SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the fiscal year ended Commission File Number
September 30, 1995 0-3415
STV GROUP, INCORPORATED
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1698231
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11 Robinson Street, Pottstown, Pennsylvania 19464
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 326-4600
Securities registered pursuant to Section 12(b) of the Act: None
Name of each exchange on
Title of each class which registered
Common Shares ($1.00 par) NASDAQ
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, (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 (Section 229.405 of this chapter) 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 as of November 30, 1995 is $1,674,251. (1)
The number of shares outstanding of the registrant's classes of common stock as
of November 30, 1995 is as follows:
Common Shares 1,821,246
DOCUMENTS INCORPORATED BY REFERENCE
Part I Part II Part III Part IV
(None) Annual Report Proxy Statement 1984, 1987, 1989, 1990
to Shareholders and Annual Re- 1991, 1992, 1993 and 1994
for fiscal 1995 port to Share- Form 10-K; Registration
holders for Statement No. 2-88904
fiscal 1995
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(1) The rules of the Securities and Exchange Commission require that the
aggregate dollar amount of the voting stock set forth above equal the amount of
common shares outstanding, reduced by the amount of common shares held by
executive officers, directors and shareholders owning in excess of 10% of the
Company's common shares, multiplied by the average bid and asked price on
November 30, 1995. The information provided shall in no way be construed as an
evaluation by the Company of the market price of such common stock, nor shall it
be construed as an admission that any officer, director or 10% shareholder in
the Company may be deemed an affiliate of the Company and any such inference is
hereby disclaimed. The information provided is included solely for record
keeping purposes of the Securities Exchange Commission.
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PART I
ITEM 1. BUSINESS
STV Group, Inc. provides engineering and architectural consulting and
design services on a variety of projects for the federal government, local,
state and foreign governments and private industry. STV Group, Inc. consists of
the following wholly-owned subsidiaries: Sanders & Thomas, Inc., Seelye
Stevenson Value & Knecht, Inc., Lyon Associates, Inc., STV Architects, Inc., STV
Environmental, Inc. and STV Construction Services. In June of 1995, the names of
Sanders & Thomas, Inc., Seelye Stevenson Value & Knecht, Inc., and Lyon
Associates, Inc., were changed to STV Incorporated. STV and its subsidiaries are
hereinafter collectively referred to as the "Company".
The Company's projects frequently require the service of a firm with
diverse capabilities. For example, a particular project may require electrical
engineers, civil engineers, draftsmen and other professional personnel. Each of
STV Group, Inc.'s subsidiaries customarily staffs a particular project with
personnel from the respective firm's offices. Where appropriate, however,
multifirm project teams are formed with qualified professionals drawn from the
entire Company. Management believes that close cooperation among the STV Group,
Inc. subsidiaries, under its management, assures proper control and support for
all Company activities. As of September 30, 1995, the Company employed 998
people.
Services
The principal areas in which the Company provides services and the
approximate percentage of the Company's revenue attributable to each service
area are set forth below:*
Year Ended September 30,
1995 1994 1993
Architectural Engineering 27% 27% 30%
Civil, Highway, Bridge,
Airport and Port Engineering 35 36 38
Defense Systems Engineering 5 4 4
Industrial Process Engineering 2 2 2
Transportation Engineering 29 28 24
Other Engineering Services 2 3 2
________________
* The Company does not record revenue data according to each service area.
However, to provide an approximation of the revenue attributable to each
service area, the Company has analyzed contract revenue in the fiscal year
according to its principal service area. The aggregate revenue each year of
these contracts is at least 75% of the consolidated revenue for these fiscal
years.
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Architectural Engineering
Architectural engineering generally involves consulting and design
services, as well as construction inspection services, for the construction of
commercial, industrial and governmental buildings, medical and educational
facilities, laboratories, recreational, religious and cultural centers, military
installations, penal institutions, and public utility facilities. As part of its
services, the Company has designed and developed systems for heating,
ventilation, cooling, refrigeration, fire protection, lighting, power generation
and distribution and communications. In addition, the Company has performed
energy conservation audits and has recommended and designed programs, including
computerized control programs for multi-building complexes, for the conservation
of fuel and electrical energy.
Civil, Highway, Bridge, Airport and Port Engineering
This area of engineering generally involves consulting and design services
for the construction of highways (including interchange ramps and secondary
roads), bridges, airports and marine ports. Services performed by the Company
have included site selection and development (including economic evaluations and
feasibility reports), design and development of specifications, and construction
inspection. As part of these services, the Company has designed lighting, toll
and service facilities, drainage and erosion control systems, and has performed
mapping and landscaping, hydraulic and hydrologic studies, soils engineering,
traffic studies and surveys. In addition, the Company has designed and inspected
the construction of airport terminals, runways, aircraft maintenance hangars,
fuel systems, control towers and marine ports.
Defense Systems Engineering
Defense systems engineering involves consulting and design services for the
development of equipment and special hardware for the Department of Defense.
Services performed by the Company have included the design, development and
testing for systems relating to naval aircraft, weapons systems, aircraft
carriers, support ships, land-based operations and support missions. The Company
has prepared analytical support studies for aircraft carriers, support ships,
land-based operations and support missions, analytical support studies for
aircraft catapults and arresting systems, jet blast deflectors, shipboard
weapons, loading and transfer systems, ship- weapon compatibility, mobile weapon
loaders, munition trailers, launch and recovery television systems, lighting and
marking systems, parachutes, life rafts and personnel life-support systems. In
addition, the Company has prepared operation and maintenance manuals, technical
reports, specifications and other documents describing equipment and hardware.
The Company has the capacity to provide all of the services necessary to prepare
these publications, including layout, artwork composition, photography and
reproduction.
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Industrial Process Engineering
This area involves consulting and design services for the development of
various manufacturing equipment and process systems. Services performed by the
Company have included technical analyses, feasibility studies, plant layouts and
machinery and construction inspection services. The Company has provided these
services in connection with systems for the manufacture of paper, plastics, bulk
chemicals, flooring, steel, rubber, telephone equipment, television sets,
ammunition, foods and automotive production equipment. In addition, the Company
has provided services for various waste-to-energy engineering projects such as
municipal and industrial incinerators designed to convert various forms of waste
into marketable energy and for various environments, sanitary and water
pollution control projects, including water supply systems, storm and sanitary
sewage collection systems.
Transportation Engineering
Transportation engineering involves consulting and design services, as well
as construction supervision services, for various transportation facilities,
including the planning and design of track, terminals, stations, yards and shops
for the railway industry. This area also involves evaluation and inspection of
rolling stock for intercity rail lines, light rail, commuter line and urban mass
transit systems and design and construction inspection of maintenance and
storage facilities.
Customers
The following table sets forth the percentage of contract revenues derived
from each of the following customers for the periods indicated:
Year Ended September 30,
1995 1994 1993
U.S. Government
Contracts.............................. 19% 22% 23%
State and Local Government
Contracts.............................. 50 49 50
Foreign Government
Contracts.............................. 2 1 2
Private Contracts............................... 29 28 25
_______________
In fiscal years 1995, 1994, and 1993 the Company's business activities in
countries other than the United States accounted for approximately 4%, 5%, and
5% of total revenues,
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respectively. Due to the fact that virtually all of the Company's international
business is funded through United States or international development agencies,
management believes that there are no unusual risks attendant to obtaining
payment for services rendered under its foreign contracts.
Contracts
In recent years, many of the Company's contracts have been awarded on a
cost-plus, as opposed to a fixed-price, basis. Under cost-plus contracts, the
Company is reimbursed for its allowable costs (direct labor plus overhead rate)
and is paid a negotiated fixed fee. Under fixed-price contracts, the Company is
paid an agreed-upon price for services rendered. Under fixed-price contacts, the
Company bears any risk of increased or unexpected costs that may reduce its
profit or cause it to sustain a loss. The majority (approximately 75%) of the
Company's contracts are cost-plus contracts.
Government Contracts
Many of the government programs in which the Company participates as a
contractor may extend for several years but may be funded on an annual basis.
The Company's government contracts are subject to termination, reduction or
modification as a result of changes in the government's requirements or
budgetary restrictions. In addition, government contracts are subject to
termination at the convenience of the government. If a contract were to be
terminated for convenience, the Company would be reimbursed for its allowable
costs to the date of termination and would be paid a proportionate amount of the
stipulated profits or fees attributable to the work actually performed. To date,
no government agency has terminated for convenience any significant contracts
with the Company.
Under certain circumstances, the government can suspend or debar
individuals or firms from obtaining future contracts with the government. While
the Company has not experienced such a suspension or debarment and considers the
possibility of any suspension or debarment to be remote, any such suspension or
debarment would have a materially adverse effect upon the Company.
The books and records of the Company are subject to audits by a number of
federal, state and local government agencies, including the Defense Contract
Audit Agency. Such audits could result in adjustments to contract costs and
fees. To date, no material audit adjustments have been made in the Company's
contracts, although no assurances can be given that future adjustments will not
be required. All contract revenues are recorded in amounts which are expected to
be realized upon final settlement and the Company does not anticipate material
audit adjustments.
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Accounts Receivable and Costs and Estimated Profits of Uncompleted Contracts in
Excess of Related Billings
Accounts receivable and costs and estimated profits of uncompleted
contracts in excess of related billings represented 83% and 85% of total assets
as of September 30, 1995 and 1994, respectively. Accounts receivable are
comprised of billed receivables while costs and estimated profits of uncompleted
contracts in excess of related billings are essentially unbilled receivables.
Unbilled receivables represent payment obligations for which invoices have not
or cannot be presented until a later period. The reasons for which invoices are
not presented may include normal invoice preparation lag, lack of billable
documents to be supplied by the client, and excess of actual direct and indirect
costs over amounts currently billable under cost reimbursement contracts to the
extent they are expected to be billed and collected. The financing of
receivables requires bank borrowings and the payment of associated interest
expense. Interest expense is a business expense not permitted as a reimbursable
item of cost under any government contracts.
Backlog
Backlog represents the value of existing contracts less the portion of such
contracts included in revenues on the basis of percentage-of-completion. The
Company's backlog for services as of September 30, 1995 and 1994 was
approximately $129,000,000 and $110,000,000, respectively. The Company's backlog
includes anticipated pass through cost such as reimbursement for travel,
purchase of supplies and sub-contracts. Over the last three years, pass through
costs, as a percent of total revenues, have been 22.2% in 1995, 26.5% in 1994
and 28.2% in 1993.
A majority of the Company's customer orders or contract awards and
additions to contracts previously awarded are received or occur at random during
the year and may have varying periods of performance. The comparison of backlog
amounts on the same date in successive years is not necessarily indicative of
trends in the Company's business or future revenues.
The major component of the Company's operating costs are payroll and
payroll-related costs. Since the Company's business is dependent upon the
reputation and experience of its personnel and adequate staffing, a reasonable
backlog is important for the scheduling of operations and for the maintenance of
a fully staffed level of operation.
Competition
The Company has numerous competitors in all areas in which it does
business. Some of its competitors are large, diversified firms having
substantially greater financial resources and larger technical staffs than the
Company. It is not possible to predict the extent of competition which the
Company will encounter in the future because of changing customer requirements
in terms of types of projects and technological developments. It has been the
Company's
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experience that the principal competitive factors for the type of service
business in which the Company engages are a firm's demonstrated ability to
perform certain types of projects, the client's own previous experience with the
competing firms, a firm's size and financial condition, and the cost of the
particular proposal.
It is Management's belief that the diversified scope of the services
offered by the Company is a positive competitive factor. Among other things, the
wide range of expertise which the Company possesses permits it to remain
competitive in obtaining federal government contracts despite shifts in federal
spending emphasis. Management believes that the national and international scope
of the Company is a positive factor in attracting and retaining clients which
have the need for engineering services in different regions of the country and
the world.
Marketing
Marketing activities are conducted by key operating and executive
personnel, including specifically assigned sales personnel, as well as through
professional personnel who maintain existing and develop new client
relationships. The Company's ability to compete successfully in the industry is
largely dependent on aggressive marketing, the development of information
regarding client requirements, the submission of responsive cost-effective
proposals and the successful completion of contracts. Information concerning
private and governmental requirements is obtained during the course of contract
performance, from formal and informal briefings, from participation in
activities of professional organizations, and from literature published by the
government and other organizations.
Personnel
As of September 30, 1995, the Company had 998 employees, of whom 885 were
engaged in engineering and architectural services, 85 were engaged in
administration and 28 in marketing.
Because of the nature of services provided, many employees are professional
or technical personnel having specialized training and skills, including
engineers, architects, analysts, management specialists, technical writers and
skilled technicians. Although many of the Company's personnel are highly
specialized in certain areas the Company is not currently experiencing any
material difficulty in obtaining the personnel it requires to perform under its
contracts. Management believes that the future growth and success of the Company
will depend, in part, upon its continued ability to retain and attract highly
qualified personnel. The Company believes its employee relations to be good.
Environmental Compliance
The Company's facilities are subject to federal, state and local
authorities environmental control regulations. The Company believes it is in
compliance with these numerous regulations and that it is not exposed to any
material liability as it relates to contamination of the environment. To date,
compliance with these environmental regulations has not had a material
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effect on the Company's earnings nor has it required the Company to expend
significant capital expenditures.
Executive Officers of the Registrant
Position with STV Group, Inc. Business
Name Age Experience During the Past 5 Years
---- --- ------------------------------------
Michael Haratunian (1) 62 Chairman of the Board and Chief Executive
Officer of STV Group, Inc.
Dominick M. Servedio (2) 55 Director, President and Chief Operating
Officer of STV Group, Inc. and President
and Chief Operating Officer of STV
Incorporated
Frank E. Lyon, Jr. (3) 67 Senior Vice President of STV Incorporated
W. A. Sanders II (4) 48 Senior Vice President of STV Incorporated
Peter W. Knipe (5) 46 Secretary/Treasurer of STV Group, Inc.
_______________
(1) Mr. Haratunian has been associated with the Company continuously since 1972
in various capacities and was appointed President of Seelye, Stevenson,
Value & Knecht, Inc. in 1977 and Director and Executive Vice-President of
Engineering of STV Group, Inc. in 1981 and assumed the Presidency of STV
Group, Inc. in 1988. He was appointed Chief Executive Officer in 1991 and
Chairman of the Board in 1993. Mr. Haratunian is a registered professional
engineer.
(2) Mr. Servedio joined the Company is 1977 as Vice President of Seelye,
Stevenson, Value & Knecht, Inc. and was appointed Executive Vice President
in 1982. He was appointed President of Seelye, Stevenson, Value & Knecht,
Inc. and Executive Vice President of STV Group, Inc. in 1988. Mr. Servedio
was elected President of STV Group, Inc. in 1993. Mr. Servedio is a
registered professional engineer.
(3) Mr. Lyon was the President and Chairman of the Board of Lyon Associates,
Inc. for more than five years prior to the acquisition of certain of its
assets by a subsidiary of the Company in 1983. Mr. Lyon currently is
President of the Company's Lyon Associates, Inc. subsidiary. Mr. Lyon is a
registered professional engineer.
(4) Mr. Sanders has been associated with the Company continuously since 1968 in
various capacities and was appointed Executive Vice President of Sanders &
Thomas in 1991. Mr. Sanders is a registered professional engineer.
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(5) Mr. Knipe joined the Company in 1979, was appointed Controller in 1983 and
was elected Treasurer in 1987 and Secretary in 1993. In addition to his
position with the Company, he serves as a director and officer of certain
subsidiaries of the Company.
ITEM 2. PROPERTIES
The Company's executive offices and a principal engineering office are
located in a modern 42,700 square foot building leased by the Company in
Pottstown, Pennsylvania, pursuant to a lease which expires in May 1996 with an
option to renew for a five-year period.
The Company leases office facilities in a number of other locations both in
the United States and overseas, at which it performs engineering and
architectural consulting and design services, including a facility of
approximately 55,000 square feet in New York, New York, pursuant to a 15 year
lease which expires in December, 2006.
The Company believes that its facilities are adequate to meet the current
and foreseeable needs of the Company. The Company does not expect to experience
any difficulty in securing additional space should that become necessary.
ITEM 3. LEGAL PROCEEDINGS
The Company is the subject of various claims, legal actions and complaints
arising in the ordinary course of business. In most cases, the Company is one of
several named defendants or third-party defendants. In the opinion of
management, most of these matters are without merit or are of such a nature or
involve such amounts that an unfavorable disposition would not have a material
adverse effect on the financial condition of the Company.
