<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e) (2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11 (c) or Rule 14a-12
WESTCOTT COMMUNICATIONS, INC.
______________________________________________________________________________
(Name of Registrant as Specified in Its Charter)
______________________________________________________________________________
(Name of Person (s) Filing Proxy Statement, other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11 (c) (1) (ii), 14a-6 (i) (1), or 14a-6 (i)
(2) or Item 22(a) (2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6
(i) (3).
[ ] Fee computed on the table below per Exchange Act Rule 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 of the underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
______________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
______________________________________________________________________________
(5) Total fee paid:
______________________________________________________________________________
[ ] Fee paid previously with preliminary materials.
______________________________________________________________________________
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a) (2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
Form or Schedule and the date of its filing.
(1) Amount Previously Paid
______________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
______________________________________________________________________________
(3) Filing party:
______________________________________________________________________________
(4) Dated Filed:
______________________________________________________________________________
<PAGE>
WESTCOTT COMMUNICATIONS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 25, 1995
To Our Shareholders:
You are invited to attend the Annual Meeting of Shareholders of WESTCOTT
COMMUNICATIONS, INC. (the "Company") which will be held at 5:30 p.m., May 25,
1995 at the Harvey Hotel, 14315 Midway Road, Dallas, Texas for the following
purposes:
1. To elect six directors; and
2. To transact any other business that may properly come before the meeting
or any adjournment or postponement thereof.
Only holders of record of the Company's common stock at the close of business
on March 31, 1995 will be entitled to vote at the meeting.
Whether or not you plan to attend the meeting, you are urged to complete, date
and sign the enclosed proxy card and return it in the enclosed envelope so that
your shares may be voted in accordance with your wishes and in order that the
presence of a quorum may be assured. YOUR VOTE IS IMPORTANT. Your proxy may be
revoked at any time prior to the time it is voted.
By order of the Board of Directors,
[SIGNATURE OF PHYLLIS FARRAGUT
APPEARS HERE]
Phyllis Farragut,
Secretary
April 24, 1995
Carrollton, Texas
<PAGE>
WESTCOTT COMMUNICATIONS, INC.
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS OF
WESTCOTT COMMUNICATIONS, INC.
TO BE HELD MAY 25, 1995
This proxy statement is furnished in connection with the solicitation by the
Board of Directors of WESTCOTT COMMUNICATIONS, INC. (the "Company") of proxies
to be voted at the Annual Meeting of Shareholders (the "Annual Meeting") which
will be held at the Harvey Hotel, 14315 Midway Road, Dallas, Texas, on May 25,
1995, at 5:30 p.m., or at any adjournment or postponement thereof, for the
purposes set forth in the accompanying Notice of Annual Meeting of Shareholders.
This proxy statement and the proxy card are being mailed to shareholders on or
about April 24, 1995.
The entire cost of soliciting proxies will be borne by the Company.
Arrangements may be made with brokerage houses and other custodians, nominees
and fiduciaries to send proxies and proxy materials to the beneficial owners of
stock and such persons may be reimbursed for their expenses. Proxies may be
solicited by directors, officers or regular employees of the Company in person
or by telephone or telegraph.
The Company's principal executive offices are located at 1303 Marsh Lane,
Carrollton, Texas 75006.
ANNUAL REPORT
The Annual Report to Shareholders for the fiscal year ended December 31, 1994,
is enclosed herewith. The Annual Report does not form any part of the material
for the solicitation of proxies.
REVOCATION OF PROXY
Any shareholder returning the accompanying proxy may revoke their proxy at any
time prior to its exercise (a) by giving written notice to the corporate
secretary of the Company of such revocation prior to its use, (b) by voting in
person at the Annual Meeting, or (c) by executing and filing with the corporate
secretary of the Company a later dated proxy.
VOTING RIGHTS
The voting securities of the Company are shares of its common stock, $.01 par
value per share (the "Common Stock"), each share of which entitles the holder to
one vote. The close of business on March 31, 1995 was the record date for
holders of Common Stock entitled to notice of and to vote at the Annual Meeting.
As of that date, the Company had 19,599,503 shares of Common Stock outstanding
and entitled to vote.
