<PAGE> 1
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
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(c)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
DIGICON INC.
- --------------------------------------------------------------------------------
(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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:
- --------------------------------------------------------------------------------
<PAGE> 2
DIGICON INC.
3701 KIRBY DRIVE
[LOGO] HOUSTON, TEXAS 77098
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 19, 1995
---------------------
Notice is hereby given that the annual meeting of the stockholders of
Digicon Inc. will be held at the offices of the Company, 3701 Kirby Drive,
Houston, Texas 77098, on Tuesday, December 19, 1995, at 10:00 a.m., Houston
time, for the following purposes:
1. To elect a board of eight directors to serve until the next annual
meeting of stockholders or until their successors are elected and qualify;
2. To consider and act upon the proposed amendment to the Company's
1992 Employee Nonqualified Stock Option Plan; and
3. To consider and act upon such other business as may properly be
presented to the meeting.
A record of stockholders has been taken as of the close of business on
October 31, 1995, and only those stockholders of record on that date will be
entitled to notice of and to vote at the meeting. A stockholders' list will be
available commencing December 8, 1995, and may be inspected during normal
business hours prior to the annual meeting at the offices of the Company, 3701
Kirby Drive, Houston, Texas 77098.
If you do not expect to be present at the meeting, please sign and date the
enclosed proxy and return it promptly in the enclosed stamped envelope which has
been provided for your convenience. The prompt return of proxies will ensure a
quorum and save the Company the expense of further solicitation.
By Order of the Board of Directors,
ALLAN C. POGACH,
Secretary
November 9, 1995
<PAGE> 3
DIGICON INC.
3701 KIRBY DRIVE
HOUSTON, TEXAS 77098
PROXY STATEMENT
This proxy statement is being mailed to stockholders commencing on or about
November 9, 1995, in connection with the solicitation by the board of directors
of Digicon Inc. (the "Company") of proxies to be voted at the annual meeting of
stockholders to be held in Houston, Texas, on Tuesday, December 19, 1995, and at
any adjournment thereof, for the purposes set forth in the accompanying notice.
Proxies will be voted in accordance with the directions specified thereon
and otherwise in accordance with the judgment of the persons designated as
proxies. Any proxy on which no direction is specified will be voted for (i) the
election of the nominees named herein to the board of directors, and (ii) the
amendment of the Company's 1992 Employee Nonqualified Stock Option Plan.
Abstentions and broker non-votes (i.e., proxies marked to indicate that the
shares are not being voted) will be treated as present for purposes of
determining whether a quorum is present. Abstentions will have the same legal
effect as votes against a proposal and broker non-votes will be disregarded. A
stockholder may revoke a proxy by (i) delivering to the Company written notice
of revocation, (ii) delivering to the Company a signed proxy of a later date, or
(iii) appearing at the meeting and voting in person.
Votes will be tabulated and the results will be certified by election
inspectors who are required to resolve impartially any interpretive questions as
to the conduct of the vote. In tabulating votes on the proposed amendment to the
Company's 1992 Employee Nonqualified Stock Option Plan, a record will be made of
the number of shares voted for and against each proposal, the number of shares
with respect to which authority to vote has been withheld and the number of
shares held of record by broker-dealers present at the meeting but not voting,
all of which will be presented in the Company's post-meeting report to
stockholders.
As of October 31, 1995, the record date for the determination of
stockholders entitled to vote at the meeting, there were outstanding and
entitled to vote 11,134,939 shares of the Company's common stock, par value $.01
per share ("Common Stock"). Each share of Common Stock entitles the holder to
one vote on all matters presented at the meeting. Holders of a majority of the
shares of Common Stock entitled to vote must be present, in person or by proxy,
to constitute a quorum for the transaction of business.
ELECTION OF DIRECTORS
At the meeting, eight nominees are to be elected, each director to hold
office until the next annual meeting of stockholders or until his successor is
elected and qualifies. The persons named in the accompanying proxy have been
designated by the board of directors, except as otherwise indicated, and unless
authority is withheld, they intend to vote for the election of the nominees
named below to the board of directors. All of the nominees previously have been
elected directors by the stockholders. If any nominee should become unavailable
for election, the proxy may be voted for a substitute nominee selected by the
persons named in the proxy or the board may be reduced accordingly; however, the
board of directors is not aware of any circumstances likely to render any
nominee unavailable.
The Company's bylaws require that, until such time as Jupiter & Associates
(a New York general partnership whose shares of the Company's Common Stock have
been distributed by it to its general partners and certain affiliates of such
general partners, such parties being referred to collectively as the "Jupiter
Group") and Quantum Partners LDC, a Netherlands Antilles corporation
("Quantum"), no longer collectively own more than 20% of the Company's
outstanding Common Stock, they will have the right to (i) designate an aggregate
of six nominees for election as directors (out of a present eight positions) at
each annual meeting of stockholders, (ii) appoint one additional director to an
expanded board of directors if the Company defaults in any payment obligation on
any of its then outstanding debt instruments or equity securities or if the
Company were to incur losses for any five consecutive fiscal quarters and (iii)
designate two
<PAGE> 4
of the three members of the executive committee of the board. Both the Jupiter
Group and Quantum have agreed that during such time they will vote their shares
in favor of the other's nominees. See "Other Information -- Certain
Stockholders."
