STV GROUP, INCORPORATED
11 Robinson Street
Pottstown, Pennsylvania 19464
OFFICE OF THE PRESIDENT AND
CHIEF EXECUTIVE OFFICER
March 1, 1996
To the Shareholders:
On Wednesday, March 27, 1996, at 10:00 A.M., the Annual Meeting of
Shareholders of the Company will be held at the office of STV Group,
Incorporated, 11 Robinson Street, Pottstown, Pennsylvania 19464, to vote to
elect a director of the Company to serve for three-year terms until the 1999
Annual Meeting of Shareholders, to vote on the adoption of the Company's 1995
Employee Stock Option Plan, and to conduct other business as necessary. We hope
you will be able to attend in person, but if this is inconvenient, we earnestly
request that you be represented by proxy.
The following pages contain the formal notice of this meeting and the
Company's proxy statement. Please sign the enclosed proxy and return it
promptly. Your vote is important, and we encourage you to exercise it. For your
convenience, and to speed delivery of your proxy, please use the enclosed
postage prepaid envelope. A copy of the Company's Annual Report for the year
ended September 30, 1995, accompanies these proxy materials.
Sincerely yours,
Michael Haratunian
Chairman and
Chief Executive Officer
STV GROUP, INCORPORATED
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of STV Group, Incorporated:
The Annual Meeting of Shareholders of STV GROUP, INCORPORATED
("Company") will be held on Wednesday, March 27, 1996, at 10:00 A.M. (local
time), at the office of STV Group, Incorporated, 11 Robinson Street, Pottstown,
Pennsylvania 19464, for the following purposes:
1. To elect to the Board of Directors, a total of one person to serve
for a term of three years and until the respective successor shall have been
duly elected and qualified.
2. To approve the Company's 1995 Employee Stock Option Plan.
3. To transact such other business as may properly come before the
meeting or any postponement or adjournment thereof.
The Board of Directors has fixed February 9, 1996, as the record date
for determination of shareholders entitled to vote at the meeting. Only
shareholders of record at the close of business on that date will be entitled to
notice of, and to vote at, the meeting or any postponement or adjournment
thereof.
A copy of the Company's Annual Report for the year ended September 30,
1995, is enclosed with this Notice of Annual Meeting of Shareholders and the
accompanying proxy statement.
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING OF SHAREHOLDERS.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE RESPECTFULLY
REQUESTED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED FORM OF PROXY PROMPTLY
IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES.
By Order of the Board of Directors
March 1, 1996 Peter W. Knipe
Secretary
IMPORTANT-Shareholders can help the Company avoid the additional expense of
further solicitation by promptly returning the enclosed proxy. The enclosed
addressed envelope requires no postage if mailed in the United States and is
intended for your convenience.
STV GROUP, INCORPORATED
11 Robinson Street
Pottstown, PA 19464
PROXY STATEMENT
This proxy statement, which together with the accompanying proxy card
is first being mailed to shareholders on or about March 1, 1996, is furnished to
the shareholders of STV GROUP, INCORPORATED (the "Company"), in connection with
the solicitation of proxies by the Board of Directors to be used in voting at
the Annual Meeting of Shareholders ("Annual Meeting") to be held on Wednesday,
March 27, 1996, and at any adjournment or postponement thereof.
The cost of the solicitation will be borne by the Company. In addition
to solicitation by mail, proxies may be solicited in person or by telephone,
telegraph or teletype, by officers, directors or employees of the Company,
without additional compensation. The Company will pay the reasonable expenses
incurred by record holders of the Company's common stock, par value $1.00 per
share ("Common Stock"), who are brokers, dealers, banks or voting trustees, or
their nominees, upon request, for mailing proxy material and annual shareholder
reports to beneficial owners.
A form of proxy is enclosed. If properly executed and received in time
for voting, and not revoked, the enclosed proxy will be voted as indicated in
accordance with the instructions thereon. If no directions to the contrary are
indicated, the persons named in the enclosed proxy will vote all shares of
Common Stock For the election of the nominee for directorship hereinafter named
and For the approval of the 1995 Employee Stock Option Plan.
The enclosed proxy confers discretionary authority to vote with respect
to any and all of the following matters that may come before the meeting: (i)
matters which the Company's Board of Directors does not know, a reasonable time
before proxy solicitation, are to be presented; (ii) approval of the minutes of
a prior meeting of shareholders, if such approval does not constitute
ratification of the action taken at that meeting; (iii) the election of any
person to any office for which a bona fide nominee is unable to serve or for
good cause will not serve; (iv) any proposal omitted from this proxy statement
and the form of proxy pursuant to Rules 14a-8 or 14a-9 under the Securities
Exchange Act of 1934, as amended; and (v) matters incidental to the conduct of
the Annual Meeting.
The Board of Directors currently is not aware of any matters (other
than procedural matters) which will be brought before the meeting and which are
not referred to in the enclosed meeting notice. If any such matters are properly
brought before the meeting, the persons named in the enclosed proxy will act or
vote in accordance with their best judgment.
Any shareholder who executes and returns a proxy may revoke it by
submitting written revocation to the Secretary of the Company at any time before
the proxy is exercised, by submitting another duly executed proxy with a later
date, or by appearing and voting in person at the Annual Meeting.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The total number of shares of Common Stock outstanding on February 9,
1996, the record date ("Record Date") for the determination of shareholders
entitled to receive notice of and to vote at the Annual Meeting, was 1,821,246
shares. Each share of Common Stock entitles the registered owner to one vote on
each matter which may be brought before the Annual Meeting, except for the right
to vote cumulatively for directors. Under cumulative voting, each share of stock
entitled to be voted in the election of directors has such number of votes as is
equal to the number of directors to be elected; all such votes may be cast for a
single director or they may be distributed among any two or more of them. The
candidates securing the highest number of votes for election shall be elected.
If no contrary instructions are given, the persons named in the enclosed proxy
will have discretionary authority to cumulate votes among directors. The
presence, in person or by proxy, of shareholders holding at least a majority of
the shares of Common Stock entitled to vote on a particular matter will
constitute a quorum for the purpose of consideration of and action on the matter
at the Annual Meeting.
The following table sets forth certain information, as of the Record
Date, with respect to the beneficial ownership of Common Stock of the Company by
each person known by the Company to own beneficially more than 5% of the Common
Stock, by each director of the Company and each director nominee, by each of the
Company's five most highly compensated executive officers, and by all directors
and named executive officers as a group. All persons listed below have sole
voting and investment power with respect to their shares, unless otherwise
indicated. There are no arrangements known to management the operation of which
may, at a subsequent date, result in a change in control of the Company.
Number of Percent of
Name and Address Shares (1) Class (2)
STV Employee Stock 1,190,356 (3) 65.4
Ownership Plan
c/o STV Group, Incorporated
11 Robinson Street
Pottstown, PA 19464
Richard L. Holland 102,137 (4) 5.6
Marathon, Florida
Michael Haratunian 102,580 (5) 5.6
11 Robinson Street
Pottstown, PA 19464
Joseph H. Santarlasci, Jr. 2,250 (6)
2210 Wyoming Ave., N.W.
Washington, D.C. 20008
Dr. Harry Prystowsky 500 (6)
Champlain Towers North
Unit 208
8877 Collins Avenue
Surfside, Florida
Maurice L. Meier 664 (6)
268 S. Oman Road
Castle Rock, CO 80104
Dominick Servedio 69,305 (7) 3.8
225 Park Avenue South
New York, New York 10003
William J. Doyle 145,844 8.0
Paolin & Sweeney
375 North Kings Highway
Cherry Hill, New Jersey 08034
Whitney A. Sanders II 35,747 (8) 2.0
11 Robinson Street
Pottstown, PA 19464
Peter W. Knipe 21,768 (9) 1.2
11 Robinson Street
Pottstown, PA 19464
Frank E. Lyon, Jr. 13,085 (10) (6)
841 Bishop Street, Suite 510
Honolulu, HI 96813-3919
All executive officers and 522,954 (11) 28.7
directors (As a group 11 persons)
(1) The securities "beneficially owned" by an individual are determined in
accordance with the definition of "beneficial ownership" set forth in
the regulations of the Securities and Exchange Commission and,
accordingly, may include securities owned by or for, among others, the
wife and/or minor children of the individual and any other relative who
has the same home as such individual, as well as other securities as to
which the individual has or shares voting or investment power or has
the right to acquire within 60 days after the Record Date. The same
shares may be beneficially owned by more than one person.
Beneficial ownership may be disclaimed as to certain of the securities.
(2) Based on 1,821,246 shares of Common Stock outstanding.
(3) Participants in the STV Employee Stock Ownership Plan have
"pass-through" voting rights. Thus, a participant is entitled to vote
all shares allocated to such participant as of a particular record
date. Unallocated shares are voted by the Plan administrators, who are
subject to fiduciary duties to the Plan participants in acting in such
capacity. The Plan administrators are appointed by the Board of
Directors and have sole investment power with respect to all shares
held in the Plan. See "EXECUTIVE COMPENSATION - Employee Stock
Ownership Plan."
(4) Includes 40,147 shares of Common Stock held jointly with his wife.
(5) Includes 1,000 shares of Common Stock held by his wife and 55,000
shares of Common Stock which may be acquired within 60 days after the
Record Date, pursuant to stock options. Includes 11,696 shares which
were allocated to Mr. Haratunian's account under the Employee Stock
Ownership Plan, as of the Record Date, and over which he has voting but
not investment power.
(6) Less than 1%.
(7) Includes 45,000 shares of Common Stock which may be acquired within 60
days after the Record Date, pursuant to stock options. Includes 10,605
shares which were allocated to Mr. Servedio's account under the
Employee Stock Ownership Plan, as of the Record Date, and over which he
has voting but not investment power.
(8) Includes 20,000 shares of Common Stock which may be acquired within 60
days after the Record Date, pursuant to stock options. Includes 7,347
shares which were allocated to Mr. Sanders' account under the Employee
Stock Ownership Plan, as of the Record Date, and over which he has
voting but not investment power.
(9) Includes 10,000 shares of Common Stock which may be acquired within 60
days after the Record Date, pursuant to stock options. Includes 4,768
shares which were allocated to Mr. Knipe's account under the Employee
Stock Ownership Plan, as of the Record Date, and over which he has
voting but not investment power.
(10) Includes 5,000 shares of Common Stock which may be acquired within 60
days after the Record Date, pursuant to stock options. Includes 8,085
shares which were allocated to Mr. Lyon's account under the Employee
Stock Ownership Plan, as of the Record Date, and over which he has
voting but not investment power.
(11) Includes 50,109 shares which were allocated to the accounts of such
executive officers and directors, as a group, under the STV Employee
Stock Ownership Plan, as of the Record Date, and over which such
persons have voting but not investment power. Includes 147,500 shares
of Common Stock which may be acquired within 60 days of the record date
pursuant to stock options.
