. Metz, Jr. and Jenifer K. Metz.
(2) After the special shareholders' meeting and the reincorporation of the
Company through the merger with and into Digital Fuel, Mr. Farley and The
Metz Trust will purchase additional shares of common stock for $10,000 and
will own 95% of Digital Fuel in accordance with that certain Stock Purchase
Agreement dated April 20, 1999, between the Company and Michael R. Farley
and Forrest L. Metz. That agreement is attached to and the terms of that
agreement are summarized in the Schedule 14F-1 Information Statement filed
with the Securities and Exchange Commission and incorporated herein by
reference.
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CHANGE IN CONTROL
On August 31, 1999, pursuant to the terms of a Stock Purchase Agreement
dated April 20, 1999, between the Company and Michael R. Farley and Forrest L.
Metz (the "Agreement"), Mr. Farley and The Metz Trust, Forrest L. Metz acting as
sole Trustee, acquired all the authorized but unissued common stock of the
Company for $100,000. Pursuant to the terms of the Agreement, the former
directors of the Company resigned on August 31, 1999, after appointing Messrs.
Farley and Metz to the board of directors. As contemplated by the Agreement,
after the Special Meeting of the shareholders of the Company described in this
Information Statement, Mr. Farley and the Metz Trust will purchase additional
shares of common stock of the Company for $10,000 and will own 95% of the common
stock of the Company. For a more complete description of the change in control
and the terms of the Agreement see the Schedule 14F-1 Information Statement
filed July 6, 1999, identified in the caption "DOCUMENTS INCORPORATED BY
REFERENCE".
MERGER
The Company intends to execute an Agreement and Plan of Merger (the "Plan")
whereby the Company will merge with and into Digital Fuel, Inc., a Delaware
corporation ("Digital Fuel"), on a 6,800 shares-for-1 share basis, with Digital
Fuel being the surviving corporation. In effect, each shareholder will receive
one share of Digital Fuel for every 6,800 shares of the Company's common stock
currently owned.
Purpose and Principal Reasons for the Reverse Stock Split.
The principal reasons to effect the reverse stock split through the merger
of the Company with and into Digital Fuel are to comply with the terms of the
Stock Purchase Agreement with Messrs. Farley and Metz. In order to give effect
to the terms of that Agreement, a reverse split is necessary to free up
authorized shares and issue the full amount of shares purchased by Mr. Farley
and the Metz Trust pursuant to the terms of that Agreement.
In addition, the Company has had no business operations since 1992 and the
Company's shares are essentially valueless. Messrs. Farley and Metz plan to
pursue business opportunities in the communications, software, and Internet
businesses which will add value to the Company. For additional information about
the investments and plans of the Company, see the Annual Report on Form 10-KSB
for December 31, 1999, identified in the caption "DOCUMENTS INCORPORATED BY
REFERENCE." In addition, the management of the Company believes that reducing
the number of outstanding and authorized shares of capital stock of the Company
will encourage a higher trading price for the Company's stock in the future.
Management of the Company believes that, in general, low trading prices have an
adverse impact on the efficient level of the trading market for securities. In
particular, brokerage firms often charge higher commissions for transaction
involving low-priced stocks than they would for the same dollar amount of
securities with a higher per share price. Some brokerage firms will not
recommend purchases of low-priced stocks to their clients or make a market in
such stocks, which tendencies adversely affect the liquidity for shareholders.
In addition, a low priced stock adversely affects a corporation's ability to
obtain equity financing.
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Purpose and Principal Reasons for the Reincorporation of the Company in
Delaware.
Management of the Company believes it is essential to be able to draw upon
well-established principles of corporate governance in making legal and business
decisions. The prominence and predictability of Delaware corporate law provide a
reliable foundation on which the Company's governance decisions can be based,
and the Company believes that shareholders and the Company will benefit from the
responsiveness of Delaware corporate law and Delaware courts.
For many years, Delaware has followed a policy of encouraging incorporation
in that state and has been a leader in adopting, construing and implementing
comprehensive, flexible corporate laws responsive to the legal and business
needs of corporations organized under its laws. Many corporations have chosen
Delaware initially as a state of incorporation or have subsequently changed
corporate domicile to Delaware in a manner similar to the plan described in this
Information Statement. Because of Delaware's prominence as the state of
incorporation for many major corporations, both the legislature and courts in
Delaware have demonstrated an ability and a willingness to act quickly and
effectively to meet changing business needs. The Delaware courts have developed
considerable expertise in dealing with corporate issues and a substantial body
of case law has developed construing Delaware law and establishing public
policies with respect to corporate legal affairs. There is substantial judicial
precedent in Delaware regarding the legal principles applicable to measures that
may be taken by a corporation and regarding the conduct of the board of
directors under the business judgment rule.
Both North Dakota and Delaware law permit a corporation to include a
provision in its certificate of incorporation which reduces or limits the
monetary liability of directors for breaches of fiduciary duty in certain
circumstances. The increasing frequency of claims and litigation directed
against directors and officers has greatly expanded the risks facing directors
and officers of corporations in exercising their respective duties. The amount
of time and money required to respond to such claims and to defend such
litigation can be substantial. The Company desires to reduce these risks to its
directors and officers and to limit situations in which monetary damages can be
recovered against directors so that the Company may continue to attract and
retain qualified directors who otherwise might be unwilling to serve because of
the risks involved. The Company believes that, in general, Delaware law provides
greater protection to directors than North Dakota law and that Delaware case law
regarding a corporation's ability to limit director liability is more developed
and provides more guidance than North Dakota law.
Merger and Surviving Corporation.
The Company will merge with and into Digital Fuel; Digital Fuel will be the
surviving corporation; and the separate existence of the Company shall cease.
Until amended, modified or
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otherwise altered, the Certificate of Incorporation of Digital Fuel will be the
Certificate of Incorporation of the surviving corporation; and the Bylaws of
Digital Fuel shall become the Bylaws of the surviving corporation.
Share Conversion.
Each share of common stock of the Company shall, upon the effective date of
the merger, be converted into 1/6,800 share of common stock of Digital Fuel and
the authorized shares the corporation can issue will be reduced from
1,500,000,000 shares to 30,000,000 shares. The par value per share will be
increased from $.0001 par value of Deucalion Research, Inc. to $.01 par value of
Digital Fuel, with appropriate adjustments in the stated capital accounts and
capital surplus accounts, with all fractional shares being rounded up to the
nearest whole share provided; however, that no shareholder, computed on a per
stock certificate of record basis on the effective date hereof, shall be reduced
to less than one share as a result of the reverse split (the "Digital Fuel
Shares".)
Survivor's Succession to Corporate Rights.
The surviving corporation shall thereupon and thereafter possess all the
rights, privileges, powers and franchises of both a public and private nature,
and subject to all the restrictions, disabilities and duties of the Company, and
all property, real, personal, and mixed, and all debts due to the Company on
whatever account, as well for stock subscriptions as all other things in action
or belonging to the Company shall be vested in the surviving corporation; and
all property, rights, privileges, powers and franchises, and all and every other
interest shall thereafter effectively be the property of the surviving
corporation as they were of the Company, and the title to any real estate vested
by deed or otherwise in the Company shall not revert or be in any way impaired
by reason of the merger; but all rights of creditors and all liens upon any
property of the Company shall be preserved unimpaired, and all debts,
liabilities and duties of the Company shall thenceforth attach to the surviving
corporation and may be enforced against it to the same extent as if said debts,
liabilities and duties had been incurred or contracted by it. Specifically, but
not by way of limitation, the surviving corporation shall be responsible and
liable to dissenting shareholders who are accorded and who preserve rights of
appraisal as required by the North Dakota Business Corporation Act (the
"NDBCA"); and any action or proceeding whether civil, criminal or
administrative, pending by or against the Company shall be prosecuted as if the
Plan had not taken place, or the surviving corporation may be substituted in
such action or proceeding.