Certain information concerning the nominees is set forth below and reflects
share information adjusted for a one for three reverse stock split (the "Reverse
Split") effective January 17, 1995:
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED
OCTOBER 31, 1995(1)
PRINCIPAL POSITION DIRECTOR ------------------------
NAME WITH THE COMPANY AGE SINCE SHARES PERCENT
- ---------------------------------- ---------------------- --- -------- --------- -------
<S> <C> <C> <C> <C> <C>
George F. Baker(2)(3)............. Director 56 1992 2,057,324(7)(9) 18.35%
James B. Clement(2)(6)............ Director 50 1994 6,666(9) *
Clayton P. Cormier(3)(4).......... Director 63 1991 10,671(9) *
Steven J. Gilbert(4)(5)(6)........ Director 48 1991 1,081,035(8)(9)(11) 9.63%
Stephen J. Ludlow(5).............. Director, president 45 1994 32,351(9) *
and chief executive
officer
Edward R. Prince, Jr.............. Director 66 1965 68,207(9) *
Douglas B. Thompson(2)(5)(6)...... Director and chairman 46 1991 2,099,324(7)(9)(10) 18.65%
of the board
Jack C. Threet(2)(3)(6)........... Director 67 1991 12,395(9) *
</TABLE>
- ---------------
* Does not exceed one percent.
(1) Each person has sole voting and investment power with respect to the
shares listed, except as otherwise specified, and is a United States
citizen.
(2) Designated by the Jupiter Group (see "Other Information--Certain
Stockholders").
(3) Member, audit committee of the board.
(4) Designated by Quantum (see "Other Information--Certain Stockholders").
(5) Member, executive committee of the board.
(6) Member, compensation committee of the board.
(7) Includes 2,047,325 shares of Common Stock which may be deemed to be
beneficially owned by Messrs. Thompson and Baker by virtue of their
participation in the Jupiter Group, but as to which Messrs. Thompson and
Baker disclaim beneficial ownership (see "Other Information -- Certain
Stockholders").
(8) Includes 1,024,263 shares of Common Stock held by Quantum Partners LDC
which may be deemed beneficially owned by Mr. Gilbert by virtue of an
investment advisory contract between Mr. Gilbert and Quantum Partners
LDC. Mr. Gilbert disclaims beneficial ownership as to these shares.
(9) Includes shares of Common Stock which the named individual has the right
to acquire upon exercise of currently exercisable warrants and stock
options, as follows: Mr. Baker -- 9,999; Mr. Clement -- 6,666; Mr.
Cormier -- 9,999; Mr. Gilbert -- 9,999; Mr. Ludlow -- 26,702; Mr.
Prince -- 67,742; Mr. Thompson -- 9,999; and Mr. Threet -- 9,999.
(10) Includes 42,000 shares of Common Stock which Jupiter Management Co.,
Inc. has the right to acquire upon exercise of currently exercisable
warrants. Mr. Thompson, by virtue of his affiliation with Jupiter
Management Co., Inc., may be deemed to beneficially own such shares, but
disclaims any beneficial ownership.
(11) Includes 43,200 shares of Common Stock which Soros Capital L.P. has the
right to acquire upon exercise of currently exercisable warrants. Mr.
Gilbert may be deemed to beneficially own such shares by virtue of his
affiliation with Soros Capital L.P.
2
<PAGE> 5
George F. Baker has been president of Cambridge Capital Holdings, Inc., a
private investment firm, for more than five years. He also serves as chairman of
the board and president of Whitehall Corporation, a manufacturer of seismic
towed arrays for offshore oil exploration and, through its Aerocorp subsidiary,
is a provider of aircraft maintenance for the airline industry.
James B. Clement has served as the president and chief executive officer of
Offshore Logistics, Inc., a supplier of helicopter, transportation and related
services to the oil and gas industry since November 1987, where he is also a
director. Mr. Clement also is a member of the board of directors of Pride
Petroleum Services, Inc.
Clayton P. Cormier is currently a financial and insurance consultant. From
1986 to 1991, Mr. Cormier was a senior vice president in the oil and gas
division of Johnson & Higgins, an insurance broker. From 1979 to 1986, he was
the chairman of the board, president and chief executive officer of Ancon
Insurance Company, S.A. Prior to that time, he was an assistant treasurer of
Exxon Corporation.
Steven J. Gilbert has been Managing General Partner of Soros Capital L.P.
since 1992. Soros Capital L.P. is the principal venture capital and leveraged
transaction entity of Quantum Group of Funds. He is also the Managing Director
of Commonwealth Capital Partners, L.P., a private equity investment fund. From
1984 to 1988, Mr. Gilbert was the Managing General Partner of Chemical Venture
Partners, which he founded. Mr. Gilbert is a director of Katz Media Group, Inc.,
NFO Research, Inc., The Asian Infrastructure Fund, Peregrine Indonesia Fund,
Inc., Terra Nova (Bermuda) Holdings, Ltd., GTS-Duratek, Inc., Sydney Harbour
Casino Holdings, Ltd. and UroMed, Inc., and is a member of the Advisory
Committee of Donaldson, Lufkin & Jenrette Merchant Banking.
Stephen J. Ludlow has served as chief executive officer since May 1994 and
was executive vice president of the Company for the four preceding years.
Edward R. Prince, Jr., has been Vice Chairman of the board of Zydeco
Exploration, Inc., an independent oil and gas exploration and service company
since August 1994. Prior to taking an indefinite leave of absence in May 1994,
Mr. Prince served as the Company's chairman of the board and chief executive
officer for a number of years.
