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 Rule 14a-11(c) or Rule 14a-12 --------------------------------------------------------------- Docucorp International, Inc. (Name of Registrant as Specified In Its Charter) --------------------------------------------------------------- Michael D. Andereck, President and CEO (Name of Person Filing Proxy Statement) Payment of Filing Fee (Check the appropriate box): [x] No fee required. [ ] Fee computed on the table below per Exchange Act Rule 14a-6(i)(4) and 0-11 ("Rule 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 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 [LOGO] DOCUCORP INTERNATI0NAL, INC. 5400 LBJ Freeway, Suite 300 Dallas, Texas 75240 October 24, 2005 Dear Stockholders: Enclosed is a proxy statement for the Annual Meeting of Stockholders to be held on Tuesday, December 6, 2005, at the Hotel Crescent Court, 400 Crescent Court, Dallas, Texas at 9:00 a.m., local time. Also enclosed are a proxy card and a copy of the Annual Report to Stockholders for fiscal 2005. On the following pages you will find a Notice of Annual Meeting of Stockholders and Proxy Statement. The following item of formal business will be presented at the Annual Meeting: (i) The election of six directors to the Board of Directors; I ask for your support for the foregoing item. During the Annual Meeting there will be a time for discussion, and I encourage you to present comments, questions and ideas at the Annual Meeting during the discussion period. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING AND REGARDLESS OF THE NUMBER OF SHARES YOU OWN, PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE (WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES). I hope that you are able to join us at the Annual Meeting. Sincerely, Michael D. Andereck PRESIDENT AND CHIEF EXECUTIVE OFFICER [LOGO] DOCUCORP INTERNATIONAL, INC. 5400 LBJ Freeway, Suite 300 Dallas, Texas 75240 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD DECEMBER 6, 2005 To Our Stockholders: NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Docucorp International, Inc., a Delaware corporation, will be held at the Hotel Crescent Court, Dallas, Texas, on December 6, 2005 at 9:00 a.m., local time, for the following purpose: (i) The election of six directors to the Board of Directors; and (ii) To transact such other business as may properly come before the meeting or any adjournment thereof. Only stockholders of record at the close of business on October 20, 2005 are entitled to notice of, and to vote at, the meeting or any adjournment thereof. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING AND REGARDLESS OF THE NUMBER OF SHARES YOU OWN, PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE (WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES). By Order of the Board of Directors, Barry R. Werner SECRETARY October 24, 2005 Dallas, Texas PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD DECEMBER 6, 2005 This Proxy Statement is furnished in connection with the solicitation by the Board of Directors of Docucorp International, Inc. of proxies for use at the Annual Meeting of Stockholders to be held on Tuesday, December 6, 2005 at 9:00 a.m., local time, and at any and all adjournments or postponements thereof. The Annual Meeting will be held at the Hotel Crescent Court, 400 Crescent Court, Dallas, Texas. Proxies in the form enclosed will be voted at the Annual Meeting, if properly executed, returned to us prior to the meeting and not revoked. The proxy may be revoked at any time before it is voted by giving written notice to the Secretary of Docucorp. ACTIONS TO BE TAKEN AT THE MEETING At the Annual Meeting, holders of Docucorp Common Stock will consider and vote for the election of six nominees as directors of the Company. In addition, any other business as may properly come before the Annual Meeting will be considered and the persons named in the proxies will vote in accordance with their judgment on such business. The Board of Directors knows of no such other business that will be brought before the Annual Meeting as of the date of this Proxy Statement. Only holders of record of Common Stock at the close of business on October 20, 2005 (the "Record Date") are entitled to notice of, and to vote at, the Annual Meeting. As of October 14, 2005, we had outstanding, and entitled to vote at the Annual Meeting, approximately 11.3 million shares of Common Stock. Holders of record of Common Stock are entitled to one vote per share on the matters to be considered at the Annual Meeting. The presence, either in person or by properly executed proxy, of the holders of record of a majority of the Common Stock outstanding on the Record Date is necessary to constitute a quorum at the Annual Meeting. The election as a director of each nominee requires the affirmative vote of the holders of record of a plurality of the outstanding voting power of the shares of Common Stock represented, in person or by proxy, at the Annual Meeting. The accompanying proxy, unless the stockholder otherwise specifies in the proxy, will be voted (i) for the election as directors of the six nominees set forth in this Proxy Statement and (ii) at the discretion of the proxy holders on any other matter that may properly come before the meeting or any adjournment thereof. If a stockholder owns shares in "street name" by a broker, the broker, as the record holder of the shares, is required to vote those shares in accordance with your instructions. If you do not give instructions to the broker, the broker will nevertheless be entitled to vote the shares with respect to "discretionary" items but will not be permitted to vote the shares with respect to "non-discretionary" items (in which case, the shares will be treated as "broker non-votes"). Abstentions and "broker non-votes" are counted as present and entitled to vote for the purposes of determining a quorum but are not counted for purposes of the election of a director. If any other matter or business is brought before the meeting, the proxy holders may vote the proxies in their discretion. The directors do not know of any such other matter or business. 