SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
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-11(c) or ss. 240.14a-12
DOCUCON, INCORPORATED
(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)(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:
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>
DOCUCON, INCORPORATED
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
June 20, 1997
The annual meeting of Stockholders of Docucon, Incorporated (the
"Company") will be held at the Company's headquarters at 7461 Callaghan Road,
San Antonio, Texas 78229, on Tuesday, August 12, 1997, at 12:00 Noon, C.D.T.,
for the following purposes:
1. To elect five Directors to serve until the next Annual Meeting of
Stockholders and until their successors are duly elected and
qualified.
2. To amend the 1993 Employee Stock Purchase Plan of the Company to
increase the number of shares offered and reserved for issuance
thereunder by 200,000 shares to 1,000,000 shares of Common Stock,
par value $.01 per share, to be offered under one additional annual
offering from January 1, 1998 to December 31, 1998.
3. To amend the 1988 Stock Option Plan of the Company to increase the
number of shares reserved for issuance thereunder by 300,000 shares
to 1,660,000 shares of Common Stock, par value $.01 per share.
4. To transact such other business as may properly come before the
Annual Meeting, or any adjournment thereof.
Stockholders of record at the close of business on June 20, 1997, are
entitled to notice of, and to vote at, the Annual Meeting or any adjournment
thereof.
If you cannot attend the Annual Meeting in person, please date and execute
the accompanying Proxy and return it promptly to the Company. If you attend the
Annual Meeting, you may revoke your Proxy and vote in person if you desire to do
so, but attendance at the Annual Meeting does not of itself serve to revoke your
Proxy.
RALPH BROWN
Secretary
<PAGE>
DOCUCON, INCORPORATED
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
Proxies by and on behalf of the Board of Directors of the Company for use at the
Annual Meeting of Stockholders to be held on August 12, 1997, or any adjournment
thereof. This Proxy Statement, the Notice of Annual Meeting and the accompanying
Proxy are being mailed to Stockholders on or about July 7, 1997.
The Company's principal executive offices are located at 7461 Callaghan
Road, Suite 200, San Antonio, Texas 78229. The Company's telephone number is
(210) 525-9221.
As to all matters that may come before the Annual Meeting, each
stockholder will be entitled to one vote for each share of Common Stock of the
Company held by him at the close of business on June 20, 1997. The holders of a
majority of the shares of Common Stock of the Company presented in person or by
proxy and entitled to vote will constitute a quorum at the Annual Meeting.
Abstentions and broker non-votes will be counted for purposes of determining the
presence of a quorum. At June 20, 1997, the record date for the Annual Meeting,
there were 12,443,222 shares of Common Stock outstanding and 17 shares of Series
A Cumulative Convertible Preferred Stock ("Series A Preferred Stock")
outstanding, each share of which is entitled to cast 33,333 votes as Common
Stock. With respect to references to votes to be taken at the Annual Meeting of
the Stockholders herein, the term "Common Stock" shall include the Company's
Common Stock and the shares of Common Stock into which the outstanding Series A
Preferred Stock may be converted, and with respect to which the holders of such
Preferred Stock are entitled to vote. Thus, the equivalent number of shares
entitled to vote at the Annual Meeting of Stockholders is 13,009,883 (12,443,222
shares of Common Stock and 566,661 shares of Common Stock obtainable upon
conversion of Series A Preferred Stock).
The purposes of the Annual Meeting of Stockholders are (a) to elect a
Board of Directors to serve until the next Annual Meeting of Stockholders, (b)
to amend the 1993 Employee Stock Purchase Plan of the Company to increase the
number of shares offered and reserved for issuance thereunder by 200,000 shares
to 1,000,000 share of Common Stock, par value $.01 per share, to be offered
under one additional annual offering from January 1, 1998, to December 31, 1996,
and (c) to amend the 1988 Stock Option Plan of the Company to increase the
number of shares reserved for issuance thereunder by 300,000 shares to 1,660,000
shares of Common Stock, par value $.01 per share. The Company is not aware at
this time of any other matters that will come before the Annual Meeting. The
approval of a majority of the shares of Common Stock present in person or by
proxy and entitled to vote at the Annual Meeting is required for election of
nominees as Directors of the Company and for approval of Proposal 2 (Increase
shares offered and authorized for issuance under one additional annual offering
of the 1993 Employee Stock Purchase Plan), and Proposal 3 (Increase shares
authorized for issuance under the Company's 1988 Employee Stock Option Plan). A
quorum equal to a majority of the outstanding Common Stock must be present in
person or by proxy at the Annual Meeting in order to elect Directors and
consider Proposals 2 and 3.
All shares of Common Stock represented by properly executed proxies which
are returned and not revoked will be voted in accordance with the instructions,
if any, given therein. If no instructions are provided in a proxy, it will be
voted FOR the Board's nominees for Director, FOR the approval of Proposals 2 and
3 and in accordance with the proxy-holders' best judgment as to any other
matters raised at the Annual Meeting. Abstentions and broker non-votes will be
counted as shares present for purposes of establishing a quorum with respect to
the proposals to which they apply. Abstention votes will be counted as voted
AGAINST the proposals with respect to which they apply. Broker non-votes will
not be considered as either FOR or AGAINST votes with respect to the proposals
to which they apply. A form of Proxy for use at the Annual Meeting is also
enclosed. Any such Proxy may be revoked by a stockholder at any time before it
is exercised by either giving written notice of such revocation to the Secretary
of the Company or submitting a later-dated Proxy to the Company prior to the
Annual Meeting. A stockholder attending the Annual Meeting may revoke his Proxy
and vote in person if he desires to do so, but attendance at the Annual Meeting
will not of itself revoke the Proxy.