In order to meet its contractual professional liability insurance
requirements, for the policy years beginning March 1993, the Company's
professional liability insurance arrangement provides for an annual aggregate
$5,000,000 of coverage with a $250,000 deductible. For the policy year beginning
in March 1992, the Company made an arrangement with its professional liability
insurance carrier whereby the carrier issues a policy with the agreement the
Company indemnify the insurer for claims properly paid under this policy. The
insurance coverage is for $1,000,000 per occurrence and $1,000,000 in the
aggregate with a $500,000 deductible. As agreed, the Company has funded this
indemnification requirement in its entirety. The Company also has a standard
professional liability insurance policy in the amount of $4,000,000 for
operating subsidiaries in excess of the $1,500,000 primary coverage and
deductible. From October 1985 to March 1992, the Company had the same
professional liability insurance arrangement with limits of $5,000,000 per
occurrence and $5,000,000 in the aggregate for operating subsidiaries and
$1,000,000 per occurrence and in the aggregate for coverage related to an
acquisition. To satisfy the indemnification requirement, the Company had a cash
reserve of $4,000,000 held by the insurance company and has posted a $1,500,000
irrevocable letter of credit in favor of the insurance company. From October 1,
1983 to September 30, 1985, the Company maintained professional liability
insurance in the annual amount of $10,000,000 per
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occurrence and $10,000,000 in the aggregate, with a deductible per loss of
$500,000. During the ten years prior to October 1, 1983, the Company maintained
professional liability insurance in annual amounts ranging from $1,000,000 to
$5,000,000 with a deductible per occurrence of between $100,000 to $500,000.
On January 20, 1992 the Company, together with its insurers, settled a
personal injury lawsuit (Skinner v. Seelye Stevenson, et al.). The Company had
been found by a jury to be 70 percent liable for negligence. The case was
settled for $5.4 million. There is a declaratory judgment action pending as to
whether coverage is provided by the Company's general liability insurance
carrier, Reliance Insurance Company, or its professional liability insurance
carrier, National Union Fire Insurance Company. While the action is pending, the
court has required that the limits of the National Union Fire Insurance coverage
be reserved to pay this claim if it is found that coverage was properly provided
by National Union Fire Insurance Company. The Company believes that coverage is
properly provided by its general liability insurance carrier, Reliance Insurance
Company, and intends to vigorously pursue this matter, including the Company's
own claims against the general liability insurer and others arising from the
handing of the defense.
On July 29, 1992, the Supreme Court of New York entered an order granting
summary judgment against the Company's former professional liability insurance
carrier, National Union Fire Insurance Company, in the approximate amount of
$4,000,000. That judgment arose from a prior proceeding in which a developer,
American Continental Properties, alleged that Michael Lynn & Associates, P.C.
(MLA), from which the Company made an asset acquisition, made certain
measurement errors in the process of providing consulting services in connection
with a condominium conversion. The Company and National Union have denied that
there existed insurance coverage under the National Union policy. The judgement
was reversed on appeal in 1994.
If the outcome of all of the aforementioned litigation is adverse to the
Company and the Company is required to pay additional amounts, it could have a
material adverse effect on the earnings and financial condition of the Company
in the year such determination is made; however, management believes that the
final resolution of these legal matters will not have a material adverse effect
on the Company's financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The information contained under the caption "Common Stock Market Prices"
from the Company's Annual Report to Shareholders for the fiscal year ended
September 30, 1995, is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information contained under the caption "Financial Highlights for the
Fiscal Year Ended September 30," 1991 through 1995 in the Company's Annual
Report to Shareholders for the fiscal year ended September 30, 1995 is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION.
Results of Operation
The Company's contracts have been awarded on a cost-plus or fixed-price
basis. See Part I, Item 1, "BUSINESS - Contracts". As a service business, the
Company's profitability is directly affected by the degree to which its
professional staff is fully utilized on existing contracts.
Fiscal Year 1995 Compared to Fiscal Year 1994
Total revenues for the fiscal year ended September 30, 1995 decreased, 0.3%
to $89,232,000. This is down from a 2.4% increase in fiscal 1994 and a 15.3%
increase in fiscal 1993. The reduction in total revenues in fiscal 1995 was the
result of a 16.4% reduction in subcontract and procurement mainly in the
transportation area. Revenues from U. S. Government contracts decreased 13% in
fiscal 1995 as compared to fiscal 1994 and 15.8% as compared to fiscal 1993.
This decrease is attributable to the Government's spending reduction,
particularly in overseas infrastructure projects. Operating revenues (total
revenues excluding pass-through costs) increased 5.6% to $69,397,000 compared to
a 4.9% increase in fiscal 1994 and a 13.5% increase in fiscal 1993. While there
was a reduction in the international region, we continue to see an increased
demand for facilities and transportation engineering. United States defense work
has decreased slightly but there is continued demand for services in other areas
of the U. S. Government.
Pass-through costs, expressed as a percentage of total revenue, decreased
to 22.2% in fiscal 1995 compared to 26.5% in fiscal 1994 and 28.2% in fiscal
1993. Costs will vary from year to year depending on the need for specialty
subconsultants and governmental subcontract requirements.
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Cost of services, expressed as a percentage of operating revenues, was
89.3% in fiscal 1995, which is comparable to the 89.2% in fiscal 1994, but is an
increase from the 88.0% in fiscal 1993. In fiscal 1995, costs increased from
$58,614,000 in fiscal 1994 to $61,942,000. This increase is due to increased
international marketing efforts and increased labor and labor-related expenses
due to increased workload. The increase in fiscal 1994 was due in part to a
transfer of certain costs from general and administrative expense to cost of
services. Without this transfer, cost of services expressed as a percentage of
revenue was comparable to fiscal 1993 at 87.7%. Total costs in fiscal 1994
(excluding the transfer of $1.0 million) increased to $57,614,000 from
$55,173,000. This increase was due to increased post retirement benefit costs,
increased international marketing efforts and increased labor and labor-related
expenses due to an increased workload.
General and administrative expense, expressed as a percentage of operating
revenues, was 7.1% in fiscal 1995 and 1994 and decreased from 8.3% in fiscal
1993. Total general and administrative costs increased 6.3% in fiscal 1995 from
$4,657,000 to $4,952,000. This increase is due mainly to an increase in legal
fees. The decrease in fiscal 1994 was due to the above mentioned
reclassification of costs from general and administrative expense to cost of
services.
Interest, expressed as a percentage of operating revenues, was 2.2% in
fiscal 1995 and 1994 and decreased from 2.3% in fiscal 1993. While interest
rates increased in fiscal 1995, the average amount of the bank loan outstanding
decreased by 7% as compared to fiscal 1994.
The company had a pre-tax profit of $949,000. Income tax expense was 58% of
pre-tax income compared to 45% in fiscal 1994 and 46% in fiscal 1993. The
variance in the rate is due to an increase in non-deductible expenses and the
recognition of income in the various states in which we do business and their
tax rates.
In the fourth quarter the Company had a pre-tax profit of $286,000 as
compared to $144,000 in fiscal 1994 and $152,000 in fiscal 1993.
Fiscal Year 1994 Compared to Fiscal Year 1993
Total revenues for the fiscal year ended September 30, 1994 increased 2.4%
to $89,465,000. This is down from a 15.3% increase in fiscal 1993 and a 6.4%
increase in fiscal 1992. The increased revenues in fiscal 1994 were the result
of increased demand for transportation engineering services. In fiscal 1993, U.
S. government contracts accounted for 47 percent of the total increase in
revenues as compared to fiscal 1992, while revenues for U. S. government
contracts were comparable in fiscal 1994 versus fiscal 1993. The balance of the
fiscal 1993 increase was also due to increased demand for transportation
engineering services. Operating revenues (total revenues excluding pass-through
costs) increased 4.9% to $65,746,000 compared to a 13.5% increase in fiscal 1993
and a 1.6% decrease in fiscal 1992. The increase in operating revenues reflects
continued demand for transportation engineering services as well as the results
of increased marketing effort. While there have been decreases in the U.S.
Government spending for defense, there has been significant demand for services
in other
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departments of the U. S. government as well as demand by non U. S. government
clients for transportation and infrastructure.
Pass-through costs, expressed as a percentage of total revenue, decreased
to 26.5% in fiscal 1994 compared to 28.2% in fiscal 1993 and 27.1% in fiscal
1992. Costs will vary from year to year depending on the need for specialty
subconsultants and governmental subcontract requirements.
Cost of services, expressed as a percentage of operating revenues,
increased to 89.2% in fiscal 1994 from 88.0% in fiscal 1993 and decreased from
89.6% in fiscal 1992. The increase in fiscal 1994 is due in part to a transfer
of certain costs from general and administrative expense to cost of services.
Without this transfer, cost of services expressed as a percentage of revenue
would be comparable to fiscal 1993 at 87.7%. Total costs (excluding the transfer
of $1.0 million) increased from $55,173,000 to $57,614,000. This increase is due
to increased post retirement benefit costs, increased international marketing
efforts and increased labor and labor related expenses due to an increased
workload. The decrease in fiscal 1993 from fiscal 1992 was due to an increase in
revenue and the Company's cost containment strategy.
General & administrative expense, expressed as a percentage of operating
revenues, decreased to 7.1% in fiscal 1994 from 8.3% in fiscal 1993 and 8.9% in
fiscal 1992. This reduction was due to the above mentioned reclassification of
costs from general and administrative expense to cost of services and without
this reclassification, would have been comparable to previous years at 8.6%.
Interest, expressed as a percentage of operating revenues, decreased to
2.2% in fiscal 1994 from 2.3% in fiscal 1993 and 2.5% in fiscal 1992. This
decrease was the result of the increase in revenues.
The company had a pre-income tax profit of $1,028,000 due to the increase
in revenues. Income tax expense was 45% of pre-tax income compared to 46% in
fiscal 1993 and an income tax benefit of 37% in fiscal 1992. Included in the
1994 tax rate was a favorable adjustment of $45,000 due to the adoption of FASB
109. The variance in the rate is primarily due to the recognition of income in
the various states in which we do business and their tax rates.
In the fourth quarter the Company had a pre-tax profit of $144,000. This
profit was impacted by higher than anticipated legal expenses.
Fiscal Year 1993 Compared to Fiscal Year 1992
Total revenues for the fiscal year ended September 30, 1993 increased 15.3%
to $87,361,000. This is up from a 6.4% increase in fiscal 1992 and a 6.7%
decrease in fiscal 1991. Operating revenues (total revenues excluding
pass-through costs) increased 13.5% to $62,692,000 compared to a 1.6% decrease
in fiscal 1992 and a 11.9% decrease in fiscal 1991. The increase
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<PAGE>
in operating revenues reflects the results of the increased marketing efforts in
transportation and infrastructure.
Pass-through costs, expressed as a percentage of total revenue, increased
to 28.2% in fiscal 1993 compared to 27.1% in fiscal 1992 and 21.2% in fiscal
1991. This increase in pass-through costs is primarily due to the need for
specialty subconsultants and governmental subcontract requirements.
Cost of services, expressed as a percentage of operating revenues decreased
to 88.0% in fiscal 1993 from 89.6% in fiscal 1992 and increased from 87.2% in
fiscal 1991. This decrease is due to the increase in revenue and the Company's
cost containment strategy. Total cost of services increased 11.5% from
$49,493,000 to $55,173,000. This increase is due to increased labor and labor
related expenses resulting from the Company's increased workload. The increase
in fiscal 1992 from fiscal 1991 was due to increased professional liability
insurance costs and a reclassification of costs from general and administrative
costs to cost of services.
General & administrative expense, expressed as a percentage of operating
revenues decreased to 8.3% in fiscal 1993 from 8.9% in fiscal 1992 and 10.0% in
fiscal 1991. This reduction is due to the increase in revenue. Total general and
administrative costs increased by 5.3% from $4,934,000 to $5,197,000. This
increase is due to increased legal fees due to on-going litigation.
Interest, expressed as a percentage of operating revenues decreased to 2.3%
in fiscal 1993 from 2.5% in fiscal 1992 and 2.9% in fiscal 1991. This decrease
was primarily the result of the increase in revenues.
The Company had a pre-income tax profit of $983,000 due to the increase in
revenues and its cost containment strategy. Income tax expense was 46% of income
compared to an income tax benefit of 37% in fiscal 1992 and an expense of 48% of
income in fiscal 1991. The variance in the rate is primarily due to the
recognition of income in the various states in which the Company does business
and their tax rates.
In the fourth quarter the Company had a pre-tax profit of $152,000. This
profit was impacted by lower than anticipated legal and insurance costs which
was more than offset by a change in estimates on two contracts, all which had an
after tax effect of a reduction to income of $156,000.
Liquidity, Capital Resources and Financing Agreements.
Cash provided in operating activities was $1,109,000 in fiscal 1995
compared to cash used in operating activities of $184,000 in fiscal 1994. This
increase was due mainly to a decrease in accounts receivable. Working capital
increased $1,386,000 to $8,570,000 in fiscal 1995 compared to a $554,000
increase in 1994 and a $275,000 increase in 1993. Investing activities included
$951,000 for the continued purchase of computer hardware and software. Financing
activities
-13-
<PAGE>
consisted of a $139,000 net reduction in short term borrowing due to the
reduction in accounts receivable.
Capital resources available to the Company include an existing line of
credit for working capital. The current line is a maximum of $16,500,000 based
on accounts receivable and work-in-progress, of which approximately $1,300,000
is currently available. The line of credit is a demand note and requires the
Company to maintain certain financial covenants. To date, the Company has
maintained these covenants and believes that its working capital and existing
line of credit are adequate to meet current fiscal year requirements. If the
Company should fail to meet these covenants or should the bank demand payment on
the note, there would be a material adverse financial impact. The Company is not
aware of any reason for the bank to demand payment and does not expect that it
would do so in the future. The Company is planning to continue its program of
purchasing computer-assisted design and drafting equipment.
In the long term, the Company relies on the ability to generate sufficient
cash flows from operating activities to fund investing and financing
requirements. If demand for services should increase sharply, additional sources
of financing may be required.
The Company is currently involved in two lawsuits, Skinner and American
Continental Properties. If the outcome of these lawsuits is adverse, the Company
may be required to pay substantial deductibles or indemnification. The Company
believes that it will be able to finance any adverse finding through the use of
an income tax carryback of the resulting loss in combination with the line of
credit, existing resources, and additional borrowings. The Company is vigorously
pursuing its defenses, and management believes the final resolution of these
legal matters will not have a material adverse effect on the Company's financial
statements.
Impact of Inflation
Because the Company's business is essentially the supplying to customers of
the expertise of its employees, there are certain factors which significantly
reduce the impact of inflation. One such factor is that the Company has a
comparatively small investment in property and equipment as a percentage of
total assets. In addition, a substantial percentage of the Company's contracts
are under cost reimbursement contract provisions or fixed-price contracts which
include inflation assumptions when bid upon.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The report of the independent auditors and consolidated financial
statements included in the Company's Annual Report to Shareholders for the year
ended September 30, 1995, are included in Part IV, Item 14 of this Report.
-14-
<PAGE>
ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained under the caption "Election of Directors" in the
company's 1995 Proxy Statement is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information contained under the caption "Executive Compensation" in the
Company's 1995 Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information contained under the caption "Security Ownership" in the
Company's 1995 Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN TRANSACTIONS AND RELATED TRANSACTIONS.
The information contained under the caption "Certain Transactions" in the
Company's 1995 Proxy Statement is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, AND REPORTS ON FORM 8-K.
(A) The following documents are filed as part of this report;
(1) Financial Statements:
Report of Independent Auditors
Consolidated Balance Sheets - September 30, 1995 and 1994
Consolidated Statements of Income - Years ended September 30,
1995, 1994 and 1993
-15-
<PAGE>
Consolidated Statements of Stockholders' Equity - Years ended
September 30, 1995, 1994 and 1993
Consolidated Statements of Cash Flows - Years ended September 30,
1995, 1994 and 1993
Notes to Consolidated Financial Statements - September 30, 1995
(2) Financial Statements schedules required by Item 8.
All schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
are not required under the related instructions or are
inapplicable, and therefore have been omitted.
(B) Reports on Form 8-K.
There were no reports on Form 8-K for the fiscal year ended September
30, 1995.
(C) Exhibits filed pursuant to Item 601 of Regulation S-K:
****** 3.1 Amended and restated Articles of Incorporation of the
Company.
****** 3.2 By-Laws of the Company, as amended.
*** 3.3 Amendment to Section 1.04 of the By-Laws of the Company.
* 4.0 Specimen Common Stock Certificate of the Company.
* 10.2 Loan Agreement, undated, between the Company and Richard
L. Holland, relating to the purchase of 48,779 shares of
Common Stock.