Subject to revocation of a proxy, shares will be voted in accordance with the
instructions on the proxy card. As to the election of directors, a shareholder
may, by checking the appropriate box on the proxy card: (i) vote for all
director nominees as a group; (ii) withhold authority to vote for all director
nominees as a group; or (iii) vote for all director nominees as a group except
those nominees identified by the shareholder in the appropriate area. With
respect to each other proposal, a shareholder may, by checking the appropriate
box on the proxy card: (i) vote "FOR" the proposal; (ii) vote "AGAINST" the
proposal; or (iii) "ABSTAIN" from voting on the proposal. In the event no
instructions are given, the persons named in the accompanying proxy card will
vote FOR the election of nominees for director listed in this proxy statement.
As to any other business that may properly be brought before the Annual Meeting,
the persons named in the accompanying proxy card will vote in accordance with
their best judgment.
<PAGE>
Pursuant to the Texas Business Corporation Act and the Company's Bylaws, the
affirmative vote of a plurality of the votes cast in person or by proxy at the
Annual Meeting will be required for the election of directors, and the
affirmative vote of a majority of the shares of Common Stock voting in person or
by proxy at the Annual Meeting will be required for the approval of Proposals
Two. Abstentions and Non-votes will not be counted with respect to Proposal
Two. A "Non-vote" occurs when a nominee holding shares for a beneficial owner
has voted on certain matters at the Annual Meeting pursuant to discretionary
authority or instructions from the beneficial owner but may not have received
instructions or exercised discretionary voting power with respect to other
matters.
2
<PAGE>
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth as of March 31, 1995 information known to the
management of the Company concerning the beneficial ownership of Common Stock by
(a) each person who is known by the Company to be the beneficial owner of more
than five percent of the shares of Common Stock outstanding, (b) each director
of the Company, (c) the Company's Chief Executive Officer, (d) each of the
Company's other most highly compensated executive officers, and (e) all
directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES BENEFICIALLY OWNED/(5)/
OF THE BENEFICIAL OWNER /(1)/ NUMBER PERCENT
- ------------------------------------------------- -------- ---------
<S> <C> <C>
Carl Westcott.................................... 2,282,056/(5)/ 11.6%
1303 Marsh Lane
Carrollton, Texas 75006
Gardner Lewis Asset Management. L.P./(2)/........ 1,328,800 6.8%
285 Wilmington - West Chester Pike
Chadds Ford, PA 19317
The Capital Group Companies, Inc/(3)/............ 1,000,000 5.1%
333 South Hope Street
Los Angeles, CA 90071
Jack T. Smith.................................... 229,292/(6)/ 1.2%
Gary J. Fernandes................................ 231,875/(7)/ 1.2%
Jeffrey M. Heller................................ 20,500/(8)/ *
Stansfield Turner................................ 20,500/(9)/ *
Kern Wildenthal.................................. 10,500/(10)/ *
Phyllis Farragut................................. 54,970/(11)/ *
William E. Smith/(4)/............................ 17,500/(12)/ *
All directors and executive officers as a group
(7 persons).................................... 2,849,718/(13)/ 14.3%
</TABLE>
- --------------
* Represents less than 1% of outstanding Common Stock.
/(1)/ Except as indicated in the footnotes to this table, 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, subject to
community property laws where applicable.
/(2)/ Based on Schedule 13G dated February 7, 1995 filed by Gardner Lewis Asset
Management, L.P. According to the Schedule 13G, Gardner Lewis Asset
Management, L.P. has sole voting control with respect to 1,076,300 shares
of Common Stock and shares voting control with respect to an additional
41,000 shares of Common Stock. Gardner Lewis Asset Management, L.P. has
sole dispositive power with respect to all 1,328,800 shares.
/(3)/ Based on Schedule 13G dated February 8, 1995 filed by The Capital Group
Companies, Inc., on behalf of itself and Capital Research and Management
Company, a wholly owned investment advisor subsidiary. According to the
Schedule 13G,
3
<PAGE>
Capital Research and Management Company exercised investment discretion
with respect to 1,000,000 shares of Common Stock, but has no power to
direct the vote of such shares.
/(4)/ Mr. William Smith resigned as an executive officer effective March 31,
1995, but will continue as a consultant for the Company until June 30,
1995.
/(5)/ Includes 100,000 shares of Common Stock which are issuable pursuant to
the exercise of stock options which were fully vested and exercisable on
March 31, 1995 or within 60 days of that date.