4 BENEFICIAL OWNERSHIP OF COMMON STOCK The following table sets forth certain information regarding the beneficial ownership of Docucorp Common Stock as of October 14, 2005 for (i) each person who is known by us to own beneficially more than 5% of the outstanding shares of Docucorp Common Stock, (ii) each director, (iii) each current executive officer listed in the Summary Compensation Table set forth under the caption "Executive Compensation" and (iv) all of the directors and current executive officers of Docucorp as a group. Except pursuant to applicable community property laws and except as otherwise indicated, each stockholder identified in the table possesses sole voting and investment power with respect to its or his shares. Shares Owned -------------------------------- NAME Number Percent ---- --------------- ------------- Michael D. Andereck (1) 1,167,729 10.3% Milledge A. Hart, III (2) 343,871 3.0 Anshoo S. Gupta (3) 152,230 1.3 John D. Loewenberg (4) 172,473 1.5 George F. Raymond (5) 123,815 1.1 Arthur R. Spector (6) 103,852 * B. Bruce Dale (7) 243,527 2.1 John H. Gray (8) 181,000 1.6 Kerry K. LeCrone (9) 121,334 1.1 James R. Skinner (10) 181,381 1.6 All Directors and Executive Officers as a group (10 persons) 2,791,212 24.6% ValueAct Capital Partners, L.P. (11) 920,380 8.1% Wellington Management Co. L.L.P. (12) 675,039 6.0% - ---------------------- * Less than one percent. (1) Includes 96,678 shares held in a trust, which is not in Mr. Andereck's control. Mr. Andereck disclaims any beneficial ownership as to such shares. In addition, includes 220,000 shares of Common Stock issuable pursuant to exercisable stock options. The stockholder's address is c/o Docucorp, 5400 LBJ Freeway, Suite 300, Dallas, Texas 75240. (2) Includes 106,500 shares of Common Stock issuable pursuant to exercisable stock options. (3) Includes 142,500 shares of Common Stock issuable pursuant to exercisable stock options. (4) Includes 128,258 shares of Common Stock issuable pursuant to exercisable stock options. (5) Includes 102,500 shares of Common Stock issuable pursuant to exercisable stock options. (6) Includes 86,500 shares of Common Stock issuable pursuant to exercisable stock options. (7) Includes 135,000 shares of Common Stock issuable pursuant to exercisable stock options. (8) Includes 175,000 shares of Common Stock issuable pursuant to exercisable stock options. (9) Includes 75,000 shares of Common Stock issuable pursuant to exercisable stock options. (10) Includes 145,000 shares of Common Stock issuable pursuant to exercisable stock options. (11) Based on Schedule 13F filed on August 9, 2005. The address of ValueAct Capital Partners, L.P. is 435 Pacific Avenue, Fourth Floor, San Francisco, California 94133. (12) Based on Schedule 13F filed on August 15, 2005. The address of Wellington Management Co. L.L.P. is 75 State Street, Boston, Massachusetts 02109. 5 ELECTION OF DIRECTORS The following six persons have been nominated for election as directors at the Annual Meeting: Milledge A. Hart, III, Michael D. Andereck, Anshoo S. Gupta, John D. Loewenberg, George F. Raymond and Arthur R. Spector. Should any nominee become unable or unwilling to accept nomination or election, the proxy holders may vote the proxies for the election in his stead of any other person the Board of Directors may recommend. Each nominee has expressed his intention to serve the entire term for which election is sought. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE NOMINATED DIRECTORS. DIRECTORS AND EXECUTIVE OFFICERS A brief description of each executive officer and director is provided below. Directors hold office until the expiration of their term of office or until their successors are elected and qualified. All officers serve at the discretion of the Board of Directors. References to "Image Sciences" and "FormMaker" mean Image Sciences, Inc. and FormMaker Software, Inc., respectively, which were predecessors of Docucorp. MILLEDGE A. HART, III, 71, was appointed Chairman of the Board of Docucorp in 1997. He served as a member of Image Sciences' Board of Directors from 1985 to 1997. Mr. Hart is founder and currently Chairman of the Board of Hart Group, Inc. He also serves on the Board of Directors of The Home Depot, Inc. and the Board of Trustees of Southern Methodist University. Mr. Hart served as President of Electronic Data Systems from 1970 until his retirement in 1977. He is also a Trustee Emeritus of Duke University. MICHAEL D. ANDERECK, 52, has been President and Chief Executive Officer of Docucorp since 1997. From 1984 to 1997, he was President, Chief Executive Officer and a director of Image Sciences. Mr. Andereck joined Image Sciences as Vice President of Finance in 1983. From 1975 to 1983, Mr. Andereck was with KPMG LLP, where he attained the position of senior manager. B. BRUCE DALE, 42, has served as Senior Vice President, Products of Docucorp since 1997. He was Vice President of Product Development of Image Sciences from 1994 through 1997. Mr. Dale joined Image Sciences in 1986 as a Client Services Custom Software Developer. Since 1988, Mr. Dale held several management positions within Client Services, Marketing and Product Development. In 1992, he was appointed Director of Product Direction. JOHN H. GRAY, 55, became Senior Vice President, Finance and Administration of Docucorp in 2001. Prior to joining Docucorp, Mr. Gray was Executive Vice President and Chief Financial Officer of Fresh America Corp. From 1981 until 1998, Mr. Gray was employed by Club Corporation International ("CCI"), a privately held company, where he served most recently as Chief Accounting Officer and Chief Administrative Officer. Mr. Gray also served on CCI's Board of Directors. Prior to joining CCI, Mr. Gray was the Controller/Treasurer for USLife Title Insurance Company and Supervising Senior Accountant with KPMG LLP. KERRY K. LECRONE, 61, became Senior Vice President, ASP of Docucorp in August 2001. Mr. LeCrone was Senior Vice President, Services of Docucorp from 1997 through 2001 and Senior Vice President, Technical and Processing Services of FormMaker from 1995 through 1997. Between 1974 and 1995, Mr. LeCrone served in various capacities for several insurance and financial service businesses with primary responsibilities for software development and operations. 