Douglas B. Thompson has served as chairman of the board since May 1994 and
has been president of Jupiter Management Co., Inc. ("Jupiter Management"), a
general partner of Jupiter & Associates ("Jupiter"), since Jupiter Management's
formation in 1989. He is also the sole director and shareholder of Jupiter
Investment Company and J/D Funding Corp., both general partners of Jupiter, and
is the sole shareholder of Jupiter Management. In addition, he is chairman of
the board and president of WellTech, Inc., a well servicing company based in
Houston, Texas. Mr. Thompson is also a director of Tacoma Boatbuilding Co., a
company engaged in the design and manufacture of marine vessels (see "Other
Information -- Certain Stockholders").
Jack C. Threet was formerly vice president for exploration of Shell Oil
Company. Prior to his retirement from Shell Oil Company in 1987, Mr. Threet was
also a member of the boards of directors of several affiliate(s) of Shell Oil
Company.
BOARD AND COMMITTEE ACTIVITY, STRUCTURE AND COMPENSATION
During fiscal 1995, the board of directors convened on four regularly and
specially scheduled occasions, and committees of the board held meetings as
follows: executive committee -- no meetings; audit committee -- four meetings;
and compensation committee -- two meetings. The executive committee of the board
is authorized to exercise, to the extent permitted by law, the power of the full
board of directors when a meeting of the full board is not practicable or
necessary. The compensation committee recommends to the board for approval the
compensation for officers and administers the Company's compensation plans. For
information concerning the audit committee, see "Other Information -- Auditors."
The board of directors does not presently maintain a nominating committee;
stockholders who may wish to suggest individuals for possible future
consideration for board positions should direct recommendations to the executive
committee of the
3
<PAGE> 6
board of directors at the Company's principal offices. Each director attended at
least 75% of the meetings held during the year by the board and each committee
on which he served.
Each director who is not otherwise compensated by the Company is paid an
annual fee of $18,000 plus travel expenses, if any. Directors are not
compensated for service on committees of the board. The Company maintains a
stock option plan for non-employee directors (the "Director Plan") providing for
stock options to be granted to each non-employee director of the Company. Under
the Director Plan, each eligible director is granted on each December 31 an
option to purchase 3,333 shares of the Company's Common Stock (as adjusted for
the Reverse Split), subject to an aggregate limit of 16,666 option shares (as
adjusted for the Reverse Split) for each director. The exercise price for each
option granted is the average closing price of the Common Stock for the 30
trading days prior to the date of grant. Options may be exercised at any time
(i) after the later of six months following the date of grant or the first
anniversary of the director's service on the board and (ii) before the sixth
anniversary of the date of grant, when the option expires.
EXECUTIVE OFFICER TENURE AND IDENTIFICATION
The executive officers of the Company serve at the pleasure of the board of
directors and are subject to annual appointment by the board at its first
meeting following the annual meeting of stockholders. In addition to Mr. Ludlow,
who is listed in the foregoing table, the Company's executive officers are as
follows:
Nicholas A. C. Bright, age 49, has been the subsidiary officer in
charge of all European, African and Middle Eastern geophysical operations
for more than five years.
David E. Graham, age 48, joined the Company in July 1995, was
designated an executive officer in October 1995 and is the subsidiary
officer in charge of North American geophysical operations. Mr. Graham has
26 years of experience in the exploration business including the past 8
years with Schlumberger, where he most recently served as western
hemisphere sales and marketing manager for Geco-Prakla, a geophysical
subsidiary of Schlumberger.
Richard W. McNairy, age 55, has served as vice president and chief
financial officer of the Company since February 1994, prior to which he was
corporate controller of Halliburton Energy Services Group for three years
and vice president -- finance for its geophysical services subsidiary for
the preceding two years.
Allan C. Pogach, age 50, has served as vice president and treasurer of
the Company since 1981 and as corporate secretary since July 1994.
Timothy L. Wells, age 42, was appointed to his present position as the
subsidiary officer in charge of the Company's Far Eastern geophysical
operations in August 1995, was designated an executive officer in October
1995 and has been employed by the Company in a series of progressively more
responsible technical and managerial positions since 1981.
4
<PAGE> 7
MANAGEMENT SHAREHOLDINGS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock at October 31, 1995, as adjusted for the
Reverse Split, of (i) all directors of the Company, (ii) the chief executive
officer and each of the other executive officers named in the Summary
Compensation Table (See "Other Information--Executive Compensation") and (iii)
all directors and executive officers, as a group.
<TABLE>
<CAPTION>
NUMBER OF PERCENT
SHARES OF CLASS
--------- --------
<S> <C> <C>
George F. Baker............................................... 2,057,324(1)(2) 18.35%
James B. Clement.............................................. 6,666(2) *
Clayton P. Cormier............................................ 10,671(2) *
Steven J. Gilbert............................................. 1,081,035(2)(3)(4) 9.63%
Stephen J. Ludlow............................................. 32,351(2) *
Edward R. Prince, Jr.......................................... 68,207(2) *
Douglas B. Thompson........................................... 2,099,324(1)(2)(5) 18.65%
Jack C. Threet................................................ 12,395(2) *
Nicholas A. C. Bright......................................... 13,333(2) *
Richard W. McNairy............................................ 16,233(2) *
Allan C. Pogach............................................... 13,333(2) *
All directors and officers as a group (11 persons named
above)...................................................... 3,363,547(6) 29.20%
</TABLE>
- ---------------
* Does not exceed one percent.
(1) Includes 2,047,325 shares of Common Stock which may be deemed to be
beneficially owned by Messrs. Thompson and Baker by virtue of their
participation in the Jupiter Group, but as to which Messrs. Thompson and
Baker disclaim beneficial ownership (see "Other Information--Certain
Stockholders").