PROPOSALS BY STOCKHOLDERS
Any proposals by stockholders of the Company intended to be presented at
the 1998 Annual Meeting of Stockholders must be received by the Company for
inclusion in the Company's Proxy Statement and form of Proxy by December 19,
1997.
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ELECTION OF DIRECTORS
NOMINEES FOR DIRECTORS
At the Annual Meeting, five Directors are to be elected. The Bylaws of the
Company permit the Board of Directors to determine the number of Directors of
the Company. Unless other instructions are specified, the enclosed Proxy will be
voted in favor of the persons named below to serve until the next Annual Meeting
of Stockholders and until their successors shall have been duly elected and
qualified. In the event any of the nominees shall be unable to serve as a
Director, it is the intention of the persons designated as proxies to vote for
substitutes selected by the Board of Directors. The Board of Directors of the
Company has no reason to believe that any of the nominees named below will be
unable to serve if elected.
The following table sets forth certain information concerning the five
nominees for Director of the Company:
PRINCIPAL OCCUPATION
AND ALL POSITIONS A DIRECTOR
NAME AGE WITH THE COMPANY SINCE
Edward P. Gistaro 61 Chairman of the Board and 1988
Chief Executive Officer
and Director
Allan H. Hobgood 58 President and Chief Operating 1992
Officer and Director
Ralph Brown 63 Attorney, San Antonio, 1987
Texas, Secretary and Director
Al R. Ireton 62 Chairman, 1993
Manchester Partners
and Directors
Chauncey E. Schmidt 65 Chairman, C.E. Schmidt 1993
& Associates
and Director
Edward P. Gistaro has served as Chief Executive Officer of the Company
since June 4, 1988 and served as President from July 10, 1988 until March 18,
1991. Mr. Gistaro was employed by Datapoint Corporation, a company involved in
the manufacturing of computer systems, in various managerial positions from 1973
to 1987. From 1982 to 1985 Mr. Gistaro served as the President and Chief
Operating Officer of Datapoint Corporation, and he served from 1985 to 1987 as
its President and Chief Executive Officer.
Allan H. Hobgood was elected Chief Operating Officer of the Company on
April 16, 1991 and President of the Company on November 4, 1992. Mr. Hobgood had
served as the Company's Vice President of Marketing from August 25, 1988 to
April 16, 1991. From January 1988 until August 1988, Mr. Hobgood served as Vice
President of Sales for Advanced Signing, Inc., a commercial sign firm, and from
1981 to March, 1987, Mr. Hobgood held several managerial positions relating to
marketing, including Vice President of U.S. Sales, at Datapoint Corporation.
Ralph Brown, an attorney in private practice since 1968, has served as
Secretary of the Company since May 1, 1987. From 1987 to 1989, he served also as
Treasurer of the Company. Mr. Brown has also served since 1975 as President of
Cherokee Ventures, Inc., a real estate leasing firm, since 1978 as President of
East Central Development Corporation and since 1982 as President of Southeast
Suburban Properties, Inc. The latter two businesses are real estate development
firms.
Al R. Ireton was elected as a Director of the Company in May 1993. Mr.
Ireton has been Chairman of Manchester Partners, an investment and growth
strategy advisory organization providing capital and strategic assistance to
growing companies, since October 1988. From 1985 through September 1988, he
served as President and Chief Executive Officer of Texet Corporation, a desktop
publishing company. Mr. Ireton has 25 years' experience serving as president and
chief executive officer of growth-oriented companies, and has served on several
corporate boards.
3
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Chauncey E. Schmidt was elected to the Board of Directors of the Company
in February 1993. He has been Chairman of C. E. Schmidt & Associates, an
investment firm, since April 1989. From 1987 to March 1989, he was Vice Chairman
of the Board of AMFAC, Inc., a New York Stock Exchange-listed company engaged in
diversified businesses. He has previously served as President of The First
National Bank of Chicago and Chairman of the Board and Chief Executive Officer
of The Bank of California, N.A. Mr. Schmidt is on the Board of Trustees of the
U. S. Naval War College Foundation and is active in several civic and charitable
organizations.
All nominees for Director are currently serving as Directors of the
Company. Directors hold office until the next Annual Meeting of Stockholders of
the Company and until their successors are elected and qualified. Officers are
elected annually by the Board of Directors and serve at the discretion of the
Board of Directors.
MANAGEMENT MATTERS
There are no arrangements or understandings known to the Company between
any of the Directors, nominees for Director or executive officers of the Company
and any other person pursuant to which any such person was elected as a Director
or an executive officer, except the Employment Agreements between the Company
and each of Edward P. Gistaro and Allan H. Hobgood, respectively, described
under "Executive Compensation" in this Proxy Statement. There are no family
relationships between any Directors, nominees for Director or executive officers
of the Company. The Board of Directors of the Company held a total of four
meetings in 1996.
