<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM _________________TO_________________
COMMISSION FILE NUMBER 0-4643
ROY F. WESTON, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-1501990
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1 WESTON WAY
WEST CHESTER, PENNSYLVANIA 19380-1499
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 701-3000
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
SERIES A COMMON STOCK (PAR VALUE $.10 PER SHARE)
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing sale price of Series A Common Stock reported
in the NASDAQ National Market System on March 14, 1997, was approximately
$25,230,000. For the purposes of calculation, all executive officers and
directors of the Company and all beneficial owners of more than 10% of the
Company's stock were considered affiliates. As of March 14, 1997, the Registrant
had outstanding 7,547,787 shares of Series A Common Stock ($.10 par value) and
2,105,394 shares of Common Stock ($.10 par value).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's 1996 Annual Report to Shareholders are incorporated by
reference into Part II of this report. Items originally incorporated by
reference into Part III of this report from the Company's Proxy Statement are
filed herein.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS
The nominees for election as directors at the Company's 1997 Annual
Meeting of Shareholders have not been determined as of the date of this filing.
The following sets forth pertinent information with respect to the current
directors of the Company.
JOSEPH BORDOGNA, PH.D., 64, ACTING DEPUTY DIRECTOR, NATIONAL SCIENCE FOUNDATION.
CHAIRMAN OF THE BOARD. DIRECTOR SINCE 1983. Dr. Bordogna was elected
non-executive Chairman of the Board of Directors in July 1996. Dr. Bordogna is
currently on leave from the University of Pennsylvania, with which he has been
affiliated since 1964, most recently serving as Dean Emeritus and Alfred Fitler
Moore Professor of Engineering. Previously, he served as Dean of Engineering and
Applied Science from 1981 to 1990. Since September 1996, Dr. Bordogna has been
serving as Acting Deputy Director at the National Science Foundation in
Washington, DC. From September 1991 to September 1996, Dr. Bordogna had served
as the Director of Engineering at the National Science Foundation.
HENRY L. DIAMOND, ESQ., 64, PARTNER, BEVERIDGE & DIAMOND, P.C., WASHINGTON, DC.
DIRECTOR SINCE 1990. Mr. Diamond has been a partner with Beveridge & Diamond,
P.C., a national firm specializing in environmental affairs and related
litigation, since 1975. From 1970 to 1975, Mr. Diamond served as the
Commissioner of the Department of Environmental Conservation of the State of New
York.
WAYNE F. HOSKING, JR., ESQ., 31, ADVANCED PROGRAMS DIRECTOR. DIRECTOR SINCE
1996. Mr. Hosking has been employed by the Company since 1988. Since 1990, he
has held various positions in client services, marketing, and sales capacities.
He is currently employed as an Advanced Programs Director, serving the needs
of the Company's Federal Programs' clients. Mr. Hosking is licensed to practice
law in the state of Colorado. Mr. Hosking is a son-in-law of A. Frederick
Thompson and is married to a granddaughter of Roy F. Weston.
ROBERT G. JAHN, PH.D., 67, DEAN EMERITUS OF THE SCHOOL OF ENGINEERING AND
APPLIED SCIENCE AND PROFESSOR OF AEROSPACE SCIENCES, PRINCETON UNIVERSITY.
DIRECTOR SINCE 1988. Dr. Jahn has been affiliated with Princeton University's
School of Engineering and Applied Sciences since 1962. Currently holding the
position of Dean Emeritus, he served as Dean from 1971 to 1986. Dr. Jahn has
been a Professor of Aerospace Sciences since 1967. He is a director of Hercules,
Incorporated.
JAMES E. KSANSNAK, CPA, 57, EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER,
ARAMARK CORPORATION. DIRECTOR SINCE 1995. Mr. Ksansnak has served as Executive
Vice President and Chief Financial Officer of ARAMARK, a service management
company, since 1991 and is responsible for financial matters, planning and
development, tax, internal audit, and information technology. Previously, he was
Senior Vice President and Chief Financial Officer from 1987 to 1991 and Senior
Vice President from 1986 to 1987 of ARAMARK. Before joining ARAMARK, Mr.
Ksansnak had been a partner with Arthur Andersen & Co. since 1971. He is a
director of CSS Industries, Inc. and Advanta Corp.
WILLIAM J. MARRAZZO, 47, PRESIDENT AND CHIEF EXECUTIVE OFFICER. DIRECTOR SINCE
1988. Mr. Marrazzo has been the President of the Company since September 1990
and the Chief Executive Officer since October 1991. Mr. Marrazzo is also
Chairman of the Board of Weston International Holdings, Inc., a wholly-owned
subsidiary of the Company. He served as Chief Operating Officer from 1989 to
1991 and as Executive Vice President from 1989 to 1990. Mr. Marrazzo joined the
Company in 1988 as a Vice President and a Division Manager. He served as
Chairman and President of Weston Services, Inc. from 1990 to 1991. Weston
Services, Inc. was a wholly-owned subsidiary until December 31, 1991, when it
merged into the Company. From 1980 to 1988, he was the Commissioner of the Water
Department for the City of Philadelphia, with responsibility for its complete
management. Financially independent from the City of Philadelphia, the Water
Department is one of the nation's largest water and wastewater utilities.