(2) Includes shares of Common Stock which the named individual has the right
to acquire upon exercise of currently exercisable warrants and stock
options, as follows: Mr. Baker--9,999; Mr. Clement--6,666; Mr.
Cormier--9,999; Mr. Gilbert--9,999; Mr. Ludlow--26,702; Mr.
Prince--67,742; Mr. Thompson--9,999; Mr. Threet--9,999; Mr.
Bright--13,333; Mr. McNairy--13,333; and Mr. Pogach--13,333.
(3) Includes 1,024,263 shares of Common Stock held by Quantum Partners LDC
which may be deemed beneficially owned by Mr. Gilbert by virtue of an
investment advisory contract between Mr. Gilbert and Quantum Partners
LDC. Mr. Gilbert disclaims beneficial ownership as to these shares.
(4) Includes 43,200 shares of Common Stock which Soros Capital L.P. has the
right to acquire upon exercise of currently exercisable warrants. Mr.
Gilbert may be deemed to beneficially own such shares by virtue of his
affiliation with Soros Capital L.P.
(5) Includes 42,000 shares of Common Stock which Jupiter Management Co., Inc.
has the right to acquire upon exercise of currently exercisable warrants.
Mr. Thompson, by virtue of his affiliation with Jupiter Management Co.,
Inc., may be deemed to beneficially own such shares, but disclaims any
beneficial ownership.
(6) Includes (i) 3,071,588 shares of Common Stock which may be deemed to be
beneficially owned by Messrs. Thompson and Baker by virtue of their
participation in the Jupiter Group and by Mr. Gilbert by virtue of an
investment advisory contract between Mr. Gilbert and Quantum Partners
LDC, but as to which Messrs. Thompson, Baker and Gilbert disclaim
beneficial ownership, (ii) 43,200 shares of Common Stock which may be
acquired by Soros Capital L.P. upon the exercise of outstanding warrants,
and may be deemed to be beneficially owned by Mr. Gilbert as noted in
note 4 above, (iii) 42,000 shares of Common Stock which may be acquired
by Jupiter Management Co., Inc. upon the exercise of outstanding
warrants, and may be deemed to be beneficially owned by Mr. Thompson, but
as to which he disclaims beneficial ownership as noted in note 5 above,
and (iv) shares of Common Stock which may be acquired by officers and
directors of the Company upon the exercise of outstanding stock options
and warrants, as noted in note 2 above.
5
<PAGE> 8
APPROVAL
The eight nominees for election as directors at the annual meeting who
receive the greatest number of votes cast for election by the holders of Common
Stock entitled to vote and present, in person or by proxy, at the annual meeting
shall be the duly elected directors of the Company. The Board of Directors
recommends a vote FOR all eight nominees to the Company's Board of Directors.
PROPOSED APPROVAL OF AMENDMENT TO
1992 EMPLOYEE NONQUALIFIED STOCK OPTION PLAN
The 1992 Employee Nonqualified Stock Option Plan (the "Employee Plan") was
originally approved by the Company's stockholders in December 1992. The Employee
Plan entitles officers and other key employees of the Company and its
subsidiaries to receive nonqualified options to purchase up to an aggregate of
658,333 shares of post-Reverse Split Common Stock. In October 1995, the Board of
Directors approved amendments to the Employee Plan that would (i) increase the
aggregate number of shares which may be issued or covered by nonqualified
options pursuant to the Employee Plan, and (ii) accelerate the exercisability of
options outstanding under the Employee Plan upon a Change of Control (as defined
below) of the Company.
The Board of Directors adopted these amendments as a means to provide (i)
officers and other key employees with a continuing proprietary interest in the
Company, and (ii) to ensure that such employees are provided with incentives to
remain with the Company in the event of a Change in Control. The Company will
continue to grant options under the Employee Plan until the earlier to occur of
(i) the Employee Plan's expiration or (ii) the issuance of options covering all
shares of Common Stock reserved for issuance under the Employee Plan.
DESCRIPTION OF AMENDMENTS
Increase in Shares Subject to Plan. The proposed amendment would increase
the number of shares of Common Stock which may be issued or covered by options
pursuant to the Employee Plan by 500,000. Of the original 658,333 options (as
adjusted for the Reverse Split) authorized for grant under the Employee Plan,
39,833 options remain available for grant as of October 31, 1995. If the
proposed amendment is approved, the aggregate number of shares which may be
issued or covered by options pursuant to the Employee Plan would be 1,158,333
shares.
Acceleration of Exercisability on Change in Control. The Employee Plan
provides that each option shall contain such terms and conditions as the
compensation committee shall deem appropriate. In the event of a Change in
Control, the proposed amendment would accelerate the exercisability of all
outstanding options. Each option would be exercisable on the date of occurrence
of a Change in Control, for the purchase of the full number of shares subject to
such option.
For purposes of the proposed amendment, "Change in Control" means the
acquisition by any person of 50% or more of the shares of Common Stock of the
Company. Although the board of directors is not aware of any specific action or
plan involving a Change in Control of the Company, it recognizes the possibility
that such circumstances may occur.
NEW PLAN BENEFITS
The dollar value of benefits or amounts to be received under proposed
amendments to the Employee Plan are not determinable because as of October 31,
1995, the fair market value of a share of the Company's Common Stock exceeded
the exercise price of substantially all currently exercisable options granted
under the Employee Plan. As of October 31, 1995, 618,500 outstanding options
would be affected by the proposed amendment, including 110,666 held by executive
officers (44,000 which were granted in fiscal year 1996 and are currently
unexercisable). See "Other Information -- Employee Options" below.