The Board of Directors has an Executive Compensation Committee and Stock
Option Committee, each consisting of Messrs. Ralph Brown, Al Ireton, Philip J.
Romano and Chauncey Schmidt. The Executive Compensation Committee reviews the
salaries, incentive compensation and other direct and indirect benefits for all
Company Officers. During 1996, the Executive Compensation Committee held four
meetings. The Stock Option Committee determines all stock option grants the
Company's 1988 Stock Option Plan. During 1996, the Stock Option Committee held
four meetings.
The Company has no other standing audit, nominating or compensation
committee of the Board of Directors.
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and Directors, and persons who beneficially own more than 10%
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC") and the Boston Stock Exchange. Officers, Directors and beneficial
owners of more than 10% of the Company's Common Stock are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms that
they file. Based solely on review of the copies of such forms furnished to the
Company, or written representations that no reports on Form 5 were required, the
Company believes that for the period from January 1, 1996 through March 31,
1997, all officers, Directors and greater-than-10% beneficial owners complied
with all Section 16(a) filing requirements applicable to them.
AMENDMENT TO 1993 EMPLOYEE STOCK PURCHASE PLAN
GENERAL
The Company has a 1993 Employee Stock Purchase Plan which allows employees
of the Company to purchase shares of the Company's Common Stock on a regular
basis through payroll deductions. The 1993 Employee Stock Purchase Plan was
approved by approved by the stockholders on April 20, 1994. The 1993 Employee
Stock Purchase Plan currently authorizes four annual Offerings, covering the
years 1993 to 1997, of 200,000 shares each, not to exceed 800,000 shares. In
January 1997, 1996, and 1995, the Company issued 286,048, 100,583, and 70,983
shares of common stock at purchase prices of $.32, $.32, and $.35 per share,
respectively. The annual purchase prices were 85 percent of the lesser of the
closing price of the Company's Common Stock on December 29, 1995, December 29,
1995, and December 30, 1994, respectively. At December 31, 1996, 342,386 shares
remained available for issuance.
REASONS FOR THE PROPOSED AMENDMENT 2
The Board of Directors believes that the 1993 Employee Stock Purchase Plan
fosters broad-based ownership of the Company's Common Stock by its employees.
The Board of Directors also believes that the 1993 Employee Stock Purchase Plan
4
<PAGE>
provides significant incentive to all employees of the Company to acquire and
hold the Company's Common Stock, thereby more effectively aligning the interests
of such employees with those of the stockholders. The Board of Directors
believes that it is in the best interests of the stockholders of the Company to
amend the 1993 Employee Stock Purchase Plan to increase the number shares
authorized and offered for issuance by 200,000 shares to 1,000,000 shares under
an additional offering period from January 1, 1998 to December 31, 1998.
DESCRIPTION OF THE PLAN
Under the 1993 Employee Stock Purchase Plan, which is administered by the
Compensation Committee of the Board of Directors, eligible employees may elect
to have up to 15% of their Base Pay (as defined) deducted and utilized for the
purchase of Common Stock of the Company in annual or semiannual offerings to be
made by the Company to eligible employees.
Under the 1993 Employee Stock Purchase Plan, the Company has made
available in each year from January 1, 1993 through December 31, 1997 up to
200,000 shares of Common Stock, plus all unissued shares from prior Offerings,
and will make available from January 1, 1998 to December 31, 1997, upon approval
of the stockholders of the Company, an additional 200,000 shares of Common
Stock, plus all unissued shares from prior Offerings. Participating employees
will be deemed to have been granted options to purchase Common Stock in each
offering in an amount equal to the amount of their respective payroll deductions
divided by 85% of the market value of the Common Stock of the Company on the
applicable Offering Commencement Date. The option price shall be the lesser of
the 85% of the closing price of the Common Stock on the Offering Commencement
Date (or the next preceding trading day) or 85% of the closing price of Common
Stock on the Offering Termination Date (or the next preceding trading day).
Unless a participating employee terminates participation as provided in the 1993
Employee Stock Purchase Plan, such employee shall be deemed to have exercised
such option on the Offering Termination Date and shall be issued a corresponding
number of shares of Common Stock. The 1993 Employee Stock Purchase Plan provides
for termination of participation or withdrawals of amounts previously deducted
under certain circumstances. Certain additional restrictions apply to
participating employees who are subject to the reporting requirements of Section
16(a) of the Securities Exchange Act of 1934.
The 1993 Employee Stock Purchase Plan may be amended at any time by one
vote of the Board of Directors. However, no amendment made without approval of
the stockholders of the Company may increase the total number of shares which
may be issued under any Offering, or amend the requirements as to the class of
Employees eligible to purchase Common Stock under the Plan or permit the members
of the Committee to purchase Common Stock under the Plan.