6 JAMES R. SKINNER, 46, became Senior Vice President, Professional Services of Docucorp in August 2001. From 1997 to 2001 Mr. Skinner was Vice President, Services of Docucorp. Mr. Skinner joined FormMaker in 1991 as Manager, Product Development. Prior to joining FormMaker, he worked for Prentice Hall Professional Software where he obtained experience in retail software development. Between 1977 and 1989 Mr. Skinner served in various capacities for companies in the insurance industry with responsibilities in the areas of underwriting, marketing and information technology. ANSHOO S. GUPTA, 59, was elected as a director of Docucorp in 1998. He was President of Production Systems Group at Xerox Corporation from 1999 to 2002. From 1969 through 1998, Mr. Gupta held a series of financial, marketing, planning and General Management positions at Xerox. He is currently on the Board of Directors of INFOUSA, Inc., and he is on the advisory board of IIT (Indian Institute of Technology) Kharagpur Foundation. JOHN D. LOEWENBERG, 65, became a director of Docucorp in 1997. He was previously Chief Executive Officer and President of FormMaker. From 1995 to 1996, he served as Executive Vice President and Chief Administrative Officer of Connecticut Mutual, a life insurance company. Prior to joining Connecticut Mutual, Mr. Loewenberg served as Senior Vice President of Aetna Life and Casualty, a multi-line insurer, and as Chief Executive Officer of Aetna Information Technology, the information systems company of Aetna Life and Casualty. Mr. Loewenberg is currently Non Executive Chairman of the Board of Applix, Inc. He is also a trustee of several not for profit organizations. GEORGE F. RAYMOND, 68 became a director of Docucorp in 1997. He is a private investor and software industry consultant. He is a director of BMC Software Inc., a Houston-based, publicly held software firm. He is also a director of NationsHealth, Inc. and Heartland Payment Systems, Inc., both publicly held services firms, as well as several privately held companies. Mr. Raymond founded Automatic Business Centers, Inc. ("ABC"), a payroll processing company in 1972, and sold the company to CIGNA in 1983. Mr. Raymond and other members of ABC's management repurchased ABC in 1986 from CIGNA, and sold ABC to Automatic Data Processing ("ADP") in 1989. In 1986, Mr. Raymond was Chairman of ITAA, the computer software and services trade association. Mr. Raymond has practiced as a Certified Public Accountant. ARTHUR R. SPECTOR, 65, has been a director of Docucorp since 1997. From 1995 to 1997, he served as Chairman of the Board and a director of FormMaker. Since 1997, Mr. Spector has served as managing director of Safeguard International, a private equity firm. Mr. Spector also serves as a director and officer of several portfolio companies of Safeguard International and a number of publicly held companies. In fiscal 2005, the Board of Directors amended the Outside Director Compensation Plan to include an annual retainer fee of $25,000, a board meeting fee of $1,500 for each face-to-face board meeting, a $750 board meeting fee for each telephonic board meeting and an annual restricted stock grant of 2,500 shares. In addition, the chairman of the Audit Committee receives an additional annual retainer fee of $10,000 and non-chairman members of the Audit Committee receive an additional annual retainer of $5,000. Directors are reimbursed for out-of-pocket expenses incurred for attendance at board meetings. CORPORATE GOVERNANCE The Board of Directors has determined that all of its members, other than Mr. Andereck, the Company's CEO, qualify as "independent" directors. In making such determination, the Board of Directors has surveyed each member regarding relationships and potential conflicts of 7 interest with the Company and has concluded, based upon the disclosures provided by each such individual, that each of its directors other than Mr. Andereck has no direct or indirect material relationship with the Company other than his service as a director. The independent directors of the Company meet in executive session at such times, including dates of regularly scheduled meetings of the entire Board of Directors, as determined by the independent directors. Mr. Hart, the Company's Chairman of the Board, presides at all executive sessions of the independent directors. The independent directors met in executive sessions three times in fiscal 2005. The Board of Directors held seven meetings in fiscal 2005. No director attended fewer than 75% of the meetings of the Board (and any committees thereof), which they were required to attend. It is a policy of the Board of Directors to encourage directors to attend each annual meeting of stockholders. Such attendance allows for direct interaction between stockholders and members of the Board of Directors. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS All future transactions between Docucorp and our officers, directors and principal stockholders or their affiliates will be on terms no less favorable to us than may be obtained from unrelated third parties, and any such transactions will be approved by a majority of the disinterested directors. COMMITTEES OF THE BOARD OF DIRECTORS The Board of Directors of Docucorp has appointed an Audit Committee, which currently consists of George F. Raymond, Chairman, Anshoo S. Gupta and Arthur R. Spector. The Audit Committee's duties are set forth in its charter, as amended to date. Each of the members of the Audit Committee is "independent," as defined by the rules of the Securities and Exchange Commission. The Board of Directors has determined that Mr. Raymond is the Audit Committee financial expert serving on the Audit Committee. A discussion of the role of the Audit Committee is provided under "Report of the Audit Committee" below. The Audit Committee held twelve meetings in fiscal 2005. The charter for the Audit Committee may be viewed at and obtained, free of charge, from our Internet website (HTTP://WWW.DOCUCORP.COM). The Board of Directors of Docucorp has also appointed a Compensation Committee, which currently consists of Milledge A. Hart, III, John D. Loewenberg and Arthur R. Spector. Effective March 16, 2005, John D. Loewenberg became chairman of the Compensation Committee, replacing Milledge A. Hart, III. The Compensation Committee's duties include reviewing and making recommendations to the Board of Directors regarding compensation and benefit plan matters, including executive officer compensation, director compensation, employee stock option and restricted stock grants, 401(k) plan matters, employee stock purchase plan matters and other defined benefit plan matters. The Compensation Committee held three meetings in fiscal 2005. The charter for the Compensation Committee may be viewed at and obtained, free of charge, from our Internet website (HTTP://WWW.DOCUCORP.COM). 8 The Board of Directors established a Governance and Nominating Committee, which currently consists of Milledge A. Hart, III, Chairman, Anshoo S. Gupta, John D. Loewenberg, George F. Raymond and Arthur R. Spector. The duties of the Governance and Nominating Committee include recommending to the Board of Directors potential members to be added as new or replacement members to the Board of Directors and recommending corporate governance guidelines to the full Board of Directors. The Governance and Nominating Committee held four meetings in fiscal 2005. The charter for the Governance and Nominating Committee may be viewed at and obtained, free of charge, from our Internet website (HTTP://WWW.DOCUCORP.COM). COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION No executive officer has served as a member of the Compensation Committee (or other board committee performing similar functions or, in the absence of any such committee, the entire board of directors) of another corporation, one of whose executive officers served on the Compensation Committee. No executive officer has served as a director of another corporation, one of whose executive officers served on the Compensation Committee. No executive officer served as a member of the Compensation Committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another corporation, one of whose executive officers served as a director of Docucorp. STOCKHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS Any Company stockholder who wishes to communicate with the Board of Directors or with an individual director regarding corporate governance or long-term strategy, may direct such communications to the Board of Directors, Docucorp International, Inc. 5400 LBJ Freeway, Suite 300 Dallas, TX 75240. The communication must be clearly addressed to the Company's Board of Directors or to a specific director, in his or her role as a director. The Board of Directors has approved a process pursuant to which any such correspondence will be forwarded to the Chairman of the Governance and Nominating committee for appropriate response. BOARD MEMBERSHIP CRITERIA The Governance and Nominating Committee works with the Board of Directors on an annual basis to determine the appropriate characteristics, skills and experience for the Board as a whole and its individual members. In evaluating the suitability of individual Board members, the Board of Directors takes into account many factors including general business knowledge, strategic business perspective, industry experience, educational and professional background and other elements relevant to the success of the Company. Each candidate for director must possess at least the following specific minimum qualifications: o Each candidate shall be prepared to represent the best interests of all the Company's stockholders and not just one particular constituency. o Each candidate shall be an individual who has demonstrated integrity and ethics in his/her personal and professional life and has established a record of professional accomplishment in his/her chosen field. o No candidate shall have any material personal, financial or professional interest in any present or potential competitor of the Company. 