6
<PAGE> 9
APPROVAL
The affirmative vote of the holders of a majority of the shares of Common
Stock outstanding and represented at the meeting, in person or by proxy, is
required to approve proposed amendments to the Employee Plan. The Board of
Directors recommends a vote FOR the approval of the proposed amendments to the
Employee Plan.
OTHER INFORMATION
CERTAIN STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock at October 31, 1995, as adjusted for the
Reverse Split, by each person who is known by the Company to own beneficially
more than 5% of the outstanding shares of Common Stock.
<TABLE>
<CAPTION>
PERCENT
NAME OF PERSON NUMBER OF OF
OR IDENTITY OF GROUP SHARES CLASS
------------------------------------------------------------ --------- -----
<S> <C> <C>
Quantum Partners LDC ("Quantum")............................ 1,024,263(4)(5) 9.17%
Kaya Flamboyan 9
Willemstad, Curacao
Netherlands Antilles
Soros Fund Management(1)
George Soros(2)
Jupiter Group(3) ......................................... 939,873(4)(6) 8.43%
Fund American Investment Subsidiary I, Inc.
c/o Fund American Enterprises Holdings, Inc.
The 1820 House
Main Street
Norwich, VT 05055
Acorn Fund.................................................. 940,000 8.44%
c/o Wanger Asset Management L.P.(7)
227 West Monroe, Suite 3000
Chicago, Illinois 60606
Wellington Trust Company, N.A.(BK).......................... 729,997 6.56%
c/o Wellington Management Company
75 State Street
Boston, Mass 02109
</TABLE>
- ---------------
(1) Investment advisor to Quantum.
(2) Sole proprietor of Soros Fund Management.
(3) The Jupiter Group consists of (a) Jupiter Investment Company, Inc., J/D
Funding Corp., DN Funding Corp., CCF/Jupiter, L.P., DJ Investors, L.P.,
and Fund American Investment Subsidiary I, Inc., each of which is a
general partner of Jupiter & Associates, a New York general partnership
("Jupiter"), and (b) Fund American Enterprises, Inc., Fund American
Enterprises Holdings, Inc., Neptune Partners -- 1989A, L.P., Neptune 1989
Investors Limited, Neptune 1989C Offshore Investors Limited, Restart
Partners, L.P., Restart Partners II, L.P., Ingrid Morsman, Natalie
Thompson Defined Benefit Pension Plan, Douglas B. Thompson, D.O. Nelson,
Edwin H. Morgens, John C. Waterfall, Francisco A. Garcia, A. Torrey Reade
and Arik Yale Prawer, each of which is an affiliate of one or more of the
Jupiter general partners, previously held an indirect interest in Jupiter
or acquired shares of the Company's Common Stock in connection with the
Distribution Agreement described below. Pursuant to an agreement dated
December 31, 1992 (the "Distribution Agreement"), Jupiter distributed all
shares of the Company's Common Stock and Common Stock purchase warrants
held by it to its general partners and to other parties who held
participation interests in Jupiter. The entities or persons listed as
members of the Jupiter Group agreed pursuant to the Distribution
Agreement that the nominees that Jupiter is entitled under certain
7
<PAGE> 10
circumstances to designate to the Company's Board of Directors will be
selected by the vote of such parties, with each such party having a
number of votes equal to the number of shares of the Company's Common
Stock it holds. Except for Fund American Investment Subsidiary I, Inc.,
no person or entity listed as a member of the Jupiter Group owns a
beneficial interest in as much as 5% of the outstanding Common Stock of
the Company.
4 All entities and individuals listed as a part of the "Jupiter Group" may
be deemed to constitute a "group," within the meaning of the Securities
Exchange Act of 1934, as amended; similarly, all entities and individuals
listed under "Quantum" may be deemed to constitute a "group," and, if
acting together, the Jupiter Group and Quantum would be deemed to
beneficially own 3,071,588 shares, or approximately 27.3% of the
Company's outstanding Common Stock. Each entity or individual listed
under the "Jupiter Group" or "Quantum" disclaims beneficial interest in
shares owned, controlled or deemed to be owned or controlled by each
other entity or individual so listed, except for George Soros who does
not disclaim beneficial ownership of Quantum.
5 Includes 40,443 shares of Common Stock which may be acquired upon the
exercise of warrants by Quantum.
6 Includes 14,978 shares of Common Stock which may be acquired upon the
exercise of warrants by Fund American Investment Subsidiary I, Inc.
7 Wanger Asset Management, L.P. is the investment advisor to Acorn Fund.
The Company's bylaws require that until such time as Jupiter (whose rights
will be exercised by the Jupiter Group) and Quantum no longer collectively own
more than 20% of the Company's outstanding Common Stock, they will have the
right to (i) designate an aggregate of six nominees for election as directors
(out of a present eight positions) at each annual meeting of stockholders, (ii)
appoint one additional director to an expanded board of directors if the Company
defaults in any payment obligation on any of its then outstanding debt
instruments or equity securities or if the Company were to incur losses for any
five consecutive fiscal quarters and (iii) designate two of the three members of
the executive committee of the board. Both Jupiter and Quantum have agreed that
during such time they will vote their shares in favor of the other's nominees.