FEDERAL TAX CONSEQUENCES
The 1993 Employee Stock Purchase Plan is intended to qualify as an
"employee stock purchase plan" within the meaning of Section 423 of the Internal
Revenue Code of 1986, as amended (the "Code"). Under Section 423, if a
participating employee otherwise complies with Section 423(a) and does not
dispose of shares of Common Stock acquired pursuant to the exercise of an option
under the 1993 Employee Stock Purchase Plan for at least two years after the
relevant Offering Commencement Date and at least six months after the relevant
Offering Termination Date, such an employee will not recognize any income at the
time that such option is deemed to be exercised on the Offering Termination
Date, but will recognize income on the sale of the underlying shares of stock.
In such case, there is no taxable event for the Company. If the participating
employee does not comply with the requirements of Section 423(a), including the
holding period requirements described above, the employee will be deemed to have
recognized compensation income in the amount of the difference between the
option exercise price and the fair market value of the Common Stock on the
relevant Offering Termination Date. In such case, the Company will receive a
corresponding deduction.
NEW PLAN BENEFITS UNDER THE 1993 EMPLOYEE STOCK PURCHASE PLAN
No currently existing benefits under the 1993 Employee Stock Purchase Plan
are dependent upon approval of the proposed amendment.
RECOMMENDATION OF THE BOARD OF DIRECTORS
Stockholder approval of the 1993 Employee Stock Purchase Plan is required
pursuant to Section 423 of the Code. The Board of Directors recommends a vote
FOR adoption of the proposed amendment to the 1993 Employee Stock Purchase Plan.
The affirmative vote of the holders of a majority of the outstanding shares of
Common Stock present or represented and entitled to vote at the Annual Meeting
will be necessary for stockholder amendment to 1993 Employee Stock Purchase
Plan.
5
<PAGE>
AMENDMENT TO 1988 STOCK OPTION PLAN
GENERAL
The Company has a 1988 Stock Option Plan, currently covering an aggregate
of 1,360,000 share of Common Stock. The 1988 Stock Option Plan provides for the
grant to officers, Directors and key employees of the Company if incentive stock
options ("ISOs") intended to qualify under Section 422 (b) of the Code and
non-qualified stock options ("NQSO"). The 1988 Stock Option Plan was approved by
the stockholders of the Company on November 15, 1988. Amendments to the 1988
Stock Option Plan increasing the number of shares covered thereby were approved
by the stockholders of the Company on April 21, 1989, May 14, 1991, May 7, 1992
and May 17, 1994. As of May 30, 1997 there were outstanding under the 1988 Stock
Option Plan options to purchase 1,166,217 shares of the Company's Common Stock
at prices ranging from $0.41 to $1.38 per share. See "Executive Compensation".
REASONS FOR PROPOSED AMENDMENT 3
The Board of Directors believes that it is in the best interests of the
Company to increase the number of shares of Common Stock reserved for issuance
under the 1988 Stock Option Plan to 1,660,000 shares, an increase of 300,000
shares The Board of Directors believes that the success of the Company is
greatly dependent upon its ability to attract and retain executives and
employees of outstanding ability who are motivated to exert their best efforts
on behalf off the Company, and that the 1988 Stock Option Plan has been
effective in achieving this goal. The Board has concluded that the number of
shares available and likely to become available for stock options under the 1988
Stock Option Plan will prove within a relatively short period of time to be
inadequate for future stock option requirements. In the opinion of the Board,
the authorization of 300,000 additional shares will give the Company sufficient
stock reserved for issuance under the 1988 Stock Option Plan to allow the
Company to attract and retain employees who are in a position to contribute
materially to the successful conduct of the Company's operations, to meet
competitive situations created by the stock options plans of other corporations,
and to stimulate in those eligible for participation an increased desire to
render greater service to the Company.
It should be noted that each director, each nominee for Director and each
officer and employee of the Company has, by reason of being eligible to receive
options under the 1988 Stock Option Plan, an interest in seeing that the
proposed amendments are adopted by stockholders. It should also be noted that,
as a matter of policy, the Company has not granted options to non-employee
Directors under the 1988 Stock Options Plan.
DESCRIPTION OF THE PLAN
Under the Stock Option Plan, which is administered by the Stock Option
Committee of the Board of Directors, key employees may be granted options to
purchase shares of the Company's Common Stock at 100% of fair market value on
the date of grant (or 110% of fair market value in the case of an ISO granted to
a 10% stockholder/grantee). The 1988 Stock Option Plan expires on October 31,
1998 in absence of approval of Amendment 4. Options granted under the 1988 Stock
Option Plan must be exercised within ten years from the date of grant, vest at
varying times, as determined by the Stock Option Committee, are nontransferable
except by will or pursuant to the laws of descent and distribution, are
protected against dilution and expire within three months after termination of
employment, unless such termination is by reason of death or disability or for
cause. All shares purchased upon exercise of any option must be paid in full at
the time of purchase, in accordance with the terms set forth on the option. Such
payment must be made in cash or through delivery of shares of Common Stock or a
combination of cash and Common Stock, all as determined by the Stock Option
Committee. The Stock Option Committee may determine other terms applicable to
particular options. The aggregate fair market value (determined at the same time
each ISO is granted) of the shares of Common Stock with respect to which ISOs
issued to any one person under the 1988 Stock Option Plan are exercisable for
the first time during any calendar year may not exceed $100,000.