9 o Each candidate shall be prepared to participate fully in activities of the Board of Directors, including active membership in at least one Committee of the Board of Directors and attendance at, and active participation in, meetings of the Board of Directors and the Committee(s) of the Board of Directors of which he or she is a member, and not have other personal or professional commitments that would, in the Governance and Nominating Committee's sole judgment, interfere with or limit his or her ability to do so. Although not an automatic disqualifying factor, the inability of a candidate to meet the independence and other governing standards of the NASDAQ or the SEC will be a significant negative factor in any assessment of a candidate's suitability. INTERNAL PROCESS OF IDENTIFYING CANDIDATES The Governance and Nominating Committee will use a variety of means for identifying potential nominees for director, including the use of outside search firms and recommendations from current members of the Board of Directors and from stockholders. In determining whether to nominate a candidate, the Governance and Nominating Committee will consider the current composition and capabilities of serving board members, as well as additional capabilities considered necessary or desirable in light of existing and future Company needs. One or more of the members of the Governance and Nominating Committee may interview, or have an outside search firm interview, a prospective candidate who is identified as having high potential to satisfy the expectations, requirements, qualities and responsibilities for membership on the Board of Directors. Other directors who are not members of the Governance and Nominating Committee may also interview prospective candidates. Reports from those interviews or from Governance and Nominating Committee members with personal knowledge and experience with the candidate, resumes, information provided by other contacts and other information deemed relevant by the Governance and Nominating Committee are then considered in determining whether a candidate shall be nominated. The Governing and Nominating Committee also exercises its independent business judgment and discretion in evaluating the suitability of a candidate for nomination. NOMINATION RIGHTS OF STOCKHOLDERS Any stockholder of the Company may recommend one or more candidates to be considered by the Governance and Nominating Committee as a potential nominee or nominees for election as director of the Company at an annual meeting of stockholders if the stockholder complies with the notice, information and consent provisions in accordance with Delaware corporate law. In order for the candidate recommendation to be timely for the Company's 2006 annual meeting of stockholders, a stockholder's notice to the Company's Board of Directors must be delivered to the Company's principal executive offices no later than August 1, 2006. Any such recommendations received will be presented to the Governing and Nominating Committee for consideration. All candidates (whether identified internally or by a stockholder) who, after evaluation based upon the criteria and process described in "Internal Process of Identifying Candidates" above, are then recommended by the Governance and Nominating Committee and approved by the Board, will be included in the Company's recommended slate of director nominees in its proxy statement. EXECUTIVE COMPENSATION The following table sets forth information concerning cash compensation paid or accrued by us during the three-year period ended July 31, 2005 to or for our Chief Executive Officer and the four other highest compensated executive officers whose total compensation exceeded $100,000. 10 Long Term Compensation Annual Compensation ($) Awards (#) ------------------------------------------------------------------------ Restricted Year Salary Bonus Options Stock (1) Other (2) ------------------------------------------------------------------------ Michael D. Andereck 2005 $385,000 $25,000 0 32,000 $6,792 PRESIDENT AND CEO 2004 370,000 60,000 20,000 9,000 7,004 2003 360,000 0 50,000 0 5,500 B. Bruce Dale 2005 $234,000 $ 8,000 0 14,000 $6,792 SR. VP, PRODUCTS 2004 223,500 22,500 15,000 6,000 6,273 2003 217,000 40,000 30,000 0 5,915 John H. Gray 2005 $216,000 $8,000 0 0 $6,480 SR. VP, FINANCE AND ADMINISTRATION 2004 216,000 12,000 15,000 6,000 6,120 2003 210,000 0 30,000 0 5,250 Kerry K. LeCrone 2005 $231,000 $15,000 0 14,000 $6,750 Sr. VP, ASP 2004 223,000 77,500 15,000 6,000 6,134 2003 217,000 49,000 30,000 0 5,500 James R. Skinner 2005 $232,000 $11,000 0 14,000 $6,768 SR. VP, PROFESSIONAL SERVICES 2004 221,500 27,500 15,000 6,000 6,292 2003 215,000 95,000 30,000 0 4,900 (1) Restricted stock vests over five or seven years with acceleration of cumulative vesting to 25%, 50%, and 100% in the first three years if specific performance goals are attained. For the years ended July 31, 2005 and 2004, the performance goals were not attained. (2) Other compensation consists of 401(k) matching payments. In January 1997, we entered into an employment agreement with Michael D. Andereck. The employment agreement has an indefinite term and provides that Mr. Andereck's salary is to be reviewed annually by the Board of Directors. Effective August 1, 2005, the Board of Directors set Mr. Andereck's annual base salary for fiscal 2006 at $385,000. In addition to base salary, the agreement allows for discretionary bonuses, participation in any 401(k) plan and stock option plan maintained by us and other fringe benefits that we maintain for our top-level executives. The agreement also contains severance provisions which, if triggered, entitle Mr. Andereck to monthly severance payments in an amount equal to Mr. Andereck's then-current monthly salary for a period of up to 12 months. The severance payments are triggered by the occurrence of any of the following events: termination of employment by us without cause, termination of employment by Mr. Andereck for good reason (which includes a material failure of us to observe or perform any material term of the employment agreement, the exclusion of Mr. Andereck from participation in any new compensation or benefit arrangement offered to similarly situated employees or a reduction in Mr. Andereck's level of responsibility, position, authority or duties), resignation by Mr. Andereck with 60 days' notice or total disability. The employment agreement also provides a non-competition provision prohibiting Mr. Andereck from competing against us while employed by us and for one year following the termination of payments to Mr. Andereck. 