ELECTION OF DIRECTORS
One Director is to be elected at the meeting to serve for a three-year
term until the 1999 Annual Meeting of Shareholders and until their respective
successors are duly elected and qualified.
The Board of Directors has designated the person listed below to be
nominee for election as director. The nominee has consented to being named in
the proxy statement and to serve if elected. The Company has no reason to
believe that any nominee will be unwilling or unable to serve; however, should
any nominee become unavailable for any reason, the Board of Directors may
designate a substitute nominee. The proxy agents intend (unless authority has
been withheld) to vote FOR the election of the Company's nominee.
The following information regarding the Company's nominees for election
as directors is based, in part, on information furnished by these individuals.
Director Positions With
Name Since Age the Company
R. M. Monti -- 66 Director, Nominee
Information Concerning Continuing Directors
The following tables set forth certain information concerning those
directors whose terms will expire in 1997 and 1998.
Director Positions With
Name Since Age the Company
The term of the following directors will expire in 1997:
William J. Doyle (2) (3) 1993 65 Director
Richard L. Holland (1) (2) (3) (4) 1974 69 Director
Michael Haratunian (1) (4) 1986 62 Chairman of the Board of
Directors and Chief
Executive Officer
The term of the following directors will expire in 1998:
Maurice L. Meier 1986 69 Director
Dr. Harry Prystowsky (2) (3) 1984 70 Director
Dominick M. Servedio 1992 55 Director, President and
Chief Operating Officer
(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
(4) Member of the Nominating Committee.
Mr. Monti has been nominated to serve as a director of the Company.
Mr. Monti is the retired Director of Engineering and Chief Engineer of the Port
Authority of New York and New Jersey, 1972 - 1992.
Mr. Doyle has been Chairman of Paolin & Sweeney, an advertising and
public relations firm, since 1992. Previously, he was Vice Chairman of Hill
International, a construction consulting firm. He also serves as a director of
Hippographics, Inc., Coriell Institute, Creative Dimensions Management and is
Chairman of Doyle Management Services.
Mr. Holland, has been associated with the Company in various capacities
continuously since 1968, and retired in 1991. Pursuant to an agreement dated
September 30, 1986, between the Company and Mr. Holland, Mr. Holland is
receiving a severance payment of $138,500 per year in equal monthly
installments. These payments will continue through September 2006.
Mr. Haratunian has been associated with the Company continuously since
1972. He was elected Chairman of the Board and Chief Executive Officer of STV
Group, Incorporated, in 1993. Mr. Haratunian is a registered professional
engineer. Previously, he was President of STV Group, Incorporated. He is also a
director of each of STV's subsidiaries.
Mr. Meier, who has been continuously associated with the Company in various
capacities since 1968 and became President of Sanders and Thomas, Inc. and
Executive Vice President of STV Group, Incorporated, retired on October 1, 1988.
Mr. Servedio has been continuously associated with the Company since 1977
and was elected President and Chief Operating Officer of STV Group,
Incorporated, in 1993. Mr. Servedio is a registered professional engineer. He is
also President of STV/Seelye Stevenson Value & Knecht, Inc.
The Board of Directors of the Company held four meetings during the
fiscal year ended September 30, 1995.
Each director of the Company attended 75% or more of the meetings of
the Board and committees of which they were members during the fiscal year. The
Board has an Audit Committee and a Compensation Committee which meet at varying
intervals. The purpose of the Audit Committee is to review all recommendations
made by the Company's independent public accountants with respect to the
accounting methods used and the system of internal control followed by the
Company and to advise the Board of Directors with respect thereto. The Audit
Committee held one meeting during the fiscal year ended September 30, 1995. The
purpose of the Compensation Committee is to make recommendations to the Board of
Directors with respect to executive compensation. The Compensation Committee
held four meetings during the fiscal year ended September 30, 1995. The Board
has a Nominating Committee, which held one meeting during the fiscal year ended
September 30, 1995.
Directors who are not also officers of the Company receive an annual fee of
$18,000 plus $500 for each committee meeting.
Under the Company's Bylaws, shareholders have the right to nominate
directors in accordance with the procedures specified therein. Nominations for
directors made by shareholders must be (i) made by a shareholder entitled to be
present and to vote at the meeting or by a duly authorized proxy, (ii) submitted
in writing to the Secretary of the Company not later than the close of business
on the tenth business day immediately preceding the date of the meeting, (iii)
accompanied by the signed written consent of the nominee to serve if elected,
and (iv) accompanied by a current resume for those nominees not recommended by
the Board of Directors. All nominations not made as set forth above will be
rejected. In addition, at any time prior to the election of directors at a
meeting or shareholders, the Board of Directors, in its sole discretion, may
(but need not)
designate a substitute nominee to replace any bona fide nominee who was
nominated by a shareholder in accordance with the Bylaws and who, for any
reason, becomes unavailable for election as a director.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file with
the Securities and Exchange Commission (the Commission) initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Such persons are required by Commission regulations
to furnish the Company with copies of all Section 16(a) forms which they file.
For purposes of this regulation, the Company's ESOP plan is considered a person
owning more than ten percent of the Company's Common Stock. Due to a delay in
receiving information, the ESOP filed the required forms late one time out of a
total of eleven transactions. In addition, through an oversight, Messrs
Haratunian, Servedio, Sanders and Knipe each failed to file a timely report of
one stock option grant which occurred in fiscal 1995.
EXECUTIVE COMPENSATION
Board Committee Report on Executive Compensation
The Compensation Committee of the Board assists the Board in
structuring compensation arrangements and incentive plans for the Executive
officers and senior management of the Company and administers the Company's
Employee Stock Option Plan. Decisions on compensation and the grant of
incentives are generally made by the three-member committee, each of whom is a
non-employee director. Decisions by the Committee relating to the compensation
and incentives for the Company's officers are submitted to the full Board for
ratification or revision. Set forth below is the Committee's report on the
compensation policies for 1995 as they affected executive officers of the
Company.
With regard to executive compensation, it is the philosophy of the STV
Group organization to provide a program which attracts and retains executive
officers and other key employees critical to the Company's success, and to
reward executive officers for corporate, group, and individual performance.
Executive compensation, including the CEO, is evaluated by the Board using the
aforementioned subjective criteria and is not based solely on specific objective
criteria such as profitability of the corporation or market value of its stock.
The primary elements of this program are base salary, an Executive
Deferred Compensation Plan, cash incentive compensation, stock options, and
participation in standard company benefit programs such as health and disability
insurance, 401K and the pension plan/ESOP which are available to all employees.
No single element of compensation is awarded without consideration of the
potential total compensation to be paid for the designated position.
Base Salary
Each year the Committee examines the salaries of the officers of the
Company. Certain of the executive officers have employment agreements which
provide for a base salary and their participation in the Company's cash
incentive plan and stock option plan, as well as certain other benefits
generally available to employees. (See Employment Agreements.") The Chief
Executive Officer recommends to the Compensation Committee salary adjustments
for executive officers. These are compared with information available about
salaries in the Company's industry, inflation and the performance of the
individuals. In 1995, the Executive Officers received an average salary increase
of 3.7% primarily as an inflation adjustment. All officers of the Company are
eligible to participate in an unfunded non-qualified deferred compensation plan
which is administered by the outside directors of the firm. This plan allows
officers to defer from ten to twenty percent of their annual salaries by making
an annual election. Interest accrues on the amount deferred at the Company's
bank prime rate plus one percent. Upon the participant's retirement or
separation from employment, the amounts deferred plus accrued interest are paid.
Cash Incentive Compensation
The Company believes that Cash Incentive Compensation plays a strong
role in stimulating management actions aimed at achievement of Company profit
goals. Acceptable profit levels shall be determined by the Board of Directors in
consultation with the Compensation Committee and with management of the Company.
Overall economic conditions, the markets for the Company's services and other
factors may be taken into consideration when determining such profit levels.
Currently, the Company is reserving a pool equal to ten percent of pre-tax,
pre-interest income.
If a cash incentive pool is generated, it is distributed to executives
upon consideration of individual attainment of Company objectives and upon
review all aspects of the individuals' total compensation package. In fiscal
1995, the Board distributed incentive compensation to the executive officers
based on their perception of the individuals performance in attaining the
Company's goals and not pursuant to a specific numerical formula.
Stock Options
Stock options are awarded to executives in order to encourage future
management actions aimed at improving the Company's sales efforts, client
service quality and Company profitability. If the Company is successful in
improving these areas, it is anticipated that these actions will generate a
positive impact on the value of the Company's common stock for stockholders, and
the individuals will be given the opportunity to share in the increased value of
the results of their efforts. In fiscal 1995, the Board authorized the issuance
of 80,000 options.
Chief Executive Officer Compensation
In establishing Mr. Haratunian's compensation levels, consideration is
given to his individual performance level relative to his previous role as
President as well as the factors discussed above for all executive officers. He
received his base salary as set by the Board under the terms of his employment
agreement and cash incentive compensation as determined by the Board under the
foregoing criteria.
Section 162(m) of the Federal Tax Code
Generally, Section 162(m) denies deduction to any publicly held company
such as the Company for certain compensation exceeding $1,000,000 paid to the
chief executive officer and the four other highest paid executive officers,
excluding among other things certain performance-based compensation. The
Compensation Committee intends that the stock options issued under the Employee
Plan qualify for the performance-based exclusion under Section 162(m). The
Compensation Committee will continually evaluate to what extent Section 162 will
apply to its other compensation programs.
Respectively submitted, The Compensation Committee
W. Doyle
R. Holland
H. Prystowski
J. Santarlasci
Summary Compensation Table
The following table shows, for fiscal 1993, 1994 and 1995, the cash
compensation paid by the Company, as well as other compensation paid or accrued
for those years, to the Executive Officers of the Company in all capacities in
which they served.
Long-Term Compensation
Annual Compensation Awards Payouts
Other Restricted
Fiscal Annual Stock LTIP All Other
Name and Position Year Salary Bonus Compensation Awards Options Payouts Compensation
M. Haratunian 1995 $239,168 $32,000 N/A $0 25,000 $0 $85,810 (H)
Chairman of the 1994 $226,644 $35,000 N/A $0 0 $0 $84,847
Board and Chief 1993 $220,000 $35,000 N/A $0 30,000 (C) $0 $20,742
Executive Officer
D. M. Servedio 1995 $203,699 (A) $28,000 N/A $0 20,000 $0 $67,037 (I)
President 1994 $193,013 (B) $30,000 N/A $0 0 $0 $68,940
1993 $187,012 $30,000 N/A $0 25,000 (D) $0 $13,069
W. A. Sanders II 1995 $164,718 $13,000 N/A $0 5,000 $0 $15,649 (J)
Sr. Vice President 1994 $150,010 $15,000 N/A $0 0 $0 $15,467
1993 $145,007 $35,000 N/A $0 15,000 (E) $0 $13,661
F. E. Lyon, Jr. 1995 $146,931 $0 N/A $0 0 $0 $10,321 (K)
Sr. Vice President 1994 $140,005 $0 N/A $0 0 $0 $11,770
1993 $140,000 $5,000 N/A $0 5,000 (F) $0 $15,936
P. W. Knipe 1995 $104,865 $7,000 N/A $0 5,000 $0 $5,714 (L)
Secretary/Treasurer 1994 $97,012 $7,000 N/A $0 0 $0 $5,319
1993 $95,322 $5,000 N/A $0 5,000 (G) $0 $4,905
(A) Includes $19,744.00 deferred in 1995 under the Company's Deferred
Compensation plan but does not include $27,700 paid in 1995
which had been deferred in previous years.