The 1988 Stock Option Plan may be amended at any time by one vote of the
Board of Directors. However, no amendment made without approval of the
stockholders of the Company may increase the total number of shares which may be
issued under options granted pursuant to the 1988 Stock Option Plan, reduce the
maximum exercise price or extend the latest date upon which options may be
granted or shall be exercisable, or change the class of employees eligible to
receive the options.
FEDERAL TAX CONSEQUENCES
Pursuant to the Code, upon the exercise of an NQSO under the 1988 Stock
Option Plan, the Company is generally entitled to a tax deduction in an amount
equal to the difference between the option price and the fair market value of
the Common Stock on
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the date the NQSO is exercised. For federal tax purposes, the person exercising
the option must pay personal income taxes on an amount equal to the difference
between the option price and the fair market value of the Common Stock on the
date the NQSO is exercised. The basis of the Common Stock obtained by exercising
the NQSO will be the option price paid plus the amount equal to the difference
between the option price and the fair market value of the Common Stock on the
date the NQSO is exercised, which amount was subject to federal income tax. A
subsequent sale of the Common Stock by the person exercising the NQSO will
result in a long- or short-term capital gain or loss depending on the total
period of time that the NQSO and Common Stock are held. Generally, no taxable
event occurs under the Code upon the grant of an NQSO under the 1988 Stock
Option Plan.
Pursuant to the Code, the holder of an ISO will recognize no taxable
income (or loss) upon the grant or exercise of an ISO. Upon the sale of the
underlying shares of Common Stock, the optionholder will incur a long-term
capital gain or loss if the provisions of Section 422(b) of the Code are
compiled with. In such case, there is no taxable event for the Company. The
principal requirement of Section 422(b), other than the limitations on option
price, duration of option period, time of exercise and volume exercisable in one
year described above, is that, in order for an option to qualify for ISO
treatment, shares received pursuant to exercise of the option may not be
disposed within two years from the date of grant and one year from the date of
exercise of the option. If an option designated as an ISO ceases to qualify as
an ISO, the tax effects for the optionholder and the Company will be identical
to those described above for NQSOs.
NEW PLAN BENEFITS UNDER THE 1988 STOCK OPTION PLAN
No currently existing benefits under the 1988 Stock Option Plan are
dependent upon approval of the proposed amendment. See "Executive Compensation -
Stock Options - 1988 Stock Option Plan" for a description of outstanding options
under the 1988 Stock Option Plan.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends a vote FOR the adoption of the proposed
amendment of the 1988 Stock Option Plan. The affirmative vote of the holders of
a majority of the outstanding shares of the Common Stock entitled to vote at the
Annual Meeting will be necessary for stockholder approval of the amendment of
the 1988 Stock Option Plan.
EXECUTIVE COMPENSATION
GENERAL
The following table sets forth compensation paid or awarded to the Chief
Executive Officer and the only other executive officer of the Company whose
compensation exceeded $100,000 for all services rendered to the Company in 1996,
1995 and 1994:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------- ----------------------
Bonus/Annual Securities Long-Term All
Incentive Underlying Incentive Other Com-
NAME AND PRINCIPAL POSITION YEAR SALARY AWARD (1) OPTIONS PAYOUTS PENSATION (2)
- --------------------------- ---- ------ --------- ------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
Edward P. Gistaro ......... 1996 $131,682 $ 97,850 50,000 $ -- $1,468
Chairman of the Board 1995 129,192 -- -- -- 2,238
and Chief Executive Officer 1994 102,701 20,000 -- 45,000 --
Allan H. Hobgood .......... 1996 100,712 112,647 50,000 -- 1,468
President and 1995 100,256 68,637 -- -- 2,250
Chief Operating Officer 1994 99,732 48,047 45,000 -- --
</TABLE>
- ------------
(1) Mr. Gistaro is eligible to receive target bonus payments totaling $76,000
under the 1996 Management Incentive Bonus Plan as approved by the
Compensation Committee of the Board of Directors. These payments may be
increased or decreased depending upon the percentage of achievements of
specified goals, which include revenues and returns on assets.
Mr. Hobgood is eligible to receive 5.5% of the government and commercial
division profits.
(2) Matching contributions under the Company's 401(k) Plan.
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STOCK OPTION GRANTS IN 1996
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANTED EXERCISE
UNDERLYING TO EMPLOYEES PRICE EXPIRATION
NAME OPTIONS GRANTED IN FISCAL YEAR PER SHARE DATE
---- --------------- -------------- --------- ----
Edward P. Gistaro..... 50,000 17.59% $.875 05/12/06
Allan H. Hobgood...... 50,000 17.59% .875 05/12/06
STOCK OPTION EXERCISES IN 1996 AND OPTION VALUES AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE OF UNEXERCISED
ACQUIRED NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ON VALUE AT DECEMBER 31, 1996 AT DECEMBER 31, 1996
-------------------------- --------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Edward P. Gistaro --- --- 281,667 33,333 $94,708 $19,974
Allan H. Hobgood --- --- 271,667 33,333 90,857 19,974
</TABLE>
EMPLOYMENT AGREEMENTS
Both Edward P. Gistaro and Allan H. Hobgood have employment agreements
with the Company. Pursuant to such agreements, Mr. Gistaro is to be paid
$100,000 per annum and Mr. Hobgood is to be paid $96,000 per annum and 5.5% of
the profits of the government and commercial divisions. The agreements do not
have fixed terms, and are terminable upon 30 days' prior written notice by
either the Company or the employee, or by the Company "for cause" at any time.