11 OPTION PLANS During the year ended July 31, 2005, there were no options granted to executive officers or employees. In July 2005, the Board of Directors accelerated the vesting of all outstanding stock options that vested after July 31, 2005. The following table sets forth certain information with respect to the options exercisable by each executive officer listed in the Summary Compensation Table set forth under the caption "Executive Compensation" during the year ended July 31, 2005 or held by such persons at July 31, 2005. Value of Unexercised Shares Number of Options In-the-Money Options Acquired Value at July 31, 2005 at July 31, 2005 (1) Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable ---- ----------- -------- ----------- ------------- ----------- ------------- Michael D. Andereck -- -- 220,000 0 $442,500 $0 B. Bruce Dale -- -- 135,000 0 $293,685 $0 John H. Gray -- -- 175,000 0 $487,985 $0 Kerry K. LeCrone -- -- 75,000 0 $124,911 $0 James R. Skinner -- -- 145,000 0 $302,935 $0 (1) Based upon the closing price of Docucorp Common Stock on July 29, 2005, which was $6.90 per share. The following table sets forth information concerning the shares of Common Stock that may be issued upon exercise of options, warrants and rights under our Equity Compensation Plan as of July 31, 2005. Our Equity Compensation Plan is the only equity compensation plan with options and similar rights outstanding at July 31, 2005. The Equity Compensation Plan has been approved by our stockholders. In addition, we granted restricted stock awards outside of our Equity Compensation Plan to employees of Newbridge Information Services, Inc. as part of the acquisition of the Newbridge business in September 2004, which grant was not submitted to our stockholders for approval. Number of Securities to Weighted-Average Number of Securities be Issued Upon Exercise Exercise Price of Remaining Available for of Outstanding Options, Outstanding Options, Future Issuance Under Warrants and Rights Warrants and Rights Equity Compensation Plan ------------------------ ---------------------- --------------------------- 1997 Equity Compensation Plan 2,345,957 $4.80 876,454 Newbridge Restricted Stock Grants 175,000 $7.90 None SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Under the securities laws of the United States, our directors and executive officers and persons who own more than 10% of Docucorp Common Stock, are required to report their initial ownership of Common Stock and any subsequent changes in that ownership to the Securities and Exchange Commission. Specific due dates have been established for these reports, and we are required to disclose in this proxy statement any failure to file by these 12 dates. Based solely on our review of the copies of such forms received by us with respect to fiscal 2005, we believe that all of our directors, officers and persons who own more than 10% of a registered class of Docucorp's equity securities timely filed these reports. STOCK PRICE PERFORMANCE Set forth below is a line graph indicating the stock price performance of Docucorp Common Stock for the period beginning July 31, 2000 and ending July 31, 2005 as contrasted with the NASDAQ Market Index and the NASDAQ Computer and Data Processing Index. The graph assumes that $100 was invested at the beginning of the period. No cash or stock dividends were paid during this period. [PERFORMANCE GRAPH] 7/31/2000 7/31/2001 7/31/2002 7/31/2003 7/31/2004 7/31/2005 ---------------------------------------------------------------------- Docucorp International, Inc. 100.00 103.39 370.62 186.27 225.66 188.73 NASDAQ Stock Market (US) Index 100.00 56.60 37.29 39.05 44.24 48.31 NASDAQ Computer & Data Processing Index 100.00 56.37 36.19 45.30 50.47 56.42 $100 invested on 7/31/00 in stock or index, including reinvestment of dividends. Fiscal year ending July 31. 13 REPORT OF THE AUDIT COMMITTEE The Audit Committee of the Board of Directors is comprised of three independent directors and operates under a written charter adopted by the Board of Directors in accordance with applicable rules of the Securities and Exchange Commission and NASDAQ. Management is responsible for our internal controls and the financial reporting process. The independent registered public accounting firm is responsible for performing an independent audit of our consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and to issue a report thereon. The Audit Committee's responsibility is to monitor and oversee these processes. The Audit Committee also recommends to the Board of Directors the selection of our independent registered public accounting firm, reviews any non-audit services performed by our independent registered public accounting firm, reviews the findings and recommendations of our independent registered public accounting firm and periodically reviews major accounting policies and significant internal accounting control procedures. In this context, the Audit Committee has met and held discussions with management, who represented to the Audit Committee that our consolidated financial statements were prepared in accordance with generally accepted accounting principles. The Audit Committee has reviewed and discussed the consolidated financial statements with both management and the independent registered public accounting firm. The Audit Committee also discussed with the independent registered public accounting firm matters required to be discussed by Statement on Auditing Standards No. 61 (as amended), Communication with Audit Committees. Our independent registered public accounting firm also provided to the Audit Committee the written disclosures required by Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees, and