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 Filed by the Registrant |X| Filed by a Party other than the Registrant |_| Check the appropriate box: |_| Preliminary Proxy Statement |_| Confidential, For Use of the Commission Only (As Permitted by Rule 14a-6(e)(2)) |X| Definitive Proxy Statement |_| Definitive Additional Materials |_| Soliciting Material Pursuant to ss. 240.14a-12 DIGICORP (Name of Registrant as Specified In Its Charter) (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): |X| No fee required |_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. (1) Title of each class of securities to which transaction applies: - -------------------------------------------------------------------------------- (2) Aggregate number of securities to which transaction applies: - -------------------------------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): - -------------------------------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: - -------------------------------------------------------------------------------- (5) Total fee paid: - -------------------------------------------------------------------------------- |_| Fee paid previously with preliminary materials. |_| Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. (1) Amount Previously Paid: - -------------------------------------------------------------------------------- (2) Form, Schedule or Registration Statement No.: - -------------------------------------------------------------------------------- (3) Filing Party: - -------------------------------------------------------------------------------- (4) Date Filed: - -------------------------------------------------------------------------------- DIGICORP 4143 Glencoe Avenue Marina Del Rey, CA 90292 NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JULY 14, 2006 To our Shareholders: You are cordially invited to attend a Special Meeting (the "Special Meeting") of Shareholders of Digicorp, which will be held at 1800 Century Park East, Suite 200, Los Angeles, CA 90067, on July 14, 2006, at 10 a.m. (local time), to consider and act upon the following matters, each of which is described more fully in the accompanying Proxy Statement: 1. Proposal No. 1: To authorize and approve a change of the Company's domicile from Utah to Delaware effected by the merger of the Company, a Utah corporation, with and into, Digicorp, Inc., a newly formed wholly owned subsidiary of the Company that was incorporated under the Delaware General Corporation Law (the "DGCL") for the purpose of effecting the change of domicile. 2. Proposal No. 2: To authorize and approve the Company's Stock Option and Restricted Stock Plan. The foregoing matters are more fully described in the Proxy Statement accompanying this Notice. The Board of Directors has fixed June 13, 2006 (the "Record Date") as the record date for the Special Meeting. Only shareholders of record at the close of business on the Record Date will be entitled to notice of and to vote at the Special Meeting and at any adjournments thereof. Each shareholder of record as of the Record Date will be entitled to one vote for each share of Common Stock held on the Record Date. You may vote your shares by marking, signing and dating the enclosed proxy card as promptly as possible and returning it in the enclosed postage-paid envelope. You may also vote in person at the Special Meeting, even if you use the option set forth above. By order of the Board of Directors: /s/ Jay Rifkin ------------------------------------- Jay Rifkin Chairman and Chief Executive Officer DIGICORP 4143 Glencoe Avenue Marina Del Rey, CA 90292 PROXY STATEMENT FOR A SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JULY 14, 2006 Digicorp (referred to herein as the "Company," "we," "us," and "our") is a Utah corporation with its principal executive offices located at 4143 Glencoe Avenue, Marina Del Rey, California 90292. The Company's telephone number is (310) 728-1450. This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of the Company for use at a Special Meeting of Shareholders (the "Special Meeting") to be held at 1800 Century Park East, Suite 200, Los Angeles, CA 90067, on July 14, 2006, at 10 a.m. (local time), and at any and all adjournments thereof, for the purposes set forth in the accompanying Notice of Special Meeting of Shareholders. Accompanying this Proxy Statement is a proxy card, which you may use to indicate your vote as to the proposals described in this Proxy Statement. This Proxy Statement and the accompanying proxy card will be mailed on or about June 20, 2006 to all shareholders entitled to vote at the Special Meeting. QUESTIONS AND ANSWERS ABOUT THIS PROXY STATEMENT AND VOTING Why am I receiving these materials? You have been sent this Proxy Statement and the enclosed proxy card because the Company is soliciting your proxy to vote at the Special Meeting on the proposals described herein (the "Proposals"). You are invited to attend the Special Meeting to vote in person on the Proposals. However, you do not need to attend the Special Meeting to vote your shares. Instead, you may vote your shares on the enclosed proxy card, as further described herein. The Notice of Special Meeting of Shareholders, this proxy statement and the accompanying proxy cards are first being mailed to shareholders on or about June 20, 2006. Who can vote at the Special Meeting? Only shareholders of record at the close of business on June 13, 2006 (the "Record Date") will be entitled to vote at the Special Meeting. As of the Record Date, there were 37,239,002 shares of Common Stock outstanding and entitled to vote. What am I voting on? There are two matters scheduled for a vote at the Special Meeting: o Proposal No. 1: The authorization and approval of a change of the Company's domicile from Utah to Delaware effected by the merger of the Company, a Utah corporation, with and into, Digicorp, Inc., a newly formed wholly owned subsidiary of the Company that was incorporated under the DGCL for the purpose of effecting the change of domicile; and o Proposal No. 2: The authorization and approval of the Company's Stock Option and Restricted Stock Plan. Each of these Proposals, as well as the recommendation of the Board with respect to each of these Proposals, are described in greater detail elsewhere in this Proxy Statement. How do I vote? Your vote is important. Please mark, sign and date the enclosed proxy card as promptly as possible and return it in the enclosed postage-paid envelope to ensure that your shares are represented at the Special Meeting. A pre-addressed, postage-paid envelope is provided for this purpose. For each of the matters to be voted on, you may vote "FOR" or "AGAINST" or "ABSTAIN" from voting. 