Further, each agreement requires that the employee keep Company matters
confidential, restricts the employee from being directly or indirectly involved
with any entity in a business competitive with that of the Company for a period
of years following the termination of the agreement, and provides for a
severance payment to the employee in the event he is terminated by the Company
without cause.
STOCK OPTIONS
1988 STOCK OPTION PLAN
The Company has a 1988 Stock Option Plan, currently covering an aggregate
of 1,360,000 shares of Common Stock. Under the 1988 Stock Option Plan, which is
administered by the Stock Option Committee of the Board of Directors, key
employees may be granted options to purchase shares of the Company's Common
Stock at 100% of fair market value on the date of grant (or 110% of fair market
value in the case of an ISO granted to a 10% stockholder/grantee). The 1988
Stock Option Plan expires on October 31, 1998. Options granted under the 1988
Stock Option Plan must be exercised within ten years from the date of grant,
vest at varying times, as determined by the Stock Option Committee, are
nontransferable except by will or pursuant to the laws of descent and
distribution, are protected against dilution and expire within three months
after termination of employment, unless such termination is by reason of death
or disability or for cause. All shares purchased upon exercise of any option
must be paid in full at the time of purchase, in accordance with the terms set
forth in the option. Such payment must be made in cash or through delivery of
shares of Common Stock or a combination of cash and Common Stock, all as
determined by the Stock Option Committee. The Stock Option Committee may
determine other terms applicable to particular options. No one person may
receive ISO options for which the aggregate fair market value (determined at the
time each ISO is granted) of options exercisable for the first time during any
calendar year exceeds $100,000.
1991 DIRECTOR PLAN
The Company also has a 1991 Director Plan currently covering an aggregate
of 500,000 shares of Common Stock. Under the 1991 Director Plan, which is
administered by the Board of Directors, non-employee Directors are granted
options to purchase 40,000 shares of the Company's Common Stock upon their
initial election as Directors and 30,000 shares on the second anniversary date
of such election at the then-current market price of such shares. One-third of
the initial grant shall vest on each anniversary of the date of grant, and
one-third of the second grant shall vest every six months after the date of
grant. The 1991 Director Plan expires on February 10, 2001. Under an amendment
to the 1991 Director Plan adopted by the Board of Directors in February 1992,
each eligible Director will receive an additional annual grant of options
covering 10,000 shares of
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<PAGE>
Common Stock, commencing with the fiscal year of the Company immediately
following the fiscal year in which all shares of Common Stock covered by the
initial grant and the second grant described above are fully vested, and such
annual grant will continue each fiscal year thereafter until options covering
all shares reserved for issuance under the 1991 Director Plan have been granted.
Options granted under the 1991 Director Plan must be exercised within ten years
from the date of grant, are nontransferable except by will or pursuant to the
laws of descent and distribution, are protected against dilution and expire
within three months after termination of service as a Director of the Company,
unless such termination is by reason of death or disability or for cause. All
shares purchased upon exercise of any option must be paid in full at the time of
purchase, in accordance with the terms set forth in the option. Such payment
must be made in cash or through delivery of shares of Common Stock or a
combination of cash and Common Stock. The 1991 Director Plan may be amended at
any time by vote of the Board of Directors.
During 1996, Messrs. Ralph Brown and Philip J. Romano, both Directors of
the Company, were granted options covering 10,000 shares each of Common Stock at
an exercise price of $1.03 per share. During 1997, Messrs. Chauncey Schmidt and
Al Ireton, both Directors of the Company, were granted options covering 10,000
shares each of Common Stock at an exercise price of $1.38 and $.78 per share,
respectively. The exercise price per share of each such option was not less than
the closing bid price of the Common Stock reported on The Nasdaq Stock Market on
the date of the grant.
REPRICING OF OUTSTANDING OPTIONS
Set forth below is certain information concerning a repricing of options
held by the executive officers named in the Summary Compensation Table set forth
in Item 10, "Executive Compensation General", during the period October 24, 1986
through February 28, 1995:
<TABLE>
<CAPTION>
LENGTH OF
ORIGINAL
MARKET PRICE EXERCISE OPTION TERM
NUMBER OF OF STOCK AT PRICE AT REMAINING AT
OPTIONS/ TIME OF TIME OF DATE OF
SARS REPRICING REPRICING NEW REPRICING OR
REPRICED OR OR OR EXERCISE AMENDMENT
NAME DATE AMENDED AMENDMENT AMENDMENT PRICE (MONTHS)
---- ---- ------- --------- --------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
Edward P. Gistaro 6/23/89 90,000 .56 .70 .56 51
8/28/91 50,000 .56 1.25 .56 77
8/13/92 30,000 .56 1.375 .56 88
8/10/93 50,000 .56 1.218 .56 100
Allan H. Hobgood 6/23/89 60,000 .56 .70 .56 51
5/28/91 50,000 .56 1.25 .56 74
8/28/91 30,000 .56 1.25 .56 77
8/13/92 30,000 .56 1.375 .56 88
8/10/93 40,000 .56 1.218 .56 100
</TABLE>
In order to ensure that the Company's equity-based compensation programs
meet their goals of providing motivation and incentive for key executives of the
Company, the Board of Directors determined at a meeting held on February 14,
1995, that it was desirable to reprice all outstanding options held by officers,
Directors and employees of the Company to bring their exercise prices into line
with the then-current market price of the Company's Common Stock. The Company's
stock option plans generally provide that the Board of Directors has the
discretion to effect such a repricing in the exercise of their business
judgment.