8
<PAGE> 11
EXECUTIVE COMPENSATION
The following table reflects all forms of compensation for services to the
Company for the years ended July 31, 1995, 1994 and 1993 of those individuals
who served as (i) the chief executive officer of the Company during fiscal year
1995, or (ii) an executive officer of the Company during fiscal year 1995 and
was compensated at an annual rate exceeding $100,000, (collectively, the
"Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION --------------
-------------------- STOCK OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (SHARES)(1) COMPENSATION(2)
- --------------------------------- ----- -------- ------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Stephen J. Ludlow................ 1995 $181,392 $15,000 -- --
President and chief 1994 181,392 -- -- --
executive officer 1993 170,979 -- 26,667 --
Nicholas A.C. Bright............. 1995 $110,743 -- -- --
Subsidiary vice president 1994 102,750 -- -- --
1993 98,274 $26,217 13,333 --
Kevin P. Callaghan(3)......... 1995 $135,462 -- -- $ 8,770
Subsidiary vice president 1994 111,000 -- -- --
1993 100,750 -- 13,333 --
Richard W. McNairy(4)......... 1995 $140,000 -- 13,333 --
Vice president and chief 1994 70,000 -- -- --
financial officer 1993 -- -- -- --
Allan C. Pogach.................. 1995 $130,000 -- -- --
Vice president, secretary 1994 121,350 -- -- --
and treasurer 1993 112,700 -- 13,333 --
</TABLE>
- ---------------
(1) As adjusted for the Reverse Split.
(2) The amount disclosed for Mr. Callaghan represents payments for accrued
vacation.
(3) Mr. Callaghan resigned from the Company June 16, 1995.
(4) Mr. McNairy joined the Company February 1, 1994.
9
<PAGE> 12
EMPLOYEE OPTIONS
Under the Company's Employee Plan, shares of the Company's Common Stock may
be granted to the executive officers and other employees. As of October 31,
1995, 618,500 shares are reserved for outstanding options and 39,833 are
reserved and remain available for future grant pursuant to the Employee Plan.
During fiscal year 1995, 13,333 options were granted to one of the Executive
Officers under the Employee Plan. See "Proposed Approval of Amendment to 1992
Employee Nonqualified Stock Option Plan" set forth above.
Option Grants in Last Fiscal Year. The following table provides information
concerning stock options granted to the Executive Officers during the year ended
July 31, 1995:
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
INDIVIDUAL GRANTS ASSUMED ANNUAL
------------------------------------------------------ RATES OF STOCK
NUMBER OF PRICE APPRECIATION
SECURITIES % OF TOTAL FOR OPTION
UNDERLYING OPTIONS GRANTED TERM(1)
OPTIONS TO EMPLOYEES IN EXERCISE EXPIRATION -------------------
NAME GRANTED FISCAL YEAR PRICE DATE 5% 10%
- --------------------------- --------- --------------- -------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Richard W. McNairy......... 13,333(2) 100% $ 6.00 11-01-2004 $52,932 $127,464
</TABLE>
- ---------------
(1) Based on actual option term (ten years) and annual compounding at rate
shown. Because the exercise prices of options granted approximated the
fair market value of the Common Stock on the date of grant, the potential
realizable value at 0% annual rate of appreciation is nil.
(2) Represents non-qualified stock options granted under the Employee Plan.
Two-thirds, or 8,888, of the options became exercisable on May 1, 1995,
and the remaining one-third, or 4,445, became exercisable on November 1,
1995.
Aggregated Option Exercises In Last Fiscal Year and Year-End Option Values.
None of the Executive Officers exercised any of their Company options during the
last fiscal year. In addition, based on the closing price for the Common Stock
on the American Stock Exchange on July 31, 1995, none of the Executive Officers
held any unexercised in-the-money options at such date. In connection with Mr.
Callaghan's resignation in June 1995, his options were terminated. The following
table sets forth information with respect to the unexercised options to purchase
shares of Common Stock which have been granted under the Employee Plan to the
Executive Officers and held by them at July 31, 1995.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED
OPTIONS HELD AT YEAR END
-----------------------------
EXERCISABLE UNEXERCISABLE
----------- -------------
<S> <C> <C>
Stephen J. Ludlow Jr. ...................................... 26,667 --
Nicholas A. C. Bright....................................... 13,333 --
Richard W. McNairy.......................................... 8,888 4,445
Allan C. Pogach............................................. 13,333 --
</TABLE>
COMPENSATION COMMITTEE REPORT
The compensation committee of the board of directors (the "Committee") has
furnished the following report on executive compensation for fiscal 1995:
Under the supervision of the Committee, the Company seeks to relate a
significant portion of potential total executive compensation to the
Company's financial performance. In general, executive financial rewards
may be segregated into the following significant components: base
compensation, bonus and stock-based benefits.
Base compensation for the Executive Officers is intended to afford a
reasonable degree of financial security and flexibility to those
individuals who were regarded by the Committee as acceptably discharging
the levels and types of responsibility implicit in the various executive
positions. Mr. Ludlow
10
<PAGE> 13
executed an employment contract with the Company during the first quarter
of fiscal 1993 under which his base compensation level was set through at
least December 31, 1995, and was subject to a contractually mandated raise
at August 1, 1994, which is not being paid at Mr. Ludlow's request.
Pursuant to his employment contract, base compensation for Mr. Ludlow is
not otherwise subject to adjustment until fiscal 1996 at the earliest. In
the case of all other Executive Officers, base compensation for fiscal 1995
was set by the Committee based upon the recommendation of Mr. Ludlow.