(B) Includes $19,413.00 deferred in 1994 under the Company's Deferred
Compensation plan but does not include $30,000 paid in 1994
which had been deferred in previous years.
(C) Of the total, 12,500 were issued in cancellation of options previously
granted.
(D) Of the total, 12,500 were issued in cancellation of options
previously granted.
(E) Of the total, 12,500 were issued in cancellation of
options previously granted.
(F) Of the total, 5,000 were issued in cancellation
of options previously granted.
(G) Of the total, 5,000 were issued in cancellation of options previously
granted.
(H) "All Other Compensation" for the 1995 fiscal year for Mr. Haratunian
includes the following items: $4,500 contribution to the ESOP plan; $5,131
for company-paid medical plan; $10,166 for company-paid life insurance,
$12,173 accrued interest earned on his deferred compensation and 53,840
earned as part of his SERP.
(I) "All Other Compensation" for the 1995 fiscal year for Mr. Servedio
includes the following items: $4,500 contribution to the ESOP plan; $5,131
for company-paid medical plan; $3,956 for company-paid life insurance,
$1,551 accrued interest earned on his deferred compensation and 51,899
earned as part of his SERP.
(J) "All Other Compensation" for the 1995 fiscal year for Mr. Sanders includes
the following items: $4,500 contribution to the ESOP plan; $5,131 for
company-paid medical plan; $1,368 for company-paid life insurance and $4,650
accrued interest earned on his deferred compensation.
(K) "All Other Compensation" for the 1995 fiscal year for Mr. Lyon includes the
following items: $4,408 contribution to the ESOP plan; $4,545 for
company-paid medical plan and $1,368 for company-paid life insurance.
(L) "All Other Compensation" for the 1995 fiscal year for Mr. Knipe includes the
following items: $3,356 contribution to the ESOP plan; $1,638 for
company-paid medical plan; $720 for company-paid life insurance.
Employment Agreements and Other Plans
Employment Agreements
On November 21, 1994, the Company entered into employment agreements
(collectively the "Agreements"), effective as of January 1, 1994, with Michael
Haratunian, as its Chief Executive Officer, and Dominick Servedio, as its
President and Chief Operating Officer (collectively the "Executive Employees").
The Agreements are for a term of five (5) years and provide for a base annual
salary of $235,000.00 for Mr. Haratunian and $200,000.00 for Mr. Servedio, which
base salary is to be reviewed annually by the Compensation Committee of the
Board of Directors (the "Compensation Committee") and may be increased, but not
decreased, as a result thereof. In addition, the Agreements provide that the
Executive Employees shall be entitled to participate in and be included in the
Company's Annual Incentive Plan established by the Compensation Committee and
ratified by the Board, all of the Company's long term incentive plans generally
available to executive officers, including stock option plans, and all welfare
benefit plans and retirement benefits generally available to other employees of
the Company. In addition, the Agreements provide that the Executive Employees
are entitled to benefits under the Company's Supplemental Executive Retirement
Plan ("SERP"). See "SERP". The Agreements may be terminated by the Company at
any time for "Cause" (as defined), upon the vote of not less than two-thirds of
the entire membership of the Company's Board of Directors. An Executive Employee
may terminate his employment agreement for "Good Reason" (as defined). In the
event that the Company terminates the Executive Employee's employment without
Cause, or the Executive Employee terminates his employment for "Good Reason",
the Executive Employee is entitled to receive his salary for the greater of the
remaining term of the Agreement or twelve (12) months and will be deemed to have
earned the maximum Annual Incentive Opportunity, to be paid in a lump sum, and
all retirement benefits and long term incentives (including the SERP) will
immediately vest. Each employment agreement also contains provisions which are
intended to limit the Executive Employee in competing with the Company
throughout the term of the Agreement.
Supplemental Executive Retirement Plan ("SERP")
The Company's Employment Agreements with Michael Haratunian and
Dominick Servedio (the "Executive Employees") provide for a Supplemental
Executive Retirement Plan ("SERP") for the benefit of Mr. Haratunian and Mr.
Servedio. Under the SERP, Mr. Haratunian will be entitled to a benefit for ten
years commencing upon the later of his attainment of age 70 or his retirement.
The Company will enter into a five year consulting agreement to commence upon
his retirement pursuant to which he will receive annual payments equal to the
SERP benefit. Mr. Servedio will be entitled to a benefit for fifteen years
commencing upon the later of his attainment of age 65 or his retirement. The
amount of the SERP benefit will range from a minimum guaranteed benefit of
thirty percent (30%) to a maximum of sixty percent (60%) of the average of the
last three years of Employees final year-end compensation, to be based upon the
Company's performance over the fiscal years 1994 through 1998. Company
performance and SERP benefits will be measured according to the following
formula with annual performance averaged over the five (5) year period:
The minimum payment to Mr. Haratunian from the aforementioned plan,
based on his current compensation, would be $76,049 per year based on thirty
percent (30%) of his compensation and the maximum payment would be $152,098 per
year based on sixty percent (60%) of his compensation. The minimum payment to
Mr. Servedio from the aforementioned plan, based on his current compensation,
would be $62,867 per year based on thirty percent (30%) of his compensation and
the maximum payment would be $125,735 per year based on sixty percent (60%) of
his compensation.
PERFORMANCE MEASURE WEIGHT BASELINE TARGET SUPERIOR MAXIMUM
o SERP Payout (% of Base) 30% 40% 50% 60%
o Percentage of Target 75% 100% 125% 150%
1 Return of Equity (5) 18% 5.5% 8% 11% 13.5%
2 Cash Flow Days Receivables 22 130 115 100 85
3 Backlog (Months) 20% 9 11 12 14
4 Return of Net Revenue 18 3.0 4.0 5.0 6.5
5 Board Discretion 22
If the Performance Level is Between: SERP Payout will be
0 - 75% 30%
75.01% - 87.50% 35%
87.51% - 100% 40%
100.01% - 112.50% 45%
112.51% - 125.00% 50%
125.01% - 137.50% 55%
137.51% - 150% 60%
In the event of the termination of an Executive Employee's employment
for cause, the SERP benefit will be determined as a percentage of the average of
the last three years of Employees final year-end compensation at the time of
such event based upon performance to such date multiplied by a fraction, the
numerator of which is the number of completed years under the Plan and the
denominator of which is five. The SERP is administered by the Compensation
Committee of the Board which will review the operation of the plan after two
years.
Other Plans
The Company formerly maintained a defined benefit plan and a money
purchase plan. The defined benefit plan was frozen on August 1, 1977, and on
July 31, 1982, the Company purchased annuities to cover its future obligations
to eligible employees under the defined benefit plan. Disclosure of annual
benefits to which all executive officers (as a group) and all employees would be
entitled has been omitted in view of the fact that such amounts would vary
depending on the number of persons in the group who were retired in a given
year.
On September 30, 1981, the money purchase plan was frozen and the
Company ceased making contributions. Amounts previously contributed to the plan
on behalf of eligible employees continued to accrue interest toward future
distribution. On June 22, 1988, a cash distribution of funds was made to all
eligible plan participants.
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End (#) FY-End ($) (1)
Shares Acquired Value Exercisable/ Exercisable/
Name On Exercise Realized Unexercisable Unexercisable
(#) ($)
M. Haratunian 0 $0 30,000 26,250
25,000 0
D. M. Servedio 0 $0 25,000 21,875
20,000 0
P. W. Knipe 0 $0 5,000 4,375
5,000 0
F. E. Lyon, Jr. 0 $0 5,000 4,375
-- --
W. A. Sanders II 0 $0 15,000 13,125
5,000 0
(1) Based on 1995 fiscal year-end share price equal to $5.00.
Option/SAR Grants in Last Fiscal Year
Individual Grants
Number of
Securities % of Total
Underlying Options/SARs Grant
Options/ Granted to Exercise Date
SARs Employees or Base Expiration Present
Name Granted (2) in Fiscal Year Price Date Value (1)
- - ---------------- ----------- -------------- --------- ------------ -------
# (%) ($/Sh) ($)
M. Haratunian 25,000 31.3 5.00 6/14/06 74,289
D. M. Servedio 20,000 25.0 5.00 6/14/06 59,431
W. A. Sanders 5,000 6.3 5.125 3/29/06 15,229
P. W. Knipe 5,000 6.3 5.125 3/29/06 15,229
(1) Value based on Black Scholes Option Pricing Model. The assumptions used in
this calculation were an expected volatility of 0.37, risk free rate of
5.66%, an expected dividend yield of 0% and a term of 10 years. The actual
value, if any, that an executive officer may receive is dependent on the
excess of the stock price over the exercise price. Use of this model should
not be viewed as a forecast of the future performance of the Company's
stock price.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG STV GROUP, INC., THE NASDAQ STOCK MARKET-US INDEX
AND TWO PEER GROUPS
Cumulative Total Return
9/90 9/91 9/92 9/93 9/94 9/95
STV Group, Incorporated STVI 100 120 70 85 88 100
1994 PEER GROUP PPEER1 100 188 181 164 122 121
1995 PEER GROUP PPEER2 100 99 85 89 88 104
NASDAQ STOCK MARKET-US INAS 100 157 176 231 233 321
* $100 INVESTMENT ON 09/30/90 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDED SEPTEMBER 30.
(1) The above graph shows a comparison of the cumulative total return for the
Company's common stock, the NASDAQ Stock Market-U.S. Index, a weighted
index of peer issuers consisting of similar engineering companies (the
"1995 Peer Group Index") and the index of peer issuers used in the
preceding year (the "1994 Peer Group Index"). The company has selected a
different peer group for 1995, from that used in the preceding year which
it believes more accurately reflects the relative performance of the
Company's common stock within the industry in which it operates. The graph
assumes an investment of $100.00 on September 30, 1990 in each company
involved and the reinvestment of all dividends. The 1994 Peer Group Index
of publicly held companies is comprised of Greiner Engineering, Inc., URS
Corp., CRSS Inc., Michael Baker Corp., and Roy F. Weston, Inc. The 1995
Peer Group Index of publicly held companies is comprised of Greiner
Engineering, Inc., URS Corp., Michael Baker Corp., Stone & Webster Inc.,
and Icf Kaiser International, Inc.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee is comprised of Messrs. William J. Doyle, Harry
Prystowsky, Richard L. Holland, and Joseph Santarlasci. In March of 1993, the
Board of Directors authorized the Company to enter into an agreement to have the
firm of Whitby, Santarlasci & Co. perform investment banking services for the
Company for a retainer of $2,500 per month. This agreement ended in December,
1994. Mr. Santarlasci is Chairman and CEO of this investment banking firm and is
also a director of the Company. Mr. Santarlasci abstained from all voting
associated with this decision.