MARVIN O. SCHLANGER, 49, EXECUTIVE VICE PRESIDENT AND CHIEF OPERATING OFFICER,
ARCO CHEMICAL COMPANY. DIRECTOR SINCE 1990. Mr. Schlanger has served as
Executive Vice President and Chief Operating Officer of ARCO Chemical Company, a
producer of intermediate and specialty chemicals since 1995. Previously, he was
Senior Vice
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President, since 1989; Chief Financial Officer from 1989 to 1993; and Vice
President, Worldwide Business Management from 1988 to 1989 of ARCO Chemical
Company. He is a director of ARCO Chemical Company.
KATHERINE W. SWOYER, 49, PRESIDENT OF INTERNATIONAL CORPORATE TRAVEL SERVICES,
INC. DIRECTOR SINCE 1992. Ms. Swoyer is owner and president of International
Corporate Travel Services, Inc. ("Intercorp"), a travel agency formed in 1994.
Ms. Swoyer is a daughter of Roy F. Weston, the sister-in-law of A. Frederick
Thompson, and the mother of Thomas M. Swoyer, Jr.
THOMAS M. SWOYER, JR., 26, JUNIOR MARKETING ANALYST. DIRECTOR SINCE 1996. Mr.
Swoyer has been employed by the Company since 1987. Since 1991, he has held the
position of Junior Marketing Analyst in the Strategic Marketing and Proposal
Management Departments of the Company. Mr. Swoyer is a grandchild of Roy F.
Weston and son of Katherine W. Swoyer and the late Thomas M. Swoyer, former
President of Roy F. Weston, Inc. from 1984 to 1989.
A. FREDERICK THOMPSON, PH.D., P.E., 55, DIRECTOR SINCE 1975. Dr. Thompson served
as Chairman of the Board from October 1991 to March 1996. Dr. Thompson served as
the Vice Chairman from 1989 to 1991; Executive Vice President from 1987 to 1990;
Vice President, Quality Assurance and Finance from 1980 to 1987; and as
Assistant Secretary from 1980 to 1990. He also served as President of Cardinal
Indemnity Company of North America, a wholly-owned subsidiary of the Company,
from 1988 to 1991 and as a director of Weston International Holdings, Inc., a
wholly-owned subsidiary of the Company. Dr. Thompson is a son-in-law of Roy F.
Weston, father-in-law of Wayne F. Hosking, Jr., and the brother-in-law of
Katherine W. Swoyer.
ROY F. WESTON, P.E., DEE, 85, CHAIRMAN EMERITUS. DIRECTOR SINCE 1957. Mr. Weston
is the founder of Roy F. Weston, Inc. Mr. Weston served as Chairman of the Board
from March 1996 to July 1996. He was Chairman Emeritus from October 1991 to
March 1996 and resumed his role in that capacity in July 1996. Mr. Weston had
served as Chairman of the Board and Chief Executive Officer of the Company for
more than 35 years. He also served as President from December 1989 to September
1990 and during the periods 1957 to 1972 and 1977 until 1984. Mr. Weston is the
father of Katherine W. Swoyer, the father-in-law of A. Frederick Thompson,
grandfather of the wife of Wayne F. Hosking, Jr., and grandfather of Thomas M.
Swoyer, Jr.
Information regarding the Company's executive officers was included in Part I on
page 12 of the Form 10-K.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 (the "Act")
requires directors and certain officers of the Company and persons or entities
holding beneficial ownership of more than 10% of the Company's equity securities
to file under the Act reports of beneficial ownership and reports of changes in
beneficial ownership. Based solely upon review of the reports and amendments
thereto under Section 16(a) of the Act furnished to the Company during its most
recent fiscal year, all Section 16(a) reports were filed on a timely basis,
except that the initial Form 3 reports of Dennis Moran and Patrick G. McCann,
executive officers who began employment with the Company in September and
October, 1996, respectively, were not sent to the SEC for filing until November
11, 1996. Their reports reflected only certain options granted upon their
employment with the Company.
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors of Roy F. Weston,
Inc. (the "Committee") is pleased to present its report on executive
compensation. This Committee report outlines the components of the Company's
Executive Officer compensation programs, including the specific relationship of
corporate performance to executive compensation, and describes the Committee's
basis for the Chief Executive Officer's (CEO) compensation for 1996.
EXECUTIVE OFFICER COMPENSATION POLICY
It is the philosophy of the Company to ensure that executive
compensation be directly linked to continuous improvements in corporate
performance and increases in shareholder value focusing on the following
concepts:
- A competitive total compensation package to attract and retain
key executives.
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- Compensation programs integrated with the Company's annual and
long-term objectives.
- Compensation opportunities that are directly linked with the
performance of the Company.
- Executive compensation aligned with the interests of the
shareholders.