/(6)/ Includes 140,000 shares of Common Stock which are issuable pursuant to
the exercise of stock options which were fully vested and exercisable on
March 31, 1995 or within 60 days of that date.
/(7)/ Includes 15,500 shares of Common Stock which are issuable pursuant to the
exercise of stock options which were fully vested and exercisable on
March 31, 1995 or within 60 days of that date.
/(8)/ Includes 15,500 shares of Common Stock which are issuable pursuant to the
exercise of stock options which were fully vested and exercisable on
March 31, 1995 or within 60 days of that date.
/(9)/ Includes 15,500 shares of Common Stock which are issuable pursuant to the
exercise of stock options which were fully vested and exercisable on
March 31, 1995 or within 60 days of that date.
/(10)/ Includes 10,500 shares of Common Stock which are issuable pursuant to the
exercise of stock options which were fully vested and exercisable on
March 31, 1995 or within 60 days of that date.
/(11)/ Includes 30,000 shares of Common Stock which are issuable pursuant to the
exercise of stock options which were fully vested and exercisable on
March 31, 1995 or within 60 days of that date.
/(12)/ Includes 17,500 shares of Common Stock which are issuable pursuant to the
exercise of stock options which were fully vested and exercisable on
March 31, 1995 or within 60 days of that date.
/(13)/ Includes 327,000 shares of Common Stock which are issuable pursuant to
the exercise of stock options which were fully vested and exercisable on
March 31, 1995 or within 60 days of that date.
4
<PAGE>
MANAGEMENT AND ELECTION OF DIRECTORS
Pursuant to the Company's By-laws, the Board of Directors has, by resolution,
fixed the number of directors at six. The nominees set forth below are
presently directors of the Company and have served continuously since first
becoming directors. All directors and executive officers are elected for a term
of one year or until their successors are elected and qualified.
The proxy holders intend to vote all proxies received by them in the
accompanying form for the nominees for directors listed below. In the event any
nominee is unable or declines to serve as a director at the time of the Annual
Meeting, the proxies will be voted for any nominee who shall be designated by
the present Board of Directors to fill the vacancy. As of the date of this
proxy statement, the Board of Directors is not aware of any nominee who is
unable or will decline to serve as a director.
NOMINEES TO BOARD OF DIRECTORS
<TABLE>
<CAPTION>
Name Age Position
- ----------------------------- --- -----------------------------------------------
<S> <C> <C>
Carl Westcott................ 55 Director, Chairman of the Board of Directors
and Chief Executive Officer
Jack T. Smith................ 42 Director, President and Chief Operating Officer
Gary J. Fernandes............ 51 Director/(1)/
Jeffrey M. Heller............ 55 Director/(1)/
Stansfield Turner............ 71 Director/(1)/
Kern Wildenthal.............. 53 Director/(1)/
- --------------
</TABLE>
/(1)/ Member of the Audit Committee, Compensation Committee, Stock Option, and
Employee Stock Purchase Plan Committees
MR. WESTCOTT has been a director, Chairman of the Board of Directors and Chief
Executive Officer of the Company since its inception in May 1986. Prior
thereto, Mr. Westcott was the sole or majority owner of a number of corporations
in the automobile sales, automobile dealership support, and communications
industries. In May 1994, Mr. Westcott also became a director of First USA,
Inc. Mr. Westcott is the brother of Ms. Farragut, Vice President, Chief
Financial Officer and Secretary of the Company.
MR. SMITH serves as the President and Chief Operating Officer of the Company.
In such capacity, Mr. Smith is primarily responsible for overseeing operations
of the Company and the formulation and implementation of its strategic plans.
He has been a director of the Company since October 1987, served as Vice
President and Chief Financial Officer of the Company from July 1987 to March
1988 and served as Executive Vice President from March 1988 to October 1989 when
he began serving as President and Chief Operating Officer. Mr. Smith provided
independent financial consulting services to the Company since its inception in
May 1986 and became a full-time employee of the Company in January 1989. Mr.
Smith is a Certified Public Accountant and maintained his own practice from
October 1983 to January 1989.
MR. FERNANDES has been a director of the Company since May 1989. Mr.
Fernandes has been employed by Electronic Data Systems Corporation ("EDS") for
the last 26 years in various capacities and is currently a Senior Vice President
of EDS. Mr. Fernandes is also a director of EDS, The Southland Corporation, and
John Wiley & Sons, Inc., Publishers.