1 How many votes do I have? On each matter to be voted upon at the Special Meeting, you have one vote for each share of Common Stock you own as of the Record Date. No preemptive, subscription, or conversion rights pertain to the Common Stock and no redemption or sinking fund provisions exist for the benefit thereof. What if I return a proxy card but do not make specific choices? If you return a signed and dated proxy card without marking any voting selections, all of your shares will be voted "FOR" each of the Proposals described in this Proxy Statement. Who is paying for this proxy solicitation? The Company will pay for the entire cost of soliciting proxies for the Special Meeting. The original solicitation of proxies by mail may be supplemented by solicitation in person, by mail, by telephone, by facsimile, or by telegram, by the Company's regularly employed officers and employees. The Company's officers and employees will not receive any additional compensation for soliciting proxies. What does it mean if I receive more than one proxy card? If you receive more than one proxy card it means that your shares are registered in more than one name or are registered in different accounts. Please complete, sign, date and return each proxy card to ensure that all of your shares are voted at the Special Meeting. Can I change my vote after submitting my proxy card? You can change your vote by revoking your proxy at any time before the final vote at the Special Meeting. You may revoke your proxy in any one of three ways: o You may submit another properly completed proxy card at a later date; o You may send a written notice that you are revoking your proxy to the Company's Corporate Secretary at 4143 Glencoe Avenue, Marina Del Rey, California 90292; or o You may attend the Special Meeting and vote in person in accordance with the procedures specified above. However, simply attending the Special Meeting will not, by itself, revoke your proxy. Following the final vote at the Special Meeting, you may not revoke your proxy or otherwise change your vote. How are votes counted? Votes will be counted by the inspector of election appointed for the Special Meeting. How many votes are needed to approve each proposal? o Proposal No. 1: Proposal No. 1 (The authorization and approval of a change of the Company's domicile from Utah to Delaware effected by the merger of the Company, a Utah corporation, with and into, Digicorp, Inc., a newly formed wholly owned subsidiary of the Company that was incorporated under the DGCL for the purpose of effecting the change of domicile) will be approved if a majority of the outstanding shares of Common Stock of the Company are voted "FOR" the proposal. Abstentions will have the same effect as votes "AGAINST" Proposal No. 1. o Proposal No. 2: Proposal No. 2 (the authorization and approval of the Company's Stock Option and Restricted Stock Plan) will be approved if a majority of the total votes properly cast in person or by proxy at the Special Meeting by the holders of Common Stock are voted "FOR" the proposal. Abstentions will have no effect on the result of the vote. 2 The approval of each Proposal described in this proxy statement is independent from the approval of each of the other Proposals described in this Proxy Statement. What is the quorum requirement? A quorum of shareholders is necessary to hold a valid meeting. For purposes of Proposal Nos. 1 and 2 a quorum will be present if at least a majority of the outstanding shares of Common Stock are represented by shareholders present at the Special Meeting or by proxy. As of the Record Date, there were 37,239,002 shares of Common Stock outstanding and entitled to vote. Your shares will be counted towards the quorum only if you submit a valid proxy card or if you vote at the Special Meeting. Abstentions will be counted towards the quorum requirement. If there is no quorum, a majority of the votes present at the Special Meeting may adjourn or postpone the Special Meeting to another date upon which a quorum may be obtained. Any adjournment may be made with respect to one or more proposals for the Company, but not necessarily for all proposals of the Company. In the event that a quorum is present at the Special Meeting but sufficient votes to approve any proposal are not received, the person named as proxy may propose one or more adjournments of the Special Meeting to permit further solicitation of proxies or to obtain the vote required for approval of one or more proposals. How can I find out the results of the voting at the Special Meeting? Preliminary voting results will be announced at the Special Meeting. Final voting results will be reported in the Company's Quarterly Report on Form 10-QSB for the fiscal quarter ending September 30, 2006. REASONS FOR THE SPECIAL MEETING The Special Meeting is being held in order to vote on two important proposals. Each proposal that will be presented at the Special Meeting is described in greater detail below. PROPOSAL NO. 1 CHANGE IN THE COMPANY'S STATE OF INCORPORATION FROM UTAH TO DELAWARE ("CHANGE OF DOMICILE") Principal Reasons for the Change of Domicile The Company's Board of Directors believes that the change of domicile will give the Company a greater measure of flexibility and simplicity in corporate governance than is available under Utah law and will increase the marketability of the Company's securities. The State of Delaware is recognized for adopting comprehensive modern and flexible corporate laws which are periodically revised to respond to the changing legal and business needs of corporations. For this reason, many major corporations have initially incorporated in Delaware or have changed their corporate domiciles to Delaware in a manner similar to that proposed by the Company. Consequently, the Delaware judiciary has become particularly familiar with corporate law matters and a substantial body of court decisions has developed construing the DGCL. The DGCL, accordingly, has been, and is likely to continue to be, interpreted in many significant judicial decisions, a fact which may provide greater clarity and predictability with respect to the Company's corporate legal affairs. For these reasons, the Company's Board of Directors believes that the Company's business and affairs can be conducted to better advantage if the Company is able to operate under Delaware law. See "Certain Significant Differences between the Corporation Laws of Delaware and Utah," below. 3 Principal Features of the Change of Domicile The change of domicile will be effected by the merger of the Company, a Utah corporation, with and into, Digicorp, Inc., a newly formed wholly owned subsidiary of the Company that was incorporated on May 30, 2006, under the DGCL for the purpose of effecting the change of domicile. The change of domicile will become effective upon the filing of the requisite merger documents in Delaware and Utah, which filings will occur promptly after the Special Meeting. Following the merger, Digicorp, Inc. will be the surviving corporation. On the effective date of the change of domicile, (i) each issued and outstanding share of Common Stock of the Company will be converted into one share of common stock of Digicorp, Inc., $.001 par value ("New Common Stock"), and (ii) each outstanding share of common stock of Digicorp, Inc. held by the Company will be retired and canceled and will resume the status of authorized and unissued Common Stock. On the effective date of the change of domicile, the Company will be governed by the Delaware Certificate of Incorporation of Digicorp, Inc. (the "Delaware Certificate"), the Delaware Bylaws of Digicorp, Inc. (the "Delaware Bylaws") and the DGCL, which include a number of provisions that are not part of the Company's present Articles of Incorporation, the Company's present Bylaws or the Utah Revised Business Corporation Act. Accordingly, as described below, a number of significant changes in shareholders' rights will be effected in connection with the change of domicile, some of which may be viewed as limiting the rights of shareholders. In particular, the Delaware Certificate includes a provision authorized by the