COMPENSATION PROGRAM COMPONENTS
In 1996, the cash compensation of the executive officers was composed
primarily of two elements: a Base Salary and a Salary-at-Risk (SAR). The
Company's SAR program is an incentive compensation program under which a portion
of a participant's "full salary" is "at risk," subject to personal and corporate
performance. The portion of a participant's salary that is at risk is termed the
Guideline SAR and is expressed as a percentage of a participant's Base Salary. A
participant's full salary is equal to the aggregate of the participant's Base
Salary plus the Guideline SAR. The Committee sets full salary at the competitive
ranges offered at comparable companies in the same industry and of similar size
and complexity. In determining appropriate compensation levels, the Committee
obtained and utilized compensation surveys and comparative analyses of
compensation data provided by the Company's human resources staff. An executive
can receive between zero and twice his/her Guideline SAR, depending upon
performance in relation to established corporate and personal goals. In 1996,
the executive officers' Guideline SARs ranged from 35% to 50% of their Base
Salary. SAR compensation payments are determined by a review of two factors: a
corporate profitability factor and a personal performance factor. The higher an
executive ranks within the organization, the more weight is given to the
corporate profitability factor. The corporate profitability factor relates
solely to corporate profits, or "contribution" earned during the year as
compared to that year's minimum, target, and maximum contribution goals as set
annually by the Board of Directors. The personal performance factor is a
qualitative and quantitative measurement of each participant's individual
quarterly performance. Thus, to the extent that the Company achieves its target
corporate profitability goals, and the executive meets his/her personal
performance goals, an executive officer's compensation should be commensurate
with that provided to similarly situated executive officers at comparable
companies. If the Company does not achieve its corporate profitability goals, an
executive could generally expect to receive less than the amount paid by
comparable companies for his/her services. However, if the Company exceeds the
corporate profitability factor, an executive can generally expect to earn more
than the comparable peer group salary.
The Company also believes that its executive officers should have the
opportunity to benefit from the long-term appreciation of the Company's
securities, and, accordingly, has instituted a stock-based incentive
compensation plan for its executive officers and certain other officers. The
determination of the option grants and other awards are made by the Committee
upon review of the executive's performance, salary grade, and the achievement of
corporate goals.
The compensation of Mr. Marrazzo as Chief Executive Officer was based
upon a combination of quarterly performance indicators and long-term increases
in shareholder value. In 1996, the Guideline SAR was equal to 50% of his Base
Salary. A percentage of the SAR payment was based upon a corporate profitability
factor, which was directly related to corporate earnings. No payments were made
during 1996 pursuant to this factor. The remainder of his SAR payment was based
upon the qualitative analysis of Mr. Marrazzo's personal performance factor,
which was primarily based upon subjective evaluation of the development of
long-term increases in shareholder value. The establishment and development of a
new business strategy during the year is intended to lead to long-term increases
in shareholder value. Insofar as the financial results for 1996 did not meet the
expectations set forth in the Company's 1996 operating plan, the SAR payments
made to the CEO for 1996 totaled $24,187, 9.6% of his Base Salary. To enable the
CEO to benefit from the alignment of the executive's personal interests with
those of the shareholders, in 1992, the CEO was granted 20,000 shares of
restricted Series A Common Stock, which vest in April 1997, provided that Mr.
Marrazzo remains employed by the Company, subject to earlier partial vesting in
the event of the termination of Mr. Marrazzo's employment by the Company for
other than cause.
Compensation Committee of the Board of Directors
Marvin O. Schlanger, Chairman
Joseph Bordogna
Henry L. Diamond
Mr. Marrazzo did not participate as a member of the Compensation Committee
during 1996.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Roy F. Weston served as a member of the Compensation Committee from
January 1996 to July 1996. Mr. Weston received a salary of $282,963 in 1996.
Until July 29, 1996, Mr. Weston had an employment agreement with the
Company that provided that he would be an employee of the Company, until his
disability or death, at an annual salary equivalent to at least 55% of the
midpoint for the salary grade then applicable to the position of Chairman of the
Board and Chief Executive Officer, plus certain other benefits. (Effective
January 1, 1993, Mr. Weston no longer participates in the Company's SAR Plan.)
Mr. Weston's employment agreement also provided that in the event of his total
disability, his salary would, after the initial 12-month period of such
disability, be reduced to 41.25% of the midpoint of such salary grade; be
continued for a period not to exceed 12 months and would thereafter be reduced
further to 27.5% of such midpoint. That reduced salary would thereafter be
continued for a period not to exceed 72 months and would be subject to offset by
any disability benefits payable from insurance policies for which premiums are
paid by the Company. The agreement also provided the Company with a right of
first refusal with respect to Mr. Weston's shares of capital stock of the
Company.
On July 29, 1996, Mr. Weston resigned as Chairman of the Board and as a
member of all Board Committees on which he then served. On that date, the
Company and Mr. Weston entered into a new employment agreement, which was
approved by the Board of Directors (with Mr. Weston abstaining because of his
interest in the agreement). Under the new agreement, Mr. Weston will serve as
Chairman Emeritus of the Company. The new employment agreement contains the same
terms as the former employment agreement, except that under the new agreement:
(1) Mr. Weston's annual compensation is increased by $18,000 (in lieu of any
directors fees, up to $18,000, which he would otherwise be entitled to receive
as a director); (2) the Company's Board will use its best efforts to nominate
Mr. Weston as a director and cause his election to the Board of Directors,
subject to any legal requirements and so long as he is not disabled; (3) if Mr.