5
<PAGE>
MR. HELLER has been a director of the Company since October 1987. Mr. Heller
has been employed by EDS for the last 27 years in various capacities and is
currently a Senior Vice President of EDS. Mr. Heller is also a director of EDS.
ADMIRAL TURNER has been a director of the Company since January 1990. Admiral
Turner is presently a professor, lecturer and writer. Admiral Turner served in
various positions in the military and government including 36th President of the
Naval War College at Newport, Rhode Island; Commander, United States Second
Fleet and NATO Striking Fleet Atlantic; Commander in Chief of NATO's Southern
Flank; Director of Central Intelligence, heading both the Intelligence Community
and the Central Intelligence Agency. Admiral Turner served as the John M. Olin
Distinguished Professor of National Security at the U. S. Military Academy at
West Point, New York during 1989 and 1990, and, since 1991, has been a professor
at the University of Maryland. Admiral Turner is also a director of Monsanto
Company, the National Life Insurance Company of Vermont and the Chase Investment
Counsel Corporation.
DR. WILDENTHAL has been a director of the Company since November 1992. Dr.
Wildenthal has been the President of the University of Texas Southwestern
Medical Center at Dallas since 1986. Prior to that he had served as medical
school dean and professor of internal medicine and physiology at the Center, and
as a Guggenheim Fellow and visiting scientist at the University of Cambridge,
England. He has held a variety of national offices in a number of health
organizations, including the American Heart Association, the Association of
Academic Health Centers, the American Federation for Clinical Research, and the
American Section of the International Society for Heart Research.
6
<PAGE>
OTHER EXECUTIVE OFFICERS
The other executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ------------------ --- ---------------------------------------------------------------
<S> <C> <C>
Phyllis Farragut.. 48 Executive Vice President, Chief Financial Officer and Secretary
William E. Smith.. 43 Executive Vice President
</TABLE>
______________
MS. FARRAGUT has been a Vice President of the Company since February 1988.
She became Controller in November 1990, was elected Secretary on December 19,
1990 and was elected Chief Financial Officer August 6, 1991. Ms. Farragut is a
Certified Public Accountant who maintained her own practice for 12 years before
joining the Company. Ms. Farragut is the sister of Mr. Westcott.
MR. WILLIAM E. SMITH joined the Company April 18, 1993 as Executive Vice
President. Prior to his election, Mr. Smith had served for three years as Vice
President of Development and of Component and Accessory Services at Ryder
Airline Services, Inc., a company specializing in maintenance and parts supply
services to the international commercial aviation industry. From 1986 to 1989,
Mr. Smith served as President of Ryder International Freight and Customs
Services, Inc., an international air and ocean freight forwarder and U.S.
customs broker. At the time of his employment, both Ryder Airline Services,
Inc. and Ryder International Freight and Customs Services, Inc. were
subsidiaries of Ryder System, Inc.
7
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD
During 1994, six meetings of the Board of Directors were held. Each of
Messrs. Carl Westcott, Jack T. Smith, Jeffrey M. Heller, and Admiral Stansfield
Turner attended in excess of 75% of the Board meetings and meetings of the
committees on which they served. Mr. Gary J. Fernandes and Dr. Kern Wildenthal
attended approximately 72% of such meetings. The Company has no nominating
committee, but it does have the following standing committees:
Audit Committee. The Audit Committee was formed in August 1989. This
committee, which met seven times during 1994, meets with the Company's
principal financial officer and independent auditors to review the scope of
auditing procedures and to review the Company's public financial statements.
The current members of the committee are Gary J. Fernandes, Jeffrey M.
Heller, Stansfield Turner and Kern Wildenthal.
Compensation Committee. The Compensation Committee is responsible for
determining appropriate incentive compensation for the Company's executive
officers. The committee is composed of Gary J. Fernandes, Jeffrey M. Heller,
Stansfield Turner and Kern Wildenthal. This committee met once during 1994.
Stock Option Committee. The Stock Option Committee, which is composed of Gary
J. Fernandes, Jeffrey M. Heller, Stansfield Turner and Kern Wildenthal,
administers the 1989 Stock Option Plan and the Nonemployee Stock Option Plan.
The committee met four times during 1994.