DGCL that would limit the liability of directors to the Company and its shareholders for breach of fiduciary duties. The Delaware Certificate will provide directors and officers with modern limited liability and indemnification rights authorized by the DGCL. The Board of Directors of the Company believes that these provisions will enhance its ability to attract and retain qualified directors and encourage them to continue to make entrepreneurial decisions on behalf of the Company. Accordingly, implementation of these provisions has been included as part of the change of domicile. The Company believes that the change of domicile will contribute to the long-term quality and stability of the Company's governance. The Company's Board of Directors has concluded that the benefit to shareholders of improved corporate governance from the change of domicile outweighs any possible adverse effects on shareholders of reducing the exposure of directors to liability and broadening director indemnification rights. Upon consummation of the change of domicile, the daily business operations of the Company will continue as they are presently conducted at the Company's principal executive office located at 4143 Glencoe Avenue, Marina Del Rey, California 90292. After the change of domicile, the authorized capital stock of the Company will consist of 60,000,000 shares of common stock, $.001 par value per share and 1,000,000 shares of preferred stock, $.001 par value per share (the "Preferred Stock"). The Preferred Stock will be issuable in series by action of the Company's Board of Directors. The Board of Directors will be authorized, without further action by the shareholders, to fix the designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions of the unissued Preferred Stock including shares of Preferred Stock having preferences and other terms that might discourage takeover attempts by third parties. After the change of domicile, the Board of Directors will continue to consist of those persons presently serving on the Board of Directors of the Company. The individuals who will serve as executive officers of the Company after the change of domicile are those who currently serve as executive officers of the Company. Exchange of Share Certificates As soon as practicable upon or after the change of domicile, the Company's shareholders of record immediately prior to the change of domicile will be sent detailed instructions concerning the procedures to be followed for submission of certificates representing Common Stock to the Company's transfer agent, together with a form of transmittal letter to be sent to the transfer agent at the time such certificates are submitted. After the change of domicile, the transfer agent will deliver to any holder who has previously submitted a duly completed and executed transmittal letter and a certificate representing the Common Stock, a new certificate issued by the Company representing an equal number of shares of Common Stock into which such shares of the Common Stock were converted. 4 After the change of domicile but before a certificate representing Common Stock is surrendered, certificates representing New Common Stock will represent the number of shares of Common Stock as a Delaware corporation into which such Common Stock was converted pursuant to the terms of the change of domicile. Failure by a shareholder to return appropriate transmittal letters or to surrender certificates representing Common Stock will not affect such person's rights as a shareholder, as such shareholder's certificates representing Common Stock following the change of domicile will represent the number of shares of New Common Stock as a Delaware corporation into which such Common Stock was converted pursuant to the terms of the change of domicile, and will present no material consequences to the Company. Capitalization The authorized capital of the Company on the Record Date, consisted of 50,000,000 shares of Common Stock, $.001 par value per share, of which 37,100,820 shares of Common Stock were outstanding. The authorized capital of Digicorp, Inc., which will be the authorized capital of the Company after the change of domicile, consists of 60,000,000 shares of New Common Stock and 1,000,000 shares of Preferred Stock. As part of the change of domicile, the authorized Common Stock of the Company will be increased from 50,000,000 shares to 60,000,000 shares. The Company does not have any plans to issue additional authorized New Common Stock or Preferred Stock. After the change of domicile the Company will have outstanding approximately 37,100,820 shares of New Common Stock and no shares of Preferred Stock. The change of domicile will not affect total shareholder equity or the total outstanding capitalization of the Company. The Preferred Stock that will be authorized upon effectiveness of the change of domicile is commonly referred to as "blank check" preferred stock ("Blank Check Preferred") because the Blank Check Preferred would have such designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof as shall be expressed in the resolution or resolutions providing for the issue of such stock adopted by the Board of Directors from time to time. As such, the Blank Check Preferred would be available for issuance without further action by the Company's shareholders, except as may be required by applicable law or pursuant to the requirements of the exchange or quotation system upon which the Company's securities are then trading or quoted. The Board of Directors believes that the creation of Blank Check Preferred is advisable and in the best interests of the Company and its shareholders for several reasons. The authorization of the Blank Check Preferred would permit the Board of Directors to issue such stock without shareholder approval and, thereby, provide the Company with maximum flexibility in structuring acquisitions, joint ventures, strategic alliances, capital-raising transactions and for other corporate purposes. The Blank Check Preferred would enable the Company to respond promptly to and take advantage of market conditions and other favorable opportunities without incurring the delay and expense associated with calling a special shareholders' meeting to approve a contemplated stock issuance. The authorization of the Blank Check Preferred would also afford the Company greater flexibility in responding to unsolicited acquisition proposals and hostile takeover bids. The issuance of Blank Check Preferred could have the effect of making it more difficult or time consuming for a third party to acquire a majority of the Company's outstanding voting stock or otherwise effect a change of control. Shares of Blank Check Preferred may also be sold to third parties that indicate that they would support the Board in opposing a hostile takeover bid. The availability of Blank Check Preferred could have the effect of delaying a change of control and of increasing the consideration ultimately paid to the Company and its shareholders. Authorization of the Blank Check Preferred is not intended to be an anti-takeover measure, and the Board of Directors is not aware of any present third party plans to gain control of the Company. The actual effect of the issuance of any shares of Blank Check Preferred upon the rights of holders of New Common Stock cannot be stated until the Board determines the specific rights of the holders of such Blank Check Preferred. However, the effects might include, among other things, restricting dividends on the New Common Stock, diluting the voting power of the New Common Stock, reducing the market price of the New Common Stock, or impairing the liquidation rights of the New Common Stock, without further action by the shareholders. Holders of the Company's New Common Stock will not have preemptive rights with respect to the Blank Check Preferred. 