STV GROUP, INCORPORATED
205 West Welsh Drive
Douglassville, Pennsylvania 19518
OFFICE OF THE PRESIDENT AND
CHIEF EXECUTIVE OFFICER
February 21, 1997
To the Shareholders:
On Thursday, March 20, 1997, at 10:00 A.M., the Annual Meeting of
Shareholders of the Company will be held at the office of STV Group,
Incorporated, 205 West Welsh Drive, Douglassville, PA 19518, to vote to elect
three directors of the Company to serve for three-year terms until the 2000
Annual Meeting of Shareholders, 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, 1996, accompanies these proxy materials.
Sincerely yours,
/s/ Michael Haratunian
Michael Haratunian
Chairman and
Chief Executive Officer
<PAGE>
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 Thursday, March 20, 1997, at 10:00 A.M. (local
time), at the office of STV Group, Incorporated, 205 West Welsh Drive,
Douglassville, PA 19518, for the following purposes:
1. To elect to the Board of Directors, a total of three persons to
serve for a term of three years and until the respective successor shall have
been duly elected and qualified.
2. To transact such other business as may properly come before the
meeting or any postponement or adjournment thereof.
The Board of Directors has fixed January 31, 1997, 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,
1996, 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
/s/ Peter W. Knipe
February 21, 1997 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.
<PAGE>
STV GROUP, INCORPORATED
205 West Welsh Drive
Douglassville, PA 19518
PROXY STATEMENT
This proxy statement, which together with the accompanying proxy card
is first being mailed to shareholders on or about February 21, 1997, 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
Thursday, March 20, 1997, 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.
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.
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The total number of shares of Common Stock outstanding on January 31,
1997, 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 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.
<TABLE>
<CAPTION>
Number of Percent of
Name and Address Shares (1) Class (2)
<S> <C> <C>
STV Employee Stock 1,263,696 (3) 69.4
Ownership Plan
c/o STV Group, Incorporated
205 West Welsh Drive
Douglassville, PA 19518
Richard L. Holland 87,137 (4) 4.8
184 Indies Drive South
Marathon, Florida 33050
Michael Haratunian 103,474 (5) 5.7
205 West Welsh Drive
Douglassville, PA 19518
Dr. Harry Prystowsky 500 (6)
Champlain Towers North
Unit 208
8877 Collins Avenue
Surfside, Florida
Maurice L. Meier 664 (6)
2143 Perry Park Avenue
Larkspur, CO 80118
Dominick Servedio 69,199 (7) 3.8
225 Park Avenue South
New York, New York 10003
<PAGE>
William J. Doyle 140,000 7.7
Paolin & Sweeney
375 North Kings Highway
Cherry Hill, New Jersey 08034
Whitney A. Sanders II 36,641 (8) 2.0
205 West Welsh Drive
Douglassville, PA 19518
Peter W. Knipe 22,454 (9) 1.2
205 West Welsh Drive
Douglassville, PA 19518
Frank E. Lyon, Jr. 13,972 (10) (6)
841 Bishop Street, Suite 510
Honolulu, HI 96813-3919
All executive officers and 473,541 (11) 26.0
directors (As a group 8 persons)
</TABLE>
(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." As of the Record Date, there were 23,553 unallocated
shares.
(4) Includes 25,147 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 12,590 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 11,499
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.
<PAGE>
(8) Includes 20,000 shares of Common Stock which may be acquired within 60
days after the Record Date, pursuant to stock options. Includes 8,241
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 5,454
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 8,972
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 46,756 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 135,000 shares
of Common Stock which may be acquired within 60 days of the record date
pursuant to stock options.
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
Three Directors are to be elected at the meeting to serve for a
three-year term until the 2000 Annual Meeting of Shareholders and until their
respective successors are duly elected and qualified.
The Board of Directors has designated the persons listed below to be
nominees for election as directors. The nominees have 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.
<TABLE>
<CAPTION>
Director Positions With
Name Since Age the Company
<S> <C> <C> <C>
William J. Doyle (2) (3) 1993 66 Director
Richard L. Holland (1) (4) 1974 70 Director
Michael Haratunian (1) (4) 1986 63 Chairman of the Board of
Directors and Chief
Executive Officer
</TABLE>
Information Concerning Continuing Directors
The following tables set forth certain information concerning those
directors whose terms will expire in 1998 and 1999.