Survivor's Succession to Corporate Acts, Plans, Contracts and Similar
Rights.
All corporate acts, plans, policies, contracts, approvals and
authorizations of the Company, its shareholders, its Board of Directors,
committees, elected or appointed by its Board of Directors, and its officers and
agents, which were valid and effective immediately prior to the effective time
of the merger, shall be taken for all purposes as the acts, plans, policies,
contracts, approvals and
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authorizations of the surviving corporation and shall be as effective and
binding thereon as the same were with the surviving corporation and continue to
be entitled to the same rights and benefits which they enjoyed as employees of
the Company.
Survivor's Rights to Assets, Liabilities, Reserves, etc.
The assets, liabilities, reserves and accounts of the Company shall be
recorded on the books of the surviving corporation at the amounts at which they,
respectively, shall then be carried on the books of Digital Fuel, subject to
such adjustments or eliminations of intercompany items as may be appropriate in
giving effect to the merger.
Directors and Officers.
-----------------------
The directors and officers of the Company shall become the directors and
officers of Digital Fuel.
Principal Office.
The principal office of the Company, which is the same as the principal
office of the surviving corporation, shall remain the principal office of the
surviving corporation.
Adoption.
The merger must be approved by persons owning a majority of the outstanding
voting securities of the Company. Messrs. Farley and Metz own or have voting
power sufficient to approve the Merger and have announced their intention to
approve the Merger, effect the reverse stock split and reincorporate in
Delaware.
Appraisal Rights and Notification.
Shareholders of the Company shall be accorded all rights, privileges and be
subject to all of the obligations contained within the NDBCA regarding rights of
appraisal, and the surviving corporation shall be obligated to notify the
Company's shareholders as provided therein.
Effective Date.
The effective date of the merger shall be the date when the Certificate of
Merger is filed and accepted by the Secretary of State of Delaware and at such
time as all applicable provisions of Delaware law have been met.
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Delivery of Shares.
On the Closing, the Digital Fuel shares shall be exchanged for the
Company's shares of common stock, on a one for 6,800 share basis while reducing
the current authorized capital from 1,5000,000 to 30,000,000 and increasing the
par value per share from $.0001 to $.01, with appropriate adjustments in the
stated capital accounts and capital surplus accounts, with all fractional shares
being rounded up to the nearest whole share; provided, however, that no
shareholder, computed on a per stock certificate of record basis on the
effective date hereof, shall be reduced to less than one share as a result of
the reverse split.
Description of Securities of Digital Fuel.
Digital Fuel is authorized to issue 30,000,000 shares of capital stock,
consisting of 20,000,000 shares of common stock having a par value of $.01 per
share, and 10,000,000 of blank check preferred stock. For a description of blank
check preferred stock see the heading Blank Check Preferred Stock below. Digital
Fuel's Certificate of Incorporation provides that each outstanding share of
common stock is entitled to one vote on each matter submitted at a meeting of
stockholders, and that each share will share equally in the distribution of
profits of the Company. The common stock carries no preemptive rights or
cumulative voting rights. For a complete description of the securities of
Digital Fuel see the Certificate of Incorporation of Digital Fuel included with
this Information Statement as Exhibit A.
Neither the Company nor Digital Fuel has any dividends in arrears or has
defaulted in principal or interest in respect of any outstanding securities.
Blank Check Preferred Stock
The Company currently has no authorized stock other than common stock. Upon
reincorporation into Digital Fuel, the Board will, without further action by the
shareholders, unless otherwise required by law, be authorized to issue up to
10,000,000 shares of Preferred Stock at such times, for such purposes and for
such consideration as it may determine. The foregoing is a summary of the terms
and conditions relating to the ability of the Board of Directors of Digital Fuel
to issue Preferred Stock. See the attached Exhibit A, the Certificate of
Incorporation of Digital Fuel, for a complete description of the terms and
conditions relating to the ability of the Board of Directors of Digital Fuel to
issue Preferred Stock.
The issuance of Preferred Stock could be used to create voting impediments
and to make it more difficult for persons seeking to effect a merger or
otherwise gain control of the Company. Neither the Board of Directors nor
management of the Company or Digital Fuel is considering the use of Preferred
Stock for such purposes. The authorization and issuance of a series of Preferred
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Stock could have certain effects on the holders of Common Stock. Such effects
might include (a) restrictions on dividends on Common Stock if dividends on
Preferred Stock are in arrears, (b) possible dilution of the voting power of the
Common Stock to the extent that the Preferred Stock has voting rights, and (c)
holders of the Common Stock not being entitled to share in the Company's assets
upon liquidation until satisfaction of any liquidation preference granted to the
Preferred Stock. The ability to issue Preferred Stock gives the Company greater
flexibility for future financing needs, acquisitions, and other corporate
purposes.
Regulatory Requirements.
With the exception of filings to be made with the Secretary of State of the
State of Delaware and the Secretary of State of the State of North Dakota, there
are no federal or state regulatory requirements to be complied with or approvals
that must be obtained in connection with the proposed change of domicile.
Reports, Opinions or Appraisals.
No report, opinion or appraisal has been sought in connection with the
proposed change of domicile.
FEDERAL INCOME TAX CONSEQUENCES OF THE REINCORPORATION
The reincorporation provided for in the Merger Agreement is intended to be
a tax-free reorganization under the Internal Revenue Code of 1986, as amended.
Assuming the reincorporation qualifies as a reorganization, no gain or loss will
be recognized to the holders of capital stock of the Company as a result of
consummation of the reincorporation, and no gain or loss will be recognized by
the Company or Digital Fuel. Each former holder of capital stock of the Company
will have the same basis in the capital stock of Digital Fuel received by such
holder pursuant to the reincorporation as such holder has in the capital stock
of the Company held by such holder at the time of consummation of the
reincorporation. Each shareholder's holding period with respect to Digital
Fuel's capital stock will include the period during which such holder held the
corresponding Company capital stock, provided the latter was held by such holder
as a capital asset at the time of consummation of the reincorporation. The
Company has not obtained a ruling from the Internal Revenue Service or an
opinion of legal or tax counsel with respect to the consequences of the
reincorporation.
A successful IRS challenge to the reorganization status of the proposed
reincorporation (in consequence or a failure to satisfy the "continuity of
interest" requirement or otherwise) would result in a shareholder recognizing
gain or loss with respect to each share of the Company's Common Stock exchanged
in the proposed reincorporation equal to the difference between the
shareholder's basis in such share and the fair market value, as of the time of
exchange therefor. In such event, a
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shareholder's aggregate basis in the shares of the Common Stock received in the
exchange would equal their fair market value on such date, and the shareholder's
holding period for such Common Stock would commence anew.
THE FOREGOING IS ONLY A SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISERS REGARDING THE SPECIFIC TAX
CONSEQUENCES TO THEM OF THE PROPOSED REINCORPORATION, INCLUDING THE
APPLICABILITY OF THE LAWS OF ANY STATE OR OTHER JURISDICTION.