In setting the base pay for Executive Officers, little consideration
was given to the compensation plans of executives in other seismic
companies because most of the Company's principal competitors are
subsidiaries of larger, more diversified oilfield service concerns, and
compensation data was not publicly available for the comparable executive
positions in those subsidiaries. Moreover, the few other publicly-held
seismic operators had such disparate operating and financial
characteristics and were of such dissimilar sizes, that the Committee found
little basis for reliable comparison. In setting Mr. Ludlow's contractually
agreed salary and the salaries of the other Executive Officers, the
Committee considered the salary histories of each executive, and his past
performance, credentials, age and experience with the Company, as well as
his perceived future utility to the Company. Considerable weight was also
accorded to the Company's financial performance during the prior year.
Annual bonuses are intended to reflect a policy of requiring a minimum
level of Company financial performance before any bonuses are earned by the
Executive Officers, with bonuses for achieving higher levels of performance
directly tied to the level achieved. No objective bonus criteria have been
established, and any bonuses potentially payable remain subject to the
complete discretion of the Committee and/or the board of directors. In
awarding Mr. Ludlow's 1995 bonus, the Committee and the board considered
the Company's success in restructuring its geographic and operational lines
of business, which reduced operating costs and restored profitability in
fiscal 1995.
The board of directors is of the view that the periodic grant of
significant blocks of stock options to the Executive Officers is calculated
to align the executive's economic interests with those of stockholders and
to provide a direct and continuing focus upon the goal of increasing
stockholder value. The Company granted options covering an aggregate of
200,000 shares of the Company's Common Stock, as adjusted for the Reverse
Split, to its executive officers during fiscal 1993 (including 66,666
shares attributable to the present Executive Officers), and intended that
such grants would be considered only every three to five years. No grants
were made in fiscal 1994. A grant of options covering 13,333 shares of the
Company's Common Stock was made to Mr. McNairy in fiscal 1995 in connection
with his acceptance of employment. All outstanding executive options
granted in fiscal 1995 and prior years have exercise prices above the
current market price for the Common Stock. Accordingly, the ability of the
Executive Officers to realize value from their outstanding options remains
entirely dependent upon their ability to achieve substantially improved
operating performance in future periods.
Insider Participation in Compensation Decisions. In July 1994, the
Company entered into a Credit Agreement with Soros Capital L.P., Jupiter
Management Co., Inc. and CCF Jupiter L.P. (collectively, the "Affiliated
Lenders"), pursuant to which the Company borrowed $2,695,000 on a secured,
subordinated basis. Steven J. Gilbert, a director of the Company, is an
affiliate of Soros Capital, and Douglas B. Thompson, chairman of the board,
and George F. Baker, a director, are affiliated with the two Jupiter
entities. Borrowings under the Credit Agreement earned interest at Bank of
America's prime commercial lending rate, plus 3% through January 26, 1995,
and at Bank of America prime rate, plus 6% thereafter. The Company fully
repaid this indebtedness in June 1995. As additional consideration for the
1994 Credit Agreement and following receipt of stockholder approval in
December 1994, the Company issued warrants evidencing the right to purchase
an aggregate of 120,000 shares of post-Reverse Split Common Stock at a
purchase price of $4.50 per share to the Affiliated Lenders.
In November 1993 the Company entered into a secured loan agreement
with the Affiliated Lenders, which agreement provided for total borrowings
of $3,386,667, an annualized interest rate of 25%, and a maturity date in
May 1994. The Company repaid such borrowings in April 1994.
11
<PAGE> 14
The above transactions were unanimously approved by the Company's
disinterested directors, and management is of the opinion that all the
above transactions were on terms at least as favorable to the Company as
could have been obtained from unaffiliated third parties at the times
negotiated and under the conditions then applicable.
Composition of the Committee. Non-management members of the Committee
(as constituted at the time 1995 compensation issues were resolved) own,
control or represent an aggregate of 3,199,420 shares, or approximately
28.2%, of the Company's outstanding Common Stock and, accordingly, also
have a substantial interest in the Company's financial performance.
The Compensation Committee
Jack C. Threet, Chairman
James B. Clement
Steven J. Gilbert
Douglas J. Thompson
EMPLOYMENT AND SALARY CONTINUATION
The Company has entered into an employment agreement with Mr. Ludlow that
provides for a current annual base salary of $175,000 and a contractually
mandated raise to $190,000 on August 1, 1994. Mr. Ludlow requested the Company
to defer this raise and therefore continues his base compensation at the fiscal
1994 rate of $175,000. The agreement with Mr. Ludlow provides for a term
expiring in 1995. The Company and Mr. Ludlow are currently negotiating the terms
of his compensation, which will take effect on January 1, 1996.
In October 1994, Messrs. Bright, McNairy and Pogach executed salary
continuation agreements with the Company pursuant to which, in the event of
termination for the convenience of the Company prior to October 31, 1999, each
is to be compensated at his most recent base salary for one year following any
such termination.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and persons who
own more than 10% of a registered class of the Company's equity securities, to
file reports of ownership and changes of ownership with the Securities and
Exchange Commission. Officers, directors and greater than 10% stockholders are
required to furnish the Company with copies of all Section 16(a) reports they
file.
Based solely on its review of the forms received by it with respect to the
fiscal year ended July 31, 1995, the Company believes that all filing
requirements applicable to the Company's officers, directors and greater than
10% stockholders have been met.
12
<PAGE> 15
COMMON STOCK PERFORMANCE GRAPH
The following graph illustrates the performance of the Company's Common
Stock, compared with the cumulative total return on (i) the Standard & Poor's
500 Stock Index and (ii) an index of peer companies selected by the Company, for
the period beginning July 5, 1991 (the date the Company's Common Stock was
registered under the Exchange Act), and ending July 31, 1995. The graph assumes
that the value of the investment in the Company's Common Stock and each index
was $100 at July 5, 1991. In all cases, the cumulative total return assumes, as
contemplated by Securities and Exchange Commission Rules, that any cash
dividends on the Common Stock of each entity included in the data presented
above were reinvested in that security.
