SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Annual Report
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report (date of earliest event reported):
December 31, 1995
WESTCOTT COMMUNICATIONS, INC.
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(Exact name of registrant as specified in its charter)
Texas 0-18194 75-2110878
- ----------------- ------------------ -------------------
(State or other (Commission File No.) (IRS Employer
jurisdiction Identification No.)
of incorporation)
1303 Marsh Lane
Carrollton, Texas 75006
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(Address of principal executive offices) (zip code)
(214) 417-4100
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(Registrant's telephone number, including area code)
<PAGE>
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to the Company's By-laws, the Board of Directors has, by
resolution, fixed the number of directors at six. The individuals 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.
Board of Directors
Name Age Position
- ---------- --- -----------------------------
Carl Westcott . . . . . . . . . 56 Director, Chairman of the Board of
Directors
and Chief Executive Officer
Jack T. Smith . . . . . . . . . 43 Director, President and Chief Operating
. . . . . . . . . . Officer
Gary J. Fernandes . . . . . . . 52 Director(1)
Jeffrey M. Heller . . . . . . . 56 Director(1)
Stansfield Turner . . . . . . . 72 Director(1)
Kern Wildenthal . . . . . . . . 54 Director(1)
______________
(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. Mr. Westcott is also a director of First USA, Inc., and Jayhawk
Acceptance Corporation. Mr. Westcott is the brother of Ms. Farragut, Executive
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 is also a director of Jayhawk Acceptance Corporation.
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 27 years in various capacities and is currently a Senior Vice President
of EDS. Mr. Fernandes is also a director of EDS, The Southland Corporation,
John Wiley & Sons, Inc., and AmTech Corp.
Mr. Heller has been a director of the Company since October 1987. Mr.
Heller has been employed by EDS for the last 28 years in various capacities and
is currently a Senior Vice President of EDS. Mr. Heller is also a director of
EDS.
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<PAGE>
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 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.
Other Executive Officers
The other executive officers of the Company are as follows:
Name Age Position
- ---------- --- -----------------------------------------
Phyllis Farragut . . . . . . . 49 Executive Vice President, Chief
Financial Officer and Secretary
Joshua D. Klarin . . . . . . . 38 Executive Vice President
______________
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. Klarin joined the Company in June 1993 as Vice President and General
Manager of the Company's then developing Interactive Distance Training Network.
Mr. Klarin was made Executive Vice President in May 1995. Prior to his
election, Mr. Klarin had served for 14 years in various capacities at Mead Data
Corporation and for the three years immediately preceding his joining the
Company was Director of New Product Development for Mead's Lexis/Nexis division.
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
the Company with copies of all Section 16(a) forms they file.
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<PAGE>
Based solely on its review of the copies of such forms received by it with
respect to fiscal 1995 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 ten percent of a
registered class of the Company's equity securities have been complied with by
such persons, except for one late filing made by Mr. Fernandes, which corrected
a previous filing reporting one transaction by Mr. Fernandes.
ITEM 11. 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 All
Underlying Other
Other Options/ Compen
Name and Fiscal Annual -------- ------
Principal Position Year Salary(2) Bonus Compensation SARs (#)(3) sation
------------------ ---- --------- ----- ------------ ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Carl Westcott 1995 $240,000 -0- -0- -0- -0-
Chairman and 1994 $240,000 -0- -0- 500,000 -0-
Chief Executive 1993 $240,000 -0- -0- -0- -0-
Officer
Jack T. Smith 1995 $222,000 -0- -0- -0- -0-
President and 1994 $222,000 -0- -0- 200,000 -0-
Chief Operating 1993 $222,000 -0- -0- 50,000 -0-
Officer
Phyllis Farragut 1995 $135,000 -0- -0- -0- -0-
Executive Vice 1994 133,125 -0- -0- 100,000 -0-
President and 1993 108,440 -0- -0- 20,000 -0-
Chief Financial
Officer
Joshua D. Klarin 1995 $135,000 $50,000 -0- 10,000 -0-
Executive Vice 1994 135,000 -0- -0- -0- -0-
President(1) 1993 78,317 -0- -0- 50,000 -0-
</TABLE>
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(1) Mr. Joshua D. Klarin joined the Company in June 1993.