*** 10.3 Asset Acquisition Agreement, dated September 22, 1987,
between STV/WAI, Inc. and Michael Lynn Assoc., P.C.
relating to the acquisition by STV/Michael Lynn
Associates, Inc. of certain assets of Michael Lynn
Assoc., P.C.
* 10.4 Lease, dated October 3, 1980, between the Company and
Montco Investors Realty Company, relating to the
Company's executive and engineering offices in
Pottstown, Pennsylvania
* 10.5 Lease, dated August 30, 1983, between the Company and
Montco Investors Realty Company, relating to the
addition to the Company's offices in Pottstown,
Pennsylvania and granting the Company an option to
extend its lease for such facility for two additional
five-year periods.
-16-
<PAGE>
* 10.6 Lease, dated November 22, 1983, accompanying Workletter,
dated October 12, 1983, and letters (2) dated November
22, 1983 between the Company and 225 Fourth Company,
providing for the renovation and use of office space at
225 Park Avenue South, New York, New York.
* 10.7 STV Engineers, Inc. Employee Stock Ownership Plan, dated
January 7, 1982, and STV Engineers Employee Stock
Ownership Plant Trust Agreement, dated January 7, 1982,
and Amendment No. 1 thereto, dated May 14, 1982.
* 10.8 STV Revised Pension Plan.
* 10.9 STV, Inc. Money Purchase Pension Plan.
10.10 Officers' and Directors' Liability Policy.
*** 10.11 Employment Agreement of Richard L. Holland
**** 10.12 Stipulation of Amendment to Employee Stock Ownership
Plan effective October 1, 1984.
*** 10.13 Loan Agreement, dated February 28, 1986, between the
Company and First Pennsylvania Bank, N.A., relating to
the Company's $13,000,000 line of credit.
*** 10.14 Amendment, dated November 26, 1986, to the Loan
Agreement between the company and First Pennsylvania
Bank, N.A., increasing the limit of standby letters of
credit in the Agreement to $3,500,000.
*** 10.15 STV Engineers, Inc. 1985 Stock Option Plan.
*** 10.16 Lease, dated January 27, 1986, and Amendments thereto,
between Company and 225 Fourth Company providing for the
use of office space at 233 Park Avenue, New York, New
York.
*** 10.17 Amendment, dated May 28, 1987, between the Company and
First Pennsylvania Bank, N.A., decreasing the interest
rate for short term borrowings and the creation of a
$1,500,000 term loan.
*** 10.18 Amendment, dated November 12, 1987, increasing the line
of credit to $17,000,000.
*** 10.19 Employment Agreement of Whitney A. Sanders, II.
-17-
<PAGE>
*** 10.20 Employment Agreement of Dominick M. Servedio.
*** 10.21 Employment Agreement of Michael Haratunian.
***** 10.22 Amendment, dated June 1, 1990 between the Company and
First Pennsylvania Bank, NA increasing the interest rate
for short term borrowings.
****** 10.23 Extension of Employment Agreement of Whitney A. Sanders,
II.
****** 10.24 Extension of Employment Agreement of Dominick M.
Servedio.
****** 10.25 Extension of Employment Agreement of Michael Haratunian.
****** 10.26 Amendment dated September 30, 1991, between the company
and CoreStates Bank, N.A., decreasing the maximum amount
of the line of credit and increasing the charge for
issuing letters of credit.
******* 10.27 Lease extension dated March 13, 1992 between the Company
and 225 Fourth Company relating to an extension of seven
years, four months for use of office space at 225 Park
Avenue South, New York, New York.
******* 10.28 Agreement effective January 1, 1992 relating to ACEC
medical and life insurance.
******* 10.29 Agreement dated August 29, 1991 relating to U. S.
Healthcare medical insurance.
******** 10.30 Minutes from October 28, 1993 Board of Directors meeting
extending the employment agreements of M. Haratunian, D.
Servedio and W. A. Sanders for three months ending
December 31, 1993.
********* 10.31 Employment Agreement of Dominick M. Servedio.
********* 10.32 Employment Agreement of Michael Haratunian.
10.33 Amendment to the STV Group Incorporated Employee Stock
Ownership Plan
11 Statement Re: Computation of Per Share Earnings.
13.1 "Common Stock Market Prices" from Company's Annual
Report to Shareholders.
-18-
<PAGE>
13.2 "Financial Highlights for the Fiscal Year Ended
September 30," 1991 through 1995 from Company's Annual
Report to Shareholders.
21.1 Subsidiaries of the Company from the Company's Annual
Report to Shareholders.
____________________
* Incorporated by reference from the Annual Report and Form 10-K for
the year ended September 30, 1984.
** Incorporated by reference from Registration Statement No. 2-88904.
*** Incorporated by reference from Form 10-K and the Annual Report for
the year ended September 30, 1987.
**** Incorporated by reference from Form 10-K and the Annual Report for
the year ended September 30, 1989.
***** Incorporated by reference from Form 10-K and the Annual Report for
the year ended September 30, 1990.
****** Incorporated by reference from Form 10-K and the Annual Report for
the year ended September 30, 1991.
******* Incorporated by reference from Form 10-K and the Annual Report for
the year ended September 30, 1992.
******** Incorporated by reference from Form 10-K and the Annual Report for
the year ended September 30, 1993.
********* Incorporated by reference from Form 10-K and the Annual Report for
the year ended September 30, 1994.
-19-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) 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: December 29, 1995 STV GROUP, INCORPORATED
-------------------------
(Registrant)
By: /s/ Michael Haratunian
-------------------------
MICHAEL HARATUNIAN,
Chairman of the Board, Chief
Executive Officer and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE CAPACITY DATE
/s/ Michael Haratunian December 29, 1995
- ------------------------------- Chairman of the Board,
MICHAEL HARATUNIAN Chief Executive Officer
and Director (Principal
Executive Officer)
/s/ Dominick M. Servedio December 29, 1995
- ------------------------------- President, Chief
DOMINICK M. SERVEDIO Operating Officer and
Director
/s/ Peter W. Knipe December 29, 1995
- ------------------------------- Secretary/Treasurer
PETER W. KNIPE (Principal Accounting
and Financial Officer)
/s/ Richard L. Holland
- ------------------------------- Director December 29, 1995
RICHARD L. HOLLAND
/s/ Harry Prystowsky
- ------------------------------- Director December 29, 1995
HARRY PRYSTOWSKY
/s/ Joseph H. Santarlasci, Jr.
- ------------------------------- Director December 29, 1995
JOSEPH H. SANTARLASCI, JR.
/s/ Maurice L. Meier
- ------------------------------- Director December 29, 1995
MAURICE L. MEIER
/s/ William J. Doyle
- ------------------------------- Director December 29, 1995
WILLIAM J. DOYLE
<PAGE>
FINANCIAL STATEMENTS
Index
Report of Independent Auditors 22
Consolidated Balance Sheets 23
Consolidated Statements of Stockholders' Equity 24
Consolidated Statements of Cash Flows 25
Notes to Consolidated Financial Statements 26
-21-
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Stockholders and Board of Directors
STV Group, Incorporated
We have audited the accompanying consolidated balance sheets of STV Group,
Incorporated and Subsidiaries as of September 30, 1995 and 1994, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended September 30, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of STV Group,
Incorporated and Subsidiaries as of September 30, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended September 30, 1995, in conformity with generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP
Reading, Pennsylvania
November 17, 1995
-22-
<PAGE>
CONSOLIDATED BALANCE SHEETS
STV Group and Subsidiaries.
<TABLE>
<CAPTION>
September 30
1995 1994
<S> <C> <C>
Assets
Current Assets:
Cash $ 668,000 $ 640,000
Accounts receivable 21,758,000 24,413,000
Costs and estimated profits of uncompleted
contracts in excess of related billings 12,976,000 13,045,000
Deferred tax benefit 344,000 309,000
Income taxes recoverable 486,000 286,000
Prepaid expenses and other current assets 2,059,000 1,434,000
----------- -----------
Total Current Assets 38,291,000 40,127,000
Property and equipment, net 1,883,000 2,092,000
Deferred tax benefit 847,000 717,000
Deposits -- 500,000
Other assets 605,000 524,000
----------- -----------
Total Assets $41,626,000 $43,960,000
Liabilities and Stockholders' Equity
Current Liabilities:
Note payable $13,251,000 $13,617,000
Current maturity of long-term debt 1,340,000 1,152,000
Accounts payable 5,254,000 7,600,000
Billings on uncompleted contracts in
excess of related costs and estimated profits 3,344,000 3,800,000
Accrued payroll and related expenses 5,217,000 5,321,000
Accrued expenses 1,315,000 1,453,000
----------- -----------
Total Current Liabilities 29,721,000 32,943,000
Long-Term Debt 2,021,000 1,939,000
Other liabilities 12,000 --
----------- -----------
Total Liabilities 31,754,000 34,882,000
Commitments and contingencies (See Note 8)
Stockholders' Equity:
Preferred stock, authorized 2,000,000 shares,
no par, no shares issued or outstanding 0 0
Convertible preferred stock, cumulative,
par $1, authorized 2,000,000 shares,
issuable in series, $1.50 series,
no shares issued or outstanding 0 0
Common stock, par $1, authorized 6,000,000 shares,
issued 1,921,000 in 1995 and 1,843,000 in 1994 1,921,000 1,843,000
Capital in excess of par 3,003,000 2,681,000
Retained earnings 5,219,000 4,825,000
----------- -----------
10,143,000 9,349,000
Less: Cost of stock held in treasury--
100,000 common shares 271,000 271,000
----------- -----------
Total Stockholders' Equity 9,872,000 9,078,000
Total Liabilities and Stockholders' Equity $41,626,000 $43,960,000
</TABLE>
See notes to consolidated financial statements.
23
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
STV Group and Subsidiaries.
<TABLE>
<CAPTION>
For the Year Ended September 30
1995 1994 1993
<S> <C> <C> <C>
Total revenues $ 89,232,000 $ 89,465,000 $ 87,361,000
Subcontract and procurement costs 19,835,000 23,719,000 24,669,000
------------ ------------ ------------
Operating revenue $ 69,397,000 $ 65,746,000 $ 62,692,000
Costs and expenses:
Costs of services $ 61,942,000 $ 58,614,000 $ 55,173,000
General and administrative 4,952,000 4,657,000 5,197,000
Interest 1,554,000 1,445,000 1,428,000
Interest in joint venture -- 2,000 (89,000)
------------ ------------ ------------
$ 68,448,000 $ 64,718,000 $ 61,709,000
Income before income taxes $ 949,000 $ 1,028,000 $ 983,000
Income tax expense (555,000) (465,000) (454,000)
------------ ------------ ------------
Net income $ 394,000 $ 563,000 $ 529,000
Earnings per common share $ .22 $ .32 $ .33
</TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
STV Group and Subsidiaries.
<TABLE>
<CAPTION>
Common Stock Treasury Stock
Capital in
Number excess of Retained Number
of shares Amount par earnings of shares Amount
<S> <C> <C> <C> <C> <C> <C>
Balance
September 30, 1992 1,725,325 $1,725,000 $2,299,000 $3,733,000 99,726 $ 271,000
Net income for the year 529,000
Issuance of stock 117,647 118,000 382,000
Balance
September 30, 1993 1,842,972 $1,843,000 $2,681,000 $4,262,000 99,726 $ 271,000
Net income for the year 563,000
Balance
September 30, 1994 1,842,972 $1,843,000 $2,681,000 $4,825,000 99,726 $ 271,000
Net income for the year 394,000
Issuance of stock 78,000 78,000 322,000
Balance
September 30, 1995 1,920,972 $1,921,000 $3,003,000 $5,219,000 99,726 $ 271,000
</TABLE>
See notes to consolidated financial statements.
24
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
STV Group and Subsidiaries.
<TABLE>
<CAPTION>
For the Year Ended September 30
1995 1994 1993
<S> <C> <C> <C>
Operating Activities
Net income $ 394,000 $ 563,000 $ 529,000
Adjustments to reconcile net income to
net cash provided by (used in) operating activities
Depreciation 1,015,000 836,000 772,000
Deferred income taxes (165,000) (225,000) (60,000)
Stock contribution to Employee
Stock Ownership Program (ESOP) 400,000 -- 500,000
Interest in Joint Venture -- 2,000 (89,000)
Changes in operating assets and
liabilities
Accounts receivable 2,655,000 (3,254,000) (995,000)
Costs and estimated profits of
uncompleted contracts in excess
of related billings and other current assets (1,000) (149,000) (1,385,000)
Accounts payable and other current liabilities (2,533,000) 1,523,000 2,613,000
Billings on uncompleted contracts in excess
of related costs and estimated profits (456,000) 390,000 191,000
Current income taxes (200,000) 130,000 266,000
------------ ------------ ------------
Net cash provided by (used in)
operating activities $ 1,109,000 $ (184,000) $ 2,342,000
Investing Activities
Purchase of property and equipment $ (727,000) $ (827,000) $ (677,000)
Purchase of software (224,000) (46,000) (65,000)
Increase in deposits -- -- (500,000)
Decrease (increase) in other assets 9,000 (23,000) 25,000
------------ ------------ ------------
Net cash used in investing
activities $ (942,000) $ (896,000) $ (1,217,000)
Financing Activities
Proceeds from line of credit and
long term borrowings $ 84,412,000 $ 79,889,000 $ 58,593,000
Principal payments on line of credit and
long term borrowings (84,551,000) (78,987,000) (58,996,000)
------------ ------------ ------------
Net cash (used in) provided by
financing activities $ (139,000) $ 902,000 $ (403,000)
Increase (decrease) in cash 28,000 (178,000) 722,000
Cash at beginning of year 640,000 818,000 96,000
Cash at end of year $ 668,000 $ 640,000 $ 818,000
</TABLE>
See notes to consolidated financial statements.
25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
STV Group and Subsidiaries
1. Significant Accounting Policies
Basis of Presentation
The Company and its subsidiaries consider themselves in a single line of
business: consulting engineering, architectural, surveying and related services.
Certain amounts in the 1994 financial statements have been reclassified to
conform to their 1995 presentation.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, its
subsidiaries, and the 50% interest in an architectural joint venture. All
significant intercompany transactions and balances have been eliminated.
Revenue Recognition
Contract revenue is determined on the percentage-of-completion method based upon
incurred costs. The asset, "Cost and estimated profits of uncompleted contracts
in excess of related billings," represents revenues recognized in excess of
amounts billed. The liability, "Billings on uncompleted contracts in excess of
related costs and estimated profits," represents billings in excess of revenues
recognized. Significant changes in contract terms affecting the results of
operations are recorded and recognized in the period in which the revisions are
determined.
Depreciation
Depreciation is primarily on the straight-line method over the estimated useful
lives of the assets. Depreciation of assets recorded under capital leases is
included in depreciation expense. For income tax purposes, accelerated
depreciation methods are used by certain subsidiaries and deferred income taxes
are provided, when applicable.
2. Accounting Changes
Effective October 1, 1994, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 112, "Employers' Accounting for Postemployment Benefits,"
which requires accrual accounting for nonaccumulating postemployment benefits,
such as the Company's disability benefits, instead of recognizing an expense for
those benefits when paid. This accounting change had no material effect on net
income or net worth.
Effective October 1, 1993, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes," which requires the
liability method of accounting. This accounting change had no material effect on
net income or net worth.
Effective October 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 106, "Em-
26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
STV Group and Subsidiaries
ployers' Accounting for Postretirement Benefits Other Than Pensions." The new
standard requires the cost of providing postretirement health care be recognized
over the employment period on a prospective basis as a part of the future annual
benefit cost as opposed to when the benefits are paid. The effect of adopting
the new rules increased 1994 net periodic postretirement benefit cost
approximately $300,000 to a total cost of $381,000 and decreased net income by
approximately $151,000, or $.09 per share, which included amortization of the
transition obligation as of October 1, 1993, of $2.5 million over an elected
20-year period. Postretirement benefit cost of $98,000, decreased net income by
$53,000 for fiscal 1993 and was recorded on the basis of benefits paid.
3. Costs and Estimated Profits of Uncompleted Contracts in Excess of Related
Billings
Costs and estimated profits of uncompleted contracts at September 30, 1995 and
1994, respectively, are as follows:
1995 1994
Costs and estimated earnings on
uncompleted contracts $294,418,000 $273,210,000
Less billings to date 284,786,000 263,965,000
------------ ------------
$ 9,632,000 $ 9,245,000
Costs and estimated profits of uncompleted contracts are included in the
accompanying balance sheet under the following captions:
1995 1994
Costs and estimated profits of
uncompleted contracts
in excess of related billings $12,976,000 $13,045,000
Billings on uncompleted
contracts in excess of related
costs and estimated profits 3,344,000 3,800,000
----------- -----------
$9,632,000 $9,245,000
Included in accounts receivable are retainages related to uncompleted contracts
in the amount of $3,245,000 in 1995 and $3,492,000 in 1994. The collection of
retainages generally coincides with final project acceptance.