INDEPENDENT PUBLIC ACCOUNTANTS
The Company's financial statements for the fiscal year ended December 31,
1999 were audited by Gelfond Hochstadt Pangburn, P.C. ("Gelfond").
Representatives of Gelfond are not expected to be present at the Meeting.
PAST, PRESENT OR PROPOSED MATERIAL CONTRACTS
Except for the Plan, the material terms of which are set forth under the
caption "Merger" of this Information Statement and the Stock Purchase Agreement
described in the Schedule 14F-1 filed with the Securities and Exchange
Commission and incorporated herein by reference, and a private placement of
convertible notes of the Company used to raise capital to pay the purchase price
of shares of common stock of SiteScape, Inc., there are no past, present or
proposed material contracts, arrangements, understandings, relationships,
negotiations or transactions involving the Company, Digital Fuel or any
affiliate of either entity.
SIMILARITIES AND DIFFERENCES BETWEEN THE CORPORATE LAWS OF
NORTH DAKOTA AND DELAWARE
The corporation laws of North Dakota and Delaware differ in some respects.
It is impracticable to summarize all of the differences in this Information
Statement, but certain differences between the corporation laws of North Dakota
and Delaware that could affect the rights of shareholders of the Company are as
follows:
Cumulative Voting for Directors.
Under cumulative voting, each share of stock entitled to vote in the
election of directors has a number of votes equal to the number of directors to
be elected. A shareholder may then cast all of his votes for a single candidate,
or may allocate them among as many candidates as such shareholder may chose.
Under Delaware law, shares may not be cumulatively voted for the election of
directors unless the certificate of incorporation specifically provides for
cumulative
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voting. In North Dakota, cumulative voting is mandatory upon notice
given by a shareholder at a shareholders' meeting at which directors are to be
elected. Once notice is given by one shareholder, all shareholders are entitled
to cumulate their votes. The Articles of Incorporation of the Company do not and
the Certificate of Incorporation of Digital Fuel will not, provide for
cumulative voting in the election of directors.
Shareholder Vote for Mergers.
North Dakota law and Delaware law relating to mergers and other corporate
reorganizations are substantially the same.
Dissenters' Rights.
Under both North Dakota and Delaware law, a shareholder of a corporation
participating in certain major corporate transactions may, under varying
circumstances, be entitled to receive cash equal to the fair market value of the
shares held by such shareholder (as determined by a court of competent
jurisdiction or by agreement of the shareholder and the corporation), in lieu of
the consideration such shareholder would otherwise receive in the transaction.
For a complete review of the dissenters rights of North Dakota see the heading
"DISSENTERS' RIGHTS" and the Exhibits referenced therein.
Indemnification.
North Dakota and Delaware have similar laws with respect to indemnification
by a corporation of its directors. For example, the laws of both states permit
corporations to adopt a provision in the Articles of Incorporation eliminating
the liability of a director to the corporation or its shareholders for monetary
damages for breach of the director's fiduciary duty of care (and the fiduciary
duty of loyalty in the case of Delaware). North Dakota allows indemnification of
directors, officers and employees (or other persons by contract or otherwise).
Delaware also extends the indemnification provisions to officers, employees and
other agents of the corporation. The Certificate of Incorporation of Digital
Fuel eliminates the liability of directors, officers, employees and other agents
of the corporation to the fullest extent permissible under Delaware law.
Payments of Dividends.
Delaware and North Dakota law are similar regarding the payment of
dividends. In both North Dakota and Delaware, the law permits the payment of
dividends if, after the dividends have been paid, the corporation is able to
pay its debts as they become due in the usual course of business (equity test
for insolvency), and the corporation's total assets are not less than the sum
of its total liabilities plus the amount that would be needed, if the
corporation were to be
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dissolved at the time of the dividend payment, to satisfy the preferential
rights upon dissolution of shareholders whose preferential rights are superior
to those receiving the dividend (balance sheet test for insolvency). In
addition, both North Dakota and Delaware law generally provides that a
corporation may redeem or repurchase its shares only if the same equity and
balance sheet test for insolvency are satisfied. In determining whether the
balance sheet test has been satisfied, the board may: (i) use financial
statements prepared on the basis of accounting practices that are reasonable
under the circumstances; (ii) make its determination based on a fair valuation,
(in the case of Delaware including, but not limited to, unrealized appreciation
and depreciation); or (iii) make its determination based upon any other method
that is reasonable in the circumstances.
Delaware Anti-Takeover Laws
In the last several years, a number of states (but not North Dakota) have
adopted special laws designed to make certain kinds of "unfriendly" corporate
takeovers, or other transactions involving a corporation and one or more of its
significant shareholders, more difficult. Under Section 203 of the Delaware
General Corporation Law ("Section 203"), certain "business combinations" by
Delaware corporations with "interested stockholders" are subject to a three-year
moratorium unless specified conditions are met.
Section 203 prohibits a Delaware corporation from engaging in a "business
combination" with an "interested shareholder" for three years following the date
that such a person becomes an interested stockholder. With certain exceptions,
an interested stockholder is a person or group who or which owns 15% or more of
the corporation's outstanding voting stock (including any rights to acquire
stock pursuant to an option, warrant, agreement, arrangement or understanding,
or upon the exercise of conversion or exchange rights, and stock with respect to
which the person has voting rights only), or is an affiliate or associate of the
corporation and was the owner of 15% or more of such voting stock at any time
within the previous three years.
For purposes of Section 203, the term "business combination" is defined
broadly to include mergers with or caused by the interested stockholder, sales
or other dispositions to the interested stockholder (except proportionately with
the corporation's other stockholders) of assets of the corporation or a
subsidiary equal to ten percent or more of the aggregate market value of the
corporation's consolidated assets or its outstanding stock; the issuance or
transfer by the corporation or a subsidiary of stock of the corporation or such
subsidiary to the interested stockholder (except for transfers in a conversion
or exchange or a pro rata distribution or certain other transactions, none of
which increase the interested stockholder's proportionate ownership of any class
or series of the corporation's or such subsidiary's stock); or receipt by the
interested stockholder (except proportionately as a stockholder), directly or
indirectly, of any loans, advances, guarantees, pledges or other financial
benefits provided by or through the corporation or a subsidiary.
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The three-year moratorium imposed on business combinations by Section 203
does not apply if: (i) prior to the date on which such stockholder becomes an
interested stockholder the board of directors approves either the business
combination or the transaction which resulted in the person becoming an
interested stockholder; (ii) the interested stockholder owns 85% of the
corporation's voting stock upon consummation of the transaction which made him
or her an interested stockholder (excluding from the 85% calculation shares
owned by directors who are also officers of the target corporation and shares
held by employee stock plans which do not permit employees to decide
confidentially whether to accept a tender or exchange offer); or (iii) on or
after the date such person becomes an interested stockholder, the board approves
the business combination and it has also approved at a stockholder meeting by
sixty-six and two-thirds percent (66 2/3 %) of the voting stock not owned by the
interested stockholder.
Section 203 only applies to Delaware corporations which have a class of
voting stock that is (i) listed on a national securities exchange, (ii)
authorized for quotation on the NASDAQ Stock Market, or (iii) held of record by
more than 2,000 stockholders. Section 203 will not be immediately applicable to
Digital Fuel after reincorporation. If Digital Fuel registers shares with NASDAQ
or approximately 800 additional persons become shareholders of Digital Fuel,
Section 203 will apply. A Delaware corporation may elect not to be governed by
Section 203 by a provision in its original certificate of incorporation or an
amendment thereto or to the bylaws, which amendment must be approved by majority
stockholder vote and may not be further amended by the board of directors.