the Audit Committee discussed with the independent registered public accounting firm their independence. Based upon the Audit Committee's discussion with management and the independent registered public accounting firm, and the Committee's review of the representation of management and the report of the independent registered public accounting firm to the Audit Committee, the Audit Committee recommended that the Board of Directors include the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended July 31, 2005 filed with the Securities and Exchange Commission. The Audit Committee has not made a recommendation to the stockholders with respect to the selection of our independent registered public accounting firm for the 2006 fiscal year, as it has not completed its deliberations on this matter. The Audit Committee held twelve meetings in fiscal 2005. Audit Committee George F. Raymond, Chairman Anshoo S. Gupta Arthur R. Spector 14 REPORT OF THE COMPENSATION COMMITTEE We are in a highly competitive industry. In order to succeed, we believe that we must be able to attract and retain outstanding executives, promote among them the economic benefits of stock ownership in Docucorp and motivate and reward executives who make contributions of special importance to the success of our business. We have structured our executive compensation program to support our strategic goals and objectives. As a matter of policy, the Compensation Committee believes that the compensation of the executive officers should consist of a base salary, contingent cash bonus and stock awards. Total compensation and base salary levels are based on generally subjective factors and include the contribution the executive officer made and is anticipated to make to our success, the level of experience and responsibility of the executive officer, the competitive position of our executive compensation and our historical levels of compensation for executive officers. Cash and/or stock bonuses are generally awarded based on the achievement of financial goals recommended by the Compensation Committee and approved by the Board of Directors. These goals may include a target range of revenue, pretax earnings, earnings per share or other objective measurement consistent with long-term stockholder goals. The Compensation Committee approves a target range for specific financial goals and a range of potential bonus amounts for each executive. Actual bonuses are awarded primarily based on the actual achievement level of the specified corporate goals compared to the target range of achievement. Grants of Docucorp stock options and restricted stock are intended to align the interests of executives and key employees with the long-term interests of our stockholders and to encourage executives and key employees to remain in our employ. Grants are awarded subjectively based on a number of factors, including the individual's level of responsibility, the amount and term of options and restricted stock already held by the individual, the individual's contributions and anticipated contributions to the achievement of our financial and strategic objectives and the achievement of our financial and strategic objectives. In December 2004, the FASB issued FASB Statement No. 123(R), "Share-Based Payment", which requires all companies to recognize an expense for share-based payments, including stock options, based on the fair value of the equity instrument. The Company commenced the adoption of this method effective as of August 1, 2005. In contemplation of this change, the Compensation Committee recommended that the Board accelerate the vesting of all outstanding stock options that were to vest after July 31, 2005. This accelerated vesting created a one-time, non-cash charge in the fourth quarter of fiscal 2005 totaling approximately $100,000. Effective August 1, 2004, the Compensation Committee recommended an increase in the base salary of Mr. Andereck, Chief Executive Officer, from $370,000 to $385,000. The increase in base salary was intended to recognize Mr. Andereck's contribution toward the growth and management of Docucorp. During fiscal 2005, Mr. Andereck was awarded 32,000 shares of restricted stock. At the conclusion of the year ended July 31, 2005, the Compensation Committee did not grant a year-end bonus to Mr. Andereck based upon the Company's failure to achieve the financial goals established by the Compensation Committee. However, a special bonus of $25,000 was granted during fiscal 2005, based upon the completion of the acquisition and integration of Newbridge. The Compensation Committee held three meetings in fiscal 2005. Compensation Committee John D. Loewenberg, Chairman Milledge A. Hart, III Arthur R. Spector 15 FEES PAID TO, AND INDEPENDENCE OF, REGISTERED PUBLIC ACCOUNTING FIRM The following table sets forth the aggregate fees billed to us for the fiscal year ended July 31, 2005 and 2004 by our principal accounting firm, PricewaterhouseCoopers LLP: Fiscal Year Annual Audit Fees (1) Audit Related Fees (2) Tax Fees (3) All Other Fees (4) ---- --------------------- ---------------------- ------------ ------------------ 2005 $642,000 $ 0 $250,000 $2,000 2004 $280,000 $ 0 $153,000 $2,000 (1) Annual audit fees relate to professional services rendered for the audit of our consolidated financial statements, subsidiary and statutory audits, the issuance of consents and assistance with review of documents filed with the Securities and Exchange Commission. Audit fees in 2005 also include fees for audit and attestation with respect to internal control over financial reporting. (2) Audit related fees are for accounting advisory services. (3) Tax fees include fees for tax planning, tax consultation, preparation of tax returns both in the United States and the United