4. Property and Equipment
Property and equipment, at cost, are as follows:
1995 1994
Land $ 54,000 $ 54,000
Equipment 5,616,000 4,687,000
Leased equipment 1,227,000 1,536,000
Furniture and
fixtures 2,334,000 2,273,000
Leased furniture
and fixtures 271,000 271,000
Leasehold
improvements 2,566,000 2,553,000
----------- -----------
$12,068,000 $11,374,000
Less: Accumulated
depreciation and
amortization 10,185,000 9,282,000
----------- -----------
$ 1,883,000 $ 2,092,000
27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
STV Group and Subsidiaries
5. Note Payable
The note payable on demand with the Company's bank is with interest at 1-1/2%
above the prime rate and is secured by substantially all assets. The bank also
provides letters of credit which incur a charge of 2-1/2% of the face value.
Currently, $1,895,000 letters of credit are outstanding. The face value of the
letters of credit and note payable cannot exceed a maximum of $16,500,000 based
on the accounts receivable and contracts in progress.
An agreement with this bank contains restrictive covenants regarding additional
debt and stockholders' equity. The restrictions include maintaining a minimum
tangible net worth, a maximum total debt to tangible net worth ratio, and a
minimum working capital amount.
6. Income Taxes
Effective October 1, 1993, the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes" (see Note 2 - Accounting Changes).
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities as of September 30, 1995, are
as follows:
Deferred tax assets:
Vacation accruals $ 580,000
Deferred compensation 606,000
Litigation 282,000
State income taxes 60,000
Postemployment benefits 27,000
Postretirement medical benefits 264,000
----------
Total deferred tax assets 1,819,000
Deferred tax liabilities:
Retainage 158,000
Accrual to cash adjustment 470,000
----------
Total deferred tax liabilities 628,000
Net deferred tax assets $1,191,000
Significant components of the provision (benefit) for income taxes are as
follows:
Liability Method Deferred Method
1995 1994 1993
Current:
Federal $ 520,000 $ 600,000 $ 434,000
State 200,000 90,000 80,000
--------- --------- ---------
Total current $ 720,000 $ 690,000 $ 514,000
Deferred:
Federal $(100,000) $(172,000) $ (56,000)
State (65,000) (53,000) (4,000)
--------- --------- ---------
Total deferred $(165,000) $(225,000) $ (60,000)
Income tax
expense $ 555,000 $ 465,000 $ 454,000
28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
STV Group and Subsidiaries
The components of the (benefit) provision for deferred income taxes for the year
ended September 30, 1993 is as follows:
1993
Depreciation $ 9,000
Vacation accruals
and deferred
compensation (34,000)
Litigation (235,000)
Rent expense --
Other 200,000
--------
$(60,000)
A reconciliation of federal income taxes at the statutory rate to the Company's
income tax provision follows:
1995 1994 1993
Federal income
tax rate 34.0% 34.0% 34.0%
Non-deductible
expenses and other 14.6 7.0 6.9
State taxes, net of
federal tax effect 9.4 4.0 5.1
---- ---- ----
58.0% 45.0% 46.0%
The Company made income tax payments of $1,014,000, $881,000, and $951,000 in
1995, 1994, and 1993, respectively. The Company received income tax refunds of
$92,000 in 1995, $225,000 in 1994, and $702,000 in 1993.
7. Amounts per Common Share
Earnings per common share is based on the weighted-average number of shares
outstanding during the periods presented after giving effect to the potential
dilutive effect, if any, of the exercise of stock options. Earnings per common
share are based upon 1,832,000 shares in 1995, 1,754,000 shares in 1994, and
1,626,000 shares in 1993.
8. Commitments and Contingencies
For policy years beginning March 4, 1993, the Company's professional liability
insurance arrangement provides for an annual aggregate $5,000,000 of coverage
with a $250,000 deductible per occurrence. For the policy year beginning March
4, 1992, the Company's professional liability insurance arrangement provides for
an aggregate $5,000,000 of coverage. There was a $500,000 deductible and a
requirement to indemnify the insurer for an additional aggregate $1,000,000. The
Company had a similar arrangement for professional liability coverage for the
period October 1, 1986, to March 3, 1992, providing an aggregate $5,000,000 of
professional liability coverage. The Company has recognized the indemnity
obligation by charges of $4,000,000 to operations in prior years and the posting
of a $1,500,000 letter of credit. In addition to the professional liability
coverage, the Company has general liability insurance of $10,000,000 per
occurrence and in the aggregate.
29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
STV Group and Subsidiaries
During 1992, the Company and its insurers settled a personal injury lawsuit for
$5,400,000, of which $2,700,000 was paid by the Company's professional liability
insurer from the funded indemnity and $2,700,000 by the general liability
insurer. There remains a declaratory judgement action pending as to whether
insurance coverage was to be provided under the previous general liability
policy or professional liability policy then in effect. In this proceeding, the
court has required that the limits of the Company's insured coverage be reserved
to pay this claim if the insurer is found liable. The Company and its
professional liability insurer believe that this matter should be covered under
its general liability policy in which case the $2,700,000 would be repaid to the
professional liability insurer to replenish the indemnity.
In addition, in 1992 the Company's former professional liability insurer was
found liable for approximately $4,000,000 due to a previous arbitration
proceeding allegedly relating to an asset acquisition. The judgement was
reversed on appeal in 1994. If the Company's professional liability insurer is
found ultimately liable under both of these actions, the Company may be required
to indemnify the professional liability insurer to the extent of the policy
limit of $5,000,000 as described above. Such payments would constitute a charge
to operations in the year the determination is made. The Company and the
Company's professional liability insurer continue to deny liability and intend
to vigorously pursue defenses available to them.
The Company is also involved in various other litigation arising out of the
ordinary course of business, which may require the payment of additional
amounts. The Company's management believes that the final resolution of the
above legal matters will not have a material adverse effect on the Company's
financial statements.
The Company has noncancellable lease agreements for the use of office space and
equipment. These agreements expire on varying dates and in some instances
contain renewal options. In addition to the base rental costs, occupancy lease
agreements generally provide for rent escalations resulting from increased
assessments for real estate taxes and other charges. Future minimum lease
payments under noncancellable leases (excluding automobile leases) with
remaining terms of more than one year are due as follows:
Capital Leases Operating Leases
1996 $ 675,000 $ 2,236,000
1997 $ 555,000 $ 1,775,000
1998 $ 228,000 $ 1,605,000
1999 $ $ 1,574,000
2000 $ $ 1,093,000
Thereafter $ $ 5,968,000
Total minimum
lease payments $ 1,458,000 $14,251,000
Less amount
representing interest $ 153,000
Present value of
net minimum
lease payments $ 1,305,000
30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
STV Group and Subsidiaries
Rental expense under operating leases amounted to $2,705,000, $2,713,000, and
$2,633,000 in 1995, 1994, and 1993, respectively.
9. Stock Plans
On October 1, 1981, the Company initiated an Employee Stock Ownership Plan
(ESOP) which covers substantially all of its employees. Contributions to the
plan are based on a percentage of eligible salaries. The total retirement
expense for the years 1995, 1994, and 1993 was $989,000, $918,000, and $877,000,
respectively. The liability is funded through either the issuance of shares of
Company stock (at fair market value on date of issuance) or a cash payment for
future stock purchases. The Company will fund the 1995 contribution with a cash
payment of approximately $512,000 by December 31, 1995. At September 30, 1995,
1,168,000 shares of Company stock are held by the ESOP and are included in the
earnings per share computation.
The Company adopted the 1985 Stock Option Plan which reserves 300,000 shares of
its common stock for grants of options to officers and key employees. The plan
requires that option prices be at least equal to the fair market value of the
common stock at the date of grant. In fiscal 1995, 80,000 options were granted,
5,000 options were terminated, 45,000 options expired, and no options were
exercised. Options to purchase 190,000 shares at $4.12 to $5.12 per share have
been granted.
On October 20, 1995, certain Company officers borrowed $125,000 from the Company
to purchase 25,000 shares of common stock from an outside director of the
Company. The five-year term loan, secured by a stock pledge agreement, is
payable at the term with interest at the Company bank borrowing rate currently
at 1-1/2 percent above prime rate.
10. Postretirement Benefit Plan
The Company sponsors a defined benefit health care plan that provides
postretirement medical benefits to all current and retired officers and their
spouses upon attaining age 65, or age 55 with 10 years of service. The plan is
contributory, with retiree contributions adjusted annually, and contains other
cost-sharing features such as deductibles and coinsurance. The accounting for
the plan anticipates future cost-sharing changes to the written plan that are
consistent with the Company's expressed intent to increase the retiree
contribution rate annually for the expected general inflation rate for that
year.
31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
STV Group and Subsidiaries
In fiscal 1994, the Company adopted Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions"
(see Note 2 -- Accounting Changes).
The following table presents the plan's status reconciled with amounts
recognized in the Company's balance sheets:
1995 1994
Accumulated postretirement
benefit obligation:
Retirees $ (728,000) $ (706,000)
Fully eligible active
plan participants (1,071,000) (1,046,000)
Other active
plan participants (790,000) (874,000)
----------- -----------
Accumulated postretirement
benefit obligation $(2,589,000) $(2,626,000)
Unrecognized
net gain (250,000) (18,000)
Unrecognized
transition obligation 2,220,000 2,344,000
----------- -----------
Accrued postretirement
benefit cost $ (619,000) $ (300,000)
Net periodic postretirement benefit costs include the following components:
1995 1994 1993
Service cost $ 67,000 $ 70,000
Interest cost 185,000 187,000
Amortization of transition
obligation over 20 years 124,000 124,000
------- -------
Net periodic
postretirement benefit cost $376,000 $381,000 $ 98,000
The weighted-average annual assumed rate of increase in the per capita cost of
covered benefits (i.e., health care cost trend rate) is 12 percent for 1995
(12.5 percent in 1994, 13 percent in 1993) and is assumed to decrease gradually
to 6 percent in 2008 and remain at that level thereafter. The health care cost
trend rate assumption has a significant effect on the amounts reported. For
example, increasing the assumed health care cost trend rates by one percentage
point in each year would increase the accumulated post retirement benefit
obligation as of September 30, 1995, 1994 and 1993 by $330,000, $334,000 and
$298,000, respectively, and the aggregate of the service and interest cost
components of net periodic postretirement benefit cost for 1995 and 1994 by
$34,000 and $36,000, respectively.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.75 percent at September 30, 1995 and
1994.
11. Major Customers
The percentage of total revenues derived from contracts with the United States
government for fiscal years 1995, 1994 and 1993 were 19 percent, 22 percent and
23 percent, respectively.
32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
STV Group and Subsidiaries
12. Long-Term Debt
Long-term debt consists of the following:
1995 1994
Capital leases with various maturities,
the latest to September 1998, rates
ranging from 8% to 11%, and monthly
installments ranging from $974 to
$15,897 $1,305,000 $1,071,000
Deferred compensation liability payable
in fixed monthly installments of $12,000
through September 2006 with interest
imputed at 16% 715,000 737,000
Executive deferred compensation
liability for certain executives with
annual interest at 1% above prime rate
as of November 1 payable upon the
termination of employment or approval of
the Board of Directors 499,000 445,000
Deferred compensation liability payable
in fixed monthly installments of $6,000
through September 1996 with interest
imputed at 20% 65,000 114,000
Supplemental executive retirement
agreements for two current executives
payable in monthly installments upon
retirement with interest imputed at 7%
(1) 193,000 96,000
Other 584,000 628,000
---------- ----------
3,361,000 3,091,000
Less: Current portion 1,340,000 1,152,000
---------- ----------
$2,021,000 $1,939,000
(1) These agreements for two current executives provide for future cash payments
of $73,000 and $136,000 annually, based on salary at retirement commencing
September 2003 and September 2005, respectively. If maximum Company performance
goals are achieved, these amounts would be increased 100 percent starting in
September 2003, or at a prorated rate based on the levels of performance
achieved.
Interest paid during 1995, 1994, and 1993 amounted to $1,517,000, $1,423,000,
and $1,368,000, respectively.
The company incurred capital lease obligations of $804,000 in 1995, $613,000 in
1994, and $554,000 in 1993 to acquire equipment.
Annual maturities of long-term debt are as follows:
Year ending September 30
1996 $1,340,000
1997 $ 540,000
1998 $ 254,000
1999 $ 359,000
2000 $ 49,000
Thereafter $ 819,000
33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
STV Group and Subsidiaries
13. Quarterly Results (unaudited)
(All dollar amounts omit 000 except per share data.)
Quarter Year
First* Second* Third* Fourth
Revenue from services:
1995 $22,817 $21,092 $23,187 $22,136 $89,232
1994 $21,808 $20,687 $23,439 $23,531 $89,465
Operating revenue:
1995 $17,353 $17,519 $17,358 $17,167 $69,397
1994 $16,381 $15,928 $16,496 $16,941 $65,746
Gross profit:
1995 $ 1,885 $ 1,871 $ 1,835 $ 1,864 $ 7,455
1994 $ 1,777 $ 1,353 $ 1,643 $ 2,359 $ 7,132
Net income:
1995 $ 102 $ 95 $ 79 $ 118 $ 394
1994 $ 237 $ 144 $ 160 $ 22 $ 563
Earnings per share:
1995 $ .05 $ .05 $ .05 $ .07 $ .22
1994 $ .14 $ .08 $ .09 $ .01 $ .32
*Net income and earnings per share for the first three quarters of fiscal year
1995 have been restated from the amounts previously reported. The restatements
reflect a correction in the effective annual income tax rate which has been
applied to the respective fiscal year quarters. The effects of the restatements
were reductions to net income of $30,000, $29,000 and $24,000, or $.02, $.02 and
$.01 per share in the quarters ended December 31, 1994, March 30 and June 30,
1995, respectively.
34
<PAGE>
EXHIBITS
Index
Exhibit 10.10 - Officers' and Directors' Liability Policy
Exhibit 10.33 - Amendment to the STV Group Incorporated Employee Stock
Ownership Plan
Exhibit 11 - Statement Re: Computation of Per Share Earnings
Exhibit 13.1 - "Common Stock Market Prices" from Company's Annual
Report to Shareholders.
Exhibit 13.2 - "Financial Highlights for the Fiscal Year Ended
September 30," 1991 through 1995 from Company's Annual
Report to Shareholders.
Exhibit 21.1 - Subsidiaries of the Company from the Company's Annual
Report to Shareholders.
EXHIBIT 10.10
OFFICERS' AND DIRECTORS' LIABILITY POLICY
[LOGO - GRAPHIC OMITTED]
NATIONAL UNION
FIRE INSURANCE COMPANY
OF PITTSBURGH, PA.
A CAPITAL STOCK COMPANY
POLICY NUMBER:
444-97-15
RENEWAL OF:
442-93-73
ADMINISTRATIVE OFFICES:
70 PINE STREET, NEW YORK, N.Y. 10270-0150
DIRECTORS AND OFFICERS INSURANCE AND COMPANY REIMBURSEMENT POLICY
NOTICE: EXCEPT TO SUCH EXTENT AS MAY OTHERWISE BE PROVIDED HEREIN, THE
COVERAGE OF THIS POLICY IS LIMITED GENERALLY TO LIABILITY FOR ONLY THOSE
CLAIMS THAT ARE FIRST MADE AGAINST THE INSUREDS AND REPORTED TO THE INSURER
DURING THE POLICY PERIOD. PLEASE READ THE POLICY CAREFULLY AND DISCUSS THE
COVERAGE THEREUNDER WITH YOUR INSURANCE AGENT OR BROKER.
NOTICE: THE LIMIT OF LIABILITY AVAILABLE TO PAY JUDGMENTS OR SETTLEMENTS
SHALL BE REDUCED BY AMOUNTS INCURRED FOR LEGAL DEFENSE. AMOUNTS INCURRED
FOR LEGAL DEFENSE SHALL BE APPLIED AGAINST THE RETENTION AMOUNT.
NOTICE: THE INSURER DOES NOT ASSUME ANY DUTY TO DEFEND; HOWEVER, THE
INSURER MAY, AND IN CERTAIN CIRCUMSTANCES MUST, ADVANCE DEFENSE COSTS
PAYMENTS PRIOR TO THE FINAL DISPOSITION OF A CLAIM.
DECLARATIONS
ITEM 1. NAMED CORPORATION: STV GROUP, INC.