DIGICON INC.
COMPARATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) DIGICON PEERS(1) S&P 500
<S> <C> <C> <C>
JULY 31, 1991 100 100 100
JULY 31, 1992 116 71 113
JULY 31, 1993 60 95 120
JULY 31, 1994 32 142 122
JULY 31, 1995 49 176 150
</TABLE>
(1) Consists of Seitel, Inc., Input/Output, Inc., Landmark Graphics
Corporation, Dawson Geophysical Company, Universal Seismic Associates,
Inc. and Grant Geophysical, Inc.
CERTAIN TRANSACTIONS
Mr. Edward R. Prince, Jr., the Company's former chairman of the board and
chief executive officer, commenced an indefinite leave of absence in May 1994,
and has retired from his position as chairman of the board. Pursuant to his
employment contract with the Company, Mr. Prince continues to be compensated
through December 31, 1995 at an annual rate of $305,000. During the ensuing
three years, Mr. Prince is to be paid $152,500 per year so long as he does not
engage or participate in any business in competition with the Company.
For a description of certain transactions involving other members of the
board of directors, see "Other Information -- Compensation Committee
Report--Insider Participation in Compensation Decisions."
13
<PAGE> 16
AUDITORS
Deloitte & Touche, certified public accountants, have served as the
independent auditors of the Company for a number of years. While management
anticipates that this relationship will continue to be maintained during fiscal
1996 and subsequent years, it is not proposed that any formal action be taken at
the meeting with respect to the continued employment of Deloitte & Touche,
inasmuch as no such action is legally required. Representatives of Deloitte &
Touche plan to attend the annual meeting and will be available to answer
questions. Its representatives will also have an opportunity to make a statement
at the meeting if they so desire, although it is not expected that any statement
will be made.
The audit committee assists the board in assuring that the accounting and
reporting practices of the Company are in accordance with all applicable
requirements. The committee reviews with the auditors the scope of proposed
audit work and meets with the auditors to discuss matters pertaining to the
audit and any other matters which the committee or the auditors may wish to
discuss. In addition, the audit committee would recommend the appointment of new
auditors to the board of directors in the event future circumstances were to
indicate that such action is desirable.
OTHER MATTERS
The annual report to stockholders covering the fiscal year ended July 31,
1995, has been mailed to each stockholder entitled to vote at the annual
meeting.
Any stockholder who wishes to submit a proposal for action to be included
in the proxy statement and form of proxy relating to the Company's 1996 annual
meeting of stockholders is required to submit such proposals to the Company on
or before July 12, 1996.
The cost of soliciting proxies in the accompanying form will be borne by
the Company. In addition to solicitations by mail, a number of regular employees
of the Company may, if necessary to assure the presence of a quorum, solicit
proxies in person or by telephone.
The persons designated to vote shares covered by board of directors'
proxies intend to exercise their judgment in voting such shares on other matters
that may properly come before the meeting. Management does not expect that any
matters other than those referred to in this proxy statement will be presented
for action at the meeting.
By Order of the Board of Directors,
ALLAN C. POGACH,
Secretary
November 9, 1995
14
<PAGE> 17
- --------------------------------------------------------------------------------
DIGICON INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
DECEMBER 19, 1995
PROXY The undersigned hereby appoints Stephen J. Ludlow and
FOR Richard W. McNairy, or either of them, each with power of
ANNUAL substitution, attorneys and proxies of the undersigned to
MEETING vote all shares of common stock of Digicon Inc. ("Company")
OF which the undersigned is entitled to vote at the annual
STOCKHOLDERS meeting of stockholders to be held on December 19, 1995 at
DECEMBER 19, the offices of the Company, 3701 Kirby Drive, Houston, Texas
1995 77098 at 10:00 a.m., Houston time, and at any adjournments.
1. / / FOR the election (except as indicated below) as
directors of George F. Baker, James B. Clement,
Clayton P. Cormier, Steven J. Gilbert, Stephen J.
Ludlow, Edward R. Prince, Jr., Douglas B. Thompson
and Jack C. Threet.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
NOMINEE, WRITE THAT NOMINEE'S NAME BELOW:
--------------------------------------------------
/ / WITHHOLD authority to vote for all nominees
listed above.
2. Approval of amendment to the 1992 Employee
Nonqualified Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
(PLEASE DATE AND SIGN ON REVERSE SIDE)
- --------------------------------------------------------------------------------
<PAGE> 18
- --------------------------------------------------------------------------------
3. / / In their discretion, upon such other matters (including
procedural and other matters relating to the conduct of the
meeting) as properly come before the meeting and any adjournment.
As described in the Notice of Annual Meeting of Stockholders and
Proxy Statement, receipt of which is hereby acknowledged.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE
HEREON. IF NO CONTRARY SPECIFICATION IS MADE, IT WILL BE VOTED "FOR"
PROPOSALS 1 AND 2.
Dated this _____ day of ________
________________________________
________________________________
Signature(s) of Stockholder
Please sign exactly as your
name appears on your stock
certificate. When signing
as executor, administrator,
trustee or other
representative, please give
your full title. All joint
owners should sign.
PLEASE DATE, SIGN AND MAIL YOUR PROXY PROMPTLY, PLEASE DO NOT FOLD THIS PROXY.
- --------------------------------------------------------------------------------