Digital Fuel did not opt out of coverage by Section 203 in its original
Certificate of Incorporation and management of Digital Fuel and the Company do
not plan to opt out of coverage in the near future.
Management of Digital Fuel and the Company believe that Section 203 will
encourage any potential acquirer to negotiate with the Company's Board of
Directors. Section 203 also has the effect of limiting the ability of a
potential Delaware acquirer to make a two-tiered bid for Digital Fuel in which
all stockholders would not be treated equally. Shareholders should note that
the application of Section 203 to Digital Fuel will confer upon the Board of
Directors the power to reject a proposed business combination, even though a
potential acquirer may be offering a substantial premium for Digital Fuel's
shares over the then-current market price (assuming the stock is then publicly
traded). Section 203 should also discourage certain potential acquirers
unwilling to comply with its provisions.
Holding Company Provisions of Delaware Law.
A new Section 251(g) has been added to the General Corporation Law
permitting a Delaware corporation to be recognized as a holding company without
stockholder approval. The reorganization contemplated by the statute is
accomplished by merging the subject corporation with or into a direct or
indirect wholly owned subsidiary of the corporation and converting the stock of
the corporation into stock of another direct or indirect wholly owned subsidiary
of the
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corporation, which would be the new holding company. The statute eliminates the
requirement for a stockholder vote on such a merger but contains several
provisions designed to ensure that the rights of stockholders are not changed by
or as a result of the merger, except and to the extent that such rights could be
changed without such a stockholder approval under existing law.
Thus, the resulting holding company must be a Delaware corporation and have
the same certificate of incorporation (except for provisions that could have
been amended or deleted without stockholder approval), bylaws, and directors
that the corporation had prior to the reorganization. The corporation or its
successor must, as a result of the reorganization, become a direct or indirect
wholly owned subsidiary of the holding company and must retain the same
certificate of incorporation and bylaws that the corporation had prior to the
reorganization (except that the capitalization may be reduced and except for the
addition of the provision described in the next sentence). To ensure that the
voting rights of the stockholders of the corporation are not changed or evaded
as a result of the reorganization, the statute requires that the certificate of
incorporation of the corporation provide that any extraordinary transactions
involving the corporation be approved by the stockholder of the holding company
by the same vote required of the stockholders of the corporation under the
General Corporation Law and/or by the corporation's certificate of
incorporation. To ensure that any restrictions on stockholders of the
corporation imposed by Section 203 or any exemption from such restrictions
remains unaffected by a holding company reorganization, the statute further
provides that the provisions of Section 203 will apply to persons who are
stockholders of the holding company immediately after the effectiveness of a
holding company reorganization to the same extent that they applied to
stockholders of the corporation immediately prior to the reorganization. In
order for no stockholder vote to be required, a holding company reorganization
must be tax-free for federal income tax purposes to stockholders of the
corporation. Appraisal rights are not available to stockholders in a merger that
qualifies as a holding company reorganization.
Dissenters' Rights of Appraisal.
The shareholders of the Company are afforded dissenters' rights of
appraisal under the laws of the State of North Dakota.
Section 10-19.1-87 of the NDBCA, provides that any shareholder, is entitled
to dissent from and obtain payment of the fair value of shares held in the
consummation of any plan if required by NDBCA Section 10-19.1-87 or the articles
of incorporation and the shareholder is entitled to vote on the merger or
consolidation.
Pursuant to Section 10-19.1-98 of the NDBCA, a corporation is required to
send a notice to all shareholders as of the applicable record date, regardless
of whether such shareholders are entitled to vote, notifying them that they are
entitled to assert dissenters' rights under the NDBCA. A shareholder who wishes
to assert dissenters' rights must comply with the procedural
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requirements of Section 10-19.1-88 of the NDBCA and cause the corporation to
receive, before the vote is taken, written notice of intent to demand payment
for shares if the proposed actions is effectuated; and such shareholder may not
vote any shares in favor of the proposed actions. In order to assert dissenters'
rights, a shareholder must have been a shareholder with respect to the shares
for which payment is demanded as of the date the proposed corporate action
creating dissenters' rights is approved by the shareholders, if such approval is
required, or as of the effective date of the corporate action, if no such
approval is required.
Pursuant to Section 10-19.1-88 of the NDBCA, the dissenters are required to
receive notice stating the address to which a demand for payment and share
certificates must be sent in order to obtain payment and the date by which they
must be received; supply a form to be used to certify the date on which the
shareholder, or the beneficial owner on whose behalf the shareholder dissents,
acquired the shares or an interest in them and to demand payment; a copy of
Sections 10-19.1-87 and 10-19.1-88 of the NDBCA. Accordingly, a copy of Sections
10-19.1-87 and 10-19.1-88 of the NDBCA is attached hereto and is incorporated
herein by reference. See the caption "Exhibits" herein.
In order to receive the fair value of shares, a dissenting shareholder must
demand payment and deposit certificated shares within 30 days after the notice
was given, but the dissenter retains all other rights of a shareholder until the
proposed action takes effect.
Section 10-19.1-88 of the NDBCA provides that after the corporate action
takes effect, or after the corporation receives a valid demand for payment,
whichever is later, the corporation shall remit to each dissenting shareholder
who has complied with subsections three four and five of Section 10-19.1-88 of
the NDBCA, the amount the corporation estimates to be the fair value of the
shares, plus interest. Each payment made shall be accompanied by a balance sheet
and statement of income of the corporation for a fiscal year ending not more
than 16 months before the effective date of the corporate action, together with
the latest available interim financial statements; a statement of the
corporation's estimate of the fair value of the shares and a brief description
of the method used to reach the estimate; and a copy of Sections 10-19.1-87 and
10-19.1-88 of the NDBCA. Accordingly, a copy of Sections 10-19.1-87 and 10-19.1-
88 of the NDBCA is attached hereto and is incorporated herein by reference. See
the caption "Exhibits" herein.
If a dissenter believes that the amount remitted by the corporation is less
than the fair value of the shares plus interest, the dissenter may give written
notice to the corporation of the dissenter's own estimate of the fair value of
the shares plus interest, within 30 days after the corporation mails the
remittance and demand payment of the difference. Otherwise, a dissenter is
entitled only to the amount remitted by the corporation.
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The corporation shall commence a proceeding within 60 days after receipt of
the counter-payment demand from the dissenting shareholder and petition the
court to determine the fair value of the shares and the amount of interest; if
the corporation does not commence the proceeding within the 60 day period, it
shall pay each dissenter whose demand remains unresolved the amount demanded.
Any such action shall be brought in the district court in the county where the
corporation maintains its registered office at 118 1/2 First Avenue West,
Williston, North Dakota, and all dissenters who have satisfied all requirements
of any counter-proposal for the payment of the fair value of their shares and
whose demands remain unresolved, shall be made party to the action. The court
may appoint one or more persons to determine the fair value of the shares, and
each dissenter made party to the proceeding is, entitled to judgement for the
amount, if any, by which the court finds the fair value of the shares, plus
interest, exceeded the amount paid by the corporation, but shall not be liable
to the corporation for the amount remitted to the dissenter that exceeds the
fair value of the shares as determined by the court, plus interest. The court
may assess costs and counsel fees, including the reasonable compensation
expenses of appraisers appointed by the court. Theses fees will be assessed
against the corporation, except that the court may assess costs against all or
some of the dissenters, in amounts the court finds equitable, to the extent the
court finds that the dissenters acted arbitrarily, vexatiously or not in good
faith in making demand for payment of the fair value of their shares. The court
may also assess fees and expenses of counsel in amounts the court finds
equitable, and against either the corporation or one or more dissenters or in
favor of any other party, if the court finds that the party against whom the
fees and expenses are assessed acted arbitrarily, vexatiously or not in good
faith. If the court finds that the services of counsel for any dissenters were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to those counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefitted. See Section 10-19.1-88 of the NDBCA.