MAILING ADDRESS: 11 ROBINSON STREET POTTSTOWN, PA 19464
STATE OF INCORPORATION OF THE NAMED CORPORATION: Pennsylvania
ITEM 2. SUBSIDIARY COVERAGE: any past, present or future Subsidiary of the
Named Corporation
ITEM 3. POLICY PERIOD: From May 05, 1995 to May 05, 1996
(12:01 A.M. Standard Time at the address stated In Item 1)
ITEM 4. LIMIT OF LIABILITY: $6,000,000 aggregate for Coverages A and
B combined (including Defense
Costs)
ITEM 5. RETENTION:
Company Reimbursement and indemnifiable Loss: $125,000 for Loss
arising from claims
alleging the same
Wrongful Act or
related Wrongful
Acts.
ITEM 6. PREMIUM: $68,000
/s/ Ty Sagolow June 15, 1995
Authorized Representative
Vice President - National Union
Countersignature Countersigned
Date At
47352 (8/88)
<PAGE>
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.
DIRECTORS AND OFFICERS INSURANCE AND COMPANY REIMBURSEMENT POLICY
In consideration of the payment of the premium, and in reliance upon the
statements made to the Insurer by application forming a part hereof and its
attachments and the material incorporated therein, National Union Fire Insurance
Company of Pittsburgh, Pa. herein called the "Insurer", agrees as follows:
1. INSURING AGREEMENTS
COVERAGE A: DIRECTORS AND OFFICERS INSURANCE
This policy shall pay the Loss of each and every Director or Officer of the
Company arising from any claim or claims first made against the Directors
or Officers and reported to the Insurer during the Policy Period or the
Discovery Period (if applicable) for any alleged Wrongful Act in their
respective capacities as Directors or Officers of the Company, except for
and to the extent that the Company has indemnified the Directors or
Officers. The Insurer shall, in accordance with and subject to Clause 9,
advance to each and every Director and Officer the Defense Costs of such
claim or claims prior to their final disposition.
COVERAGE 8: COMPANY REIMBURSEMENT INSURANCE
This policy shall reimburse the Company for Loss arising from any claim or
claims which are first made against the Directors or Officers and reported
to the Insurer during the Policy Period or the Discovery Period (if
applicable) for any alleged Wrongful Act in their respective capacities as
Directors or Officers of the Company, but only when and to the extent that
the Company has indemnified the Directors or Officers for such Loss
pursuant to law, common or statutory, or contract, or the Charter or
By-laws of the Company duly effective under such law which determines and
defines such rights of indemnity.
2. DEFINITIONS
(a) The "Company" means the Named Corporation designated in Item 1 of the
Declarations and any Subsidiary thereof.
(b) "Defense Costs" means reasonable and necessary fees, costs and
expenses consented to by the Insurer (including premiums for any
appeal bond, attachment bond or similar bond, but without any
obligation to apply for or furnish any such bond) resulting solely
from the investigation, adjustment, defense and appeal of any claim
against the Insureds, but excluding salaries of Officers or employees
of the Company.
(c) "Insured(s)", or "Director(s) or Officer(s)", means any past, present
or future duly elected or appointed Directors or Officers of the
Company. Coverage will automatically apply to all new Directors or
Officers after the inception date of this policy.
(d) "Loss" means damages, judgments, settlements and Defense Costs;
however, Loss shall not include civil or criminal fines or penalties
imposed by law, punitive or exemplary damages, the multiplied portion
of multiplied damages, taxes, any amount for which the Insureds are
not financially liable or which are without legal recourse to the
Insureds, or matters which may be deemed uninsurable under the law
pursuant to which this policy shall be construed.
(e) "Policy Period" means the period of time from the inception date shown
in Item 3 of the Declarations to the earlier of the expiration date
shown in Item 3 of the Declarations or the effective date of
cancellation of this policy; however, to the extent that coverage
under this policy replaces coverage in other policies terminating at
noon standard time on the inception date of such coverage hereunder,
then such coverage as is provided by this policy shall not become
effective until such other coverage has terminated.
-1-
47353 (8/88)
<PAGE>
(f) "Subsidiary" means a corporation of which the Named Corporation owns
on or before the inception of the Policy Period more than 50% of the
issued and outstanding voting stock either directly or indirectly
through one or more of its Subsidiaries.
"Subsidiary" also means any corporation which becomes a Subsidiary
during the Policy Period but only upon the condition that within 90
days of its becoming a Subsidiary, the Named Corporation shall have
provided the Insurer with full particulars of the new Subsidiary and
agreed to any additional premium and/or amendment of the provisions of
this policy required by the Insurer relating to such new Subsidiary.
Further, coverage as shall be afforded to the new Subsidiary is
conditioned upon the Named Corporation paying when due any additional
premium required by the Insurer relating to such new Subsidiary. A
corporation becomes a Subsidiary when the Named Corporation owns more
than 50% of the issued and outstanding voting stock either directly or
indirectly through one or more of its Subsidiaries.
(g) "Wrongful Act" means any breach of duty, neglect, error, misstatement,
misleading statement, omission or act by the Directors or Officers of
the Company in their respective capacities as such, or any matter
claimed against them solely by reason of their status as Directors or
Officers of the Company.
3. EXTENSIONS
Subject otherwise to the terms hereof, this policy shall cover Loss arising
from any claims made against the estates, heirs, or legal representatives
of deceased Directors or Officers, and the legal representatives of
Directors or Officers in the event of their incompetency, insolvency or
bankruptcy, who were Directors or Officers at the time the Wrongful Acts
upon which such claims are based were committed.
4. EXCLUSIONS
The Insurer shall not be liable to make any payment for Loss in connection
with any claim or claims made against the Directors or Officers:
(a) arising out of, based upon or attributable to the gaining in fact of
any personal profit or advantage to which they were not legally
entitled;
(b) arising out of, based upon or attributable to the committing in fact
of any criminal or deliberate fraudulent act;
(c) arising out of, based upon or attributable to the payment to the
Insureds of any remuneration without the previous approval of the
stockholders of the Company, which payment without such previous
approval shall be held to have been illegal;
(d) arising out of, based upon or attributable to profits in fact made
from the purchase or sale by the Insureds of securities of the Company
within the meaning of Section 16(b) of the Securities Exchange Act of
1934 and amendments thereto or similar provisions of any state
statutory law;
(The Wrongful Act of any Director or Officer shall not be imputed to any
other Director or Officer for the purpose of determining the applicability
of the foregoing exclusions 4(a) through 4(d) )
(e) alleging, arising out of, based upon or attributable to any attempt,
whether successful or unsuccessful, by any person or entity to acquire
securities of the Company against the opposition of the Board of
Directors of the Company ('Board'), or any action, whether successful
or unsuccessful, by the Company or the Board to resist such attempts;
however, this exclusion shall not apply if, before taking any such
resistive action, the Company or the Board has obtained a written
opinion (1) from independent legal counsel that such resistive action
is a lawful exercise of the Board's business judgment and (2)
-2-
47353 (8/88)
<PAGE>
from an independent investment banking firm that the price of such
acquisition of securities is inadequate, and that any financial
transaction approved by the Board which is resistive of such
acquisition is fair to the Company and its shareholders;
(f) alleging, arising out of, based upon or attributable to any failure or
omission on the part of the Insureds or the Company to effect and
maintain insurance;
(g) alleging, arising out of, based upon or attributable to the facts
alleged, or to the same or related Wrongful Acts alleged or contained,
in any claim which has been reported, or in any circumstances of which
notice has been given, under any policy of which this policy is a
renewal or replacement or which it may succeed in time;
(h) alleging, arising out of, based upon or attributable to any pending or
prior litigation as of the inception date of this policy, or alleging
or derived from the same or essentially the same facts as alleged in
such pending or prior litigation;
(i) which are brought by any Insured or the Company; or which are brought
by any security holder of the Company, whether directly or
derivatively, unless such claim(s) is instigated and continued totally
independent of, and totally without the solicitation of, or assistance
of, or active participation of, or intervention of, any Insured or the
Company; provided, however, this exclusion shall not apply to wrongful
termination of employment claims brought by a former employee other
than a former employee who is or was a Director of the Company;
(j) alleging, arising out of, based upon, attributable to, or in any way
involving, directly or indirectly:
(1) the actual, alleged or threatened discharge, dispersal, release or
escape of pollutants, or
(2) any direction or request to test for, monitor, clean up, remove,
contain, treat, detoxify or neutralize pollutants,
including but not limited to claims alleging damage to the Company or
its shareholders.
Pollutants includes (but is not limited to) any solid, liquid, gaseous
or thermal irritant or contaminant, including smoke, vapor, soot,
fumes, acids, alkalis, chemicals and waste. Waste includes (but is not
limited to) materials to be recycled, reconditioned or reclaimed;
(k) alleging, arising out of, based upon or attributable to any act or
omission in their capacities as directors or officers of any other
entity other than the Company, or by reason of their status as a
director or officer of such other entity;
(1) for violation(s) of any of the responsibilities, obligations or duties
imposed upon fiduciaries by the Employee Retirement Income Security
Act of 1974 or amendments thereto or any similar provisions of state
statutory law or common law;
(m) for bodily injury, sickness, disease, death or emotional distress of
any person, or damage to or destruction of any tangible property,
including the loss of use thereof, or for injury from oral or written
publication of a libel or slander or of other defamatory or
disparaging material or of material that violates a person's right of
privacy;
(n) of any Subsidiary for any alleged Wrongful Act occurring at any time
when the Named Corporation did not own more than 50% of the issued and
outstanding voting stock of such Subsidiary either directly or
indirectly through one or more of its Subsidiaries.
-3-
47353 (8/88)
<PAGE>
5. LIMIT OF LIABILITY-(FOR ALL LOSS-INCLUDING DEFENSE COSTS)
The limit of liability stated in Item 4 of the Declarations is the limit of
the Insurer's liability for all Loss, under Coverage A and Coverage B
combined, arising out of all claims first made against the Insureds and
reported to the Insurer during the Policy Period and the Discovery Period
(if applicable); however, the limit of liability for the Discovery Period
shall be part of, and not in addition to, the limit of liability for the
Policy Period. Further, any claim which is made subsequent to the Policy
Period or Discovery Period (if applicable) which pursuant to Clause 8(b) or
8(c) is considered made during the Policy Period or Discovery Period shall
also be subject to the one aggregate limit of liability stated in Item 4 of
the Declarations.
Defense Costs are not payable by the Insurer in addition to the limit of
liability. Defense costs are part of Loss and as such are subject to the
limit of liability for Loss.
6. RETENTION-INDEMNIFIED OR INDEMNIFIABLE LOSS
The Insurer shall only be liable for the amount of Loss arising from a
claim which is in excess of the retention amount stated in Item 5 of the
Declarations, such retention amount to be borne by the Company and/or the
Insureds and shall remain uninsured, with regards to all Loss under
Coverage A or B for which the Company has indemnified or is permitted or
required to indemnify the Insured(s). A single retention amount shall apply
to Loss arising from all claims alleging the same Wrongful Act or related
Wrongful Acts.
7. COINSURANCE CLAUSE
The Insurer shall be liable to pay 95% of Loss excess of the retention
amount described in Clause 6 up to the Limit of Liability described in
Clause 5, it being a condition of this insurance that the remaining 5% of
each and every Loss shall be carried by the Company and the Insureds at
their own risk and be uninsured.
8. NOTICE/CLAIM REPORTING PROVISIONS
Notice hereunder shall be given in writing to National Union Fire Insurance
Company of Pittsburgh, Pa., Financial Services Claims Department, 70 Pine
Street, New York, N.Y. 10270-0150. If mailed, the date of mailing of such
notice shall constitute the date that such notice was given and proof of
mailing shall be sufficient proof of notice.
(a) The Company or the Insureds shall, as a condition precedent to the
obligations of the Insurer under this policy, give written notice to
the Insurer as soon as practicable during the Policy Period, or during
the Discovery Period (if applicable), of any claim made against the
Insureds.
(b) If during the Policy Period or during the Discovery Period (if
applicable) written notice of a claim has been given to the Insurer
pursuant to Clause 8(a) above, then any claim which is subsequently
made against the Insureds and reported to the Insurer alleging,
arising out of, based upon or attributable to the facts alleged in the
claim of which such notice has been given, or alleging any Wrongful
Act which is the same as or related to any Wrongful Act alleged in the
claim of which such notice has been given, shall be considered made at
the time such notice was given.
(c) If during the Policy Period or during the Discovery Period (if
applicable) the Company or the Insureds shall become aware of any
circumstances which may reasonably be expected to give rise to a claim
being made against the Insureds and shall give written notice to the
Insurer of the circumstances and the reasons for anticipating such a
claim, with full particulars as to dates and persons involved, then
any claim which is subsequently made against the Insureds and reported
to the Insurer alleging, arising out of, based upon or attributable to
such circumstances or alleging any Wrongful Act which is the same as
or
-4-
47353 (8/88)
<PAGE>
related to any Wrongful Act alleged or contained in such
circumstances, shall be considered made at the time such notice of
such circumstances was given.
9. DEFENSE COSTS, SETTLEMENTS, JUDGMENTS (INCLUDING THE ADVANCEMENT OF DEFENSE
COSTS)
Under Coverage A, except as hereinafter stated, the Insurer shall advance
Defense Costs prior to the final disposition of the claim, unless such
Defense Costs have been advanced by the Company. Such advance payments by
the Insurer shall be repaid to the Insurer by the Insureds, severally
according to their respective interests, in the event and to the extent
that the Insureds shall not be entitled under the terms and conditions of
this policy to payment of such Loss. Notwithstanding the foregoing, if the
Company is required or permitted to advance such Defense Costs in
accordance with the fullest application of law, common or statutory, or
contract, or the Charter or By-laws of the Company, then the Insurer
assumes no duty to advance Defense Costs prior to the final disposition of
the claim and the retention amount as stated in item 5 of the Declarations
shall apply to such Loss. In such case, however, the Insurer may, in its
absolute discretion, advance all or any part of such Defense Costs prior to
the final disposition of the claim and in such event the advance payments
by the Insurer shall be repaid to the Insurer by the Company or the
Insureds, severally according to their respective interests, in the event
and to the extent that the Company or the Insureds shall not be entitled
under the terms and conditions of this policy to payment of such Loss.
Under Coverage B, the Insurer assumes no duty to reimburse Defense Costs
prior to the final disposition of the claim. The Insurer may, in its
absolute discretion, reimburse all or any part of such Defense Costs prior
to the final disposition of the claim. In such event, however, such advance
payments by the Insurer shall be repaid to the Insurer by the Company or
the Insureds, severally according to their respective interests, in the
event and to the extent that the Company or the Insureds shall not be
entitled under the terms and conditions of this policy to payment of such
Loss.
The Insurer does not, however, under this policy, assume any duty to
defend. The Insureds shall not admit or assume any liability, enter into
any settlement agreement, stipulate to any judgment or incur any Defense
Costs without the prior written consent of the Insurer. Only those
settlements, stipulated judgments and Defense Costs which have been
consented to by the Insurer shall be recoverable as Loss under the terms of
this policy. The Insurer's consent shall not be unreasonably withheld,
provided that the Insurer shall be entitled to effectively associate in the
defense and the negotiation of any settlement of any claim in order to
reach a decision as to reasonableness.
The Insurer shall have the right to effectively associate with the Company
and the Insureds in the defense and settlement of any claim that appears
reasonably likely to involve the Insurer, including but not limited to
effectively associating in the negotiation of a settlement. The Insureds
shall defend and contest any such claim. The Company and the Insureds shall
give the Insurer full cooperation and such information as it may reasonably
require.
With respect to the Defense Costs and any joint settlement of any claim
made against the Company and the Insureds, such Defense Costs and joint
settlement having been consented to by the Insurer, the Company and the
Insureds and the Insurer agree to use their best efforts to determine a
fair and proper allocation of the amounts as between the Company and the
Insureds and the Insurer.
10. DISCOVERY CLAUSE
If the Insurer shall cancel or refuse to renew this policy the Named
Corporation shall have the right, upon payment of an additional premium of
75% of the full annual premium, to a period of one year following the
effective date of such cancellation or nonrenewal (herein referred to as
the Discovery Period) in which to give written notice to the Insurer of
claims first made against the Insureds during said one year period for any
Wrongful Act occurring prior to the end of the
-5-
47353 (8/88)
<PAGE>
Policy Period and otherwise covered by this policy. As used herein, "full
annual premium" means the premium level in effect immediately prior to the
end of the Policy Period.