PROPOSAL TWO
APPROVAL OF 1995 EMPLOYEE STOCK OPTION PLAN
In October, 1995, the Board of Directors of the Company adopted the STV
Group, Inc. 1995 Employee Stock Option Plan, subject to approval by the
shareholders of the Company (the "Employee Stock Option Plan" or "Plan").
Pursuant to the Employee Stock Option Plan, stock options may be granted which
qualify under Section 422 of the Internal Revenue Code as incentive stock
options ("Incentive Options") as well as stock options that do not qualify as
incentive options ("Non-Qualified Options"). All officers and key employees of
the Company or any current or future subsidiary corporation are eligible to
receive options under the Employee Stock Option Plan. As of February 9, 1996, no
options had been granted under the Plan.
The Board of Directors recommends that the Employee Stock Option Plan
be approved because it believes that the Plan will advance the interest of the
Company and its shareholders by strengthening the Company's ability to attract,
retain and motivate officers and key employees. The Employee Stock Option Plan
replaces the Company's 1985 Employee Stock Option Plan, which provided for the
issuance of options for an aggregate 300,000 shares of the Company's Common
Stock and which expired in 1995. See "Option Grants."
Set forth below is a summary of the provisions of the Plan. This
summary is qualified and amplified in its entirety by the detailed provisions of
the text of the actual Plan set forth as Exhibit "A" to this Proxy Statement,
all of which is incorporated herein.
Purpose
The purpose of the Employee Stock Option Plan is to provide additional
incentive to officers and other employees of the Company by encouraging them to
invest in the Company's Common Stock and thereby acquire a proprietary interest
in the Company and an increased personal interest in the Company's continued
success and progress.
Administration
The Employee Stock Option Plan is administered by the Compensation
Committee of the Board of Directors ("Compensation Committee") which is
appointed by the Board of Directors and consists of a minimum of three Directors
each of whom shall be a "disinterested person" within the meaning of Rule
16b-3(c)(2)(i) under the Securities Exchange Act or any future corresponding
rule. The Compensation Committee determines, among other things, which officers
and key employees receive an option or options under the Employee Stock Option
Plan, the type of option (Incentive Options or Non-Qualified Options, or both)
to be granted, the number of shares subject to each option, the rate of option
exercisability, and, subject to certain other provisions to be discussed below,
the option price and duration of the option.
The Compensation Committee may, in its discretion, modify or amend any
of the option terms hereafter described, provided that if an Incentive Option is
granted under the Plan, the option as modified or amended continues to be an
Incentive Option.
Aggregate Number of Shares
The aggregate number of shares which may be issued upon the exercise of
options granted under the Employee Stock Option Plan is 500,000 shares of Common
Stock. In the event of any change in the number of outstanding shares of the
Common Stock of the Company, such as by stock dividend, stock split, combination
of shares, recapitalization, merger, consolidation, transfer of assets,
reorganization, conversion or what the Compensation Committee deems in its sole
discretion to be similar circumstances, the aggregate number and kind of shares
which may be issued under the Plan will be appropriately adjusted in a manner
determined in the sole discretion of the Compensation Committee. Reacquired
shares of the Company's Common Stock, as well as unissued shares, may be used
for the purpose of the Plan. Common Stock of the Company subject to options
which have terminated unexercised, either in whole or in part, will be available
for future options granted under the Plan.
Exercise Price
The exercise price for Incentive Options issued under the Employee
Stock Option Plan must be at least equal to the fair market value of the Common
Stock as of the date the option is granted, except that the option exercise
price of Incentive Options granted to an individual owning shares of the Company
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any parent or subsidiary of the Company must not be less
than 110% of the fair market value as of the date of the grant of the option.
The fair market value on any particular date shall mean the last reported sale
price of a share of the Company's Common Stock on any Stock Exchange on which
such stock is then listed or admitted to trading, or on the NASDAQ Stock Market,
on such date, or if no sale took place on such date, the last such date on which
a sale took place, or if the Common Stock is not then quoted on the NASDAQ Stock
Market, or listed or admitted to trading on any Stock Exchange, the average of
the bid and the asked prices in the over-the-counter market on such date, or if
none of the foregoing, a price determined by the Compensation Committee. January
23, 1996 the last reported sale price for the common stock was $6.00.
The Option Price for Non-Qualified Options may be, at the discretion of
the Compensation Committee, less than the fair market value of the Common Stock
on the date of the grant.
Payment
Payment of the option price on exercise of options granted under the
Plan may be made in (a) cash, (b) Company Common Stock which will be valued by
the Secretary of the Company at its fair market value or (c) any combination of
cash and Common Stock of the Company valued as provided in clause (b).
Under the terms of the Plan, the Board has interpreted the provision of
the Plan which allows payment of the option price in Common Stock of the Company
to permit the "pyramiding" of shares in successive exercises. Thus, an optionee
could initially exercise an option in part, acquiring a small number of shares
of Common Stock, and immediately thereafter effect further exercises of the
option, using the Common Stock acquired upon earlier exercises to pay for an
increasingly greater number of shares received on each successive exercise. This
procedure could permit an optionee to pay the option price by using a single
share of Common Stock or a small number of shares of Common Stock and to acquire
a number of shares of Common Stock having an aggregate fair market value equal
to the excess of (a) the fair market value of all shares to which the option
relates over (b) the aggregate exercise price under the option. A vote in favor
of Proposal Two is also a vote in favor of this interpretation.
Exercisability
The Compensation Committee will determine at the time of the grant the
rate of exercisability and may include certain "vesting" provisions. However, in
any case, in the event of a "change in control" of the Company as defined in the
Plan, each optionee may exercise the option for the total number of shares then
subject to the option. Consequently, the approval of the Plan may be deemed to
have certain "anti-takeover" and "anti-greenmail" effects.
Option Expiration and Termination
Unless terminated earlier by the option's terms, Incentive Options and
Non-Qualified Options expire ten years after the date they are granted, except
that if Incentive Options are granted to an individual owning shares of the
Company possessing more than 10% of the total combined voting power of all
classes of stock of the Company on the date of grant, such option will expire
five (5) years after they are granted.
Options terminate three months after the date on which an optionee's
employment by the Company or parent or subsidiary corporation of the Company is
terminated (whether such termination be voluntary or involuntary), other than by
reason of death or disability. The option terminates one year from the date of
termination due to death or disability (but not later than the scheduled
termination date). The heirs or personal representative of a deceased optionee
who could have exercised an option while alive may exercise such option within
one (1) year following the optionee's death (but in no event later than the
expiration date).
Non-Transferability
Options granted pursuant to the Plan are not transferable, except by
the will or the laws of descent and distribution in the event of death. During
an optionee's lifetime, the option is exercisable only by the optionee,
including, for this purpose, the optionee's legal guardian or custodian in the
event of disability.
Amendment or Termination; Plan Expiration
The Company's Board of Directors has the right at any time, and from
time to time, to modify, amend, suspend or terminate the Plan, without
shareholder approval, except to the extent that shareholder approval of the Plan
modification or amendment is required by the Internal Revenue Code of 1986, as
amended, to permit the granting of Incentive Options under the Plan. Any such
action will not affect options previously granted. If the Board of Directors
voluntarily submits a proposed modification, amendment, suspension or
termination for shareholder approval, such submission will not require any
future modifications, amendments, suspensions or terminations (whether or not
relating to the same provision or subject matter) to be similarly submitted for
shareholder approval. Options shall not be granted pursuant to this Plan after
the expiration of ten (10) years from the date the Plan is adopted by the Board
of Directors
Federal Income Tax Consequences
THE FOLLOWING INFORMATION IS NOT INTENDED TO BE A COMPLETE DISCUSSION
OF THE FEDERAL INCOME TAX CONSEQUENCES OF PARTICIPATION IN THE PLAN AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE"), AND THE REGULATIONS ADOPTED PURSUANT THERETO. THE
PROVISIONS OF THE CODE DESCRIBED IN THIS SECTION INCLUDE CURRENT TAX LAW ONLY
AND DO NOT REFLECT ANY PROPOSALS TO REVISE CURRENT TAX LAW.
Incentive Stock Options
Generally, under the Code, an optionee will not realize taxable income
by reason of the grant or the exercise of an Incentive Option (see, however,
discussion of Alternative Minimum Tax below). If an optionee exercises an
Incentive Option and does not dispose of the shares until the later of (i) two
years from the date the option was granted and (ii) one year from the date of
exercise, the entire gain, if any, realized upon
disposition of such shares will be taxable to the optionee as long-term capital
gain, and the Company will not be entitled to any deduction. If an optionee
disposes of the shares within the period of two years from the date of grant or
one year from the date of exercise (a "disqualifying disposition"), the optionee
generally will realize ordinary income in the year of disposition and the
Company will receive a corresponding deduction, in an amount equal to the excess
of (1) the lesser of (a) the amount, if any, realized on the disposition and (b)
the fair market value of the shares on the date the option was exercised (or
such later date, if applicable, as described below in "Non-Qualified Options",
if the optionee is a "16(b) Person" who has not made an "83(b) Election," as
such terms are defined in "Non-Qualified Options" below) over (2) the option
price. Any additional gain realized on the disposition will be long-term or
short-term capital gain and any loss will be long-term or short-term capital
loss. The optionee will be considered to have disposed of a share if he sells,
exchanges, makes a gift of or transfers legal title to the share (except
transfers, among others, by pledge, on death or to spouses). If the disposition
is by sale or exchange, the optionee's tax basis will equal the amount paid for
the share plus any ordinary income realized as a result of the disqualifying
disposition.
The exercise of an Incentive Option may subject the optionee to the
alternative minimum tax. The amount by which the fair market value of the shares
purchased at the time of the exercise (or such later date, if applicable, as
described above in "Non-Qualified Options", if the optionee is a 16(b) Person
who has not made an 83(b) Election) exceeds the option exercise price is an
adjustment for purposes of computing the so-called alternative minimum tax. In
the event of a disqualifying disposition of the shares in the same taxable year
as exercise of the Incentive Option, no adjustment is then required for purposes
of the alternative minimum tax, but regular income tax, as described above, may
result from such disqualifying disposition. Effective January 1, 1993, the
Revenue Reconciliation Act of 1993 replaced the 24% alternative minimum tax rate
on individuals with a two-tier alternative minimum tax rate having an initial
rate of 26% and a second-tier rate of 28% on alternative minimum taxable income
over $175,000.