5 Although the Company may consider issuing Blank Check Preferred in the future for purposes of raising additional capital or in connection with acquisition transactions, the Company currently has no agreements or commitments with respect to the issuance of the Blank Check Preferred. Significant Differences Between the Corporation Laws of Utah and Delaware The Company is incorporated under the laws of the State of Utah and Digicorp, Inc. is incorporated under the laws of the State of Delaware. Upon the change of domicile, the shareholders of the Company, whose rights currently are governed by Utah law and the Company's Articles of Incorporation and Bylaws, which were created pursuant to Utah law, will become shareholders of a Delaware company, Digicorp, Inc., and their rights as shareholders will then be governed by Delaware law and the Delaware Certificate and the Delaware Bylaws which were created under Delaware law. Although the corporate statutes of Utah and Delaware are similar, certain differences exist. The most significant differences, in the judgment of the Company's management, are summarized below. This summary is not intended to be complete, and shareholders should refer to the DGCL and the Utah Revised Business Corporation Act ("Utah law") to understand how these laws apply to the Company and Digicorp, Inc. Quorum. Section 725(1) of the Utah law states that, unless the corporation's articles of incorporation provide otherwise, a majority of the votes entitled to be cast on a matter constitutes a quorum for action on that matter. Section 216 of the DGCL contains a similar provision, but goes on to state that "in no event shall a quorum consist of less than one-third of the shares entitled to vote at the meeting." Neither the Delaware Certificate nor the Delaware Bylaws will contain any contrary provision. Therefore, management does not believe that the change of domicile will create any material change in the shareholders' meeting quorum requirements of the Company. Action of Shareholders Without a Meeting. Both Section 704 of the Utah law and Section 228 of the DGCL permit any action that may be taken at an annual or special meeting of the shareholders to be taken without a meeting and without notice if one or more written consents, setting forth the action so taken, are signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take the action at a meeting at which all shareholders attend and vote. However, Section 1704(4) of the Utah law prohibits a Utah corporation in existence before July 1, 1992 from taking any action by the written consent of fewer than all of the shareholders entitled to vote with respect to the subject matter of the action unless a resolution providing otherwise is approved either by a written consent signed by all of the shareholders entitled to vote with respect to such matter or at a duly convened meeting of shareholders by a majority of the outstanding shares of common stock of the corporation entitled to vote. Because the Company was incorporated under the Utah law on July 19, 1983, and because the Company's shareholders have not approved a resolution providing otherwise, the Company, as a Utah corporation, presently may not take any action by the written consent of fewer than all of its shareholders entitled to vote. Both statutes further require that the corporation give notice of shareholder approval of any matter without a meeting, unless the written consents of all shareholders have been obtained. The Utah law requires that such notice be given to non-consenting shareholders at least ten days before the consummation of the matter authorized by consent, while the DGCL requires "prompt" notice of any such action. In any event, applicable federal securities laws in the United States require reporting companies with a class of securities registered pursuant to Section 12 Exchange Act to provide notice to shareholders of actions taken by written consent at least 20 days prior to the effective date of the corporate action. Accordingly, so long as the Company's common stock remains registered under Section 12 of the Exchange Act, this difference between the Utah law and the DGCL will not affect the rights of shareholders. However, Section 704(5) of the Utah law provides that directors may never be elected by written consent of shareholders unless the written consents of all shares entitled to vote on the election are obtained. The DGCL contains no comparable provision. Once the change of domicile has been completed, this difference may make it easier for the Company to take action by unanimous written consent of its shareholders and will make it easier for Company's shareholders to remove and elect directors by written consent. Authorized Number of Directors. Section 803(1) of the Utah Law provides that, once shares in a Utah corporation have been issued, the corporation must have at least three directors. Section 141(b) of the DGCL requires a Delaware corporation to have a minimum of one director. Therefore, following the change of domicile, it would be possible for the powers of the Board of Directors to be concentrated in the hands of fewer directors than is permitted by Utah law. 6 Removal of Directors. Under Section 808 of the Utah law, the shareholders of a Utah corporation may remove one or more directors with or without cause, unless the articles of incorporation provide that directors may be removed only for cause. If cumulative voting (the right of a shareholder to multiply the number of voting shares he, she or it owns times the number of directors to be elected, with the ability to vote the product thereof for one or more candidates) is in effect, a director may not be removed if the number of shares sufficient to elect him or her is voted against removal. Under the Utah law, a director may be removed by the shareholders only at a meeting called for that purpose, and the notice of the meeting must state that the purpose, or one of the purposes of the meeting, is the removal of the director. Section 141(k) of the DGCL provides similar removal provisions, but does not limit removal by shareholders to meetings called for that purpose. The effect of this difference in law would be to grant the Company's shareholders greater flexibility in removing directors. Special Meetings of Shareholders. Section 702(1) of the Utah law and Section 211(d) of the DGCL permit a corporation's Board of Directors and such person or persons as are authorized by the bylaws to call a special meeting of the shareholders. In addition, the DGCL permits a Delaware corporation to authorize such persons to call a special meeting in its certificate of incorporation. Unlike the DGCL, the Utah law also permits the holders of 10% or more of the shares entitled to vote on a matter to submit a written demand for a special meeting to the corporate secretary. Following the change of domicile, 10% or greater shareholders of the Company will not have the legal right to demand a special meeting. Indemnification of Directors. The Utah