Weston is not elected to the Board, he will become an ex-officio member of the
Board, subject to any legal requirements and so long as he is not disabled; (4)
if Mr. Weston predeceases his wife, the amount of his salary shall continue to
be paid to her during her life; and (5) the Company's right of first refusal
with respect to Mr. Weston's shares of capital stock of the Company will have a
30-day exercise period and will expire altogether on July 29, 1998.
SUMMARY COMPENSATION TABLE
The following table shows, for the fiscal years ended December 31,
1996, 1995, and 1994, the cash compensation paid by the Company and its
subsidiaries, as well as certain other compensation paid or accrued for those
years, to the Chief Executive Officer and each of the four most highly
compensated executive officers of the Company in 1996 whose cash compensation
exceeded $100,000 in all capacities in which they served.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------------- ------------------------- -------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND POSITION YEAR SALARY BONUS (1) COMPENSATION AWARDS OPTIONS PAYOUTS COMP. (2)
- ----------------- ---- ------ --------- ------------ ------ ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
W. J. Marrazzo 1996 $252,000 $24,187 N/A $0 4,400 $0 $4,500
President and Chief 1995 $252,000 $28,350 N/A $0 4,400 $0 $4,500
Executive Officer 1994 $252,000 $25,200 N/A $0 4,400 $0 $4,500
M.C. Murphy 1996 $167,695 $15,121 N/A $0 3,600 $0 $4,500
Exec. Vice President 1995 $170,993 $17,440 N/A $0 3,600 $0 $4,500
and Chief Financial 1994 $159,973 $18,926 N/A $0 3,600 $0 $4,500
Officer
P. J. Marks 1996 $187,776 $17,917 N/A $0 3,600 $0 $4,500
Exec. Vice President 1995 $163,499 $21,583 N/A $0 3,600 $0 $4,500
and Chief Operating 1994 $150,010 $21,331 N/A $0 2,800 $0 $4,498
Officer
R.F. Weston 1996 $282,963 $ 0 N/A $0 N/A $0 $ 0
Chairman of the 1995 $275,002 $ 0 N/A $0 N/A $0 $ 0
Board (3) 1994 $275,002 $ 0 N/A $0 N/A $0 $ 0
</TABLE>
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<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------------- ------------------------- -------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND POSITION YEAR SALARY BONUS(1) COMPENSATION AWARDS OPTIONS PAYOUTS COMP. (2)
- ----------------- ---- ------ -------- ------------ ------ ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
S. C. Vorndran 1996 $135,879 $ 7,901 N/A $0 3,600 $0 $71,168
Exec. Vice President 1995 $182,000 $15,125 N/A $0 3,600 $0 $ 4,500
Corporate Development(4) 1994 $169,938 $17,439 N/A $0 4,000 $0 $ 4,497
</TABLE>
(1) Includes amounts under the SAR program. Payments under the SAR program
are included under the caption "Bonus" because the SAR program is a
pay-for-performance program. SAR payments are considered by the Company
to be a portion of the individual's salary which is at risk, payment of
which is dependent upon the achievement of corporate and personal
performance goals.
(2) Includes amounts contributed by the Company for the executive officers
under the Company's Employee Savings Plan.
(3) In July 1996, Mr. Weston resigned as Chairman of the Board, although he
continues to serve as Chairman Emeritus. (See Compensation Committee
Interlocks and Insider Participation on page 4.)
(4) Mr. Vorndran resigned from his employment with the Company in August
1996. Under the terms of his severance agreement with the Company, Mr.
Vorndran is to receive $16,667 per month for nine months commencing in
September 1996 plus certain other benefits. The amounts set forth in
the above table under the caption "All Other Comp" for the year 1996
include amounts paid to Mr. Vorndran under this severance agreement.
CERTAIN TRANSACTION - MARRAZZO AGREEMENT
Effective December 3, 1996, Mr. Marrazzo and the Company entered into
an agreement, approved by the disinterested members of the Company's
Compensation Committee. Under the agreement, if Mr. Marrazzo's employment is
terminated for reasons other than "cause", or if Mr. Marrazzo resigns because of
a material change in his responsibilities, duties or authority, he will be paid,
for 16 months, the greater of $23,350 per month or his monthly base salary at
the time of such termination or resignation, plus certain other benefits.
PENSION AND RETIREMENT PLANS
RETIREMENT PLAN
The Company has a defined benefit Retirement Income Plan (the
"Retirement Plan") covering all employees of the Company and of certain
subsidiaries who attain 21 years of age, complete 1 year of service, and have
completed 1,000 hours of service in that year. The Retirement Plan provides a
monthly retirement income benefit. For each year an employee is a participant,
he or she will accrue a benefit equal to 1.15% of his compensation for such year
up to 75% of the Social Security wage base plus 1.5% of compensation in excess
of 75% of the Social Security wage base. Compensation is defined as a
participant's W-2 earnings. All contributions to the Retirement Plan are made by
the Company, and vesting occurs upon an employee's completion of 5 years of
service, the attainment of age 65, or upon disability. Benefits are paid
following the participant's retirement after age 60 and, in some instances, upon
the death of the participant.