Employee Stock Purchase Plan Committee. The Employee Stock Purchase Plan
Committee, which is composed of Gary J. Fernandes, Jeffrey M. Heller,
Stansfield Turner and Kern Wildenthal, administers the Employee Stock
Purchase Plan. This committee did not meet during 1994.
COMPENSATION OF DIRECTORS
The Company pays each of Messrs. Fernandes and Heller, Admiral Turner and Dr.
Wildenthal $12,000 per year for their services as directors, plus $2,000 for
each Board meeting attended and reimbursement for expenses associated with
attending Board meetings. Admiral Turner, as chairman of the Company's Audit
Committee, also receives $1,000 for each Audit Committee meeting attended.
In addition to the cash compensation, each of Messrs. Fernandes and Heller
hold an option for 20,000 shares of Common Stock at $12.63 per share, Admiral
Turner holds an option for 20,000 shares of Common Stock at $2.44 per share and
Dr. Wildenthal holds an option for 20,000 shares of Common Stock at $9.69 per
share. Except for Messrs. Fernandes and Heller, these options were granted
pursuant to the Company's Nonemployee Stock Option Plan (the "Plan") upon the
holder's initial election as a director of the Company. Messrs. Fernandes' and
Heller's options were granted upon their re-election to the Board on May 18,
1993 pursuant to an amendment to the Plan which removed a restriction on
granting options to employees of Electronic Data Systems Corporation which was
adopted by the Company's shareholders at the last annual meeting of
shareholders. The amendment also provided for the automatic grant of stock
options to nonemployee directors. Under the Plan as amended, nonemployee
directors are granted options to purchase 10,000 shares of Common Stock upon
their initial election to the Board of Directors at a price per share equal to
the fair market value of such shares on the date of such election. Thereafter,
upon re-election, nonemployee directors are granted options to purchase 1,000
shares of Common Stock at a price per share equal to the fair market value of
such shares on the date of such re-election. Each of Messrs. Fernandes and
Heller, Admiral Turner and Dr. Wildenthal were granted an option for 1,000
shares of Common Stock at $14.88 upon their re-election to the Board of
Directors in 1994,pursuant to the automatic grant provisions of the Plan.
Options granted under the Plan vest in twenty percent increments over five years
and expire after ten years from the date of grant.
8
<PAGE>
EXECUTIVE COMPENSATION
CASH COMPENSATION
The following table sets forth the cash compensation paid by the Company to
its Chief Executive Officer and to each of its most highly compensated executive
officers, during each of the last three years.
<TABLE>
<CAPTION>
SECURITIES
UNDERLYING ALL
OTHER OPTIONS/ OTHER
NAME AND FISCAL ANNUAL ------------ COMPEN
PRINCIPAL POSITION YEAR SALARY/(1)/ BONUS COMPENSATION ARS (#)/(2)/ SATION
- -------------------- ------ ----------- --------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Carl Westcott 1994 $240,000 -0- -0- 500,000 -0-
Chairman and 1993 $240,000 -0- -0- -0- -0-
Chief Executive 1992 $240,000 -0- -0- -0- -0-
Officer
Jack T. Smith 1994 $222,000 -0- -0- 200,000 -0-
President and 1993 $222,000 -0- -0- 50,000 -0-
Chief Operating 1992 $210,250 -0- -0- -0- -0-
Officer
Phyllis Farragut 1994 $133,125 -0- -0- 100,000 -0-
Executive Vice 1993 108,440 -0- -0- 20,000 -0-
President and 1992 85,500 -0- -0- -0- -0-
Chief Financial
Officer
William E. Smith 1994 $145,950 -0- -0- 70,000 -0-
Executive Vice 1993 103,230 -0- -0- -0- -0-
President 1992 -0- -0- -0- -0- -0-
</TABLE>
- -------------------
/(1)/ Mr. William Smith joined the Company in May 1993. Mr. William Smith
resigned as an executive officer effective March 31, 1995, but will
continue as a consultant for the Company until June 30, 1995.
/(2)/ See "Option Grants and Exercises."