An optionee who surrenders shares as payment of the exercise price of
his Incentive Option generally will not recognize gain or loss on his surrender
of such shares. The surrender of shares previously acquired upon exercise of an
Incentive Option in payment of the exercise price of another Incentive Option,
is, however, a "disposition" of such stock. If the incentive stock option
holding period requirements described above have not been satisfied with respect
to such stock, such disposition will be a disqualifying disposition that may
cause the optionee to recognize ordinary income as discussed above.
Under the Code, all of the shares received by an optionee upon exercise
of an Incentive Option by surrendering shares will be subject to the incentive
stock option holding period requirements. Of those shares, a number of shares
(the "Exchange Shares") equal to the number of shares surrendered by the
optionee will have the same tax basis for capital gains purposes (increased by
any ordinary income recognized as a result of any disqualifying disposition of
the surrendered shares if they were incentive stock option shares) and the same
capital gains holding period as the shares surrendered. For purposes of
determining ordinary income upon a subsequent disqualifying disposition of the
Exchange Shares, the amount paid for such shares will be deemed to be the fair
market value of the shares surrendered. The balance of the shares received by
the optionee will have a tax basis (and a deemed purchase price) of zero and a
capital gains holding period beginning on the date of exercise. The Incentive
Stock Option holding period for all shares will be the same as if the option had
been exercised for cash.
Non-Qualified Options
Generally, there will be no federal income tax consequences to either
the optionee or the Company on the grant of Non-Qualified Options granted
pursuant to the Plan. On the exercise of a Non-Qualified Option, the optionee
(except as described below) has taxable ordinary income equal to the excess of
the fair market value of the shares acquired on the exercise date over the
option price of the shares. The Company will be entitled to a federal income tax
deduction in an amount equal to such excess, provided that the Company complies
with applicable withholding rules. However, special rules apply where stock is
registered under the Exchange Act and the optionee is an officer, director or
10% or greater shareholder of the Company subject to potential liability under
Section 16(b) of the Securities Exchange Act of 1934 ("Exchange Act") for
so-called "short-swing" profits
(a "16(b) Person") in connection with certain purchases and sales, or sales and
purchases, of the Company's stock within a period of six months.
Under SEC rules promulgated under Section 16(b) of the Exchange Act,
the grant of an option, not its exercise, is treated as a "purchase" for Section
16(b) purposes. If such grant is made pursuant to a plan qualifying under the
SEC rules and six months elapse between the grant of the option and the sale of
the shares received upon the exercise thereof, such grant will be exempt from
Section 16(b). With respect to the exercise of a Non-Qualified Option, if a
16(b) Person has not purchased or acquired shares of Common Stock within the six
month period prior to the exercise date (other than purchases or acquisitions
exempt from Section 16(b)), the 16(b) Person will be required to recognize
ordinary income (i) six months after the date of grant (in the event of exercise
within six months of the date of grant) or (ii) the date of exercise (in the
event of exercise after six months from the date of grant). The timing of income
recognition with respect to a 16(b) Person who exercises a Non-Qualified Option
within six months of a prior non-exempt purchase or acquisition of Common Stock
is uncertain. It is possible that the Internal Revenue Service will take the
position that, despite the prior non-exempt purchase or acquisition, the 16(b)
Person recognizes income on the date of exercise rather than the date which is
six months following the date of such prior non-exempt purchase or acquisition.
A 16(b) Person can be certain of recognizing income on the exercise date by
making an election not later than 30 days following the exercise date to have
the income determined as of the date of exercise (an "83(b) Election"), in which
case the Company's deduction will also be determined as of the exercise date.
Upon the sale of stock acquired by exercise of a Non-Qualified Option,
optionees will realize long-term or short-term capital gain or loss depending
upon their holding period for such stock. Under current law, net capital gains
(net long term capital gain less net short term capital loss) is subject to a
maximum rate of 28%. Capital losses are deductible only to the extent of capital
gains for the year plus $3,000 for individuals.
An optionee who surrenders shares in payment of the exercise price of a
Non-Qualified Option will not recognize gain or loss with respect to the shares
so delivered unless such shares were acquired pursuant to the exercise of an
Incentive Option and the delivery of such shares is a disqualifying disposition.
See "FEDERAL INCOME TAX CONSEQUENCES - Incentive Stock Options". The optionee
will recognize ordinary income on the exercise of the Non-Qualified Option as
described above. Of the shares received in such an exchange, that number of
shares equal to the number of shares surrendered will have the same tax basis
and capital gains holding period as the shares surrendered. The balance of the
shares received will have a tax basis equal to their fair market value on the
date of exercise and the capital gains holding period will begin on the date of
exercise (or such later date, as described above, if the optionee is a 16(b)
Person who has not made an 83(b) Election, and such later date is applicable).
Section 162(m)
Whenever an optionee recognizes ordinary income as a result of a
failure to satisfy the holding period requirements with respect to an Incentive
Option or upon the exercise of a Non-Qualified Option, the Company will be
entitled to a deduction in the same amount at the same time, provided that the
Company satisfies any applicable federal withholding requirements and the
deduction limit contained in Section 162(m) of the Code is not exceeded.
Generally, Section 162(m) of the Code and the regulations promulgated thereunder
deny a deduction to any publicly held corporation, such as the Company, for
certain compensation exceeding $1,000,000 paid to the chief executive officer
and the four other highest paid executive officers, excluding among other
things, certain performance-based compensation. The Company is reviewing Section
162(m) to determine whether modifications of the Plan are required to qualify
Options granted under the Plan for the performance-based compensation exclusion.
Option Grants
As of December 31, 1995, options to purchase a total of 235,000 shares
of Common Stock at an average exercise price of $4.516 had been granted under
the Company's 1985 Stock Option Plan.
No determination has been made as to how the proposed 500,000 option
shares under the 1995 Employee Stock Option Plan will be allocated among any
particular officer or employee.
For information as to the number of options granted to the Company's
Chief Executive Officer and four other highest paid Executive Officers pursuant
to the Company's 1985 Employee Stock Option Plan, see "Executive Compensation -
Aggregate Option/SAR Exercises in Fiscal Year and FY-End Option/SAR Values
- - -Number of Unexercised Options at FY-End." The weighted average exercise price
for such options is $4.523. In addition to these options, pursuant to the
Company's 1985 Employee Stock Option Plan, the Company has issued options to
purchase 50,000 shares of Common Stock to the Company's other Executive
Officers, at a weighted average exercise price of $4.525 and options to purchase
10,000 shares of Common Stock to all employees, other than Executive Officers,
at a weighted average exercise price of $4.625.
Vote Required
Unless authority has been withheld, the proxy agents intend to vote for
the approval of the Employee Stock Option Plan. The approval requires the
affirmative vote of the majority of the votes cast by all shareholders
represented and entitled to vote thereon. Under the Pennsylvania Business
Corporation Law, an abstention, withholding of authority to vote or broker
non-vote, therefore will not have the same legal effect as an against vote and
will not be counted in determining whether the proposal has received the
required shareholder vote. However for purposes of compliance with the
shareholder approval requirement under Rule 16b-3 of the Securities Exchange Act
of 1934 applicable to the foregoing proposal, the staff of the Securities and
Exchange Commission has expressed the view that abstentions (but not broker
non-votes) have the legal effect of an "against" vote and are counted in
determining whether a proposal has received the required shareholder vote.
The Board of Directors of the Company unanimously recommends that you
vote "For" Proposal Two.
SHAREHOLDER PROPOSALS
Shareholder proposals for the 1997 Annual Meeting must be submitted to
the Company by November 10, 1996, to receive consideration.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Company's independent public accountant for the fiscal year ended
September 30, 1995, and for the current fiscal year is the firm of Ernst & Young
LLP, Reading, Pennsylvania. The selection of the independent public accountant
is not being submitted to shareholders for approval because there is no legal
requirement to do so.
A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting and to be available to respond to appropriate questions. The
representative will have the opportunity to make a statement if he or she so
desires.
For the fiscal year ended September 30, 1995, Ernst & Young LLP
performed audit, tax and consulting services for the Company.
EACH PERSON SOLICITED HEREUNDER CAN OBTAIN A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED SEPTEMBER 30, 1995, REQUIRED TO BE FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION, WITHOUT CHARGE, EXCEPT FOR EXHIBITS
TO THE REPORT, BY SENDING A WRITTEN REQUEST THEREFOR TO STV GROUP, INCORPORATED,
11 ROBINSON STREET, P. O. BOX 459, POTTSTOWN, PENNSYLVANIA 19464. ATTENTION:
PETER W. KNIPE, SECRETARY.
By Order of the Board of Directors
Peter W. Knipe
Secretary
EXHIBIT A
STV GROUP, INC.
1995 EMPLOYEE STOCK OPTION PLAN
1. Purpose of Plan
The purpose of the 1995 Employee Stock Option Plan (the "Plan") is
to provide additional incentive to officers and other key employees of STV
Group, Inc. (the "Company") and each present or future parent or subsidiary
corporation by encouraging them to invest in shares of Common Stock, par value
$1.00 per share ("Common Stock"), of the Company and thereby acquire a
proprietary interest in the Company and an increased personal interest in the
Company's success and progress, to the mutual benefit of officers, employees and
shareholders.
2. Aggregate Number of Shares
500,000 shares of the Company's Common Stock shall be the aggregate
number of shares which may be issued under this Plan. Notwithstanding the
foregoing, in the event of any change in the outstanding shares of the Common
Stock of the Company by reason of a stock dividend, stock split, combination of
shares, recapitalization, merger, consolidation, transfer of assets,
reorganization, conversion or what the Compensation Committee (defined in
Section 4(a)), deems in its sole discretion to be similar circumstances, the
aggregate number and kind of shares which may be issued under this Plan shall be
appropriately adjusted in a manner determined in the sole discretion of the
Compensation Committee. Reacquired shares of the Company's Common Stock, as well
as unissued shares, may be used for the purpose of this Plan. Shares of the
Company's Common Stock subject to options which have terminated unexercised,
either in whole or in part, shall be available for future options granted under
this Plan.
3. Class of Persons Eligible to Receive Options
(a) All officers and key employees of the Company and of any present
or future parent or subsidiary corporation of the Company are eligible to
receive an option or options under this Plan. The individuals who shall, in
fact, receive an option or options shall be selected by the Compensation
Committee, in its sole discretion, except as otherwise specified in Section 4
hereof.
(b) The maximum number of shares of Common Stock for which options
may be granted under this Plan to any participant during any fiscal year of the
Company is 100,000 shares (as adjusted for any change in the outstanding shares
of the Common Stock of the Company by reason of a stock dividend, stock split,
combination of shares, recapitalization, merger, consolidation, transfer of
assets, reorganization, conversion or what the Compensation Committee deems in
its sole discretion to be similar circumstances).