The following table shows the projected annual pension benefits payable
on a straight life annuity basis at normal retirement date (age 65) to each of
the participating individuals listed in the Summary Compensation Table on page
4, assuming continuation of employment to normal retirement date at the rate of
plan compensation in effect for 1996, not including any Social Security
benefits. The projected annual retirement benefits under the Retirement Plan are
computed according to the Internal Revenue Code's (IRC) limit on annual pension
benefits. For 1996, the limitation is $120,000; the limit for 1997 is $125,000.
In addition, the projected annual retirement benefit is calculated using the
compensation limited to $150,000 -- the IRC's maximum salary limitation for 1996
as amended by the Omnibus Budget Reconciliation Act of 1993 (OBRA '93).
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<TABLE>
<CAPTION>
YEARS OF SERVICE AS OF NORMAL RETIREMENT
ANNUAL PENSION BENEFITS DECEMBER 31, 1996 DATE
----------------------- ----------------- ----
<S> <C> <C> <C>
William J. Marrazzo $58,202 8.1 July 1, 2014
M. Christine Murphy $50,493 6.3 March 1, 2014
Peter J. Marks $62,777 31.5 January 1, 2007
Steven C. Vorndran(1) $17,768 7.8 May 1, 2012
</TABLE>
(1) Mr. Vorndran resigned from his employment with the Company effective August
1996 and the amount shown represents his vested benefits.
The Company also provides supplemental retirement income through the
Retirement Income Restoration Plan (the "Restoration Plan"). The Restoration
Plan was adopted in 1996 by the Board of Directors and is a non-qualified plan
for federal income tax purposes. It covers all employees eligible to participate
in the Retirement Plan whose annual compensation after January 1, 1994 exceeds
the OBRA '93 maximum salary limitation. The Restoration Plan provides a monthly
retirement income benefit and is intended to make up the benefit cutback due to
the OBRA '93 maximum salary limitation. For each year an employee is a
participant, he or she will accrue a benefit equal to 1.15% of compensation for
such year up to 75% of the Social Security wage base plus 1.5% of compensation
in excess of 75% of the Social Security wage base. Compensation is defined as a
participant's W-2 earnings, but is limited to the IRC's maximum salary limit
before the OBRA '93 amendment. This limit is $250,000 for 1996. The benefit
accrual calculated under the Restoration Plan is then reduced by the Retirement
Plan pension benefit accrual.
All other provisions of the Restoration Plan such as vesting and early
retirement are generally the same as the Retirement Plan. No benefits were paid
pursuant to the Restoration Plan in 1996.
The projected annual Restoration Plan pension benefits payable on a
straight life annuity basis at normal retirement date (age 65) to each of the
participating individuals listed in the Summary Compensation Table on page 4,
assuming continuation of employment to normal retirement date at the rate of
plan compensation in effect for 1996 limited to the pre-OBRA '93 level, not
including Social Security benefits was $30,559 for Mr. Marrazzo, $10,272 for Ms.
Murphy, $9,902 for Mr. Marks and $1,817 for Mr. Vorndran. Mr. Vorndran resigned
from his employment with the Company effective August 1996 and the amount shown
represents his vested benefits.
INSURANCE AND SUPPLEMENTAL RETIREMENT BENEFITS
The Company has purchased an insurance policy on the life of Roy F.
Weston in the amount of $4 million. The cash premium paid by the Company for
1996 was $259,355. The cash surrender value of the policy increased by $204,000
during 1996.
The Company's Supplemental Split Dollar Life Insurance Plan (the
"Supplemental Plan") provides for death benefits and additional retirement
benefits for officers and certain key employees designated by the Chairman of
the Board and approved by the Compensation Committee. Upon the death of a
participant, the Company will pay a $200,000 death benefit to the participant's
designated beneficiary. A participant in the employ of the Company at age 65
will receive a lump sum retirement benefit based upon the participant's years of
participation in the Supplemental Plan. None of the five most highly compensated
officers participates in the Supplemental Plan.
Executive officers who do not participate in the Supplemental Plan may
be designated by the Chairman of the Board to participate in the Company's
Executive Supplemental Benefit Plan (the "Executive Plan"). Under the Executive
Plan, upon the death of a participant, the Company will pay a death benefit to
the participant's designated beneficiary. Upon the retirement of the
participant, supplementary retirement benefits will be paid to the participant
for a 15-year period. The amount of the death benefit is based upon a benefit
determination made by the Compensation Committee. The supplementary retirement
benefit is based on that benefit determination and the participant's years of
participation in the Executive Plan. The estimated annual supplementary
retirement benefits under the Executive Plan payable upon retirement at age 65
for each of the participating named executive officers listed in the Summary
Compensation Table on page 4 are $151,500 for Mr. Marrazzo, $48,000 for Ms.
Murphy, $36,000 for Mr. Marks and $10,000 for Mr. Vorndran. Mr. Vorndran
resigned from his employment with the Company effective August 1996 and the
amount shown represents his vested benefits.
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Mr. Marrazzo's Executive Plan provides for an early retirement benefit,
payable after 15 years of service with the Company, commencing after age 55 and
prior to the normal retirement age of 65. If Mr. Marrazzo were to elect early
retirement at age 55, he would be entitled to $42,000 per year payable for each
of 15 consecutive years.