9
<PAGE>
OPTION GRANTS AND EXERCISES
The following table sets forth as to the Company's Chief Executive Officer and
its other most highly compensated executive officers certain information with
respect to option grants during the year ended December 31, 1994.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- ----------------------------------------------------------------------------- -----------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SARS EXERCISE
OPTIONS/ GRANTED TO OR BASE
SARS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED/(2)/ FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ----------------------- ------------- ------------- -------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Carl Westcott 500,000 45.7 22.38 3/14/04 7,040,000 17,835,000
Jack T. Smith 200,000 18.3 22.38 3/14/04 2,816,000 7,134,000
Phyllis Farragut 100,000 9.1 22.38 3/14/04 1,408,000 3,567,000
William E. Smith/(1)/ 0 0 N/A N/A N/A N/A
</TABLE>
- -----------------
/(1)/ Mr. William Smith resigned as an executive officer effective March 31,
1995, but will continue as a consultant for the Company until June 30,
1995.
/(2)/ These options are nonincentive stock options granted pursuant to the
Company's 1989 Stock Option Plan. Each option vests in twenty percent
increments over the first five years of the option, and expires on March
14, 2004. In the event of a merger of the Company with or into another
corporation or a sale of all or substantially all of the Company's assets,
each option shall be assumed or an equivalent option substituted by the
successor corporation; if not so assumed or substituted, the Board of
Directors of the Company must accelerate the exercisability of the
options.
10
<PAGE>
AGGREGATE OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table sets forth the aggregate exercises of options for the
Company's Chief Executive Officer and its other most highly compensated
executive officers during the year ended December 31, 1994, and the value of
unexercised options at year-end.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FISCAL OPTIONS AT FISCAL
ACQUIRED YEAR-END YEAR-END
ON VALUE --------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Carl Westcott 0 $ 0 0 500,000 $ 0/(2)/ $ 0/(2)/
Jack T. Smith 0 0 87,500 262,500 675,000/(3)/ 225,000/(6)/
Phyllis Farragut 32,770 358,798 5,000 115,000 0/(4)/ 0/(7)/
William E. Smith/(1)/ 0 0 17,500 52,500 1,085/(5)/ 3,255/(5)/
</TABLE>
- -----------------
/(1)/ Mr. William Smith resigned as an executive officer effective March 31,
1995, but will continue as a consultant to the Company until June 30,
1995.
/(2)/ Exercise price of $22.375.
/(3)/ Exercise prices of $3.75 on 75,000 shares; $14.00 on 12,500.
/(4)/ Exercise prices of $14.00 on 5,000 shares.
/(5)/ Exercise price $12.69.
/(6)/ Exercise prices of $3.75 on 25,000 shares; $14.00 on 37,500 shares; and
22.38 on 200,000 shares.
/(7)/ Exercise prices of $14.00 on 15,000 shares; and $22.38 on 100,000 shares.
OTHER COMPENSATION
The Company has no pension, retirement, annuity, savings or similar benefit
plan other than as described above. Other than cash compensation, no officer
received compensation in excess of the lesser of 10% of such officer's cash
compensation or $50,000, nor did all executive officers as a group receive
additional compensation in excess of the lesser of 10% of such officers'
aggregate cash compensation or $50,000 times the number of such officers.
In December 1994, Mr. William Smith entered into an Employment and Settlement
Agreement pursuant to which Mr. Smith was to continue as an Executive Vice
President of the Company until the earlier of March 31, 1995 or his earlier
resignation. Under the terms of the agreement, Mr. Smith is to receive a salary
of $11,750 per month during his employment. This Agreement expired on March 31,
1995, at which time, the Company entered into a three month Consulting Agreement
with Mr. Smith, under which he is to perform consulting services in connection
with the conversion of the Company's accounting software system and related
projects. Mr. Smith will receive $12,000 per month during the term of the
Consulting Agreement.
11
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
In late 1992, the Compensation Committee of the Board of Directors (the
"Committee") began a study and review of the Company's executive compensation
structure. At its meeting on February 1, 1994, the Committee adopted a
Compensation Philosophy and Procedures for the Company (the "Compensation
Philosophy") to implement a compensation plan which would be both competitive
and reflective of individual and Company performance. The Compensation
Philosophy is to compensate executive officers and managers in a manner which
promotes long-term, strategic management and the enhancement of shareholder
value; to reward achievements for meeting the Company's goals, and to attract
and retain executives whose abilities are key to the long-term success and
competitiveness of the Company. In line with this philosophy, the Committee
reviews and approves each executive officer's base salary annually. The
determination of the appropriate level of base salary is primarily subjective
with consideration given to responsibility, experience, time at the position,
individual performance and external competitive pay practices.