(2) In April 1995 the Company established a savings plan under Section 401(k) of
the Internal Revenue Code (the "Savings Plan"). Eligible employees of the
Company may elect to contribute up to 15% of their compensation to any of
several investment vehicles established under the Savings Plan. The Company
does not make any contribution on behalf of eligible employees to the
Savings Plan. All amounts contributed by the officers named above are
included in amounts stated for salary and bonus.
(3) See "Option Grants and Exercises."
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Option Grants and Exercises
The following table sets forth as to the Company's Chief Executive Officer
and its other most highly compensated executive officers certain information
with respect to option grants during the year ended December 31, 1995.
<TABLE><CAPTION>
Potential
Realizable Value
at
Assumed Annual
Rates of Stock
Price
Appreciation
Individual Grants for Option Term
--------------------------------------------------------------- ----------------
Number of
Securities % of Total
Underlying Options/SARs Exercise
Options/ Granted to or Base Expira-
SARs Employees in Price tion
Name Granted Fiscal Year ($/SH) Date 5% ($) 10% ($)
------------ ---------- ------------ --------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Carl Westcott -0- N/A N/A N/A N/A N/A
Jack T. Smith -0- N/A N/A N/A N/A N/A
Phyllis Farragut -0- N/A N/A N/A N/A N/A
Joshua D. Klarin 10,000(1) 8.7% $14.88 2/6/02 $62,025 $142,860
</TABLE>
_________________
(1) This option is a nonincentive stock options granted pursuant to the
Company's 1989 Stock Option Plan. The option vests in twenty-five percent
increments over the first four years of the option, and expires on February
6, 2002. 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,
the 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.
5
<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, 1995, and the value of
unexercised options at year-end.
<TABLE><CAPTION>
Number of Securities
Underlying Unexercised Value of
Options at Fiscal Unexercised
Year-End In-The-Money
Shares ----------------------------- Options at Fiscal
Acquired Exercisable Year-End
on Value --------------- ----------------------------
Name Exercise Realized Unexercisable Exercisable Unexercisable
---- -------- -------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Carl Westcott 0 $ 0 125,000 375,000 $ 0(1) $ 0(1)
Jack T. Smith 10,000 106,875 165,000 175,000 900,000(2) 0(1)
Phyllis Farragut 0 0 35,000 85,000 0(1) 0(1)
Joshua D. Klarin
0 0 25,000 25,000 10,750(3) 10,750(3)
_________________
</TABLE>
(1) No options in-the-money.
(2) Exercise price of $3.75.
(3) Exercise price of $13.32.
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 ten percent 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 ten percent of such
officers' aggregate cash compensation or $50,000 times the number of such
officers.
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
holds an option for 20,000 shares of Common Stock at $12.63 per share, and Dr.
Wildenthal holds an option for 20,000 shares of Common Stock at $9.69 per share.
These options were granted pursuant to the Company's Nonemployee Stock Option
Plan (the "Plan"), which provides for the automatic grant of stock options
to nonemployee directors. Under the Plan, 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, and Admiral
Turner and Dr. Wildenthal were granted an option for 1,000 shares of Common
Stock at $14.88 and for 1,000 shares of Common Stock at $15.00 upon their
reelection to the Board of Directors in 1994 and 1995, respectively, pursuant to
the automatic grant
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<PAGE>
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.
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.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 28, 1996 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 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.
Name and Address Shares Beneficially Owned(2)
of the Beneficial Owner (1) Number
- ------------------------------------------ ------
Percent
- ---------
Carl Westcott . . . . . . . . . . . . . . . . . . 2,225,556(3) 10.9%
1303 Marsh Lane
Carrollton, Texas 75006
Gardner Lewis Asset Management. L.P. . . . . . .
1,592,800 (4) 7.8%
285 Wilmington - West Chester Pike
Chadds Ford, PA 19317
The Capital Group Companies, Inc. . . . . . . . .