STOCK-BASED INCENTIVE COMPENSATION PLAN
The following table sets forth certain information about grants of
options to purchase shares of Series A Common Stock in the last fiscal year to
the Chief Executive Officer and the participating executive officers listed in
the Summary Compensation Table. The Company has not granted stock appreciation
rights.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS GRANT DATE VALUE
--------------------------------------------------------- ----------------
NUMBER OF
SECURITIES PERCENT OF GRANT
UNDERLYING TOTAL OPTIONS DATE
OPTIONS GRANTED TO EXERCISE EXPIRATION PRESENT
NAME GRANTED EMPLOYEES IN 1996 PRICE DATE VALUE(1)
---- ------- ----------------- ----- ---- --------
<S> <C> <C> <C> <C> <C>
W. J. Marrazzo 4,400(2) 2.76% $4.75 2/26/2006 $15,048
M.C. Murphy 3,600(2) 2.26% $4.75 2/26/2006 $12,312
P. J. Marks 3,600(2) 2.26% $4.75 2/26/2006 $12,312
S.C. Vorndran(3) 3,600(2) 2.26% $4.75 2/26/2006 $12,312
</TABLE>
(1) Present values were calculated using the Black-Scholes option valuation
method. The actual value, if any, that an executive officer may receive
is dependent on the excess of the stock price over the exercise price.
Use of this model should not be viewed as a forecast of the future
performance of the Company's stock price. The estimated grant date
present value of each stock option is $3.42 based on the following
defined option terms and assumptions: (a) a stock price of $4.75; (b)
an exercise price of $4.75; (c) a term of 10 years; (d) a risk-free
interest rate of 6.28%, which represents the yield on a 30-year zero
coupon bond with a maturity date corresponding to that of the option;
(e) a dividend yield of 0%, representing the stock's current yield; and
(f) a stock price volatility rate of 54.44% which reflects how much the
stock price varies on a daily basis, and which is calculated as the
variance of the rate of return on the stock as measured over the 250
days prior to the grant date.
(2) Options vest 20% per year beginning on the first anniversary of grant
and terminate 10 years from date of grant.
(3) Mr. Vorndran's options were canceled upon his resignation from the
Company.
The following table sets forth certain information regarding the number
and value, as of December 31, 1996, of unexercised options to purchase shares of
Series A Common Stock held by the Chief Executive Officer and the participating
executive officers listed in the Summary Compensation Table. None of the
executive officers listed below exercised any stock options in the fiscal year
ended December 31, 1996.
AGGREGATED OPTION EXERCISES IN 1996 AND DECEMBER 31, 1996 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
SHARES UNDERLYING UNEXERCISED UNEXERCISED
ACQUIRED OPTIONS AT IN-THE-MONEY OPTIONS AT
ON VALUE DECEMBER 31, 1996 DECEMBER 31, 1996
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
W. J. Marrazzo 0 N/A 25,440 14,160 $0 $0
M.C. Murphy 0 N/A 21,280 11,120 $0 $0
P. J. Marks 0 N/A 16,720 10,080 $0 $0
S. C. Vorndran 0 N/A 0 0 $0 $0
</TABLE>
The table does not include the value of unexercised options which were
out-of-the-money at December 31, 1996.
7
<PAGE> 9
PERFORMANCE GRAPH
The following performance graph compares the performance of the
Company's Series A Common Stock (NASDAQ symbol: WSTNA) to the Value Line
Environmental Services Group Index and the Russell 2000 Index for the Company's
last 5 fiscal years. The graph assumes that the value of an investment in the
Company's Series A Common Stock and each index was $100 at December 31, 1991 and
that all dividends were reinvested. The stock price performance in the graph
below is not indicative of future price performance.
COMPARATIVE FIVE-YEAR TOTAL RETURNS
[GRAPH]
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Name 1991 1992 1993 1994 1995 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Roy F. Weston, Inc. 100.00 105.88 56.86 45.10 40.20 27.45
- ---------------------------------------------------------------------------------------------------------
Russell 2000 Index 100.00 118.41 140.80 138.01 177.26 206.48
- ---------------------------------------------------------------------------------------------------------
Value Line Environmental 100.00 101.46 77.39 79.01 91.06 97.91
Services Index
- ---------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 10
COMPENSATION OF DIRECTORS
In July 1996, Joseph Bordogna was elected non-executive Chairman of the
Board, in which capacity he is paid $45,000 annually. Each other director who is
not an officer of the Company receives an annual retainer of $12,000. The
non-executive Chairman of the Board and all such other directors who are not
officers of the Company are also paid $1,500 plus travel expenses for each Board
meeting they attend and for each Committee meeting they attend that is not held
on the same day as a meeting of the Board. Fees payable to a director who is an
employee of the Company are reduced by that director's employee salary for the
days that he attends a meeting of the Board or a Board Committee. Directors who
are management officers of the Company receive no additional compensation for
their service as a director.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table set forth below shows, as of March 14, 1997, certain
information regarding the beneficial ownership of the Company's Common Stock and
Series A Common Stock by each person known by the Company to beneficially own
more than 5% of any class of the Company's capital stock, each of the Company's
directors, each of the named executive officers, and all directors and executive
officers of the Company as a group. Director nominees for the coming year have
not yet been determined. Unless otherwise noted, the persons named in the table
have sole voting and investment power with respect to all of the shares owned by
them.