4. Administration of Plan
(a) This Plan shall be administered by the Compensation Committee of
the Board of Directors (the "Compensation Committee"). The Compensation
Committee shall be composed of a minimum of three members of the Board of
Directors as the Board shall determine, each of whom shall be a "disinterested
person" within the meaning of Rule 16b-3(c)(2)(i) under the Securities Exchange
Act of 1934, as amended, of the Securities and Exchange Commission (the "SEC")
or any future corresponding rule.
(b) The Compensation Committee shall, in addition to its other
authority and subject to the provisions of this Plan, determine which
individuals shall in fact be granted an option or options, whether the option
shall be an Incentive Stock Option or a Non-Qualified Stock Option (as such
terms are defined in Section 5(a)), the number of shares to be subject to each
of the options, the time or times at which the options shall be granted, the
rate of option exercisability, and, subject to Section 5 hereof, the price at
which each of the options is exercisable and the duration of the option.
(c) The Compensation Committee shall adopt such rules for the
conduct of its business and administration of this Plan as it considers
desirable. A majority of the members of the Compensation Committee shall
constitute a quorum for all purposes. The vote or written consent of a majority
of the members of the Compensation Committee on a particular matter shall
constitute the act of the Compensation Committee on such matter. The
Compensation Committee shall have the right to construe the Plan and the options
issued pursuant to it, to correct defects and omissions and to reconcile
inconsistencies to the extent necessary to effectuate the Plan and the options
issued pursuant to it, and such action shall be final, binding and conclusive
upon all parties concerned. No member of the Compensation Committee or the Board
of Directors shall be liable for any act or omission (whether or not negligent)
taken or omitted in good faith, or for the exercise of any authority or
discretion granted in connection with the Plan to the Compensation Committee or
the Board of Directors, or for the acts or omissions of any other members of the
Compensation Committee or the Board of Directors. Subject to the numerical
limitations on Compensation Committee membership set forth in Section 4(a)
hereof, the Board of Directors may at any time appoint additional members of the
Compensation Committee and may at any time remove any member of the Compensation
Committee with or without cause. Vacancies in the Compensation Committee,
however caused, may be filled by the Board of Directors, if it so desires.
5. Incentive Stock Options and Non-Qualified Stock Options
(a) Options issued pursuant to this Plan may be either Incentive
Stock Options granted pursuant to Section 5(b) hereof or Non-Qualified Stock
Options granted pursuant to Section 5(c) hereof, as determined by the
Compensation Committee. An "Incentive Stock Option" is an option which satisfies
all of the requirements of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") and the regulations thereunder, and a "Non-Qualified Stock
Option" is an option which either does not satisfy all of those requirements or
the terms of the option provide that it will not be treated as an Incentive
Stock Option. The Compensation Committee may grant both an Incentive Stock
Option and a Non-Qualified Stock Option to the same person, or more than one of
each type of option to the same person. The option price for Incentive Stock
Options issued under this Plan shall be equal at least to the fair market value
(as defined below) of the Company's Common Stock on the date of the grant of the
option as determined by the Compensation Committee in accordance with its
interpretation of the requirements of Section 422 of the Code and the
regulations thereunder. The option price for Non-Qualified Stock Options issued
under this Plan may, in the sole discretion of the Compensation Committee, be
less than the fair market value of the Common Stock on the date of the grant of
the option. If an Incentive Stock Option is granted to an individual who, at the
time the option is granted, owns stock possessing more than 10% of the total
combined voting power of all shares of stock of the Company or any parent or
subsidiary corporation of the Company (a "10% Shareholder"), the option price
shall not be less than 110% of the fair market value of the Company's Common
Stock on the date of grant of the option. The fair market value of the Company's
Common Stock on any particular date shall mean the last reported sale price of a
share of the Company's Common Stock on any stock exchange on which such stock is
then listed or admitted to trading, or on the Nasdaq Stock Market, on such date,
or if no sale took place on such day, the last such date on which a sale took
place, or if the Common Stock is not then quoted on the Nasdaq Stock Market, or
listed or admitted to trading on any stock exchange, the average of the bid and
asked prices in the over-the-counter market on such date, or if none of the
foregoing, a price determined by the Compensation Committee.
(b) Subject to the authority of the Compensation Committee set forth
in Section 4(b) hereof, Incentive Stock Options issued pursuant to this Plan
shall be issued substantially in the form set forth in Appendix I hereof, which
form is hereby incorporated by reference and made a part hereof, and shall
contain substantially the terms and conditions set forth therein. Incentive
Stock Options shall not be exercisable after the expiration of ten years (five
years in the case of 10% Shareholders) from the date such options are granted,
unless terminated earlier under the terms of the option. At the time of the
grant of an Incentive Stock Option hereunder, the Compensation Committee may, in
its discretion, modify or amend any of the option terms contained in Appendix I
for any particular optionee, provided that the option as modified or amended
satisfies the requirements of Section 422 of the Code and the regulations
thereunder. Each of the options granted pursuant to this Section 5(b) is
intended, if possible, to be an "Incentive Stock Option" as that term is defined
in Section 422 of the Code and the regulations thereunder. In the event this
Plan or any option granted pursuant to this Section 5(b) is in any way
inconsistent with the applicable legal requirements of the Code or the
regulations thereunder for an Incentive Stock Option, this Plan and such option
shall be deemed automatically amended as of the date hereof to conform to such
legal requirements, if such conformity may be achieved by amendment.
(c) Subject to the authority of the Compensation Committee set forth
in Section 4(b) hereof, Non-Qualified Stock Options issued pursuant to this Plan
shall be issued substantially in the form set forth in Appendix II hereof, which
form is hereby incorporated by reference and made a part hereof, and shall
contain substantially the terms and conditions set forth therein. Non-Qualified
Stock Options shall expire ten years after the date they are granted, unless
terminated earlier under the option terms. At the time of granting a
Non-Qualified Stock Option hereunder, the Compensation Committee may, in its
discretion, modify or amend any of the option terms contained in Appendix II for
any particular optionee.
(d) Neither the Company nor any of its current or future parent,
subsidiaries or affiliates, nor their officers, directors, shareholders, stock
option plan committees, employees or agents shall have any liability to any
optionee in the event: (i) an option granted pursuant to Section 5(b) hereof
does not qualify as an "Incentive Stock Option" as that term is used in Section
422 of the Code and the regulations thereunder; (ii) any optionee does not
obtain the tax treatment pertaining to an Incentive Stock Option; or (iii) any
option granted pursuant to Section 5(c) hereof is an "Incentive Stock Option."
6. Modification, Amendment, Suspension and Termination
Options shall not be granted pursuant to this Plan after the
expiration of ten years from the date the Plan is adopted by the Board of
Directors of the Company. The Board of Directors reserves the right at any time,
and from time to time, to modify or amend this Plan in any way, or to suspend or
terminate it, effective as of such date, which date may be either before or
after the taking of such action, as may be specified by the Board of Directors;
provided, however, that such action shall not affect options granted under the
Plan prior to the actual date on which such action occurred. If a modification
or amendment of this Plan is required by the Code or the regulations thereunder
to be approved by the shareholders of the Company in order to permit the
granting of "Incentive Stock Options" (as that term is defined in Section 422 of
the Code and regulations thereunder) pursuant to the modified or amended Plan,
such modification or amendment shall also be approved by the shareholders of the
Company in such manner as is prescribed by the Code and the regulations
thereunder. If the Board of Directors voluntarily submits a proposed
modification, amendment, suspension or termination for shareholder approval,
such submission shall not require any future modifications, amendments,
suspensions or terminations (whether or not relating to the same provision or
subject matter) to be similarly submitted for shareholder approval.
7. Effectiveness of Plan
This Plan shall become effective on the date of its adoption by the
Company's Board of Directors, subject however to approval by the holders of the
Company's Common Stock in the manner as prescribed in the Code and the
regulations thereunder. Options may be granted under this Plan prior to
obtaining shareholder approval, provided such options shall not be exercisable
before such shareholder approval is obtained.
8. General Conditions
(a) Nothing contained in this Plan or any option granted pursuant to
this Plan shall confer upon any employee the right to continue in the employ of
the Company or any present or future parent, affiliated or subsidiary
corporation or interfere in any way with the rights of the Company or any
present or future parent, affiliated or subsidiary corporation to terminate his
employment in any way.
(b) Corporate action constituting an offer of stock for sale to any
employee under the terms of the options to be granted hereunder shall be deemed
complete as of the date when the Compensation Committee authorizes the grant of
the option to the employee, regardless of when the option is actually delivered
to the employee or acknowledged or agreed to by him.
(c) The terms "parent corporation" and "subsidiary corporation" as
used throughout this Plan, and the options granted pursuant to this Plan, shall
(except as otherwise provided in the option form) have the respective meanings
ascribed to such terms when contained in Section 422(b) of the Code and the
regulations thereunder, and the Company shall be deemed to be the grantor
corporation for purposes of applying such meanings.
(d) References in this Plan to the Code shall be deemed to also
refer to the corresponding provisions of any future United States revenue law.
(e) The use of the masculine pronoun shall include the feminine gender
whenever appropriate.
APPENDIX I
INCENTIVE STOCK OPTION
To:________________________________Name_________________________________________
______________________________Address________________________________________
Date of Grant:_________________________________
You are hereby granted an option, effective as of the date hereof, to
purchase ______ shares of Common Stock, par value $1.00 per share ("Common
Stock"), of STV Group, Inc. (the "Company") at a price of _____ per share
pursuant to the Company's 1995 Employee Stock Option Plan (the "Plan") adopted
by the Company's Board of Directors effective October 11, 1995. Your option
price is intended to equal at least the fair market value of the Company's
Common Stock as of the date hereof; provided, however, that if, at the time this
option is granted, you own stock possessing more than 10% of the total combined
voting power of all shares of stock of the Company or any parent or subsidiary
corporation of the Company (a "10% Shareholder"), your option price is intended
to be at least 110% of the fair market value of the Company's Common Stock as of
the date hereof.
Your option may first be exercised on and after__________, but not before
that time. [On and after ______________ and prior to the Termination Date (as
hereinafter defined), your option may be exercised for up to __% of the total
number of shares subject to the option minus the number of shares previously
purchased by exercise of the option (as adjusted for any change in the
outstanding shares of the Common Stock of the Company by reason of a stock
dividend, stock split, combination of shares, recapitalization, merger,
consolidation, transfer of assets, reorganization, conversion or what the
Compensation Committee deems in its sole discretion to be similar
circumstances). Each succeeding year thereafter and prior to the Termination
Date, your option may be exercised for up to an additional ____% of the total
number of shares subject to the option minus the number of shares previously
purchased by exercise of the option (as adjusted for any change in the
outstanding shares of the Common Stock of the Company by reason of a stock
dividend, stock split, combination of shares, recapitalization, merger,
consolidation, transfer of assets, reorganization, conversion or what the
Compensation Committee deems in its sole discretion to be similar
circumstances).]1 No fractional shares shall be issued or delivered.