<TABLE>
<CAPTION>
Director Positions With
Name Since Age the Company
The term of the following directors will expire in 1998:
<S> <C> <C> <C>
Maurice L. Meier (4) 1986 70 Director
Dr. Harry Prystowsky (2) (3) 1984 71 Director
Dominick M. Servedio (1) 1992 56 Director, President and
Chief Operating Officer
</TABLE>
<TABLE>
<CAPTION>
The term of the following director will expire in 1999:
<S> <C> <C> <C>
Ray M. Monti (2) (3) 1996 67 Director
</TABLE>
(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
(4) Member of the Nominating Committee.
<PAGE>
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
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.
Dr. Prystowsky is a retired Senior Vice President of Health Affairs
and Dean, College of Medicine, of The Milton S. Hershey Medical Center.
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 Incorporated.
Mr. Monti is the retired Director of Engineering and Chief Engineer
of the Port Authority of New York and New Jersey, 1972 - 1992.
The Board of Directors of the Company held four meetings during the
fiscal year ended September 30, 1996.
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, 1996. The
purpose of the Compensation Committee is to make recommendations to the Board of
Directors with respect to executive compensation. The Compensation Committee
held three meetings during the fiscal year ended September 30, 1996. The Board
has a Nominating Committee, which held one meeting during the fiscal year ended
September 30, 1996.
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.
<PAGE>
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 three times out of
a total of eleven transactions.
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 1996 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 that of 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 1996, the Executive Officers received an average salary increase
of 3.5% 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.
<PAGE>
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
1996, the Board distributed incentive compensation to the executive officers
based on its perception of each individual's 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 1996, the Board did not authorize the
issuance of any 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
<PAGE>
Summary Compensation Table
The following table shows, for fiscal 1994, 1995 and 1996, 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.
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C> <C> <C>
M. Haratunian 1996 $253,102 $48,000 N/A $0 0 $0 $130,030 (C)
Chairman of the 1995 $239,168 $32,000 N/A $0 25,000 $0 $85,810
Board and Chief 1994 $226,644 $35,000 N/A $0 0 $0 $84,847
Executive Officer
D. M. Servedio 1996 $223,600(A) $42,000 N/A $0 0 $0 $99,812 (D)
President 1995 $203,699(B) $28,000 N/A $0 20,000 $0 $67,037
1994 $193,013 $30,000 N/A $0 0 $0 $68,940
W. A. Sanders II 1996 $169,826 $18,000 N/A $0 0 $0 $15,634 (E)
Sr. Vice President 1995 $164,718 $13,000 N/A $0 5,000 $0 $15,649
1994 $150,010 $15,000 N/A $0 0 $0 $15,467
F. E. Lyon, Jr. 1996 $150,010 $0 N/A $0 0 $0 $10,674 (F)
Sr. Vice President 1995 $146,931 $0 N/A $0 0 $0 $10,321
1994 $140,005 $0 N/A $0 0 $0 $11,770
P. W. Knipe 1996 $111,734 $8,000 N/A $0 0 $0 $5,506 (G)
Secretary/Treasurer 1995 $104,865 $7,000 N/A $0 5,000 $0 $5,714
1994 $97,012 $7,000 N/A $0 0 $0 $5,319
</TABLE>
(A) Includes $19,994 deferred in 1996 under the Company's Deferred Compensation
plan but does not include $22,000 paid in 1996 which had been deferred in
previous years.
(B) Includes $19,744 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.
(C) "All Other Compensation" for the 1996 fiscal year for Mr. Haratunian
includes the following items: $4,500 contribution to the ESOP plan; $2,476
for company-paid medical plan; $9,798 for company-paid life insurance;
$14,974 accrued interest earned on his deferred compensation; and 97,068
earned as part of his SERP. (See page 10.)
(D) "All Other Compensation" for the 1996 fiscal year for Mr. Servedio includes
the following items: $4,500 contribution to the ESOP plan; $3,626 for
company-paid medical plan; $3,588 for company-paid life insurance; $1,425
accrued interest earned on his deferred compensation; and 85,932 earned as
part of his SERP. (See page 10.)
(E) "All Other Compensation" for the 1996 fiscal year for Mr. Sanders includes
the following items: $4,500 contribution to the ESOP plan; $3,626 for
company-paid medical plan; $1,788 for company-paid life insurance; and
$5,720 accrued interest earned on his deferred compensation.