Kingdom and tax consulting related to expatriate assignees. (4) For fiscal 2005 and 2004, all other fees are for a subscription to a research database. Representatives of Pricewaterhouse Coopers, our independent accounting firm, are expected to be present at the annual meeting with the opportunity to make a statement if they so desire and to be available to respond to appropriate questions. The Audit Committee has established policies and procedures for the approval and pre-approval of audit services and permitted non-audit services. The Audit Committee has the responsibility to engage and terminate our independent registered public accounting firm, to pre-approve their performance of audit services and permitted non-audit services, to approve all audit and non-audit fees and to set guidelines for permitted non-audit services and fees. All fees for fiscal 2005 requiring pre-approval were pre-approved by the Audit Committee or were within pre-approved guidelines for permitted non-audit services and fees established by the Audit Committee, and there were no instances of waiver of approval requirements or guidelines during the same periods. STOCKHOLDERS' PROPOSALS Any proposals that our stockholders desire to have presented at the 2006 annual meeting of stockholders must be received by us at our principal executive offices no later than August 1, 2006 and must also comply with the notice, information and other provisions contained in our bylaws. 16 MISCELLANEOUS The accompanying proxy is being solicited on behalf of the Board of Directors. We will pay the costs associated with preparing, printing and mailing the form of proxy and the material used in the solicitation thereof. In addition to the use of mails, proxies may be solicited by persons we regularly employ, by personal interview, telephone, e-mail and telegraph. Such persons will receive no additional compensation for such services, but will be reimbursed for any out-of-pocket expenses incurred by them in connection with such services. Arrangements may also be made with brokerage houses and other custodians, nominees and fiduciaries for the forwarding of solicitation materials to the beneficial owners of shares of Common Stock held of record by such persons, and we may reimburse such persons for reasonable out-of-pocket expenses incurred by them in connection therewith. Certain stockholders who hold their shares in street name and live in the same household may receive only one copy of this Proxy Statement and Annual Report. This practice is known as "householding." If you hold your shares in street name and would like additional copies of these materials, please contact your broker. If you receive multiple copies and would prefer to receive only one, please contact your broker as well. We do not currently use householding for record holders and will send notice to record holders before using householding, giving record holders the opportunity to continue to receive multiple copies in the same household. By Order of the Board of Directors, Barry R. Werner SECRETARY Dallas, Texas October 24, 2005 17 PROXY DOCUCORP INTERNATIONAL, INC. The undersigned hereby (a) acknowledges receipt of the Notice of Annual Meeting of Stockholders of Docucorp International, Inc. (the "Company") to be held on December 6, 2005, at 9:00 a.m., C.S.T., and the Proxy Statement in connection therewith, and (b) appoints Milledge A. Hart and Michael D. Andereck, or each of them, his proxies with full power of substitution and revocation, for and in the name, place and stead of the undersigned, to vote upon and act with respect to all of the shares of Common Stock of the Company standing in the name of the undersigned or with respect to which the undersigned is entitled to vote and act at said meeting or at any adjournment thereof, and the undersigned directs that his proxy be voted as follows: 1. ELECTION OF DIRECTORS [_] FOR nominees listed below except as marked to the contrary below [_] WITHHOLD AUTHORITY to vote for all nominees listed below Milledge A. Hart, III, Michael D. Andereck, Anshoo S. Gupta, John D. Loewenberg, George F. Raymond and Arthur R. Spector INSTRUCTION: To withhold authority to vote for any individual nominee, write that nominee's name in the space below. 2. To vote upon other such matters that may legally come before the meeting or any adjournment or postponement thereof. (Continued and to be signed on reverse side) (Continued from other side) If more than one of the proxies listed on the reverse side shall be present in person or by substitute at the meeting or any adjournment thereof, the majority of said proxies so present and voting, either in person or by substitute, shall exercise all of the powers hereby given. THIS PROXY WILL BE VOTED AS SPECIFIED ON THE REVERSE SIDE. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES FOR DIRECTORS. The undersigned hereby revokes any proxy or proxies heretofore given to vote upon or act with respect to such stock and hereby ratifies and confirms all that said proxies, their substitutes, or any of them, may lawfully do by virtue hereof. Dated:_________________________________ _______________________________________ Signature _______________________________________ (Signature if held jointly) Please date the proxy and sign your name exactly as it appears hereon. Where there is more than one owner, each should sign. When signing as an attorney, administrator, executor, guardian or trustee, please add your title as such. If executed by a corporation, the proxy should be signed by a duly authorized officer. Please sign the proxy and return it promptly whether or not you expect to attend the meeting. If you do attend, you may revoke your proxy and vote in person if you so desire. PLEASE MARK, SIGN, DATE AND MAIL IN THE RETURN ENVELOPE PROVIDED HEREWITH.