This option shall terminate and is not exercisable after the expiration of
ten years from the date of its grant (five years from the date of grant if, at
the time of the grant, you are a 10% Shareholder) (the "Scheduled Termination
Date"), except if terminated earlier as hereinafter provided (the "Termination
Date").
In the event of a "change of control" (as hereafter defined) of the
Company, your option may, from and after the date of the change of control, and
notwithstanding the second paragraph of this option, be exercised for up to 100%
of the total number of shares then subject to the option minus the number of
shares previously purchased upon exercise of the option (as adjusted for any
changes in the outstanding Common Stock by reason of a stock dividend, stock
split, combination of shares, recapitalization, merger, consolidation, transfer
of assets, reorganization, conversion or what the Compensation Committee deems
in its sole discretion to be similar circumstances).
__________________________
1 The bracketed portion of this paragraph should be included if the number
of shares which may be acquired upon exercise of the option will increase over
time.
A "change of control" shall be deemed to have occurred upon the happening
of any of the following events:
1. A change within a twelve-month period in a majority of the members of
the board of directors of the Company;
2. A change within a twelve-month period in the holders of more than 50% of
the outstanding voting stock of the Company; or
3. Any other event deemed to constitute a "change in control" by the
Compensation Committee.
You may exercise your option by giving written notice to the Secretary of
the Company on forms supplied by the Company at its then principal executive
office, accompanied by payment of the option price for the total number of
shares you specify that you wish to purchase. The payment may be in any of the
following forms: (a) cash, which may be evidenced by a check; (b) certificates
representing shares of Common Stock of the Company, which will be valued by the
Secretary of the Company at the fair market value per share of the Company's
Common Stock (as determined in accordance with the Plan) on the last trading day
immediately preceding the date of delivery of such certificates to the Company,
accompanied by an assignment of the stock to the Company; or (c) any combination
of cash and Common Stock of the Company valued as provided in clause (b). Any
assignment of stock shall be in a form and substance satisfactory to the
Secretary of the Company, including guarantees of signature(s) and payment of
all transfer taxes if the Secretary deems such guarantees necessary or desirable
or determines that such taxes are due and payable.
Your option will, to the extent not previously exercised by you, terminate
three months after the date on which your employment by the Company or a parent
or subsidiary corporation of the Company is terminated, whether such termination
is voluntary or not, other than by reason of disability as defined in Section
22(e)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations thereunder, or death, in which case your option will terminate one
year from the date of termination of employment due to disability or death (but
in no event later than the Scheduled Termination Date). After the date your
employment is terminated, as aforesaid, you may exercise this option only for
the number of shares which you had a right to purchase and did not purchase on
the date your employment terminated. If you are employed by a subsidiary
corporation of the Company, your employment shall be deemed to have terminated
on the date your employer ceases to be a subsidiary corporation of the Company,
unless you are on that date transferred to the Company or another subsidiary
corporation of the Company. Your employment shall not be deemed to have
terminated if you are transferred from the Company to a subsidiary corporation,
or vice versa, or from one subsidiary corporation to another subsidiary
corporation.
Anything in this option to the contrary notwithstanding, your option will
terminate immediately if your employment is terminated for cause (as determined
by the Company in its sole and absolute discretion). Your employment shall be
deemed to have been terminated for cause if you are terminated due to, among
other reasons, (i) your willful misconduct or gross negligence, (ii) your
material breach of any agreement with the Company or (iii) your failure to
render satisfactory services to the Company.
If you die while employed by the Company or a parent or subsidiary
corporation of the Company, your legatee(s), distributee(s), executor(s) or
administrator(s), as the case may be, may, at any time within one year after the
date of your death (but in no event later than the Scheduled Termination Date),
exercise the option as to any shares which you had a right to purchase and did
not purchase during your lifetime. If your employment with the Company or a
parent or subsidiary corporation is terminated by reason of your becoming
disabled (within the meaning of Section 22(e)(3) of the Code and the regulations
thereunder), you or your legal guardian or custodian may at any time within one
year after the date of such termination (but in no event later than the
Scheduled Termination Date), exercise the option as to any shares which you had
a right to purchase and did not purchase prior to such termination. Your
legatee, distributee, executor, administrator, guardian or custodian must
present proof of his authority satisfactory to the Company prior to being
allowed to exercise this option.
In the event of any change in the outstanding shares of the Common Stock
of the Company by reason of a stock dividend, stock split, combination of
shares, recapitalization, merger, consolidation, transfer of assets,
reorganization, conversion or what the Compensation Committee deems in its sole
discretion to be similar circumstances, the number and kind of shares subject to
this option and the option price of such shares shall be appropriately adjusted
in a manner to be determined in the sole discretion of the Compensation
Committee.
This option is not transferable otherwise than by will or the laws of
descent and distribution, and is exercisable during your lifetime only by you,
including, for this purpose, your legal guardian or custodian in the event of
disability. Until the option price has been paid in full pursuant to due
exercise of this option and the purchased shares are delivered to you, you do
not have any rights as a shareholder of the Company. The Company reserves the
right not to deliver to you the shares purchased by virtue of the exercise of
this option during any period of time in which the Company deems, in its sole
discretion, that such delivery would violate a federal, state, local or
securities exchange rule, regulation or law.
Notwithstanding anything to the contrary contained herein, this option is
not exercisable until all the following events occur and during the following
periods of time:
(a) Until the Plan pursuant to which this option is granted is
approved by the shareholders of the Company in the manner prescribed by the Code
and the regulations thereunder;
(b) Until this option and the optioned shares are approved and/or
registered with such federal, state and local regulatory bodies or agencies and
securities exchanges as the Company may deem necessary or desirable; or
(c) During any period of time in which the Company deems that the
exercisability of this option, the offer to sell the shares optioned hereunder,
or the sale thereof, may violate a federal, state, local or securities exchange
rule, regulation or law, or may cause the Company to be legally obligated to
issue or sell more shares than the Company is legally entitled to issue or sell.
The following two paragraphs shall be applicable if, on the date of
exercise of this option, the Common Stock to be purchased pursuant to such
exercise has not been registered under the Securities Act of 1933, as amended,
and under applicable state securities laws, and shall continue to be applicable
for so long as such registration has not occurred:
(a) The optionee hereby agrees, warrants and represents that he will
acquire the Common Stock to be issued hereunder for his own account for
investment purposes only, and not with a view to, or in connection with, any
resale or other distribution of any of such shares, except as hereafter
permitted. The optionee further agrees that he will not at any time make any
offer, sale, transfer, pledge or other disposition of such Common Stock to be
issued hereunder without an effective registration statement under the
Securities Act of 1933, as amended, and under any applicable state securities
laws or an opinion of counsel acceptable to the Company to the effect that the
proposed transaction will be exempt from such registration. The optionee shall
execute such instruments, representations, acknowledgements and agreements as
the Company may, in its sole discretion, deem advisable to avoid any violation
of federal, state, local or securities exchange rule, regulation or law.
(b) The certificates for Common Stock to be issued to the optionee
hereunder shall bear the following legend:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or under applicable state
securities laws. The shares have been acquired for investment and may not
be offered, sold, transferred, pledged or otherwise disposed of without an
effective registration statement under the Securities Act of 1933, as
amended, and under any applicable state securities laws or an opinion of
counsel acceptable to the Company that the proposed transaction will be
exempt from such registration."
The foregoing legend shall be removed upon registration of the legended shares
under the Securities Act of 1933, as amended, and under any applicable state
laws or upon receipt of any opinion of counsel acceptable to the Company that
said registration is no longer required.
The sole purpose of the agreements, warranties, representations and legend
set forth in the two immediately preceding paragraphs is to prevent violations
of the Securities Act of 1933, as amended, and any applicable state securities
laws.
It is the intention of the Company and you that this option shall, if
possible, be an "Incentive Stock Option" as that term is used in Section 422 of
the Code and the regulations thereunder. In the event this option is in any way
inconsistent with the legal requirements of the Code or the regulations
thereunder for an "Incentive Stock Option," this option shall be deemed
automatically amended as of the date hereof to conform to such legal
requirements, if such conformity may be achieved by amendment.
This option shall be subject to the terms of the Plan in effect on the
date this option is granted, which terms are hereby incorporated herein by
reference and made a part hereof. In the event of any conflict between the terms
of this option and the terms of the Plan in effect on the date of this option,
the terms of the Plan shall govern. This option constitutes the entire
understanding between the Company and you with respect to the subject matter
hereof and no amendment, modification or waiver of this option, in whole or in
part, shall be binding upon the Company unless in writing and signed by the
President of the Company. This option and the performances of the parties
hereunder shall be construed in accordance with and governed by the laws of the
Commonwealth of Pennsylvania.
Please sign the copy of this option and return it to the Company's
Secretary, thereby indicating your understanding of and agreement with its terms
and conditions.
STV GROUP, INCORPORATED
By:______________________________
I hereby acknowledge receipt of a copy of the foregoing stock option and,
having read it, hereby signify my understanding of, and my agreement with, its
terms and conditions.
_________________________________ ___________________________
(Signature) (Date)
APPENDIX II
NON-QUALIFIED STOCK OPTION
To:_____________________________Name____________________________________________
____________________________Address__________________________________________
Date of Grant:_____________________
You are hereby granted an option, effective as of the date hereof, to
purchase ______ shares of Common Stock, par value $1.00 per share ("Common
Stock"), of STV Group, Inc. (the "Company") at a price of _____ per share
pursuant to the Company's 1995 Employee Stock Option Plan (the "Plan") adopted
by the Company's Board of Directors effective October 11, 1995. [Your option
price is intended to equal at least the fair market value of the Company's
Common Stock as of the date hereof.]
Your option may first be exercised on and after ___________, but not before
that time. [On and after ___________ and prior to the Termination Date (as
hereinafter defined), your option may be exercised for up to __% of the total
number of shares subject to the option minus the number of shares previously
purchased by exercise of the option (as adjusted for any change in the
outstanding shares of the Common Stock of the Company by reason of a stock
dividend, stock split, combination of shares, recapitalization, merger,
consolidation, transfer of assets, reorganization, conversion or what the
Compensation Committee deems in its sole discretion to be similar
circumstances). Each succeeding year thereafter and prior to the Termination
Date, your option may be exercised for up to an additional ____% of the total
number of shares subject to the option minus the number of shares previously
purchased by exercise of the option (as adjusted for any change in the
outstanding shares of the Common Stock of the Company by reason of a stock
dividend, stock split, combination of shares, recapitalization, merger,
consolidation, transfer of assets, reorganization, conversion or what the
Compensation Committee deems in its sole discretion to be similar
circumstances).]1 No fractional shares shall be issued or delivered.