The rights contained in this clause shall terminate, however, unless
written notice of such election together with the additional premium due is
received by the Insurer within ten (10) days of the effective date of
cancellation or non-renewal. The additional premium for the Discovery
Period shall be fully earned at the inception of the Discovery Period. The
Discovery Period is not cancellable. This clause and the rights contained
herein shall not apply to any cancellation resulting from non-payment of
premium.
The offer by the Insurer of renewal terms, conditions, limits of liability
and/or premiums different from those of the expiring policy shall not
constitute refusal to renew.
11. CANCELLATION CLAUSE
This policy may be cancelled by the Named Corporation at any time only by
mailing written prior notice to the Insurer or by surrender of this policy
to the Insurer or its authorized agent. This policy may also be cancelled
by or on behalf of the Insurer by delivering to the Named Corporation or by
mailing to the Named Corporation, by registered, certified, or other first
class mail, at the Named Corporation's address as shown in Item 1 of the
Declarations, written notice stating when, not less than thirty (30) days
thereafter, the cancellation shall be effective. The mailing of such notice
as aforesaid shall be sufficient proof of notice. The Policy Period
terminates at the date and hour specified in such notice, or at the date
and time of surrender.
If this policy shall be cancelled by the Named Corporation, the Insurer
shall retain the customary short rate proportion of the premium hereon.
If this policy shall be cancelled by the Insurer, the Insurer shall retain
the pro rata proportion of the premium hereon.
Payment or tender of any unearned premium by the Insurer shall not be a
condition precedent to the effectiveness of cancellation but such payment
shall be made as soon as practicable.
If the period of limitation relating to the giving of notice is prohibited
or made void by any law controlling the construction thereof, such period
shall be deemed to be amended so as to be equal to the minimum period of
limitation permitted by such law.
12. TERMINATION OF COVERAGE FOR SUBSEQUENT WRONGFUL ACTS AFTER CERTAIN
TRANSACTIONS
If during the Policy Period:
1. the Named Corporation shall consolidate with or merge into, or
sell all or substantially all of its assets to, any other person
or entity or group or persons and/or entities acting in concert;
or
2. any person or entity or group of persons and/or entities acting
in concert shall acquire an amount of the outstanding securities
representing more than 50% of the voting power for the election
of Directors of the Named Corporation, or acquires the voting
rights of such an amount of such securities;
(either of the above events herein referred to as the
"Transaction")
then, there shall be no coverage afforded by any provision of this policy
(including but not limited to Clause 10 Discovery Clause) for any alleged
Wrongful Act occurring after the effective date of Transaction.
The Named Corporation shall give the Insurer written notice of the
Transaction as soon as practicable, but not later than 30 days after the
effective date of the Transaction.
-6-
47353 (8/88)
<PAGE>
13. SUBROGATION
In the event of any payment under this policy, the Insurer shall be
subrogated to the extent of such payment to all the Company's and the
Insureds' rights of recovery therefor, and the Company and the Insureds
shall execute all papers required and shall do everything that may be
necessary to secure such rights including the execution of such documents
necessary to enable the Insurer effectively to bring suit in the name of
the Company and/or the Insureds.
14. OTHER INSURANCE
Such insurance as is provided by this policy shall apply only as excess
over any other valid and collectible insurance.
15. NOTICE AND AUTHORITY
It is agreed that the Named Corporation shall act on behalf of its
Subsidiaries and all Insureds with respect to the giving and receiving of
notice of claim or cancellation, the payment of premiums and the receiving
of any return premiums that may become due under this policy, the receipt
and acceptance of any endorsements issued to form a part of this policy and
the exercising or declining to exercise any right to a Discovery Period.
16. ASSIGNMENT
This policy and any and all rights hereunder are not assignable without the
written consent of the Insurer.
17. ACTION AGAINST INSURER
No action shall lie against the Insurer unless, as a condition precedent
thereto, there shall have been full compliance with all of the terms of
this policy, nor until the amount of the Insureds' obligation to pay shall
have been finally determined either by judgment against the Insureds after
actual trial or by written agreement of the Insureds, the claimant and the
Insurer.
Any person or Organization or the legal representative thereof who has
secured such judgment or written agreement shall thereafter be entitled to
recover under this policy to the extent of the insurance afforded by this
policy. No person or Organization shall have any right under this policy to
join the Insurer as a party to any action against the Insureds or the
Company to determine the Insureds' liability, nor shall the Insurer be
impleaded by the Insureds or the Company or their legal representatives.
Bankruptcy or insolvency of the Company or the Insureds or of their estates
shall not relieve the Insurer of any of its obligations hereunder.
IN WITNESS WHEREOF, the Insurer has caused this policy to be signed by its
President and a Secretary and countersigned on the Declarations Page by a
duly authorized representative of the Insurer.
/s/ Elizabeth M. Tuck /s/ William D. Smith
SECRETARY PRESIDENT
-7-
47353 (8/88)
<PAGE>
ENDORSEMENT # 1
This endorsement, effective 12:01 AM, May 05, 1995 forms a part of
policy number 444-97-15
issued to STV GROUP, INC.
by National Union Fire Insurance Company of Pittsburgh, Pa.
NUCLEAR ENERGY LIABILITY EXCLUSION ENDORSEMENT
(BROAD FORM)
In consideration of the premium charged, it is hereby understood and agreed that
the Insurer shall not be liable to make any payment for Loss in connection with
any claim or claims made against the Directors or Officers:
A. alleging, arising out of, based upon, attributable to, or in any way
involving, directly or indirectly the hazardous properties of nuclear
material, including but not limited to:
(1) nuclear material located at any nuclear facility owned by, or operated
by or on behalf of, the Company, or discharged or dispersed therefrom;
or
(2) nuclear material contained in spent fuel or waste which was or is at
any time possessed, handled, used, processed, stored, transported or
disposed of by or on behalf of the Company; or
(3) the furnishing by an insured or the Company of services, materials,
parts or equipment in connection with the planning, construction,
maintenance, operation or use of any nuclear facility; or
(4) claims for damages to the company or its shareholders which alleges,
arises from, is based upon, is attributed to or in any way involves,
directly or indirectly, the hazardous properties of nuclear material.
B. (1) which is insured under a nuclear energy liability policy issued by the
Nuclear Energy Liability Insurance Association, Mutual Atomic Energy
Liability underwriters or Nuclear Insurance Association of Canada or
would be insured under any such policy but for its termination or
exhaustion of its Limit of Liability; or
(2) with respect to which (a) any person or organization is required to
maintain financial protection pursuant to the Atomic Energy Act of
1954, or any law amendatory thereof, or (b) the Company or any insured
is, or had this policy not been issued would be, entitled to indemnity
from the United States of America, or any agency thereof, under any
agreement entered into by the United States of America, or any agency
thereof, with any person or organization.
As used in this endorsement:
"hazardous properties" include radioactive, toxic or explosive properties;
"nuclear material" means source material, special nuclear material or byproduct
material;
Page 1
51723 EDO246
<PAGE>
NUCLEAR ENERGY LIABILITY EXCLUSION ENDORSEMENT # 1
(BROAD FORM)
"source material", "special nuclear material", and "byproduct material" have the
meanings given them in the Atomic Energy Act of 1954 or in any law amendatory
thereof;
"spent fuel" means any fuel element or fuel component, solid or liquid, which
has been used or exposed to radiation in a nuclear reactor;
"waste" means any waste material (1) containing byproduct material and (2)
resulting from the operation by any person or organization of any nuclear
facility included within the definition of nuclear facility under paragraph (a)
or (b) thereof;
"nuclear facility" means
(a) any nuclear reactor,
(b) any equipment or device designed or used for (1) separating the isotopes of
uranium or plutonium, (2) processing or utilizing spent fuel, or (3)
handling, processing or packaging waste,
(c) any equipment or device used for the processing, fabricating or alloying of
special nuclear material if at any time the total amount of such material
in the custody of the insured at the premises where such equipment or
device is located consists of or contains more than 25 grams of plutonium
or uranium 233 or any combination thereof, or more than 250 grams of
uranium 235.
(d) any structure, basin, excavation, premises or place prepared or used for
the storage or disposal of waste, and includes the site on which any of the
foregoing is located, all operations conducted on such site and
all-premises used for such operations;
"nuclear reactor" means any apparatus designed or used to sustain nuclear
fission in a self- supporting chain reaction or to contain a critical mass of
fissionable material.
/s/ Ty Sagolow
-------------------------
AUTHORIZED REPRESENTATIVE
EDO246
Page 2
51723
<PAGE>
ENDORSEMENT # 2
This endorsement, effective 12:01 AM, May 05, 1995 forms a part of
policy number444-97-15
issued to STV GROUP, INC.
by National Union Fire Insurance Company of Pittsburgh, Pa.
COMMISSIONS EXCLUSION
In consideration of the premium charged, it is hereby understood and agreed that
the Insurer shall not be liable to make any payment for Loss in connection with
any claim made against the Directors and Officers, alleging, arising out of,
based upon or attributable to:
(I) Payments, commissions, gratuities, benefits or any other favors to or for
the benefit of any full or past-time domestic or foreign governmental or
armed services officials, agents, representatives, employees or any
members of their family or any entity with which they are affiliated; or
(II) Payments, commissions, gratuities, benefits or any other favors to or for
the benefit of any full or part-time officials, directors, agents,
partners, representatives, principal shareholders, or owners or employees,
or affiliates (as that term is defined in The Securities Exchange Act of
1934, including any of their officers, directors, agents, owners,
partners, representatives, principal shareholders or employees) of any
customers of the company or any members of their family or any entity with
which they are affiliated; or
(III) Political contributions, whether domestic or foreign.
/s/ Ty Sagolow
-------------------------
51698 (4/91) AUTHORIZED REPRESENTATIVE
<PAGE>
ENDORSEMENT # 3
This endorsement, effective 12:01 AM, May 05, 1995 forms a part of
policy number 444-97-15
issued to STV GROUP, INC.
by National Union Fire Insurance Company of Pittsburgh, Pa.
PENNSYLVANIA AMENDATORY ENDORSEMENT
(Discovery Clause)
In consideration of the premium charged, it is hereby understood and agreed that
Clause 10, DISCOVERY CLAUSE, is hereby amended to read as follows:
10. DISCOVERY CLAUSE
If the Insurer shall cancel or refuse to renew this policy the Named
Corporation shall have the right, upon payment of the additional premium of
75% of the full annual premium to a period of one year following the
effective date of such cancellation or non-renewal (herein called the
Discovery Period) in which to give written notice to the Insurer of claims
first made against the Insureds during said Discovery Period for any
alleged Wrongful Act committed before the end of Policy Period and
otherwise covered by this policy. As used herein, "The Full Annual Premium"
means the premium level in effect immediately prior to the end of the
Policy Period.
This right shall terminate however, unless written notice of such election
together with payment of the additional premium due is received by the
Insurer within sixty (60) days after the effective date of cancellation or
non-renewal. The additional premium for the Discovery Period shall be fully
earned at the inception date of the Discovery Period. The Discovery Period
is not cancellable. This Clause and the rights contained herein shall not
apply to any cancellation resulting from non-payment of premium, if when
the cancellation notice is mailed by the Insurer, this policy has been in
effect less than six months and this policy is not a renewal of a policy
issued by the Insurer. The offer by the Insurer of renewal terms,
conditions, limits of liability and/or premiums different from those of the
expiring policy shall not constitute refusal to renew.
/s/ Ty Sagolow
-------------------------
(8/88) AUTHORIZED REPRESENTATIVE
<PAGE>
ENDORSEMENT # 4
This endorsement, effective 12:01 AM, May 05, 1995 forms a part of
policy number 444-97-15
Issued to STV GROUP, INC.
by National Union Fire Insurance Company of Pittsburgh, Pa.
PENNSYLVANIA
AMENDATORY ENDORSEMENT
Wherever used in this endorsement: 1) "we", "us", "our", and "Insurer" mean the
insurance company which issued this policy; and 2) "you", "your", "named
Insured", "First Named Insured", and "Insured" mean the Named Corporation, Named
Organization, Named Sponsor, Named Insured, or Insured stated in the
declarations page; and 3) "Other Insured(s)" means all other persons or entities
afforded coverage under the policy.
CANCELLATION/NONRENEWAL
The cancellation provision of this policy is amended as follows:
Cancelling a policy midterm is prohibited except if:
1. A condition material to insurability has changed substantially;
2. Decrease or loss of reinsurance has occurred;
3. Material misrepresentation by the Insured or Other Insured(s);
4. Policy was obtained through fraud;
5. The Insured has failed to pay a premium when due;
6. The Insured has requested cancellation;
7. Material failure to comply with terms;
8. Other reasons that the commissioner may approve.
Notice Requirements for Midterm Cancellation and Nonrenewal
Notice shall be mailed by registered or first class mail by the Insurer directly
to the named Insured. Written notice will be forwarded directly to the named
Insured at least sixty (60) days in advance of the termination date unless one
or more of the following exists:
1) The Insured have made a material misrepresentation which affects the
insurability of the risk, in which case the prescribed written notice of
cancellation shall be forwarded directly to the named Insured at least
fifteen (15) days in advance of the effective date of termination.
- 1 -
52165 (9/91)
<PAGE>
ENDORSEMENT # 4 (continued)
2) The Insured has failed to pay a premium when due, whether the premium is
payable directly to the Insurer or its agents or indirectly under a premium
finance plan or extension of credit, in which case the prescribed written
notice of cancellation shall be forwarded directly to the Named Insured at
least fifteen (15) days in advance of the effective date of termination.
3) The policy was cancelled by the named Insured, in which case written notice
of cancellation shall not be required and coverage shall be terminated on
the data requested by the Insured. Nothing in these three sections shall
restrict the Insurer's right to rescind an insurance policy ab initio upon
discovery that the policy was obtained through fraudulent statements,
omissions or concealment of fact material to the acceptance of the risk or
to the hazard assumed by the Insurer.
The notice shall be clearly labeled "Notice of Cancellation" or "Notice of
Nonrenewal". A midterm cancellation or nonrenewal notice shall state the
specific reasons for the cancellation or nonrenewal. The reasons shall identify
the condition or loss experience which caused the midterm cancellation or
nonrenewal. The notice shall provide sufficient information or data for the
Insured to correct the deficiency.
A midterm cancellation or nonrenewal notice shall state that, at the Insured's
request, the Insurer shall provide loss information to the Insured for at least
three years or the period of time during which the Insurer has provided coverage
to the Insured, whichever is less. Loss information on the Insured shall consist
of the following:
1) Information on closed claims, including date and description or occurrence,
and any amount of payments, if any;
2) Information on open claims, including date and description of occurrence,
amount of payment, if any, and amount of reserves, if any;
3) Information on notices of occurrence, including date and description of
occurrence and amount or reserves, if any.
The Insured's written request for loss information must be made within ten (10)
days of the Insured's receipt of the midterm cancellation or nonrenewal notice.
The Insurer shall have thirty (30) days from the date of receipt of the
Insured's written request to provide the requested information.
Notice of Increase in Premium
The Insurer shall provide not less than sixty (60) days notice of intent to
increase the Insured's renewal premium with thirty (30) days notice of an
estimate of the renewal premium. The notice of renewal premium increase will be
mailed or delivered to the Insured's last known address. If notice is mailed, it
will be by registered or first class mail.
Return of Unearned Premium
Cancellation Initiated by Insurer -- Unearned premium must be returned to the
Insured not later than ten (10) business days after the effective date of
termination.
52165 (9/91)
- 2 -
<PAGE>
ENDORSEMENT # 4 (continued)
Cancellation Initiated by Insured -- Unearned premium must be returned to the
Insured not later than thirty (30) days after the effective date of termination.
All other terms, conditions and exclusions shall remain the same.
/s/ Ty Sagolow
-------------------------
52165 (9/91) AUTHORIZED REPRESENTATIVE
- 3 -
<PAGE>
ENDORSEMENT # 5
This endorsement, effective 12:01 AM, May 05, 1995 forms a part of
policy number 444-97-15
issued to STV GROUP, INC.
by National Union Fire Insurance Company of Pittsburgh, Pa.
PENNSYLVANIA CANCELLATION/NONRENEWAL
AMENDATORY ENDORSEMENT
Whenever used in this endorsement "Insurer" means the insurance company which
issued this policy.
Cancellation/Nonrenewal
The cancellation provision of this policy is amended as follows:
Cancelling a policy midterm is prohibited for any reason other than the
following:
1) A condition, factor or loss experience material to insurability has changed
substantially or a substantial condition, factor or loss experience
material to insurability has become known during the policy term.
2) Loss of reinsurance or a substantial decrease in reinsurance has occurred,
which loss or decrease shall, at the time of cancellation, be certified to
the Pennsylvania Insurance Commissioner as directly affecting in-force
policies.