law and the DGCL contain similar provisions for the indemnification of directors in certain circumstances. Both statutes require a corporation to indemnify a director who was successful, on the merits or otherwise, in the defense of any proceeding or any claim, issue or matter, to which he or she was a party because of his or her status as a director of the corporation, against reasonable expenses incurred in connection with the proceeding or claim with respect to which he or she was successful. However, the Utah law authorizes the limitation of such mandatory indemnification in a corporation's articles of incorporation; the DGCL contains no such limitation. The effect of this difference following the change of domicile would be to prevent the Company from limiting mandatory indemnification of its directors in such circumstances. Inspection of Shareholder List for Meeting. After fixing a record date for a shareholders' meeting, Section 720 of the Utah Law requires a Utah corporation to prepare a list of the names of all its shareholders entitled to be given notice of the meeting and to make the shareholder list available for inspection by any shareholder for a period beginning on the earlier of ten days before the meeting for which the list was prepared or two business days after notice of the meeting is given, and continuing through the meeting and any adjournments thereof. Under Section 720(4) of the Utah law, if the corporation refuses to allow a shareholder to inspect the shareholder list before or at the meeting, the shareholder may apply to the district court of the county where the corporation's principal office or, if none, its registered office, is located, and the district court may summarily order inspection or copying of the list at the corporation's expense and may postpone the meeting until the inspection or copying is complete. Section 219(a) of the DGCL likewise requires a Delaware corporation to make its shareholder list available for inspection by shareholders prior to any meeting of shareholders, but this is required only for ten days prior to the meeting and at the meeting. Under Section 219(b) of the DGCL, the willful neglect or refusal of the directors to produce such list at a meeting for the election of directors will result in their ineligibility for election to any office at such meeting. This is the only remedy provided by the DGCL for failure to provide the shareholder list as required. Because management fully intends to comply with right of shareholders to inspect lists of shareholders entitled to be given notice of meetings, the Company's management does not believe that the foregoing statutory differences will have any significant effect on the rights of the Company's shareholders. Appraisal Rights. Section 262 of the DGCL provides appraisal rights to shareholders that are substantially similar to the Utah law in connection with mergers or consolidations. However, the statutes differ in that the DGCL permits a shareholder who has received notice of appraisal rights from the corporation, and who has submitted a written demand for appraisal, to file a petition with the Court of Chancery of the State of Delaware to demand a determination of the fair value of such shareholder's shares. Such petition must be filed within 120 days after the effective date of a merger or consolidation. Section 262(b) of the DGCL provides that shareholders do not have appraisal rights for certain mergers with or into single direct or indirect wholly owned subsidiaries, which includes the proposed change of domicile of the Company. The Utah law also sets forth procedures for a Utah corporation to give shareholders notice of their appraisal rights, and for such shareholders to exercise such rights. However, the Utah law authorizes only the corporation to commence judicial appraisal proceedings with all shareholders who have properly dissented and whose demand remain unresolved to be named as parties to such proceedings. 7 Dividends. Section 640 of the Utah law authorizes the Board of Directors of a Utah corporation to make distributions to its shareholders subject to the articles of incorporation. However, no such distribution may be made if, after giving it effect, the corporation would not be able to pay its debts as they become due in the usual course of business, or the corporation's total assets would be less than the sum of its total liabilities plus (unless the articles of incorporation permit otherwise) the amount that would be needed, if the corporation were dissolved at the time of the distribution, to satisfy the preferential rights of preferred shareholders. Section 170 of the DGCL similarly permits a Delaware corporation to pay dividends upon its capital stock subject to the certificate of incorporation, but only (a) out of its surplus, or, (b) if no surplus exists, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year, and then only if the corporation has capital equal to or in excess of the aggregate amount of capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of the corporation's assets. The DGCL also protects a corporation's Board of Directors from personal liability for good faith reliance on the records of the corporation and the representations and opinions of its officers and employees and others with respect to the determination of the amount of surplus or other funds from which dividends may be paid. The Utah law does not contain similar protection for the Board of Directors. Anti-Takeover Provisions. Section 61-6-1 et seq. of the Utah Code Annotated (the "Utah Control Shares Acquisitions Act" or "UCSAA") provides that "control shares" of an "issuing public corporation" acquired in a "control share acquisition" shall have the same rights as they had before such acquisition only to the extent granted by resolution of the shareholders of the corporation. The UCSAA defines "control shares" as shares that, when combined with all other voting shares held by the shareholder, would entitle the holder to vote in the election of directors within any of the following ranges of voting power: (a) 1/5 or more but less than 1/3 of all voting power; (b) 1/3 or more but less than a majority of all voting power; or (c) a majority or more of all voting power. An "issuing public corporation" is defined as a Utah corporation with (a) 100 or more shareholders; (b) its principal place of business, its principal office, or substantial assets within the state; and (c) (i) more than 10% of its shareholders resident in Utah; (ii) more than 10% of its shares owned by Utah residents; or (iii) 10,000 shareholders resident in the state. A Utah corporation's articles of incorporation or bylaws may provide that the UCSAA does not apply to control share acquisitions of the corporation, as long as any such provision is adopted before the control share acquisition in question. Section 203 of the DGCL prohibits a Delaware corporation that is (a) listed on a national securities exchange; (b) authorized for quotation on the NASDAQ Stock Market; or (c) held of record by more than 2,000 shareholders from engaging in any "business combination" with any "interested stockholder" for a period of three years from the date that such person became an interested stockholder. A Delaware corporation subject to Section 203 may engage in a "business combination" with an "interested stockholder" under certain circumstances including circumstances in which, prior to