EMPLOYEE STOCK PURCHASE PLAN
The Company has a 1993 Employee Stock Purchase Plan (the "1993 Plan")
which was approved by the stockholders at the 1994 Annual Meeting of
Stockholders. Under the 1993 Plan, eligible employees may elect to have up to
10% of their Base Pay (as defined) deducted and utilized for the purchase of
Common Stock of the Company in annual or semiannual offerings to be made by the
Company to eligible employees. The Company has reserved 800,000 shares of Common
Stock for issuance pursuant to the 1993 Purchase Plan. The Company issued
286,050, 100,583 and 70,983 shares in January 1997, 1996 and 1995
9
<PAGE>
pursuant to this Plan at purchase prices of $.32, $.32 and $.345 per share,
which represents 85% of the closing price on December 29, 1995, December 29, and
December 30, 1994, respectively.
Under the 1993 Plan, the Company has made available in each year from
January 1, 1994 through December 31, 1997, up to 200,000 shares of Common Stock.
Such shares are offered to participating employees in annual or semiannual
offerings. Participating employees are deemed to have been granted options to
purchase Common Stock in each offering in an amount equal to the amount of their
respective payroll deductions divided by 85% of the market value of the Common
Stock of the Company on the applicable Offering Commencement Date. The option
price is the lesser of 85% of the closing price of the Common Stock on the
Offering Commencement Date (or the next preceding trading day) or 85% of the
closing price of Common Stock on the Offering Termination Date (or the next
preceding trading day). Unless a participating employee terminates participation
as provided in the 1993 Plan, such employee shall be deemed to have exercised
such option on the Offering Termination Date and shall be issued a corresponding
number of shares of Common Stock.
The 1993 Plan is administered by the Compensation Committee of the Board
of Directors and will expire on December 31, 1997, unless sooner terminated or
amended by the Board of Directors.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 1, 1997, by all persons
known to the Company to own beneficially more than 5% of the Company's Common
Stock.
NAME AND AMOUNT AND
ADDRESS OF NATURE OF PERCENT
TITLE OF CLASS BENEFICIAL OWNERS BENEFICIAL OWNERSHIP OF CLASS
- -------------- ----------------- -------------------- --------
Common Stock, Demuth, Folger & Terhune 900,000 (1) 6.5
par value $.01 One Exchange Plaza
per share 55 Broadway
New York, New York 10006
(1) Consists of 900,000 shares of Common Stock underlying a Warrant to
Purchase Common Stock exercisable at an exercise price of $2.00 per share.
The percentage of ownership is calculated based on 13,856,936 shares of
outstanding.
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of May 30, 1997 (a) by each of the
Company's directors, (b) by the Company's Chief Executive Officer and its only
other executive officer whose 1996 compensation exceeded $100,000, and (c) by
all Directors and executive officers as a group.
NAME AND AMOUNT AND
ADDRESS OF NATURE OF PERCENT
TITLE OF CLASS BENEFICIAL OWNER (1) BENEFICIAL OWNERSHIP (2) OF CLASS (3)
- --------------------------------------------------------------------------------
Common Stock, Edward P. Gistaro 588,663 (4) 4.42%
par value $.01 Allan H. Hobgood 407,586 (5) 3.07%
per share Ralph Brown 278,100 (6) 2.13%
Al R. Ireton 70,000 (7) .54%
Philip J. Romano 235,763 (6) 1.8%
Chauncey E. Schmidt 190,000 (8) 1.45%
All Directors and
Executive Officers
as a Group (7
persons including
the above) 1,856,224 (9) 13.32%
- --------------------
(1) The address for all persons named is 7461 Callaghan Road, San Antonio,
Texas 78229.
10
<PAGE>
(2) The persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
except as otherwise indicated.
(3) Unless otherwise indicated below, the percentage of ownership is based
upon 13,009,883 shares of Common Stock outstanding, which includes 566,661
shares of Common Stock into which outstanding shares of Preferred Stock
are convertible and which the holders of the Preferred Stock are entitled
to vote.
(4) Includes 298,334 shares subject to currently exercisable stock options.
The percentage of ownership is based on 13,308,217 shares outstanding.
(5) Includes 288,334 shares subject to currently exercisable stock options.
The percentage of ownership is based on 13,298,217 shares outstanding.
(6) Includes 60,000 shares subject to currently exercisable stock options. The
percentage of ownership is based on 13,069,883 shares outstanding.