3) The insured has made a material misrepresentation which affects the
insurability of the risk.
4) The policy was obtained through fraudulent statements, omissions or
concealment of fact material to the acceptance of the risk or to the hazard
assumed by the Insurer.
5) The insured has failed to pay a premium when due, whether the premium is
payable directly to the Insurer or its agents or indirectly under a premium
finance plan or extension of credit.
6) The insured has requested cancellation.
7) Material failure to comply with policy terms, conditions or contractual
duties.
8) Other reasons that the Pennsylvania Insurance Commissioner may approve.
Notice Requirements for Midterm Cancellation and Nonrenewal
Notice shall be mailed by registered or first class mail by the Insurer directly
to the Named lnsured(s). Written notice will be forwarded directly to the Named
Insured(s) at least sixty (60) days in advance of the termination date unless
one or more of the following exists:
1) The Insured has made a material misrepresentation which affects the
insurability of the risk, in which case the prescribed written notice of
cancellation shall be forwarded directly to the Named Insured at least
fifteen (15) days in advance of the effective date of termination.
55471 (1/93) EDO470
- 1 -
<PAGE>
ENDORSEMENT # 5 (continued)
2) The Insured has failed to pay a premium when due, whether the premium is
payable directly to the Insurer or its agents or indirectly under a premium
finance plan or extension of credit, in which case the prescribed written
notice of cancellation shall be forwarded directly to the Named Insured at
least fifteen (15) days in advance of the effective date of termination.
3) The policy was cancelled by the Named Insured, in which case written notice
of cancellation shall not be required and coverage shall be terminated on
the date requested by the Insured.
Nothing in these three sections shall restrict the Insurer's right to rescind an
insurance policy ab initio upon discovery that the policy was obtained through
fraudulent statements, omissions or concealment of fact material to the
acceptance of the risk or to the hazard assumed by the Insurer.
The notice shall be clearly labeled "Notice of Cancellation" or "Notice of
Nonrenewal". A midterm cancellation or nonrenewal notice shall state the
specific reasons for the cancellation or nonrenewal. The reasons shall identify
the condition, factor or loss experience which caused the midterm cancellation
or nonrenewal. The notice shall provide sufficient information or data for the
Insured to correct the deficiency.
A midterm cancellation or nonrenewal notice shall state that, at the Insured's
request, the Insurer shall provide loss information to the Insured for at least
three years or the period of time during which the Insurer has provided coverage
to the Insured, whichever is less. Loss information on the Insured shall consist
of the following:
1) Information on closed claims, including date and description of occurrence,
and any amount of payments, if any;
2) Information on open claims, including date and description of occurrence,
amount of payment, if any, and amount of reserves, if any;
3) Information on notices of occurrence, including date and description of
occurrence and amount of reserves, if any
The Insured's written request for loss information must be made within ten (10)
days of the Insured's receipt of the midterm cancellation or nonrenewal notice.
The Insurer shall have thirty (30) days from the date of receipt of the
Insured's written request to provide the requested information.
Notice of Increase in Premium
Unless this policy is written on a retrospective rating plan, the Insurer shall
provide not less than sixty (60) days notice of intent to increase the Insured's
renewal premium with thirty (30) days notice of an estimate of the renewal
premium. The notice of renewal premium increase will be mailed or delivered to
the Insured's last known address. If notice is mailed, it will be by registered
or first class mail.
Return of Unearned Premium (Does Not Apply To Policies Written On a
Retrospective Rating Plan)
Cancellation Initiated by Insurer -- Unearned premium must be returned to the
Insured not later than ten (10) business days after the effective date of
termination.
55471 (1/93) EDO470
- 2 -
<PAGE>
ENDORSEMENT # 5 (continued)
Cancellation Initiated by Insured -- Unearned premium must be returned to the
Insured not later than thirty (30) days after the effective date of termination.
Where the amount of premium to be returned cannot be calculated precisely within
the required time period for return of premium because: (1) the policy was
written on the basis of an estimated premium; or (2) the policy was issued
subject to a premium audit; the unearned premium shall be returned to the
insured on an estimated basis. Upon the Insurer's completion of computation of
the exact premium to be returned, an additional return premium or charge shall
be made to the named insured or insureds within 15 days of the final
computation.
Payment or tender of unearned premium is not a condition of cancellation.
/s/ Ty Sagolow
-------------------------
AUTHORIZED REPRESENTATIVE
55471 (1/93) EDO470
- 3 -
<PAGE>
ENDORSEMENT # 6
This endorsement, effective 12:01 AM, May 05, 1995 forms a part of
policy number 444-97-15
issued to STV GROUP, INC.
by National Union Fire Insurance Company of Pittsburgh, Pa.
PENDING OR PRIOR LITIGATION
In consideration of the premium charged, it is hereby understood and agreed that
exclusion (h) of form(s) 47353 is deleted in its entirety and replaced by the
following:
(h) alleging, arising out of, based upon or attributable to any pending or
prior litigation as of October 26, 1983, or alleging or derived from
the same or essentially the same facts as alleged in such pending or
prior litigation.
/s/ Ty Sagolow
-------------------------
AUTHORIZED REPRESENTATIVE
42609
<PAGE>
ENDORSEMENT # 7
This endorsement, effective 12:01 AM, May 05, 1995 forms a part of
policy number 444-97-15
issued to STV GROUP, INC.
by National Union Fire Insurance Company of Pittsburgh, Pa.
In consideration of the premium charged, it is hereby understood and agreed that
with respect to the Limit of Liability $1,000,000 excess of $1,000,000,
exclusion 4(h) is amended to indicate that the Insurer shall not be liable to
make any payment for Loss in connection with any claim or claims made against
the Directors or Officers alleging, arising out of, based upon or attributable
to any pending or prior litigation as of May 05, 1990 or alleging or derived
from the same or essentially the same facts as alleged in such pending or prior
litigation.
/s/ Ty Sagolow
-------------------------
AUTHORIZED REPRESENTATIVE
(8/88)
<PAGE>
ENDORSEMENT # 8
This endorsement, effective 12:01 AM, May 05, 1995 forms a part of
policy number 444-97-15
issued to STV GROUP, INC.
by National Union fire Insurance Company of Pittsburgh, Pa.
PANEL COUNSEL ENDORSEMENT (WITH ARBITRATION)
In consideration of the premium charged, it is hereby understood and agreed
that:
SELECTION OF DEFENSE COUNSEL
Attached to and made a part of this endorsement is a list of Panel Counsel law
firms ("Panel Counsel Firms"). The list provides the Insured Directors and
Officers a choice of law firms from which a selection of legal counsel shall be
made to conduct the defense of a claim(s) made against them. The duty of a
selected Panel Counsel Firm shall be to defend the claim(s) brought against the
Insured Directors and Officers.
JURISDICTION
The Insured Directors and Officers shall select a Panel Counsel Firm in the
jurisdiction in which the claim is brought. In the event a claim is brought in a
jurisdiction not included on the list, the Insured Directors and Officers shall
select a Panel Counsel Firm in the listed jurisdiction which is the nearest
geographic jurisdiction to either where the claim is brought or where the
corporate headquarters of the Insured Company is located. In such a case the
Insured Directors and Officers also may, with the consent of the Insurer which
consent shall not be unreasonably withheld, select a non Panel Counsel Firm in
the jurisdiction in which the claim is brought to function as "local counsel" on
the claim assisting the Panel Counsel Firm who would function as "lead counsel"
in conducting the defense of the claim.
CONFLICT OF INTEREST
With the express prior written consent of the Insurer, an Insured Director or
Officer may select a different Panel Counsel Firm from other Insured defendants
if such selection is required due to conflict of interest considerations or is
otherwise reasonably justifiable.
AMENDMENT OF PANEL COUNSEL FIRMS
The list of Panel Counsel Firms may be amended from time to time by the Insurer.
However, no change shall be made to the specific list attached to this
endorsement during the policy period without the consent of the company first
named in the declarations ("Company"). At the request of the Insured Directors
and Officers or the Company, the Insurer may in its discretion add to the
attached list of Panel Counsel Firms for the purposes of defending a claim made
against the Insured Directors and Officers in any specified jurisdiction(s)
(including those jurisdiction(s) not originally included in the Panel Counsel
list), a non-panel counsel law firm, or a Panel Counsel Firm not originally
listed for such jurisdiction(s). The Insurer may in its discretion waive, in
part or in whole, the provisions of this endorsement as respects a particular
claim. The list of Panel Counsel Firms may also be amended to add with the
consent of the Insurer, which consent shall not be
59123 (2/94) EDO464
- 1 -
<PAGE>
ENDORSEMENT # 8 (continued)
unreasonably withheld, a non Panel Counsel Firm for the purposes of acting as
"local counsel" to a existing Panel Counsel Firm for claims brought in a
particular jurisdiction in which no Panel Counsel Firm is presently listed.
TYPES OF CLAIMS
This endorsement shall only apply to claims alleging a violation of the
securities laws, claims relating to the purchase or sale of securities, claims
brought by, on the behalf of or in the right of the Company or its security
holders or claims brought in the form of a class action (whether or not relating
to securities).
ARBITRATION
With respects to claims described in the TYPE OF CLAIMS section of this
endorsement, all disputes or differences which may arise under or in connection
with this policy, whether arising before or after termination of this policy,
including any determination of the amount of Loss, shall be submitted to the
American Arbitration Association under and in accordance with its then
prevailing commercial arbitration rules. The arbitrators shall be chosen in the
manner and within the time frames provided by such rules. If permitted under
such rules, the arbitrators shall be three disinterested active or retired
individuals having knowledge of the legal, corporate management or insurance
issues relevant to the matters in dispute.
The arbitration proceeding shall take place in Pennsylvania The arbitrators
shall give due consideration to the general principles of Delaware law; the
terms, conditions, provisions and exclusions of this policy are to be construed
in an evenhanded fashion as between the parties, including without limitation,
where the language of this policy is deemed to be ambiguous or otherwise
unclear, the issue shall be resolved in the manner most consistent with the
relevant terms, conditions, provisions or exclusions of the policy (without
regard to the authorship of the language, without any presumption or arbitrary
interpretation or construction in favor of either party or parties, and in
accordance with the intent of the parties.)
The written decision of the arbitrators shall be provided to both parties and
shall be binding on them.
Each party shall bear equally the expenses of the arbitration.
/s/ Ty Sagolow
-------------------------
AUTHORIZED REPRESENTATIVE
59123 (2/94) EDO464
- 2 -
<PAGE>
PANEL COUNSEL
- 3 -
CALIFORNIA
Los Angeles
Gibson Dunn & Crutcher
333 South Grand Avenue
Los Angeles, California 90071-3197
Contact Person: Robert Warren or
Robert S. Warren (213) 229-7326
Wayne W. Smith (213) 229-7464
John H. Sharer (213) 229-7476
Irell & Manella
1800 Avenue Of The Stars
Suite 900
Los Angeles, California 90067-4276
Contact Person: Richard Borow
(310) 277-1010
Kirkland & Ellis
300 South Grand Avenue
Los Angeles, California 90071
Contact Person: Jeffrey S. Davidson or
Stephen C. Neal (213) 680-8400
Latham & Watkins
633 West Fifth Avenue
Los Angeles, CA 90071
Contact:
Hugh Steven Wilson (213) 485-1234
Munger, Tolles & Olson
355 South Grand Avenue -- 35th Floor
Los Angeles, California 90071-1560
Contact Person: Dennis Kinnaird
(213) 683-9264
or John W. Spiegel (213) 683-9152
O'Melveny & Myers
400 South Hope Street
Los Angeles, California 90071-2899
Contact Person: Seth Aronson or
Robert Vanderet (213) 669-6000
Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue
Suite 3400
Los Angeles, California 90071
Contact Person: James E. Lyons or
Frank Rothman (213) 687-5000
Palo Alto
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Contact Person: Bruce Vanyo or
Steven Sethatz (415) 493-9300
Heller, Eliman, White & McAuliffe
525 University Avenue
Palo Alto, California 94301
Contact Person: Norman J. Blears
(415) 324-7000
San Francisco
Brobeck, Phleger & Harrison
Spear Street Tower
One Market
San Francisco, California 94104
Contact Person:
Tower C. Snow, Jr. (415) 442-0900
Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, California 94104-2878
Contact Person: Douglas Schwab or
M. Laurence Popofsky (415) 772-6000
McCutchen, Doyle, Brown & Enersen
3 Embarcadero Center - 18th floor
San Francisco, California 94111-4034
Contact Person: David Balabanian or
Phillip Rotner (415) 393-2000
Morrison & Foerster
345 California Street
San Francisco, California 94104-2675
Contact Person:
Melvin R. Goldman (415) 677-7311
Paul T. Friedman (415) 677-7444
Orrick Herrington & Sutcliffe
Old Federal Reserve Bank Bldg.
400 Sansome Street
San Francisco, California 94111
Contact Person: James A. Hughes
(415) 392-1122
or W. Reece Bader (415) 392-1122
Pillsbury, Madison & Sutro
P.O. Box 7880
235 Montgomery Street
San Francisco, California 94104
Contact Person: Gary H. Anderson
(415) 983-1341
<PAGE>
PANEL COUNSEL
- 4 -
DISTRICT OF COLUMBIA
Washington
Arnold & Porter
555 Twelfth St. N.W.
Washington, DC 20004
Contact Person: Scott Schreiber
(202) 942-5672
Davis Polk & Wardwell
1300 I Street, NW
Suite 1100
Washington, D.C. 20005
Contact Person: Scott W. Muller
Michael P. Carroll (202) 962-7000
Gibson, Dunn & Crutcher
1050 Connecticut Avenue, NW Suite 900
Washington, D.C. 20036-5306
Contact Person: F. Joseph Warin
(202) 887-3609
Mudge Rose Guthrie Alexander & Ferdon
212 K Street, NW
Washington, D.C. 20037-5303
Contact Person: Leonard Garment or
I. Lewis Libby (202) 429-9355
Patton Boggs, L.L.P
2550 M Street N.W.
Suite 900
Washington, D.C. 20037
Contact Person:
C. Allen Foster (202) 457 6320 or
Charles H. Camp (202) 457-5265
Shearman & Sterling
801 Pennsylvania Avenue N.W.
Washington, D.C. 20004-2604
Contact Person: Thomas S. Martin or
Jonathan L. Greenblatt (202) 508-8000
Willkie Farr & Gallagher
Three Lafayette Centre
1155 21st Street N.W.
Washington, D.C. 20036-3384
Contact Person:
Kevin B. Clark (202) 328-8000
GEORGIA
Atlanta
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Contact Person: Peter Q. Bassett (404) 881-7343
Mary C. Gill (404) 881-7276
King & Spalding
191 Peachtree Street N.W.
Atlanta, Georgia 30303
Contact Person: Michael R. Smith or
Griffin Bell (404) 572-4600
Long, Aldridge & Norman
One Peachtree Center
303 Peachtree Street -- Suite 5300
Atlanta, Georgia 30308
Contact Person: Clay C. Long (404) 527-4050
J. Allen Maines (404) 527-8340
Smith, Gambrell & Russel
Suite 1800
3343 Peachtree Road N.E.
Atlanta, Georgia 30326
Contact Person: David Handley (404) 264-2671
Robert C. Schwartz (404) 264-2658
ILLINOIS
Chicago
Jenner & Block
One IBM Plaza
Chicago, Illinois 60611
Contact Person: Jerold Solovy
(312)222-9350
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Contact Person: Garrett B. Johnson
Robert J. Kopecky (312) 861-2000
<PAGE>
PANEL COUNSEL
- 5 -
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603-2003
Contact Person: Robert Downing (312) 853-7434
Eugene Schoon (312) 853-7279
Walter C. Carlson (312) 853-7734
Skadden, Arps, Slate, Meagher & Flom
333 West Wacker Drive
Suite 2100
Chicago, Illinois 60606
Contact Person: Timothy Nelsen or
Susan Getzendanner (312) 407-0700
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606-6404
Contact Person: Harold D. Shapiro
(312) 876-8035
MASSACHUSETTS
Boston
Goodwin, Proctor & Hoar
Exchange Place
Boston, Massachusetts 02109-2881
Contact Person:
Don M. Kennedy (617) 570-1000
Hale & Dorr
60 State St.
Boston, Massachusetts 02109
Jeffery Rudman (617) 742-9100
Ropes & Gray
One International Plaza
Boston, Massachusetts 02110-2624
Contact Person: John Donovan, Jr.