This option shall terminate and is not exercisable after the expiration of
ten years from the date of its grant (the "Scheduled Termination Date"), except
if terminated earlier as hereinafter provided (the "Termination Date").
In the event of a "change of control" (as hereafter defined) of the
Company, your option may, from and after the date of the change of control, and
notwithstanding the second paragraph of this option, be exercised for up to 100%
of the total number of shares then subject to the option minus the number of
shares previously purchased upon exercise of the option (as adjusted for any
changes in the outstanding Common Stock by reason of a stock dividend, stock
split, combination of shares, recapitalization, merger, consolidation, transfer
of assets, reorganization, conversion or what the Compensation Committee deems
in its sole discretion to be similar circumstances).
A "change of control" shall be deemed to have occurred upon the happening
of any of the following events:
1. A change within a twelve-month period in a majority of the members of
the board of directors of the Company;
______________________
1 The bracketed portion of this paragraph should be included if the number
of shares which may be acquired upon exercise of the option will increase over
time.
2. A change within a twelve-month period in the holders of more than 50% of
the outstanding voting stock of the Company; or
3. Any other event deemed to constitute a "change in control" by the
Compensation Committee. You may exercise your option by giving written notice to
the Secretary of the Company on forms supplied by the Company at its then
principal executive office, accompanied by payment of the option price for the
total number of shares you specify that you wish to purchase. The payment may be
in any of the following forms: (a) cash, which may be evidenced by a check; (b)
certificates representing shares of Common Stock of the Company, which will be
valued by the Secretary of the Company at the fair market value per share of the
Company's Common Stock (as determined in accordance with the Plan) on the last
trading day immediately preceding the date of delivery of such certificates to
the Company, accompanied by an assignment of the stock to the Company; or (c)
any combination of cash and Common Stock of the Company valued as provided in
clause (b). Any assignment of stock shall be in a form and substance
satisfactory to the Secretary of the Company, including guarantees of
signature(s) and payment of all transfer taxes if the Secretary deems such
guarantees necessary or desirable or determines that such taxes are due and
payable.
Your option will, to the extent not previously exercised by you, terminate
three months after the date on which your employment by the Company or a parent
or subsidiary corporation of the Company is terminated, whether such termination
is voluntary or not, other than by reason of disability as defined in Section
22(e)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations thereunder, or death, in which case your option will terminate one
year from the date of termination of employment due to disability or death (but
in no event later than the Scheduled Termination Date). After the date your
employment is terminated, as aforesaid, you may exercise this option only for
the number of shares which you had a right to purchase and did not purchase on
the date your employment terminated. If you are employed by a subsidiary
corporation of the Company, your employment shall be deemed to have terminated
on the date your employer ceases to be a subsidiary corporation of the Company,
unless you are on that date transferred to the Company or another subsidiary
corporation of the Company. Your employment shall not be deemed to have
terminated if you are transferred from the Company to a subsidiary corporation,
or vice versa, or from one subsidiary corporation to another subsidiary
corporation.
Anything in this option to the contrary notwithstanding, your option will
terminate immediately if your employment is terminated for cause (as determined
by the Company in its sole and absolute discretion). Your employment shall be
deemed to have been terminated for cause if you are terminated due to, among
other reasons, (i) your willful misconduct or gross negligence, (ii) your
material breach of any agreement with the Company or (iii) your failure to
render satisfactory services to the Company.
If you die while employed by the Company or a parent or subsidiary
corporation of the Company, your legatee(s), distributee(s), executor(s) or
administrator(s), as the case may be, may, at any time within one year after the
date of your death (but in no event later than the Scheduled Termination Date),
exercise the option as to any shares which you had a right to purchase and did
not purchase during your lifetime. If your employment with the Company or a
parent or subsidiary corporation is terminated by reason of your becoming
disabled (within the meaning of Section 22(e)(3) of the Code and the regulations
thereunder), you or your legal guardian or custodian may at any time within one
year after the date of such termination (but in no event later than the
Scheduled Termination Date), exercise the option as to any shares which you had
a right to purchase and did not purchase prior to such termination. Your
legatee, distributee, executor, administrator, guardian or custodian must
present proof of his authority satisfactory to the Company prior to being
allowed to exercise this option.
In the event of any change in the outstanding shares of the Common Stock
of the Company by reason of a stock dividend, stock split, combination of
shares, recapitalization, merger, consolidation, transfer of assets,
reorganization, conversion or what the Compensation Committee deems in its sole
discretion to be similar circumstances, the number and kind of shares subject to
this option and the option price of such shares shall be appropriately adjusted
in a manner to be determined in the sole discretion of the Compensation
Committee.
This option is not transferable otherwise than by will or the laws of
descent and distribution, and is exercisable during your lifetime only by you,
including, for this purpose, your legal guardian or custodian in the event of
disability. Until the option price has been paid in full pursuant to due
exercise of this option and the purchased shares are delivered to you, you do
not have any rights as a shareholder of the Company. The Company reserves the
right not to deliver to you the shares purchased by virtue of the exercise of
this option during any period of time in which the Company deems, in its sole
discretion, that such delivery would violate a federal, state, local or
securities exchange rule, regulation or law.
Notwithstanding anything to the contrary contained herein, this option is
not exercisable until all the following events occur and during the following
periods of time:
(a) Until the Plan pursuant to which this option is granted is
approved by the shareholders of the Company in the manner prescribed by the Code
and the regulations thereunder;
(b) Until this option and the optioned shares are approved and/or
registered with such federal, state and local regulatory bodies or agencies and
securities exchanges as the Company may deem necessary or desirable; or
(c) During any period of time in which the Company deems that the
exercisability of this option, the offer to sell the shares optioned hereunder,
or the sale thereof, may violate a federal, state, local or securities exchange
rule, regulation or law, or may cause the Company to be legally obligated to
issue or sell more shares than the Company is legally entitled to issue or sell.
The following two paragraphs shall be applicable if, on the date of
exercise of this option, the Common Stock to be purchased pursuant to such
exercise has not been registered under the Securities Act of 1933, as amended,
and under applicable state securities laws, and shall continue to be applicable
for so long as such registration has not occurred:
(a) The optionee hereby agrees, warrants and represents that he will
acquire the Common Stock to be issued hereunder for his own account for
investment purposes only, and not with a view to, or in connection with, any
resale or other distribution of any of such shares, except as hereafter
permitted. The optionee further agrees that he will not at any time make any
offer, sale, transfer, pledge or other disposition of such Common Stock to be
issued hereunder without an effective registration statement under the
Securities Act of 1933, as amended, and under any applicable state securities
laws or an opinion of counsel acceptable to the Company to the effect that the
proposed transaction will be exempt from such registration. The optionee shall
execute such instruments, representations, acknowledgements and agreements as
the Company may, in its sole discretion, deem advisable to avoid any violation
of federal, state, local or securities exchange rule, regulation or law.
(b) The certificates for Common Stock to be issued to the optionee
hereunder shall bear the following legend:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or under applicable state
securities laws. The shares have been acquired for investment and may not
be offered, sold, transferred, pledged or otherwise disposed of without an
effective registration statement under the Securities Act of 1933, as
amended, and under any applicable state securities laws or an opinion of
counsel acceptable to the Company that the proposed transaction will be
exempt from such registration."
The foregoing legend shall be removed upon registration of the legended shares
under the Securities Act of 1933, as amended, and under any applicable state
laws or upon receipt of any opinion of counsel acceptable to the Company that
said registration is no longer required.
The sole purpose of the agreements, warranties, representations and legend
set forth in the two immediately preceding paragraphs is to prevent violations
of the Securities Act of 1933, as amended, and any applicable state securities
laws.
It is the intention of the Company and you that this option shall not be
an "Incentive Stock Option" as that term is used in Section 422 of the Code and
the regulations thereunder.
This option shall be subject to the terms of the Plan in effect on the
date this option is granted, which terms are hereby incorporated herein by
reference and made a part hereof. In the event of any conflict between the terms
of this option and the terms of the Plan in effect on the date of this option,
the terms of the Plan shall govern. This option constitutes the entire
understanding between the Company and you with respect to the subject matter
hereof and no amendment, modification or waiver of this option, in whole or in
part, shall be binding upon the Company unless in writing and signed by the
President of the Company. This option and the performances of the parties
hereunder shall be construed in accordance with and governed by the laws of the
Commonwealth of Pennsylvania.
Please sign the copy of this option and return it to the Company's
Secretary, thereby indicating your understanding of and agreement with its terms
and conditions.
STV GROUP, INCORPORATED
By:____________________________________
I hereby acknowledge receipt of a copy of the foregoing stock option and, having
read it, hereby signify my understanding of, and my agreement with, its terms
and conditions.
___________________________ _________________________________
(Signature) (Date)
STV GROUP, INCORPORATED
Annual Meeting of Shareholders - March 27, 1996
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints MICHAEL HARATUNIAN, and RICHARD L.
HOLLAND, and each of them, with full power of substitution, proxy agents to vote
all shares which the undersigned is entitled to vote at the annual meeting of
shareholders (including any adjournment or postponement thereof) of STV Group,
Incorporated (the "Company"), which is scheduled to be held on March 27, 1996,
on all matters that properly come before the meeting, subject to any directions
indicated below. The proxy agents are directed to vote as follows on the
proposals described in the Company's proxy statement:
1. ELECTION OF DIRECTORS
FOR /_/ R. M. Monti
To withhold authority to vote for the nominee, check this box
/_/.
2. TO APPROVE THE COMPANY'S 1995 EMPLOYEE STOCK OPTION PLAN
FOR /_/ AGAINST /_/ ABSTAIN /_/
3. To transact such other business as may properly come before the meeting
or any postponement or adjournment thereof.
(Continued and to be signed on reverse side)
This proxy will be voted as directed. If no directions to the
contrary are indicated, the proxy agents intend to vote FOR the election of the
Company's nominee as director as described in the accompanying Proxy Statement
and FOR proposal number two to approve the Company's 1995 Employee Stock Option
Plan. Note: This proxy must be returned in order for your shares to be voted.
A majority of the proxy agents present and acting at the meeting,
in person or by their substitutes (or if only one is present and acting, then
that one), may exercise all the powers conferred hereby. Discretionary authority
is conferred hereby as to certain matters described in the Company's Proxy
Statement.
Receipt of the Company's Annual Report to Shareholders and the
Notice of Annual Meeting and Proxy Statement dated March 1, 1996 is hereby
acknowledged.
Dated:........................................, 1996
(Please date this Proxy)
...................................................
...................................................
Signature(s)
It would be helpful if you signed your name
as it appears hereon, indicating any official
position or representative capacity. If shares
are registered in more than one name, all owners
should sign.
Please date and sign this proxy and return it promptly in the enclosed postage
paid envelope)