<TABLE>
<CAPTION>
NAME AND NUMBER OF SHARES NUMBER OF SHARES PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
ADDRESS OF OF COMMON OF SERIES A COMMON CAPITAL STOCK COMMON SERIES A
BENEFICIAL OWNER(1) STOCK STOCK BENEFICIALLY STOCK COMMON
BENEFICIALLY OWNED(2) STOCK
OWNED(2)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Trustee under the
Roy F. Weston, Inc.
Employees' Savings
Plan(4) -- 1,217,950 12.6% -- 16.1%
The TCW Group, Inc.(5) -- 771,900 8.0% -- 10.2%
Pioneering Management Corp.(6) -- 612,000 6.3% -- 8.1%
Heartland Advisers, Inc.(7) -- 550,000 5.7% -- 7.3%
FMR Corp.(8) -- 393,800 4.1% -- 5.2%
RFW Partnership Limited(9) 438,081 -- 4.5% 20.8% --
Trustee under Deed
of Trust dated
March 5, 1969(10) 175,620 -- 1.8% 8.3% --
William J. Marrazzo -- 58,046(11) * -- *
Peter J. Marks 13,000 23,378(11) * * *
M. Christine Murphy -- 35,023(11) * -- *
Steven C. Vorndran -- 8,779 * -- *
Wayne F. Hosking, Jr.(12) 89,672 2,528 * 4.2% *
Thomas M. Swoyer, Jr 89,672 420 * 4.2% *
Joseph Bordogna -- 1,000 * -- *
Henry L. Diamond -- 2,000 * -- *
Robert G. Jahn 100 -- * * --
James E. Ksansnak -- 1,500 * -- *
Marvin O. Schlanger -- 2,000 * -- *
Katherine W. Swoyer(9)(10)(13) 429,976 26,984 4.7% 20.4% *
A. Frederick Thompson(9)(10)(14) 396,338 3,103 4.1% 18.8% *
Roy F. Weston(9)(15) 140,000 70,593 2.2% 6.6% *
All directors and
executive officers as
a group (7 persons with
respect to Common
Stock and 13 persons
with respect to Series A
Common Stock)(16) 1,772,459 236,225(11) 20.8% 84.2% 3.1%
</TABLE>
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF
ADDRESS OF AGGREGATE
BENEFICIAL OWNER(1) VOTING POWER(3)
- -------------------------------------------------------
<S> <C>
Trustee under the
Roy F. Weston, Inc.
Employees' Savings
Plan(4) 4.3%
The TCW Group, Inc.(5) 2.7%
Pioneering Management Corp.(6) 2.1%
Heartland Advisers, Inc.(7) 1.9%
FMR Corp.(8) 1.4%
RFW Partnership Limited(9) 15.3%
Trustee under Deed
of Trust dated
March 5, 1969(10) 6.1%
William J. Marrazzo *
Peter J. Marks *
M. Christine Murphy *
Steven C. Vorndran *
Wayne F. Hosking, Jr.(12) 3.2%
Thomas M. Swoyer, Jr 3.1%
Joseph Bordogna *
Henry L. Diamond *
Robert G. Jahn *
James E. Ksansnak *
Marvin O. Schlanger *
Katherine W. Swoyer(9)(10)(13) 15.1%
A. Frederick Thompson(9)(10)(14) 13.9%
Roy F. Weston(9)(15) 5.1%
All directors and
executive officers as
a group (7 persons with
respect to Common
Stock and 13 persons
with respect to Series A
Common Stock)(16) 62.5%
</TABLE>
* Less than 1%.
9
<PAGE> 11
(1) Except as indicated below, the business address of the beneficial
owners is c/o Roy F. Weston, Inc., 1 Weston Way, West Chester, PA
19380-1499.
(2) A beneficial owner of securities is one who, directly or indirectly,
has or shares with others: (a) the power to vote or direct the voting
of such securities; or (b) investment power with respect to such
securities, which includes the power to dispose or direct the
disposition of such securities. A person is deemed to be a beneficial
owner of a security if that person has the right to acquire beneficial
ownership of such security within 60 days of March 14, 1997, including
but not limited to, the right to acquire through the exercise of any
option, warrant, or right or through the conversion of a security.
(3) Aggregate voting power is calculated by multiplying the total number of
shares of Common Stock and Series A Common Stock outstanding by one
vote and one-tenth of one vote per share, respectively.
(4) Vanguard Fiduciary Trust Company is the trustee under the Roy F.
Weston, Inc. Employees' Savings Plan ("Employees' Savings Plan"), and
is located at P.O. Box 2900, Valley Forge, PA 19482. Under the terms of
the Employees' Savings Plan and the Trust Agreement between Vanguard
and the Company, a Company committee has the right to direct the
Trustee how to vote the shares held by the Trustee.
(5) The Company received a copy of Schedule 13G, dated February 12, 1997,
filed with the Securities and Exchange Commission by The TCW Group,
Inc., 865 South Figueroa Street, Los Angeles, CA 90017. The TCW Group,
Inc. had sole voting and dispositive power over 771,900 shares.