MEMBERS OF THE BOARD OF DIRECTORS COLLECTIVELY OWN SUFFICIENT VOTING
SECURITIES OF THE COMPANY TO ADOPT, RATIFY AND APPROVE THE MERGER PURSUANT TO
WHICH THE COMPANY WILL CHANGE ITS DOMICILE FROM THE STATE OF NORTH DAKOTA TO THE
STATE OF DELAWARE, AND ALSO TO EFFECTUATE A ONE FOR ONE SIX THOUSAND EIGHT
HUNDRED REVERSE SPLIT. NO FURTHER CONSENTS, VOTES OR PROXIES ARE NEEDED, AND
NONE ARE REQUESTED.
The information contained in this Information Statement and the Dissenting
Shareholders' Payment Demand Form which is attached hereto constitutes the only
notice any dissenting shareholder will be provided under the NDBCA relative to
dissenting shareholders' rights of appraisal.
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FINANCIAL INFORMATION
A copy of the Company's Annual Report on Form 10-KSB, as amended, for the
year ended December 31, 1999 will be made available upon request. See Documents
Incorporated By Reference.
INTEREST OF CERTAIN PERSONS IN OR OPPOSITION TO MATTERS TO BE
ACTED UPON.
None of the Company's officers, directors or any of their respective
affiliates has any interest in any of the proposals to be acted upon at the
Special Meeting of Shareholders. None of the Company's directors has indicated
to the Company that they intend to oppose any of the proposals to be acted upon
at the Special Meeting of Shareholders. The Board of Directors of the Company,
Messrs. Farley and Metz, have enough votes to approve the Proposals outlined
herein and have indicated that they will approve the Proposals at the Special
Meeting. Mr. Farley and the Metz Trust have the right to acquire additional
shares of common stock of Digital Fuel up to 95% of the outstanding shares of
Digital Fuel after the Merger and reverse stock split for an additional $10,000
according to the terms of the Stock Purchase Agreement described in the Schedule
14F-1 filed with the Securities and Exchange Commission and incorporated herein
by reference.
FORWARD-LOOKING STATEMENTS
This Proxy Statement may contain certain "forward-looking" statements as
such term is defined in the Private Securities Litigation Reform Act of 1995 or
by the Securities and Exchange Commission in its rules, regulations and
releases, which represent the Company's expectations or beliefs, including but
not limited to, statements concerning the Company's operations, economic
performance, financial condition, growth and acquisition strategies,
investments, and future operational plans. For this purpose, any statements
contained herein that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the generality of the foregoing,
words such as "may," "will," "expect," "believe," "anticipate," "intend,"
"could," "estimate," "might," or "continue" or the negative or other variations
thereof or comparable terminology are intended to identify forward-looking
statements. These statements, by their nature, involve substantial risks and
uncertainties, certain of which are beyond the company's control, and actual
results may differ materially depending on a variety of important factors,
including uncertainty related to acquisitions, governmental regulation, managing
and maintaining growth, volatility of stock prices and any other factors
discussed in this and other Company filings with the Securities and Exchange
Commission.
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AVAILABLE INFORMATION
The Company reports the information requirements of the Securities and
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information filed with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, NW, Washington, DC
20549 or at the Regional Offices of the Commission which are located as follows:
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York
10048. Copies of such material can also be obtained from the Commission at
prescribed rates. Written requests for such material should be addressed to the
Public Reference Section, Securities and Exchange Commission, 450 Fifth Street,
NW, Washington, DC 20549. The Commission maintains a Web site that contains
reports, proxy statements and other information filed electronically by the
Company with the Commission which can be accessed over the internet at
http://www.sec.gov.
DOCUMENTS INCORPORATED BY REFERENCE
This Proxy Statement incorporates by reference documents relating to the
Company which are not included in or delivered with these proxy materials.
Documents relating to the Company (other than exhibits to such documents unless
such exhibits are specifically incorporated by reference) are available to any
person, including any beneficial owner, to whom this Information Statement is
delivered, on written or oral request, without charge, from Deucalion Research,
Inc., 6601 East Grant Road, Suite 101, Tucson, Arizona 85715, Attention:
Secretary, Telephone (520) 886-5354. Copies of documents so requested will be
sent by first class mail, postage paid within one business day of the receipt of
such request.
The following documents of the Company are incorporated by reference
herein:
1. Annual report on Form 10-KSB, as amended, for the year ended December
31, 1999;
2. Annual report on Form 10-KSB, as amended, for the year ended December
31, 1998;
3. Quarterly Report on Form 10-QSB for the quarter ended March 31, 1999;
4. Quarterly Report on Form 10-QSB for the quarter ended June 30, 1999;
5. Quarterly Report on Form 10-QSB for the quarter ended September 30,
1999;
6. Current Report of Form 8-K filed on September 10, 1999;
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7. Schedule 13D filed August 6, 1999; and
8. Schedule 14F-1 Information Statement filed July 6, 1999.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act after the date hereof and prior
to the date of the Meeting shall be deemed to be incorporated by reference
herein and shall be a part hereof from the date of filing of such documents. Any
statements contained in a document incorporated by reference herein or contained
in this Information Statement shall be deemed to be modified or superseded for
purposes hereof to the extent that a statement contained herein (or in any other
subsequently filed document which also is incorporated by reference herein)
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed to constitute a part hereof except as so modified or
superseded.
OTHER BUSINESS
Management of the Company knows of no other matter which may come before
the Special Meeting. However, if any additional matters are properly presented
at the Special Meeting, Messrs. Farley and Metz have enough votes to establish a
quorum and each will vote in accordance with his judgment on such matters.
EXHIBITS
A. Certificate of Incorporation of Digital Fuel.
B. Section 10-19.1-87 of the North Dakota Business Corporation Act -
Rights of Dissenting Shareholders.
C. Section 10-19.1-88 of the North Dakota Business Corporation Act -
Procedures for Asserting Dissenters' Rights.
D. Notice to Shareholders Re: Dissenters' Rights of Appraisal
E. Dissenting Shareholders' Payment Demand Form
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EXHIBIT A
CERTIFICATE OF INCORPORATION
OF
DIGITAL FUEL, INC.
ARTICLE I
Name
----
Section 1. The name of the corporation is Digital Fuel, Inc.
----------
ARTICLE II
Registered Office
-----------------
Section 1. The address of the registered office of the corporation in the
----------
State of Delaware is 1013 Centre Road, City of Wilmington, County of Newcastle,
State of Delaware 19805. The name of the corporation's registered agent at that
address is Corporation Service Company.
ARTICLE III
Purpose
-------
Section 1. The purpose of the corporation is to engage in any lawful act
----------
or activity for which a corporation may be organized under the General
Corporation Law of Delaware (the "DGCL").