the person becoming an interested stockholder, the corporation's Board of Directors approves the "business combination" with the interested stockholder or the transaction in which the person becomes an interested shareholder. A "business combination" is defined as, among other things, a merger or consolidation of the corporation or any subsidiary with the interested stockholder or with any other corporation if such transaction is caused by the interested stockholder and as a result of such merger or consolidation Section 203 is not applicable to the surviving corporation. An "interested stockholder" is defined as any person that (a) owns 15% or more of the corporation's voting stock; or (b) is an affiliate or associate of the corporation and was the owner of 15% or more of the corporation's voting stock at any time within the three-year period immediately prior to the date on which it is sought to be determined whether such person is an interested stockholder. As under the UCSAA, a corporation may opt out of Section 203. However, under Section 203(b)(3) of the DGCL, if the corporation's certificate of incorporation or bylaws are amended to opt out by shareholder vote, such amendment will not be effective until 12 months after its adoption and will not apply to any business corporation between the corporation and any person who became an interested shareholder on or prior to such adoption. These foregoing differences are not the only differences between the Utah law and the DGCL. However, management believes that they are the most likely to have a material effect on the relative rights of the Company's shareholders as a result of the change of domicile. 8 Officers And Directors Upon the effective date of change of domicile, the present officers and directors will continue to be the officers and directors of the Company. Federal Tax Consequences The following is a discussion of certain federal income tax considerations that may be relevant to holders of Common Stock who receive New Common Stock as a result of the proposed change of domicile. No state, local, or foreign tax consequences are addressed herein. This discussion does not address the state, local, federal or foreign income tax consequences of the change of domicile that may be relevant to particular shareholders, such as dealers in securities, or Company shareholders who exercise dissenters' rights. In view of the varying nature of such tax considerations, each shareholder is urged to consult his or her own tax adviser as to the specific tax consequences of the proposed change of domicile, including the applicability of federal, state, local, or foreign tax laws. Subject to the limitations, qualifications and exceptions described herein, and assuming the change of domicile qualifies as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), the following federal income tax consequences generally should result: o No gain or loss should be recognized by the shareholders of the Company upon conversion of their Common Stock into New Common Stock pursuant to the change of domicile; o The aggregate tax basis of the New Common Stock received by each shareholder of the Company in the change of domicile should be equal to the aggregate tax basis of Common Stock converted in exchange therefor; o The holding period of New Common Stock received by each shareholder of the Company in the change of domicile should include the period during which the shareholder held his or her Common Stock converted therefor, provided such Common Stock is held by the shareholder as a capital asset on the effective date of the change of domicile; and o The Company should not recognize gain or loss for federal income tax purposes as a result of the change of domicile. The Company has not requested a ruling from the Internal Revenue Service or an opinion of counsel with respect to the federal income tax consequences of the change of domicile under the Code. The Company believes the change of domicile will constitute a tax-free reorganization under Section 368(a) of the Code, inasmuch as Section 368(a)(1)(F) of the Code defines a reorganization as a mere change in identity, form, or place of organization of one corporation however effected. Vote Required; Board Recommendation Proposal No. 1 (The authorization and approval of a change of the Company's domicile from Utah to Delaware effected by the merger of the Company, a Utah corporation, with and into, Digicorp, Inc., a newly formed wholly owned subsidiary of the Company that was incorporated under the DGCL for the purpose of effecting the change of domicile) will be approved if a majority of the outstanding shares of Common Stock of the Company are voted "FOR" the proposal. Abstentions will have the same effect as votes "AGAINST" Proposal No. 1. The Board unanimously recommends that you vote all of your shares "FOR" the approval of the Plan as described in this Proposal No. 1. 9 PROPOSAL NO. 2 AUTHORIZATION AND APPROVAL OF THE COMPANY'S STOCK OPTION AND RESTRICTED STOCK PLAN Background Effective July 20, 2005, the Board of Directors approved the Company's Stock Option and Restricted Stock Plan (the "Plan"), which provides for the issuance of a maximum of up to 15,000,000 restricted shares of common stock, options to purchase shares of Common Stock (including non-qualified stock options and also incentive stock options ("ISOs")) upon shareholder approval of this Proposal No. 2) and warrants to purchase shares of Common Stock to employees, directors and consultants. As of May 23, 2006 the Company has issued 16,071 restricted shares of Common Stock, options to purchase 8,662,500 shares of Common Stock and warrants to purchase 50,000 shares of Common Stock pursuant to the Plan. The Company is requesting stockholder approval of the Plan, which is included as Appendix A to this proxy statement. The purpose of the Plan is to advance the interests of the Company by providing to key employees of the Company and its subsidiaries who have substantial responsibility for the direction and management of the Company, as well as certain directors and consultants of the Company, additional incentives, to the extent permitted by law, to exert their best efforts on behalf of the Company, to increase their proprietary interest in the success of the Company, to reward outstanding performance and to provide a means to attract and retain persons of outstanding ability to the service of the Company. It is recognized that the Company cannot attract or retain these individuals without this compensation. Upon approval of Proposal No. 2 at the Special Meeting, options granted under the Plan may qualify as ISOs, as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). Except for restricted stock and options which have already been granted under the Plan as described above, and except for the equity compensation of Board members described below, the Company has not yet determined the amount of any options grants, warrant grants or restricted stock awards to be offered to any officers, employees, directors or consultants under the Plan. The Company has adopted the following policy for equity compensation paid to directors. Each director receives $1,000 for each meeting of the Board of Directors that each such director attends (either in person or by teleconference). Such $1,000 may be paid at the Company's option either in cash or in shares of restricted Common Stock of the Company valued at the closing