(F) "All Other Compensation" for the 1996 fiscal year for Mr. Lyon includes the
following items: $4,500 contribution to the ESOP plan; $4,386 for company-
paid medical plan; and $1,788 for company-paid life insurance.
(G) "All Other Compensation" for the 1996 fiscal year for Mr. Knipe includes the
following items: $3,592 contribution to the ESOP plan; $1,054 for company-
paid medical plan; and $859 for company-paid life insurance.
<PAGE>
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 $76,989 per year based on thirty
percent (30%) of his compensation and the maximum payment would be $153,978 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 $65,400 per year based on thirty percent (30%) of his compensation and
the maximum payment would be $130,800 per year based on sixty percent (60%) of
his compensation.
<PAGE>
<TABLE>
<CAPTION>
PERFORMANCE MEASURE WEIGHT BASELINE TARGET SUPERIOR MAXIMUM
<S> <C> <C> <C> <C> <C>
SERP Payout (% of Base) 30% 40% 50% 60%
Percentage of Target 75% 100% 125% 150%
1 Return of Equity 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
</TABLE>
<TABLE>
<CAPTION>
If the Performance Level is Between: SERP Payout will be
<S> <C>
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%
</TABLE>
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 Employee's 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.
<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
96 FY-End (#) 96 FY-End ($) (1)
Shares Acquired Value Exercisable/ Exercisable/
Name On Exercise Realized Unexercisable Unexercisable
(#) ($)
<S> <C> <C> <C> <C>
M. Haratunian 0 $0 55,000 163,750
0 0
D. M. Servedio 0 $0 45,000 134,375
0 0
P. W. Knipe 0 $0 10,000 28,750
0 0
F. E. Lyon, Jr. 0 $0 5,000 16,875
0 0
W. A. Sanders II 0 $0 20,000 62,500
0 0
(1) Based on 1996 fiscal year-end share price equal to $7.50.
</TABLE>
<PAGE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG STV GROUP, INC., THE NASDAQ STOCK MARKET-US INDEX
AND A PEER GROUP
<TABLE>
<CAPTION>
Cumulative Total Return
9/91 9/92 9/93 9/94 9/95 9/96
<S> <C> <C> <C> <C> <C> <C> <C>
STV Group, Incorporated STVI 100 58 71 73 83 121
1996 PEER GROUP PPEER1 100 86 90 90 109 92
NASDAQ STOCK MARKET-US INAS 100 112 147 148 204 242
</TABLE>
*$100 INVESTMENT ON 09/30/91 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, and a weighted
index of peer issuers consisting of similar engineering companies (the
"1996 Peer Group Index'). The 1996 Peer Group Index does not include
Greiner Engineering, Inc., which was included in the 1995 Peer Group Index,
because they are no longer trading. The graph assumes an investment of
$100.00 on September 30, 1991 in each company involved and the reinvestment
of all dividends. The 1996 Peer Group Index of publicly held companies is
comprised of URS Corp., Michael Baker Corp., Stone & Webster Inc., and Icf
Kaiser International, Inc.
<PAGE>
SHAREHOLDER PROPOSALS
Shareholder proposals for the 1998 Annual Meeting must be submitted to
the Company by November 3, 1997, to receive consideration.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Company's independent public accountant for the fiscal year ended
September 30, 1996, 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, 1996, 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, 1996, 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, 205 WEST WELSH DRIVE, DOUGLASSVILLE, PA 19518, ATTENTION: PETER W.
KNIPE, SECRETARY.
By Order of the Board of Directors
/s/ Peter W. Knipe
Peter W. Knipe
Secretary
<PAGE>
STV GROUP, INCORPORATED
Annual Meeting of Shareholders - March 20, 1997
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints MICHAEL HARATUNIAN, RICHARD L.
HOLLAND, and MAURICE L. MEIER, 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 20, 1997, 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 /_/ William J. Doyle, Richard L. Holland, Michael Haratunian
To withhold authority to vote for all directors, check this box
/_/.
To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.
2. 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)
<PAGE>
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 nominees as directors as described in the accompanying Proxy
Statement. 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 February 21, 1997 is hereby
acknowledged.
Dated: . . .. . . . . . . . . . . . . ., 1997
(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.)