(617) 951-7566
Skadden, Arps, Slate, Meagher & Flom
1 Beacon Street
Boston, Massachusetts 02108
Contact Person: Thomas A. Dougherty or
George J. Skelley (617) 573-4800
Palmer & Dodge
1 Beacon Street
Boston, Massachusetts 02108
Contact Person: Peter Terris or
Peter Saparoff (617) 573-0100
NEW YORK
New York
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Contact Person: Charles A. Gilman
or Thomas J. Kavaler (212) 701-3000
or Immanuel Kohn
Davis, Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Contact Person: Henry King,
or Dan Kolb (212) 450-4000
Fried Frank Harris Shriver & Jacobson
1 New York Plaza - 27th Floor
New York, New York 10004
Contact Person: Sheldon Raab
(212) 820-8090
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, New York 10022-4675
Contact Person: Yosef J. Riemer or
Frank M. Holozubiec (212) 446-4800
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Contact Person: Russell E. Brooks
(212) 530-5554
Mudge Rose Guthrie Alexander & Ferdon
180 Maiden Lane
New York, New York 10038
Contact Person: Kenneth Conboy,
John J. Kirby, Jr., or
Laurence V. Senn, Jr. (212) 510-7000
Shearman & Sterling
Citicorp Center
153 E 53rd Street
New York, New York 10022-4676
Contact Person:
Dennis Orr (212) 848-8000
<PAGE>
PANEL COUNSEL
- 6 -
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3909
Contact Person: Roy L. Reardon,
James Hagan, or
Michael J. Chepiga (212) 455-2000
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Contact Person: Barry H. Garfinkel or
Jonathan Lerner (212) 735-3000
Stroock & Stroock & Lavan
Seven Hanover Square
New York, NY 10004-2696
Contact:
Melvin A. Brosterman (212) 806-5400
Laurence Greenwald (212) 806-5400
Alvin K. Hellerstein (212) 806-5400
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Contact Person: John L. Warden
(212) 558-4000
Wachtell, Lipton, Rosen & Katz
51 West 57th Street
New York, New York 10019
Contact Person: Norman Redlich
(212) 371-9200
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
Contact Person:
Michael R. Young (212) 821-8000
David L. Foster (212) 821-8000
Richard L. Posen (212) 821-8000
Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Contact Person: Dennis J. Block
(212) 310-8000
Kaye, Scholer, Fierman, Hays & Handier
425 Park Avenue
New York, New York 10022
Contact Person: Frederic W. Yerman
(212) 836-8663
TEXAS
Dallas
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
4100 Suite
1700 Pacific Avenue
Dallas, Texas 75201-4618
Contact Person: Michael Lowenberg P.C.
or Louis P. Bickel (214) 969-2800
Fulbright & Jaworski
2200 Ross Avenue
Suite 2800
Dallas, Texas 75201
Contact Person: Karl G. Dial
(214) 855-8000
Locke Purnell Rain Harrell
2200 Ross Avenue
Suite 2200
Dallas, TX 75201-6776
Contact Person: John McElhaney (214) 740-8458
Peter Flynn (214) 740-8654
Morris Harrell (214) 740-8404
Thompson & Knight, P.C.
1700 Pacific Avenue
Suite 3300
Dallas, TX 75201
Contact Person:
Schuyler B. Marshall (214) 969-1246
Baker & Botts, L.L.P.
2001 Ross Avenue
Dallas, Texas 75201-2916
Contact Person:
Ronald L. Palmer (214) 953-6500
Haynes & Boone, L.L.P.
3100 NationsBank Plaza
901 Main Street
Dallas, Texas 75202-3789
Contact Person: Michael Boone,
George Bramblett, or
Noel Hensley (214) 651-5000
<PAGE>
PANEL COUNSEL
- 7 -
Houston
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
Pennzoil Place - South Tower
711 Louisiana Street
Suite 1900
Houston, Texas 77002
Contact Person: Charles Moore or
Paula Hinton (713) 220-5800
Fulbright & Jaworski, L.L.P.
1301 McKinney
Suite 5100
Houston, Texas 77010-3095
Contact Person: Richard Carrell or
Frank Jones (713) 651-5151
Vinson & Elkins
2500 First City Tower
1001 Fannin
Houston, Texas 77002-6760
Contact Person: David T. Hedges Jr.
(713) 758-2676
Baker & Botts
910 Louisiana Street
One Shell Plaza
Houston, Texas 77002-4995
Contact Person:
William C. Slugger (713) 229-1234
Harold Metts (713) 229-1234
<PAGE>
ENDORSEMENT # 9
This endorsement, effective 12:01 AM, May 05, 1995 forms a part of
policy number 444-97-15
issued to STV GROUP, INC.
by National Union Fire Insurance Company of Pittsburgh, Pa.
SEC Exclusion Relating to Secondary Public Offerings of Securities
(With 30 day reporting provision)
In consideration of premium charged, it is hereby understood and agreed that the
Insurer shall not be liable to make any payment for Loss in connection with any
claim or claims made against the Directors and Officers (including but not
limited to claims brought by any governmental or regulatory entity or any
security holder, whether directly, derivatively or by class action, or by any
other claimant) whether under federal, state or foreign, statutory, regulatory
or common law, if such claim alleges, arises out of, is based upon or is
attributable to the purchase or sale, or offer or solicitation of an offer to
purchase or sell, any security of the Company in a public offering of securities
(hereinafter an OFFERING OF SECURITIES).
This exclusion shall apply, but not be limited to, any such claim which alleges,
arises out of, is based upon or is attributable to any claim arising out of any
alleged misrepresentations or non- disclosures in any written or oral statement,
including but not limited to any Registration Statement, prospectus, offering
circular, private placement memorandum or other document or statement relating
to the OFFERING OF SECURITIES, as well as any failure to file any document
required to be filed with the Securities and Exchange Commission.
Notwithstanding the above, this endorsement shall not apply to the OFFERING OF
SECURITIES described below:
REGISTRATION STATEMENT NO. DATE
Notwithstanding the foregoing, however, this exclusion shall not apply in the
event that within thirty days prior to the effective time of an OFFERING OF
SECURITIES not scheduled or described above, the Company gives written notice
thereof together with all particulars and underwriting information relating
thereto; the Insurer agrees, in its discretion, to grant coverage subject to
such terms, conditions and additional premium as it may require; and the Company
accepts such terms, conditions and additional premium. Such coverage is also
subject to the Company paying when due such additional premium.
ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
AUTHORIZED REPRESENTATIVE
EDO308
60059 (4/94)
<PAGE>
ENDORSEMENT # 10
This endorsement, effective 12:01 AM, May 05, 1995 forms a part of
policy number 444-97-15
issued to STV GROUP, INC.
by National Union Fire Insurance Company of Pittsburgh, Pa.
In consideration of the premium charged, it is hereby understood and agreed that
the Insurer shall not be liable to make any payment for Loss in connection with
any claim or claims made against the Director or Officer alleging, arising out
of, based upon or attributable to the performance of or failure to perform
services as an Architect or Engineer.
AUTHORIZED REPRESENTATIVE
(8/88)
<PAGE>
ENDORSEMENT # 11
This endorsement, effective 12:01 AM, May 05, 1995 forms a part of
policy number 444-97-15
issued to STV GROUP, INC.
by National Union Fire Insurance Company of Pittsburgh, Pa.
In consideration of the premium charged, it is hereby understood and agreed that
Clause 7, COINSURANCE CLAUSE, of form(s) 47353 is deleted in its entirety.
AUTHORIZED REPRESENTATIVE
42610
<PAGE>
ENDORSEMENT # 12
This endorsement, effective 12:01 AM, May 05, 1995 forms a part of
policy number 444-97-15
issued to STV GROUP, INC.
by National Union Fire Insurance Company of Pittsburgh, Pa.
MARITAL ESTATE EXTENSION
In consideration of the premium charged, it is hereby understood and agreed that
Clause 3, EXTENSIONS CLAUSE, is amended by adding the following new paragraph to
the end thereof:
Subject otherwise to the terms hereof, this policy shall cover Loss arising
from any claims made against the lawful spouse (whether such status is
derived by reason of statutory law, common law or otherwise of any
applicable jurisdiction in the world) of a Director or Officer, for claims
arising solely out of his or her capacity as the spouse of a Director or
Officer, including such claims that seek damages recoverable from marital
community property, property jointly held by the Director or Officer and
the spouse, or property transferred from the Director or Officer to the
spouse; provided, however, that this extension shall not afford coverage
for any claim for any actual or alleged Wrongful Act of the spouse and that
this policy shall apply only to actual or alleged Wrongful Acts of a
Director or Officer subject to the full policy's terms and conditions.
All other Terms and Conditions remain unchanged.
AUTHORIZED REPRESENTATIVE
EDO449
53310 (4/92)
<PAGE>
Endorsement # 13
This endorsement, effective 12:01 a.m., May 05, 1995 forms a part of
policy number 444-97-15
issued to STV GROUP, INC.
by National Union Fire Insurance Company of Pittsburgh, PA.
In consideration of the premium charged, it is hereby understood and agreed that
with respect to the Limit of Liability $1,000,000 excess of $2,000,000,
exclusion 4(h) is amended to indicate that the Insurer shall not be liable to
make any payment for Loss in connection with any claim or claims made against
the Directors or Officers alleging, arising out of, based upon or attributable
to any pending or prior litigation as of May 05, 1992 or alleging or derived
from the same facts as alleged in such pending or prior litigation.
It is further understood and agreed that with respect of the Limit of Liability
$1,000,000 excess of $3,000,000, exclusion 4(h) is amended to indicate that the
Insurer shall not be liable to made any payment for Loss in connection with any
claim or claims made against the Directors and Officers alleging, arising out of
based upon or attributable to any pending or prior litigation as of August 19,
1992 or alleging or derived from the same facts as alleged in such pending or
prior litigation.
It is further understood and agreed that with respect to the Limit of Liability
$2,000,000 excess of $4,000,000, exclusion 4(h) is amended to indicate that the
Insurer shall not be liable to make any payment for Loss in connection with any
claim or claims made against the Directors or Officers alleging, arising out of,
based upon or attributable to any pending or prior litigation as of May 05, 1994
or alleging or derived from the same facts as alleged in such pending or prior
litigation.
All other terms and conditions shall remain exactly the same.
/s/ Ty Sagolow
-------------------------
Authorized Representative
EXHIBIT 10.33
AMENDMENT TO THE
STV GROUP INCORPORATED
EMPLOYEE STOCK OWNERSHIP PLAN
STV Group Incorporated Employee Stock Ownership Plan (herein referred to as
the "Plan") is hereby amended as follows:
1. DIRECT ROLLOVER
This applies to distributions made on or after January 1, 1993.
Notwithstanding any provision of the Plan to the contrary that would otherwise
limit a distributee's election, a distributee may elect, at the time and in the
manner prescribed by the Plan Administrator, to have any portion of an eligible
rollover distribution paid directly to an eligible retirement plan specified by
the distributee in a direct rollover.
The following definitions shall apply:
(1) An eligible rollover distribution is any distribution of all or
any portion of the balance to the credit of the distributee, except
that an eligible rollover distribution does not include: any
distribution that is one of a series of substantially equal periodic
payments (not less frequently than annually) made for the life
expectancies) of the distributee and the distributee and the
distributee's designated beneficiary, or for a specified period of ten
year or more; any distribution to the extent distribution is required
under Section 401(a)(9) of the Code; and the portion of any
distribution that is not includible in gross income (determined
without regard to the exclusion for net unrealized appreciation with
respect to employer securities).
(2) An eligible retirement plan is an individual retirement account
described in Section 408(a) of the Code, an individual retirement
annuity described in Section 408(b) of the Code, an annuity plan
described in Section 403(a) of the Code, or a qualified trust
described in Section 401(a) of the Code, that accepts the
distributee's eligible rollover distribution. However, in the case of
an eligible rollover distribution to the surviving spouse, an eligible
retirement plan is an individual retirement account or individual
retirement annuity.
<PAGE>
(3) A distributee includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse and the
Employee's or former Employee's spouse or former spouse who is the
alternate payee under a qualified domestic relations order, as defined
in section 414(p) of the Code, are distributees with regard to the
interest of the spouse or former spouse.
(4) A direct rollover is a payment by the Plan to the eligible
retirement plan specified by the distributee.
2. COMPENSATION
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan years
beginning on or after January 1, 1994, the annual compensation of each employee
taken into account under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000 as
adjusted by the Commissioner for increases in the cost of living in accordance
with Section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not exceeding 12
months, over which compensation is determined (determination period) beginning
in such calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual compensation limit will be multiplied by a fraction,
the numerator of which is the number of months in the determination period, and
the denominator of which is 12.
For Plan years beginning on or after January 1, 1994, any reference in this
Plan to the limitation under Section 401(a)(17) of the Code shall mean the OBRA
'93 annual compensation limit set forth in this provision.
If compensation for any prior determination period is taken into account in
determining an employee's benefits accruing in the current plan year, the
compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before January 1, 1994, the
OBRA '93 annual compensation limit is $150,000.
3. PLAN AMENDMENT
Any amendment to the Plan shall be adopted by formal action of the
Employer's board of directors, partners of the Employer or owner of the
Employer, as appropriate, and executed by an officer, a partner or owner, as
appropriate, authorized to act on behalf of the Employer.
<PAGE>
4. BENEFIT DISTRIBUTION
If a distribution is one to which Sections 401(a)(11) and 417 of the
Internal Revenue Code do not apply, such distribution may commence less than 30
days after the notice required under Section 1.411(a)-11(c) of the Income Tax
Regulations is given, provided that:
(1) The Plan administrator clearly informs the participant that the
participant has a right to a period of at least 30 days after receiving the
notice to consider the decision of whether or not to elect a distribution
(and, if applicable, a particular distribution option), and
(2) The participant, after receiving the notice, affirmatively elects a
distribution.
IN WITNESS WHEREOF, this Amendment has been executed this 3rd day of May,
1995.
STV GROUP INCORPORATED
By /s/ Peter W. Knipe
------------------------
Employer
Attest /s/ Patrick M. Austin
---------------------
EXHIBIT 11
Statement Re: Computation of Per-Share Earnings
<TABLE>
<CAPTION>
Year ended September 30
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Primary
Average shares outstanding 1,812,000 1,743,000 1,626,000
Net effect of dilutive stock options - based
on the treasury stock method using
average market price 20,000 11,000 0
---------- ---------- ----------
Total 1,832,000 1,754,000 1,626,000
========== ========== ==========
Net income $ 394,000 $ 563,000 $ 529,000
========== ========== ==========
Per-share amount $ .22 $ .32 $ .33
========== ========== ==========
</TABLE>
EXHIBIT 13.1
Common Stock Market Prices
The common stock of STV Group, Inc., is traded in the over-the-counter market
under the symbol STVI. The following table sets forth the reported high and low
bid prices for the periods indicated. Such quotations, supplied by NASDAQ,
represent interdealer prices without retail mark-up, mark-down or commission.
1995 High Ask Low Bid
4th Quarter 5 7/8 5
3rd Quarter 5 1/2 5
2nd Quarter 5 1/4 4 3/4
1st Quarter 5 1/2 4 3/8
1994 High Ask Low Bid
4th Quarter 4 1/2 4
3rd Quarter 5 1/4 4 1/4
2nd Quarter 5 5/8 4 7/8
1st Quarter 5 1/4 4 1/4
EXHIBIT 13.2
FINANCIAL HIGHLIGHTS FOR THE FISCAL YEAR ENDED
September 30
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Total Revenues $ 89,232,000 $ 89,465,000 $ 87,361,000 $ 75,789,000 $ 71,244,000
Operating Revenue 69,397,000 65,746,000 62,692,000 55,231,000 56,149,000
Net Income (Loss) 394,000 563,000 529,000 (576,000) 32,000
Net Income (Loss)
per Common Share .22 .32 .33 (.37) .02
Working Capital 8,570,000 7,184,000 6,630,000 6,355,000 6,312,000
Stockholders' Equity 9,872,000 9,078,000 8,515,000 7,486,000 7,862,000
Total Assets 41,626,000 43,960,000 40,719,000 37,184,000 35,339,000
Long-Term Obligations 2,021,000 1,939,000 1,875,000 1,790,000 2,058,000
</TABLE>
EXHIBIT 21.1
Subsidiaries:
STV Incorporated
STV Architects, Inc.
STV Construction Services, Inc.
STV Environmental, Inc.
STV International, Inc.
STV/Silver & Ziskind, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Transmitting STV Grop's Form 10-K. Period ending 09/30/95.
</LEGEND>
<CIK> 0000095045
<NAME> STV GROUP, INC.
<S> <C>
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1,921,000
0
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</TABLE>