The Committee believes that a substantial portion of an executive officer's
total compensation should be incentive compensation, both annual and long-term.
Among the purposes of executive incentive compensation should be the following:
a. To motivate executives to improve the profitability and overall performance
of the Company;
b. To encourage greater accountability by focusing executives on the
achievement of the annual business plan for the Company;
c. To create an identity of interest between executives and shareholders by
directly linking a significant portion of incentive compensation to
corporate performance;
d. To encourage stock ownership and promote a long-term perspective on
managing the business, especially for executives in higher level positions;
e. To provide an attraction for continued employment through the opportunity
for significant rewards in years of good corporate performance.
The Committee believes a significant portion of an executive's cash
compensation should be an annual incentive to focus attention on annual
performance results that in turn enhance shareholder value. The degree of risk
or relative size of the incentive component in relation to total compensation
should increase with responsibility level, and be most significant for the
highest paid executives. Pursuant to the Compensation Philosophy, at the
beginning of each year, the Chief Executive Officer and Chief Operating Officer
present to the Compensation Committee a proposed business plan or goal for the
Company. After review and consideration, an approved plan or goal is adopted by
the Committee as a standard for determining annual incentive cash compensation
during the forthcoming year and the Committee will establish a formula or a
methodology for determining a cash bonus pool to be available if the adopted
plan or goal is exceeded. The Committee, however, has established a limit on
the amount of cash incentive bonus payable to any one executive officer such
that the total cash compensation to an executive officer will be deductible to
the Company for federal income tax under the provisions of the 1993 Omnibus
Budget Reconciliation Act.
The 1994 base cash compensation of executive officers other than Mr. Westcott
was set in accordance with the Compensation Philosophy but in relation to that
of Mr. Westcott. Mr. Westcott's base compensation was not increased during 1994
and has remained level since it decreased in 1991. The 1994 a cash bonus pool
for executive officers was established in an amount equal to twenty five percent
(25%) of the amount, if any, that the Company's net income for 1994 exceeded the
business plan submitted and approved by the Compensation Committee. No cash
bonuses were paid to any executive officer for the year ended 1994 because
business plan targets were not met.
The long-term incentive portion of executive compensation has been provided
through the use of stock options under the Company's 1989 Stock Option Plan.
The Committee believes the number of stock options and/or stock awards granted
should be based on the recipient's position and level of responsibility, the
resulting opportunity to impact directly the value of the
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<PAGE>
Company's common stock and other relevant factors. In 1994, additional stock
options were awarded to certain executive officers based on these factors.
Pursuant to the long-term incentive compensation aspect of the Compensation
Philosophy, the Stock Option Committee on March 15, 1994 granted to Carl
Westcott, Jack Smith and Phyllis Farragut, executive officers deemed by the
Committee to not previously have been awarded sufficient long-term incentives,
options to purchase 500,000, 200,000 and 100,000 shares, respectively. The
options are for ten years and will vest proportionately over five years.
The 1995 base cash compensation of executive officers was not increased from
1994 levels. Pursuant to the Compensation Philosophy, the Committee has
established for 1995 a cash bonus pool for executive officers and other managers
in an amount equal to twenty five percent (25%) of the amount, if any, that the
Company's net income for 1995 exceeds the business plan submitted and approved
by the Compensation Committee. At the end of 1995, the Committee will review
recommendations from management as to the extent that such bonus fund should be
paid out in cash bonuses, the potential participants and the individual amounts
of bonuses. The Company will review such recommendations in light of the
performance for 1995 of both the Company and individuals and consider cash
bonuses at that time.
By: Jeffrey M. Heller (Chairman)
Gary J. Fernandes
Adm. Stansfield Turner
Dr. Kern Wildenthal
13
<PAGE>
STOCK OPTION AND COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The Company's Compensation Committee is composed of Gary J. Fernandes, Jeffrey
M. Heller, Stansfield Turner and Kern Wildenthal, none of which are officers or
employees of the Company.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than ten percent of a registered class of equity
securities, to file with the Securities and Exchange Commission (the "SEC")
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Directors, executive officers and
greater than ten-percent stockholders are required by SEC regulations to furnish
with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it with
respect to fiscal 1994 and written representations from certain reporting
persons, the Company believes that all filing requirements applicable to its
directors, executive officers and persons who own more than 10% of a registered
class of the Company's equity securities have been complied with by such
persons.