ARTICLE IV
Capitalization
--------------
Section 1. The total number of shares of capital stock which the
----------
corporation shall have authority to issue is 30,000,000 shares consisting of,
20,000,000 shares of common stock, $.01 par value (the "Common Stock") and
10,000,000 shares of preferred stock, $.01 par value (the Preferred Stock").
Section 2. Shares of Preferred Stock may be issued from time to time in
----------
one or more classes or series as may be determined from time to time by the
board of directors of the corporation (the "Board of Directors"), each such
class or series to be distinctly designated. Except in respect of the
particulars fixed by the Board of Directors for classes or series provided for
by the Board of Directors as permitted hereby, all shares of Preferred Stock
shall be of equal rank and shall be identical. All shares of any one series of
Preferred Stock so
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designated by the Board of Directors shall be alike in every particular, except
that shares of any one series issued at different times may differ as to the
dates from which dividends thereon shall be cumulative. The voting rights, if
any, of each such class or series and the preferences and relative,
participating, optional and other special rights of each such class or series
and the qualifications, limitations and restrictions thereof, if any, may differ
from those of any and all other classes or series at any time outstanding; and
the Board of Directors of the corporation is hereby expressly granted authority
to fix, by resolutions duly adopted prior to the issuance of any shares of a
particular class or series of Preferred Stock so designated by the Board of
Directors, the voting powers of stock of such class or series, if any, and the
designations, preferences and relative, participating, optional and other
special rights and the qualifications, limitations and restrictions of such
class or series, including, but without limiting the generality of the
foregoing, the following:
(a) The distinctive designation of, and the number of shares of Preferred
Stock which shall constitute such class or series, and such number may
be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares thereof
then outstanding) from time to time by action of the Board of
Directors;
(b) The rate and time at which, and the terms and conditions upon which,
dividends, if any, on shares of Preferred Stock of such class or
series shall be paid, the extent of the preference or relation, if
any, of such dividends or the dividends payable on any other class or
classes or of any series of the same or any other class or classes of
stock and whether such dividends shall be cumulative or non-
cumulative;
(c) The right, if any, of the holders of shares of Preferred Stock of such
class or series to convert the same into, or exchange the same for,
shares of any other class or classes or of any series of the same or
any other class or classes of stock and the terms and conditions of
such conversion or exchange;
(d) Whether or not shares of Preferred Stock of such class or series shall
be subject to redemption, and the redemption price or prices and the
time or times at which, and the terms and conditions upon which,
shares of Preferred Stock of such class or series may be redeemed;
(e) The rights, if any, of the holders of shares of Preferred Stock of
such class or series upon the voluntary or involuntary liquidation of
the corporation;
(f) The terms of the sinking fund or redemption or purchase account, if
any, to be provided for the shares of Preferred Stock of such class or
series; and
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(g) The voting powers, if any, of the holders of shares of such class or
series of Preferred Stock.
ARTICLE V
Incorporation
-------------
Section 1. The name and mailing address of the Sole Incorporator are as
----------
follows:
Gerald Raskin
1400 Glenarm Place
Third Floor
Denver, CO 80202-5099
Section 2. The powers of the Sole Incorporator shall terminate upon the
----------
filing of this Certificate of Incorporation.
ARTICLE VI
Interim Directors
-----------------
Section 1. The name and mailing address of the persons who will serve as
----------
director until the first annual meeting of stockholders or until his successor
is elected and qualified is as follows:
Name Mailing Address
---- ---------------
Michael R. Farley 6601 E. Grant Road, Suite 101
Tucson, Arizona 85715
Forrest L. Metz 877 S. Alvernon Way
Tucson, Arizona 95711
ARTICLE VII
Board of Directors
------------------
Section 1. The business and affairs of this corporation shall be managed
----------
by or under the direction of the Board of Directors. The Board of Directors
shall consist of one or more members which may from time to time be increased or
decreased in such manner as shall be provided by the Bylaws of this corporation.
Election of directors or their appointment need not be by written ballot unless
required by the Bylaws. The requisite quorum for the transaction of business at
a meeting of the Board of Directors shall consist of a majority of the total
number of directors.
Section 2. Meetings of stockholders may be held within or without the
----------
State Delaware, as the Bylaws may provide. The books of the corporation may be
kept (subject to any
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provision contained in the statutes) outside the State of Delaware at such place
or places as may be designated from time to time by the Board of Directors or in
the Bylaws of the corporation.
Section 3. In furtherance and not in limitation of the powers conferred by
----------
statute, the Board of Directors is expressly authorized:
(h) To manage and govern the corporation by majority vote of members
present at any regular or special meeting at which a quorum shall be
present unless the act of a greater number is required by the laws of
Delaware, the Certificate of Incorporation or the Bylaws of this
corporation.
(i) To determine from time to time whether, to what extent, at what times
and places and under what conditions and regulations the accounts,
books and papers of the corporation, or any of them, shall be open to
the inspection of the stockholders, and no stockholder shall have any
right to inspect any account, book or document of the corporation,
except as and to the extent expressly provided by law with reference
to the right of stockholders to examine the original or duplicate
stock ledger, or otherwise expressly provided by law, or except as
expressly authorized by resolution of the Board of Directors.
(j) Except to the extent prohibited by law, the Board of Directors shall
have the right (which, to the extent exercised, shall be exclusive) to
establish the rights, powers, duties, rules and procedures that from
time to time shall govern the Board of Directors and each of its
members including without limitation the vote required for any action
by the Board of Directors, and that from time to time shall affect the
directors' power to manage the business and affairs of the
corporation; and no Bylaw shall be adopted by stockholders which shall
impair or impede the implementation of the foregoing.
(k) To adopt, amend, or repeal the Bylaws of the corporation.
(l) To issue or redeem stock, warrants, options, or a shareholder rights
plan.
ARTICLE VIII
Director Liability
------------------
Section 1. A director of the corporation shall not be personally liable to
----------
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL, or (iv) for any
transaction from which the director derived any improper personal benefit. If
the DGCL is amended after approval by the stockholders of this
-22-
Article to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
corporation shall be eliminated or limited to the fullest extent permitted by
the DGCL, as so amended. Any repeal or modification of the foregoing paragraph
by the stockholders of the corporation shall not adversely affect any right or
protection of a director of the corporation existing at the time of such repeal
or modification.
ARTICLE IX
Indemnification
---------------
Section 1. The corporation has the right and/or duty to indemnify any
----------
person who is or was a director to the fullest extent provided by law.
Section 2. The corporation has the right and/or duty to indemnify any
----------
person who is or was an officer, employee or agent of the corporation who is not
a director to the fullest extent provided by law, or to a greater extent if
consistent with law and if provided by resolution of the corporation's
stockholders or directors, or in a contract.
Section 3. The corporation may purchase and maintain insurance on behalf
----------
of any person who is or was a director, officer, employee, fiduciary or agent of
the corporation and who while a director, officer, employee, fiduciary or agent
of the corporation, is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee, fiduciary or agent of any other
foreign or domestic corporation, partnership, joint venture, trust other
enterprise or employee benefit plan against any liability asserted against or
incurred by him in any such capacity or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under provisions of the DGCL.
Section 4. Expenses (including attorneys' fees) incurred by a director or
----------
officer in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount, if
it shall ultimately be determined that he is not entitled to be indemnified by
the corporation as authorized in this Article. Such expenses (including
attorneys' fees) incurred by other employees and agents may be advanced upon
such terms and conditions, if any, as the Board of Directors deems appropriate.