price of the Common Stock on the date of the meeting or, if such meeting date is a day that the principal trading market of the Common Stock is not open for business, then valued at the closing price of the Common Stock on the most recent date after the meeting date on which the principal trading market is open for business. A committee of the Board of Directors (the "Committee") comprised of at least two non-employee directors determines the amount and features of the stock options, warrants or restricted stock to be awarded to participants in the Plan. The Committee evaluates a number of criteria, including the service of each such participant to the Company, the present and potential contributions of such participant to the success of the Company, and such other factors as the Committee deems relevant in connection with accomplishing the purposes of the Plan, including the recipient's current stock holdings, position with the Company, and other factors. The Committee does not apply a formula assigning specific weights to any of these factors when making its determination. The Committee awards stock options, warrants and restricted stock on a subjective basis and such awards depend in each case on the performance of the officer, employee or consultant under consideration, and in the case of new hires, their potential performance. Description of the Plan The following is a brief description of the material features of the Plan. Such description is qualified in its entirety by reference to the full text of the Plan, which is attached to this proxy statement as Appendix A. Purpose. The purpose of the Plan is to advance the interests of the Company by providing key employees of the Company who have substantial responsibility for the direction and management of the Company, as well as certain directors, employees and consultants with additional incentives to exert their best efforts to increase their proprietary interest in the success of the Company, to reward outstanding performance, and to attract and retain persons of outstanding ability. 10 Authorization. The Plan provides for the issuance of a maximum of 15,000,000 shares of Common Stock, which may be issued as restricted shares of Common Stock, options to purchase shares of Common Stock (including non-qualified stock options and also ISOs upon shareholder approval of this Proposal No. 2) and warrants to purchase shares of Common Stock. Administration. The Plan is administered by a Committee of the Board of Directors comprised of at least two members of the Board, each of whom must (a) be a non-employee director, as defined in Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"); and (b) be an "outside director" as the term is defined under Section 162(m) of the Code. The Committee interprets the Plan and, to the extent and in the manner contemplated in the Plan, exercises the discretion reserved to it in the Plan. The decision of the Committee on any interpretation of the Plan or administration thereof is final and binding with respect to the Company, any participant or any person claiming to have rights as, or on behalf of, any participant. Participants. The Committee determines and designates those officers, employees, directors and consultants of the Company who are eligible to participate in the Plan. The Committee also determines the number of options, warrants and shares of restricted stock to be awarded to each participant. In making these determinations, the Committee takes into account the potential contributions of the participant to the success of the Company, and such other factors as the Committee deems relevant to accomplish the purposes of the Plan. Award Agreements. All options, warrants and restricted stock granted under the Plan are evidenced by an agreement. Agreements evidencing awards made to different participants or at different times need not contain similar provisions. Options that are intended to be ISOs will be designated as such; any option not so designated will be treated as a non-qualified stock option. Terms of options and warrants. Stock options and warrants are granted under the Plan at a price not less than the prevailing market value at the time of grant and will have realizable value only if the Company's stock price increases. The Committee determines the amount and features of the stock options and warrants, if any, to be awarded to participants. The Committee evaluates a number of criteria, including the present and potential contributions of such participant to the success of the Company, and such other factors as the Committee deems relevant in connection with accomplishing the purposes of the Plan, including the participant's current stock holdings, position with the Company and other factors. The Committee does not apply a formula assigning specific weights to any of these factors when making its determination. The Committee awards stock options and warrants on a subjective basis and such awards depend in each case on the performance of the participant under consideration. Options granted under the Plan may be ISOs or non-qualified stock options. Exercise of options and warrants. Options and warrants are exercisable at a price equal to the fair market value of the shares at the time the option or warrant is granted, provided, however, that the exercise price of any option that is intended to be treated as an ISO and that is granted to a holder of 10% or more of the Company's shares may not be less than 110% of such current fair market value. The day on which the Company approves the grant of an option or warrant or the date specified in the Plan will be considered the date on which the option or warrant is granted. For purposes of the Plan, the fair market value of the shares as of any date is the average of the high and low trading prices of the shares on that date. Options may contain such other terms and conditions as the Committee deems advisable, including, but not limited to, being exercisable only in installments. Options and warrants granted to different participants or at different times need not contain similar provisions. Each option and warrant states the period or periods of time within which the option or warrant may be exercised by the participant, which may not exceed ten years from the date the option or warrant is granted and, in the case of an option that is intended to be an ISO and that is granted to a holder of 10% or more of the Company's shares, not more than five years. Unless specifically provided otherwise in an agreement evidencing the award of options, any option awarded to a participant becomes exercisable over four years, with 25% of the option becoming exercisable on each of the first four anniversaries of the date of the award. 