(6) The Company received a copy of Schedule 13G, dated January 24, 1997,
filed with the Securities and Exchange Commission by Pioneering
Management Corporation, 60 State Street, Boston, MA 02114. Pioneering
Management Corporation had sole voting and dispositive power over
612,000 shares, as investment adviser to an investment company that
beneficially owns such shares.
(7) The Company received a copy of Schedule 13G, dated February 12, 1997,
filed with the Securities and Exchange Commission by Heartland
Advisers, Inc., 790 North Milwaukee Street, Milwaukee, WI 53202.
Heartland Advisers, Inc. had sole voting and dispositive power over
550,000 shares, as investment adviser to an investment company that
beneficially owns such shares.
(8) The Company received a copy of Schedule 13G, dated February 14, 1997,
filed with the Securities and Exchange Commission by FMR Corp., 82
Devonshire Street, Boston, MA 02109. FMR Corp. had sole dispositive
power over 393,800 shares, as investment adviser to various investment
companies that beneficially owns such shares.
(9) RFW Partnership Limited is a limited partnership in which RFW
Enterprises, Inc., Susan W. Thompson, and Katherine W. Swoyer are
general partners. Susan W. Thompson is a daughter of Roy F. Weston and
wife of A. Frederick Thompson. Katherine W. Swoyer is a daughter of Roy
F. Weston. Roy F. Weston is president of RFW Enterprises, Inc. Under
the partnership agreement, the shares held by the partnership are voted
by direction of a majority of the general partners.
(10) Katherine W. Swoyer and Susan W. Thompson, daughters of Roy F. Weston,
share voting power as trustees under Deeds of Trust dated March 5, 1969
over 175,620 shares.
(11) Includes the following number of shares which may be obtained upon the
exercise of options exercisable within 60 days of March 14, 1997:
William J. Marrazzo, 30,800 shares; Peter J. Marks, 20,080 shares; M.
Christine Murphy, 25,200 shares; and all directors and executive
officers as a group, 76,080 shares.
(12) Of the Common Stock reported as beneficially owned by Mr. Hosking,
89,672 are owned by his wife. Of the Series A Common Stock reported as
beneficially owned by Mr. Hosking, 155 shares are owned by his wife.
(13) Of the Common Stock reported as beneficially owned by Ms. Swoyer,
76,163 shares are registered in Ms. Swoyer's name as custodian for her
minor daughter.
(14) Of the Common Stock reported as beneficially owned by Dr. Thompson,
351,083 shares are owned by his wife, Susan W. Thompson.
(15) Of the Common Stock reported as beneficially owned by Mr. Weston,
70,000 shares are owned by his wife.
10
<PAGE> 12
(16) In determining the number of shares held by officers and directors as a
group, shares beneficially owned by more than one officer or director
have been counted only once.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Henry L. Diamond is a partner in the law firm of Beveridge & Diamond,
P.C. The Company retained the law firm to provide services during 1996 and
expects to continue to retain the firm in 1997. The amount of the fees paid to
the firm in 1996 did not exceed five percent of the law firm's gross revenues
for the firm's last full fiscal year.
Katherine W. Swoyer is President and sole shareholder of Intercorp, a
travel services agency which has provided services to the Company since 1994.
Effective January 2, 1996, the Company and Intercorp agreed to a revised
arrangement pursuant to which Intercorp receives an annual management fee,
payable in monthly installments, for providing such services to the Company. The
arrangement runs for a term of three years, terminating at the end of 1998. The
annual fee is an amount equal to $550,000, less all commissions, fees, and other
payments received by Intercorp from any travel service vendor/provider in
respect of Company-related travel up to a specified maximum amount determined by
reference to anticipated annual travel volume. All such commissions, fees, and
other payments are to be paid to the Company. In addition, in an effort to
maximize potential cost savings and service enhancements, the Company and
Intercorp share commissions in excess of a specified maximum amount and will
share in additional savings resulting from negotiations with vendors/providers.
Intercorp's profit relative to the Company's travel services is limited by the
agreement to no more than 3% pre-tax of its gross revenue and any excess shall
be paid to the Company. The terms of the agreement with Intercorp were reviewed
and approved by the disinterested members of the Audit Committee and the Board
of Directors of the Company. In 1996, the gross fee paid by the Company was
$570,000; net payments to the travel agency were $286,000.
Ms. Swoyer receives from the Company a pre-retirement death benefit,
pursuant to the terms of the Executive Plan under which her late husband, Thomas
M. Swoyer, participated. Mr. Swoyer was the President of the Company at the time
of his death in 1989. In 1996, the Company paid Ms. Swoyer $80,000 pursuant to
this plan. The Company is obligated to make payments of $80,000 for each of the
next 3 consecutive years, in equal monthly installments.
Additional information with respect to this item is set forth above in
Item 11 under the caption "Compensation Committee Interlocks and Insider
Participation."
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, ROY F. WESTON, INC. has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized:
ROY F. WESTON, INC.
By: /s/ M. Christine Murphy
--------------------------------------
M. Christine Murphy
Executive Vice President and Chief
Financial Officer
(Duly authorized representative)
Date: April 30, 1997
11