1,508,000 (5) 7.4%
333 South Hope Street
Los Angeles, CA 9007
Wellington Management Company . . . . . . . . . . 1,143,000(6) 5.6%
75 State Street
Boston, Mass 02109
Thomas W. Smith . . . . . . . . . . . . . . . . . 1,013,540(7) 5.0%
323 Railroad Avenue
Greenwich, CO 06830
Jack T. Smith . . . . . . . . . . . . . . . . . . 314,792(8) 1.5%
Gary J. Fernandes . . . . . . . . . . . . . . . . 193,850(9) 1.0%
Jeffrey M. Heller . . . . . . . . . . . . . . . . 20,750(10) *
Stansfield Turner . . . . . . . . . . . . . . . . 12,750(11) *
Kern Wildenthal . . . . . . . . . . . . . . . . . 15,750(12) *
Phyllis Farragut . . . . . . . . . . . . . . . . 89,970(13) *
Joshua D. Klarin . . . . . . . . . . . . . . . . 27,500(14) *
All directors and executive officers as a group
(8 persons) . . . . . . . . . . . . . . . . .
2,900,918(15) 14.2%
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______________
* Represents less than one percent 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) Includes 618,000 shares of Common Stock which are issuable pursuant to the
exercise of stock options which were fully vested and exercisable on March
28, 1996 or within 60 days of that date.
(3) Includes 250,000 shares of Common Stock which are issuable pursuant to the
exercise of stock options which were fully vested and exercisable on March
28, 1996 or within 60 days of that date.
(4) Based on Schedule 13G dated February 9, 1996 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 1,362,800 shares
of Common Stock and shares voting control with respect to an additional
44,700 shares of Common Stock. Gardner Lewis Asset Management, L.P. has
sole dispositive power with respect to all 1,592,800 shares.
(5) Based on Schedule 13G dated February 9, 1996 filed by The Capital Group
Companies, Inc., on behalf of itself, Capital Research and Management
Company, and Capital Guardian Trust Company, operating subsidiaries.
According to the Schedule 13G, Capital Research and Management Company
exercises investment discretion with respect to 1,000,000 shares of Common
Stock but has no power to direct the vote of such shares, and Capital
Guardian Trust Company exercises investment discretion with respect to
508,000 shares of Common Stock and has sole voting control with respect to
473,000 of such shares.
(6) Based on Schedule 13G dated February 2, 1996 filed by Wellington Management
Company on behalf of Wellington Trust Company, N.A.. According to the
Schedule 13G, Wellington Trust Company, N.A. has shared dispositive power
with respect to 1,143,000 shares of Common Stock and shares voting control
with respect to 237,000 of such shares.
(7) Based on Schedule 13D dated February 22, 1996 filed by Thomas W. Smith and
Thomas N. Tryforos. According to the Schedule 13D, Mr. Smith has sole
voting and dispositive power with respect to 173,540 shares of Common Stock
and shares voting and dispositive power with respect to an additional
840,000 shares, and Mr. Tryforos has sole voting and dispositive power with
respect to 9,450 shares of Common Stock and shares voting and dispositive
power with respect to an additional 840,000 shares.
(8) Includes 227,500 shares of Common Stock which are issuable pursuant to the
exercise of stock options which were fully vested and exercisable on March
28, 1996 or within 60 days of that date.
(9) Includes 15,750 shares of Common Stock which are issuable pursuant to the
exercise of stock options which were fully vested and exercisable on March
28, 1996 or within 60 days of that date.
(10) Includes 15,750 shares of Common Stock which are issuable pursuant to the
exercise of stock options which were fully vested and exercisable on March
28, 1996 or within 60 days of that date.
(11) Includes 750 shares of Common Stock which are issuable pursuant to the
exercise of stock options which were fully vested and exercisable on March
28, 1996 or within 60 days of that date.
(12) Includes 15,750 shares of Common Stock which are issuable pursuant to the
exercise of stock options which were fully vested and exercisable on March
28, 1996 or within 60 days of that date.
(13) Includes 65,000 shares of Common Stock which are issuable pursuant to the
exercise of stock options which were fully vested and exercisable on March
28, 1996 or within 60 days of that date.
(14) Includes 27,500 shares of Common Stock which are issuable pursuant to the
exercise of stock options which were fully vested and exercisable on March
28, 1996 or within 60 days of that date.
(15) Includes 618,000 shares of Common Stock which are issuable pursuant to the
exercise of stock options which were fully vested and exercisable on March
28, 1996 or within 60 days of that date.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED 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 $149783 in 1995 for its use of the jet aircraft.
8
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: April 24, 1995
WESTCOTT COMMUNICATIONS, INC.
By: /s/ Phyllis Farragut
------------------------------
Phyllis Farragut,
Executive Vice President and
Chief Financial Officer
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