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<PAGE>
FIVE-YEAR SHAREHOLDER RETURN COMPARISON
The graph below compares the cumulative total shareholder return on the Common
Stock of the Company for the five fiscal years ended December 31, 1994, with the
cumulative total shareholder return on the NASDAQ Market Index and MG Industry
Group - 111 Communications, an index of peer companies.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
COMPANY OR INDEX 1989 1990 1991 1992 1993 1994
- ------------------------------- ------ ----- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Westcott Communications, Inc. 100.00 47.50 80.00 217.50 365.00 255.00
Industry Index 100.00 91.92 114.24 132.27 170.05 152.95
Broad Market Index 100.00 81.12 104.14 105.16 126.14 132.44
</TABLE>
The closing sale price of the Common Stock as reported by the NASDAQ National
Market on March 31, 1995 was $13.88 per share.
15
<PAGE>
CERTAIN TRANSACTIONS
The Company periodically leases a jet aircraft from a corporation which is
wholly-owned by Mr. Westcott. Under this leasing arrangement, the Company pays
a rate of approximately $3,000 per hour of use, plus crew fees and applicable
taxes. The Company believes that these terms are no less favorable to the
Company than can be obtained for similar services from unaffiliated parties.
The Company paid $283,591 in 1994 for its use of the jet aircraft.
INDEPENDENT ACCOUNTANTS
The firm of Ernst & Young served as the Company's independent public
accountants for the fiscal year 1994 and has been selected as the Company's
accountants for fiscal 1995. Representatives of Ernst & Young are expected to be
present at the Annual Meeting, have the opportunity to make a statement if they
so desire, and will be available to respond to appropriate questions.
OTHER MATTERS
Management does not know of any matters to be presented at this Annual Meeting
other than those set forth in this proxy statement and in the notice
accompanying this proxy statement. If other matters should properly come before
the meeting, it is intended that the proxy holders will vote on such matters in
accordance with their best judgment.
It is important that your shares be represented at the meeting, regardless of
the number of shares which you hold. You are, therefore, urged to promptly
execute and return the accompanying proxy in the envelope which has been
enclosed for your convenience. Shareholders who are present at the meeting may
revoke their proxies and vote in person or, if they prefer, may abstain from
voting in person and allow their proxies to be voted.
16
<PAGE>
PROPOSALS OF SHAREHOLDERS
A shareholder who intends to present a proposal at the 1996 Annual Meeting of
Shareholders for inclusion in the Company's 1996 proxy statement and proxy card
relating to such meeting must submit such proposal by December 19, 1995. The
proposal must be mailed to the Company's principal executive office, at 1303
Marsh Lane, Carrollton, Texas 75006, Attention: Phyllis Farragut, Secretary.
By order of the Board of Directors,
[Signature of Phyllis Farragut
appears here]
Phyllis Farragut,
Secretary
April 24, 1995
Carrollton, Texas
17
<PAGE>
WESTCOTT COMMUNICATIONS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 25, 1995
The undersigned hereby appoints Jack T. Smith and Phyllis Farragut or either
of them, proxies of the undersigned, with power of substitution, to vote all
shares of Common Stock of the Company held by the undersigned which are entitled
to be voted at the Annual Meeting of Shareholders to be held May 25, 1995, and
any adjournment(s) as effectively as the undersigned could do if personally
present.
(1) To elect six directors.
[ ] For all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
contrary below) listed below
Carl Westcott, Jack T. Smith, Gary J. Fernandes, Jeffrey M. Heller, Stansfield
Turner, Kern Wildenthal
------------
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THE NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
(Continued on back)
(2) In the discretion of the proxies on any other matters as may properly
come before the meeting or any adjournments thereof.
The shares represented by this proxy will be voted as directed. WHERE NO
DIRECTION IS GIVEN, THE SHARES WILL BE VOTED FOR MATTERS (1), (2) AND (3).
Please sign below, date, and return promptly.
DATED: , 1995
------------------------
-------------------------------------
Signature
-------------------------------------
Signature
IMPORTANT: Please sign exactly as
name appears to the left. When
signing on behalf of a corporation,
partnership, estate, trust, or in
other representative capacity, please
sign name and title. For joint
accounts, each joint owner must sign.