11 Awards of Restricted Stock. Each award of restricted stock contains a vesting schedule, which sets forth the times at which the participant will acquire a nonforfeitable right to the shares awarded to him or her. In general, it is intended that awards of restricted stock will vest ratably over the four years following the date of the award, but an individual award agreement may provide otherwise. Shares that are not vested upon a participant's termination of employment with, or cessation of providing services to, the Company will be forfeited. Effect of change in shares subject to the Plan. If there is a change in the outstanding shares through the declaration of stock dividends, stock splits, or combinations or exchanges of shares, or otherwise, the number of shares available for options, warrants and awards of restricted stock and the shares subject to an option or warrant and the option and warrant prices will be appropriately adjusted by the Committee. Amendment and termination. The Board of Directors may amend or alter, suspend or discontinue the Plan at any time. While the Board may seek shareholder approval of an action modifying a provision of the Plan when deemed advisable, the Board may make certain modifications without shareholder approval (except with respect to the number of shares authorized for issuance under the Plan). The Plan will terminate ten years from the date of its adoption by the Board. Resale of shares acquired pursuant to awards. Participants purchasing shares pursuant to options, warrants and/or vesting in awards of restricted stock may resell the shares through brokers or dealers at prevailing market prices, to the extent a market exists for the Company's Common Stock. Any sales by participants who may be deemed affiliates of the Company must be made pursuant to registration under the Securities Act or pursuant to an exemption therefrom. Any resale of shares acquired pursuant to awards under the Plan that are made pursuant to registration under the Securities Act or an exemption therefrom may be made at the Company's expense. Federal tax consequences of the Plan. The following is a summary of certain federal income tax consequences of transactions under the Plan based on current federal income tax laws. This summary is not intended to be exhaustive and does not describe state, local, or other tax consequences. Non-qualified stock options and warrants. The grant of a non-qualified stock option or a warrant under the Plan will not result in the recognition of taxable income to the participant or in a deduction to the Company. In general, upon exercise, a participant will recognize ordinary income in an amount equal to the excess of the fair market value of the shares of common stock purchased over the exercise price. The Company is required to withhold tax on the amount of income so recognized, and is entitled to a tax deduction equal to the amount of such income. Gain or loss upon a subsequent sale of any shares of common stock received upon the exercise of a non-qualified stock option or a warrant is taxed as capital gain or loss (long-term or short-term, depending upon the holding period of the stock sold) to the participant. Incentive stock options. Generally, neither the grant nor the exercise of an incentive stock option will result in the recognition of taxable income by the participant. Rather, when the participant disposes of stock acquired upon exercise of an ISO, the participant will recognize income in the amount of the excess of the amount realized upon disposition (if any) over the exercise price. This special tax treatment is available only if the participant does not dispose of the stock acquired upon the exercise of the ISO before the later of the first anniversary of the date of exercise or the second anniversary of the date of the grant of the option. A disposition before that time is referred to as a "disqualifying disposition." If a participant effects a disqualifying disposition, he or she will generally have income taxable at ordinary rates equal to the excess of the fair market value of the stock on the date of exercise over the exercise price and income taxable at capital gains rates on any amount realized on disposition in excess of the fair market value of the stock on the date of exercise. The Company is generally not entitled to any deduction in connection with the issuance or exercise of an ISO. If, however, a participant effects a disqualifying disposition, the Company will be entitled to a deduction in an amount equal to the amount of income recognized by the participant that is taxable at ordinary income rates. Restricted Stock. The grant of an award of restricted stock will not result in the recognition of taxable income or in a deduction for the Company. Instead, when a participant becomes vested in shares of restricted stock, the participant generally will recognize income taxable at ordinary income rates in an amount equal to the fair market value of the stock on the date of vesting, and the Company will be entitled to a corresponding deduction. A participant may, however, make an election to include in income at the time of grant the fair market value of the restricted stock by making an election under section 83(b) of the Code within 30 days of the award of restricted stock. The Company will be entitled to a corresponding deduction. If the participant subsequently forfeits shares of restricted stock, he or she may not be entitled to claim a deduction or a loss. 12 Transferability of Options, Warrants and Restricted Stock. Options, warrants and restricted stock is not transferable other than to the spouse or lineal descendants (including adopted children) of the participant, any trust for the benefit of the participant or the benefit of the spouse or lineal descendants (including adopted children) of the participant, or the guardian or conservator of the participant. Termination of Options, Warrants and Restricted Stock Awards. All rights to exercise options and warrants terminate 60 days after any optionee or warrant holder ceases to be a director of the Company or a key employee or consultant of the Company and/or any of its subsidiaries, and no options or warrants will vest after an optionee's or warrant holder's termination date. Notwithstanding the foregoing, however, if an optionee's or warrant holder's service as a director of the Company or key employee or consultant terminates as a result of the optionee's or warrant holder's death or his total and permanent disability, the optionee, warrant holder or the executors or administrators or legatees or distributees of the estate, as the case may be and to the extent they are permitted transferees, shall have the right, from time to time within one year after the optionee's or warrant holder's total and permanent disability or death and prior to the expiration of the term of the option or warrant, to exercise any portion of the option or warrant not previously exercised, in whole or in part, as provided in the respective agreement evidencing the award of the options or warrants. A participant's rights to shares awarded as restricted stock shall, under all circumstances, be set forth in the agreement evidencing the award of restricted stock. Vote Required; Board Recommendation Proposal No. 2 (the authorization and approval of the Company's Stock Option and Restricted Stock Plan) will be approved if a majority of the total votes properly cast in person or by proxy at the Special Meeting by the holders of Common Stock are voted "FOR" the proposal. Abstentions will have no effect on the result of the vote. The Board unanimously recommends that you vote all of your shares "FOR" the approval of the Plan as described in this Proposal No. 2. ADDITIONAL INFORMATION Executive Compensation The following table sets forth information concerning the total compensation that we have paid or that has accrued on behalf of our chief executive officer and other executive officers with annual compensation exceeding $100,000 during the years ended December 31, 2005, 2004 and 2003 (the "named executive officers"). SUMMARY COMPENSATION TABLE