Section 5. The indemnification and advancement of expenses provided by or
----------
granted pursuant to this Article, unless otherwise provided when authorized or
ratified, shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
ARTICLE X
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Compromise
----------
Section 1. Whenever a compromise or arrangement is proposed between the
----------
corporation and its creditors or any class of them and/or between the
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the corporation under the
provisions of Section 291 of Title 8 of the DGCL or on the application of
trustees in dissolution or of any receiver or receivers appointed for the
corporation under the provisions of Section 279 of Title 8 of the DGCL, order a
meeting of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of the corporation, as the case may be, to be summoned in
such manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the
corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the corporation, as the case may be, and also on the
corporation.
ARTICLE XI
Amendment
---------
Section 1. Subject to the provisions of this Certificate of Incorporation,
----------
the corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
thereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
-24-
EXHIBIT B
NORTH DAKOTA BUSINESS CORPORATION ACT
10-19-.1-87 RIGHTS OF DISSENTING SHAREHOLDERS. -- 1. A shareholder of a
corporation may dissent from, and obtain payment for the fair value of the
shareholder's shares in the event of, any of the following corporate actions:
a. An amendment of the articles that materially and adversely affects the
rights of preferences of the shares of a dissenting shareholder in that it:
(1) Alters or abolishes a preferential right of the shares;
(2) Creates, alters, or abolishes a right in respect of the redemption of
the shares, including a provision respecting a sinking fund for the redemption
or repurchase of shares;
(3) Alters or abolishes a preemptive right of the holder of the shares to
acquire shares, securities other than shares, or rights to purchase shares or
securities other than shares; or
(4) Excludes or limits the right of a shareholder to vote on a matter, or
to accumulate votes, except as the right may be excluded or limited through the
authorization or issuance of securities of an existing or new class or series
with similar or different voting rights;
b. A sale, lease, transfer, or other disposition of all or substantially
all of the property and assets of the corporation, but not including a
transaction permitted without shareholder approval in subsection 1 of section
10-19.1-109 or a disposition pursuant to an order of a court, or a disposition
for cash on terms requiring that all or substantially all of the net proceeds of
disposition be distributed to the shareholders in accordance with their
respective interests within one year after the date of disposition;
c. A plan of merger to which the corporation is a party, except as
provided in subsection 3;
d. A plan of exchange, whether under this chapter or under chapter 10-32,
to which the corporation is a party as the corporation whose shares will be
acquired by the acquiring corporation, if the shares of the shareholder are
entitled to vote on the plan; or
e. Any other corporate action taken pursuant to a shareholder vote with
respect to which the articles, the bylaws, or a resolution approved by the board
directs that dissenting shareholder may obtain payment for their shares.
2. A shareholder may not assert dissenter's rights as to less than all of
the shares registered in the name of the shareholder, unless the shareholder
dissents with respect to all the shares that are beneficially owned by another
person but registered in the name of the shareholder and discloses the name and
address of each beneficial owner on whose behalf the shareholder dissents. In
that event, the rights of the dissenter must be determined as if the shares as
to which the shareholder has dissented and the other shares were registered in
the name of different shareholders. The beneficial owner of shares who is not
the shareholder may assert dissenters' rights with respect to shares held on
behalf of the beneficial owner, and must be treated as a dissenting shareholder
under the terms of this section and section 10-19.1-88, if the beneficial owner
submits to the corporation at the time of or before the assertion of the rights
a written consent of the shareholder.
3. Unless the articles, the bylaws, or a resolution approved by the board
otherwise provide, the right to obtain payment under this section does not apply
to the shareholders of the
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surviving corporation in a merger if the shares of the shareholder are not
entitled to be voted on the merger.
4. The shareholders of a corporation who have a right under this section
to obtain payment for their shares do not have a right at law or in equity to
have a corporate action described in subsection 1 set aside or rescinded, except
when the corporate action is fraudulent with regard to the complaining
shareholder or the corporation. (Last amended by Ch. 103.L. '97, eff. 8-1-97.)
5. If a date is fixed according to subsection 1 of section 10-19.1-73.2
for the determination of shareholders entitled to receive notice of and to vote
on an action described under subsection 1, only shareholders as of the date
fixed and beneficial owners as of the date fixed who hold through shareholders,
as provided in subsection 2, may exercise dissenter's rights. (Last amended by
Ch. 95, L. '99, eff. 7-1-99.)
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EXHIBIT C
NORTH DAKOTA BUSINESS CORPORATION ACT
10-19.1-88 PROCEDURES FOR ASSERTING DISSENTERS' RIGHTS. -- 1. For purposes of
this section, the terms defined in this subsection have the meanings given them.
a. "Corporation" means the issuer of the shares held by a dissenter
before the corporate action referred to in subsection 1 of section 10-19.1-87 or
the successor by merger of that issuer.
b. "Fair value of the shares" means the value of the shares of a
corporation immediately before the effective date of a corporate action referred
to in subsection 1 of section 10-19.1-87.
c. "Interest" means interest commencing five days after the effective
date of the corporate action referred to in subsection 1 of section 10-19.1-87,
up to and including the date of payment, calculated at the rate provided in
section 28-20-34 for interest on verdicts and judgments.
2. If the corporation calls a shareholder meeting at which any action
described in subsection 1 of section 10-19.1-87 is to be voted upon, the notice
of the meeting shall inform each shareholder of the right to dissent and shall
include a copy of section 10-19.1-87 and this section.
3. If the proposed action must be approved by the shareholders, a
shareholder who is entitled to dissent under section 10-19.1-87 and who wishes
to exercise dissenter's rights shall file with the corporation before the vote
on the proposed action a written notice of intent to demand the fair value of
the shares owned by the shareholder and may not vote the shares in favor of the
proposed action.
4. After the proposed action has been approved by the board and, if
necessary, the shareholders, the corporation shall send to all shareholders who
have complied with subsection 3 and to all shareholders entitled to dissent if
no shareholder vote was required, a notice that contains:
a. The address to which a demand for payment and share certificates must
be sent in order to obtain payment and the date by which they must be received;
b. A form to be used to certify the date on which the shareholder, or the
beneficial owner on whose behalf the shareholder dissents, acquired the shares
or an interest in them and to demand payment; and
c. A copy of section 10-19.1-87 and this section.
5. In order to receive the fair value of shares, a dissenting shareholder
must demand payment and deposit certificated shares within thirty days after the
notice required by subsection 4 was given, but the dissenter retains all other
rights of a shareholder until the proposed action takes effect.
6. After the corporate action takes effect, or after the corporation
receives a valid demand for payment, whichever is later, the corporation shall
remit to each dissenting shareholder who has complied with subsections 3, 4, and
5, the amount the corporation estimates to be the fair value of the shares, plus
interest, accompanied by:
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a. The corporation's closing balance sheet and statement of income for a
fiscal year-ending not more than sixteen months before the effective date of the
corporate action, together with the latest available interim financial
statements;
b. An estimate by the corporation of the fair value of the shares and a
brief description of the method used to reach the estimate; and
c. A copy of section 10-19.1-87 and this section.
7. The corporation may withhold the remittance described in subsection 6
from a person who was not a shareholder on the date the action dissented from
was first announced to the public or who is dissenting on behalf of a person who
was not a beneficial owner on that date. If the dissenter has complied with
subsection 3, 4, and 5, the corporation shall forward to the dissenter the
materials described in subsection 6, a statement of the reason for withholding
the refinance, and an offer to pay to the dissenter the amount listed in the
materials of the dissenter agrees to accept the amount in full satisfaction.