(7) Includes 70,000 shares subject to currently exercisable stock options. The
percentage of ownership is based on 13,079,883 shares outstanding.
(8) Includes 100,000 shares subject to currently exercisable stock options.
The percentage of ownership is based on 13,109,883 shares outstanding.
(9) Includes 929,502 shares subject to currently exercisable stock options.
The percentage of ownership is based on 13,939,385 shares outstanding.
RELATIONSHIP WITH
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen & Co., San Antonio, Texas has been engaged by the Board of
Directors of the Company as independent public accountants for the Company and
its subsidiaries for the fiscal year 1996, and it is expected that such firm
will serve in that capacity for the 1997 fiscal year. Management expects that a
representative of Arthur Andersen & Co. will be present at the Annual Meeting to
make a statement if he or she desires to do so and to be available to answer
appropriate questions posed by stockholders.
FINANCIAL STATEMENTS
The Company's audited financial statements for the fiscal year ended
December 31, 1996, and Management's Discussion and Analysis of Financial
Condition and Results of Operations incorporated herein by reference to the
Company's 1996 Annual Report to Stockholders which is being mailed to
stockholders with this Proxy Statement.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors of the
Company does not know of any business which will be presented for consideration
at the Annual Meeting other than that specified herein and in the Notice of
Annual Meeting of Stockholders, but if other matters are presented, it is the
intention of the persons designated as proxies to vote in accordance with their
judgment on such matters.
SOLICITATION
The cost of soliciting Proxies in the accompanying form will be borne by
the Company. In addition to the solicitation of Proxies by the use of the mails,
certain officers and associates (who will receive no compensation therefor in
addition to their regular salaries) may be used to solicit Proxies personally
and by telephone and telegraph. In addition, banks, brokers and other
custodians, nominees and fiduciaries will be requested to forward copies of the
Proxy material to their principals and to
11
<PAGE>
request authority for the execution of Proxies. The Company will reimburse such
persons for their expenses in so doing. In addition, the Company has engaged
MacKenzie Partners, Inc., New York, New York to assist in soliciting Proxies for
a fee of approximately $3,000 plus reasonable out of pocket expenses.
COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1996, INCLUDING THE FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES THERETO, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WILL BE
FURNISHED WITHOUT CHARGE TO ANY STOCKHOLDER OF THE COMPANY WHOSE PROXY IS
SOLICITED BY THE FOREGOING PROXY STATEMENT, UPON THE WRITTEN REQUEST OF ANY SUCH
PERSON ADDRESSED TO RALPH BROWN, SECRETARY, DOCUCON, INCORPORATED, 7461
CALLAGHAN ROAD, SAN ANTONIO, TEXAS 78229. SUCH A REQUEST FROM A BENEFICIAL OWNER
OF THE COMPANY'S COMMON STOCK MUST CONTAIN A GOOD-FAITH REPRESENTATION BY SUCH
PERSON THAT, AS OF JUNE 20, 1997, HE WAS A BENEFICIAL OWNER OF THE COMPANY'S
COMMON STOCK.
Please SIGN and RETURN the enclosed Proxy promptly.
By Order of the Board of Directors:
RALPH BROWN
Secretary
June 20, 1997
<PAGE>
DOCUCON, INCORPORATED
PROXY
ANNUAL MEETING OF STOCKHOLDERS-AUGUST 12, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints EDWARD P. GISTARO and ALLAN H. HOBGOOD or
___________________________, and each of them, with several powers of
substitution, proxies to vote the shares of Common Stock, par value $.01 per
share of Docucon, Incorporated which the undersigned could vote if personally
present at the Annual Meeting of Stockholders of Docucon, Incorporated to be
held at the Company's headquarters at 7461 Callaghan Road, San Antonio, Texas
78229, on Tuesday, August 12, 1997, at 12:00 Noon, C.D.T., and any adjournment
thereof:
1. Election of Directors:
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees listed below
contrary below)
INSTRUCTION: To withhold authority for any individual nominee, mark a line
through the nominee's name in the list below.
Edward P. Gistaro Allan H. Hobgood Chauncey E. Schmidt
Ralph Brown Al R. Ireton
2. To amend the 1993 Employee Stock Purchase Plan of the Company to increase
the number of shares offered and reserved for issuance thereunder by
200,000 shares to 1,000,000 shares of Common Stock, par value $.01 per
share, to be offered under one additional annual offering from January 1,
1998 to December 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To amend the 1988 Stock Option Plan of the Company to increase the number
of shares reserved for issuance thereunder by 300,000 shares to 1,660,000
share of Common Stock, par value $.01 per share.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, to act upon any matters incidental to the foregoing
and such other business as may properly come before the Annual Meeting, or
any adjournment thereof.
This Proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this Proxy will be
voted FOR Items 1, 2, and 3 above. Any stockholder who wishes to withhold the
discretionary authority referred to in Item 6 above should mark a line through
the entire Item.
Dated ________________, 1997 Signatures(s) _______________________
----------------------------------
(Please sign exactly and as fully as
your name appears on your stock
certificate. If shares are held jointly,
each stockholder should sign.)
PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY, USING THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED.
<PAGE>