The dissenter may decline the offer an demand payment under subsection 9.
Failure to do so entitles the dissenter only to the amount offered. If the
dissenter makes demand, subsection 10 and 11 apply.
8. If the corporation fails to remit within sixty days of the deposit of
certificates, it shall return all deposited certificates. However, the
corporation may again give notice under subsections 4 and 5 and require deposit
at a later time.
9. If a dissenter believes that the amount remitted under subsections 6,
7, and 8 is less than the fair value of the shares plus interest, the dissenter
may give written notice to the corporation of the dissenter's own estimate of
the fair value of the shares plus interest, within thirty days after the
corporation mails the remittance under subsections 6, 7, and 8, and demand
payment of the difference. Otherwise, a dissenter is entitled only to the
amount remitted by the corporation.
10. If the corporation receives a demand under subsection 9, it shall,
within sixty days after receiving the demand, either pay to the dissenter the
amount demanded or agreed to by the dissenter after a discussion with the
corporation or file in court a petition requesting that the court determine the
fair value of the shares plus interest. The petition shall be filed in the
county in which the registered office of the corporation is located, except that
a surviving foreign corporation that receives a demand relating to the shares of
a constituent corporation shall file the petition in the county in this state in
which the last registered office of the constituent corporation was located.
The petition shall name as parties all dissenters who have demanded payment
under subsection 9 and who have not reached agreement with the corporation. The
corporation, after filing the petition, shall serve all parties with a summons
and copy of the petition under the rules of civil procedure. The residents of
this state may be served by registered mail or by publication as provided by
law. Except as otherwise provided, the rules of civil procedure apply to the
proceeding. The jurisdiction of the court is plenary and exclusive. The court
may appoint appraisers with powers and authorities the court deems proper, to
receive evidence on and recommend the amount of the fair value of the shares.
The court shall determine whether the shareholder or other shareholders in
question have fully complied with the requirements of the section, and shall
determine the fair value of the shares, taking into account any and all factors
the court finds relevant, computed by any method or combination of methods that
the court, in its discretion, sees fit to use, whether or not used by the
corporation or by a dissenter. The fair value of the shares as determined by
the court is binding on all shareholders, wherever located. A
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dissenter is entitled to judgment for the amount by which the fair value of the
shares as determined by the court, plus interest, exceeds the amount, if any,
remitted under subsection 6, 7, and 8, but shall not be liable to the
corporation for the amount, if any, by which the amount, if any, remitted to the
dissenter under subsections 6, 7, and 8 exceeds the fair value of the shares as
determined by the court, plus interest.
11. The court shall determine the costs and expenses of a proceeding under
subsection 10, including the reasonable expenses in compensation of any
appraisers appointed by the court, and shall assess those costs and expenses
against the corporation, except that the court may assess part or all of those
costs and expenses against a dissenter whose action in demanding payment under
subsection 9 is found to be arbitrary, vexatious, or not in good faith.
12. If the court finds that the corporation has failed to comply
substantially with this section, the court may assess all fees and expenses of
any experts or attorneys as the court deems equitable. These fees and expenses
may also be assessed against a person who has acted arbitrarily, vexatiously, or
not in good faith in bringing the proceeding, and may be awarded to a party
injured by those actions.
13. The court may award, in its discretion, fees and expenses to an
attorney for the dissenters out of the amount awarded to the dissenters, if any.
(Last amended by Ch. 95, L. '99, eff. 7-1-99.)
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EXHIBIT D
NOTICE TO SHAREHOLDERS OF DISSENTERS' RIGHTS OF APPRAISAL
PURSUANT TO NORTH DAKOTA BUSINESS CORPORATION ACT
SECTION 10-19.1-98
To all shareholders of Deucalion Research, Inc.:
Section 10-19.1-87 of the North Dakota Business Corporation Act
(hereinafter referred to as "NDBCA") provides that any shareholder, is entitled
to dissent from and obtain payment of the fair value of shares held in the
consummation of any plan of merger, consolidation, or reorganization if required
by NDBCA Section 10-19.1-87, and the shareholder is entitled to vote on the
merger, consolidation or reorganization.
A shareholder who wishes to assert dissenters' rights must comply with the
procedural requirements of Section 10-19.1-88 of the NDBCA, included herein as
Exhibit C, and send to the corporation written notice of intent to demand
payment for shares if the proposed actions are effectuated before a vote on the
action(s) is taken. Furthermore, any such shareholder may not vote any shares in
favor of the proposed action(s). In order to assert dissenters' rights, a
shareholder must have been a shareholder with respect to the shares for which
payment is demanded as of the date the proposed corporate action creating
dissenters' rights is approved by the shareholders, if such approval is
required, or as of the effective date of the corporate action, if no such
approval is required.
If you wish to assert dissenters' rights of appraisal with regard to the
change of domicile of Deucalion Research, Inc. (the "Company") by merging the
Company with and into its recently formed and wholly owned Delaware subsidiary,
Digital Fuel, Inc. and effecting a one-for-6,800 reverse stock split (and other
authorizations as described in this Information Statement), you must return the
Dissenting Shareholders' Payment Demand Form, included herein as Exhibit E, and
your certified share certificate(s) to Deucalion Research, Inc., 6601 East Grant
Road, Suite 101, Tucson, Arizona 85715, to the attention of Michael R. Farley,
Chief Executive Officer, by ________, 2000.
By Order of the Board of Directors:
Michael R. Farley, Chief Executive Officer
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EXHIBIT E
DISSENTING SHAREHOLDERS' PAYMENT DEMAND FORM
Michael R. Farley
Chief Executive Officer
Deucalion Research, Inc.
6601 East Grant Road, Suite 101
Tucson, Arizona 85715
Re: Proposed change of domicile of Deucalion Research, Inc., a North
Dakota corporation (the "company"), to the State of Delaware, by
merger of the Company with and into its wholly owned subsidiary,
Digital Fuel, Inc., a Delaware corporation ("Digital Fuel")
Dear board of directors:
The undersigned hereby dissents with respect to the proposed change of
domicile of the Company from the State of North Dakota to the State of Delaware;
effecting a reverse split of one-for-6,800; reducing the authorized capital from
1,500,000,000 shares to 30,000,000; increasing the par value from $.0001 to $.01
per share and authorizing the board of directors to issue blank check preferred
stock.
I hereby demand payment for the fair value of my "certificated" shares,
which are described below and enclosed herewith, and I demand that payment be
forwarded to the address indicated below. I understand that this demand for
payment must be received on or before June 12, 2000.
The undersigned represents and warrants that the undersigned was the owner
of the shares covered by this demand on the record date for the special
shareholders meeting to be held June 1, 2000.
If the undersigned is other than the "record holder" of the shares for
which demand for payment is made, the undersigned will provide evidence of the
purchase of such shares and enclose such evidence herewith. The undersigned
acknowledges that this Dissenting Shareholders' Payment Demand Form was
accompanied by official notice of dissenters rights by the company, a copy of
the applicable provisions of the North Dakota Business Corporation Act relating
to such dissenting stockholder's rights of appraisal, and an Information
Statement describing the transactions to be effected by the Company.
________________________ ______/______/________
Signature Date
________________________ ________________________________________
Print Name Address
________________________________________
City, State Zipcode
________________________ ________________________________________
Certificate # Number of Shares Represented
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