<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) Of The Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Valley Forge Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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<PAGE> 2
VALLEY FORGE CORPORATION
100 SMITH RANCH ROAD, SUITE 326
SAN RAFAEL, CALIFORNIA 94903
NOTICE OF ANNUAL STOCKHOLDERS' MEETING
TO OUR STOCKHOLDERS:
The annual meeting of the stockholders of Valley Forge Corporation, a Delaware
corporation, will be held on June 10, 1998, at 10:00 a.m., Pacific Standard
time, at the offices of the Company, located at 100 Smith Ranch Road, Suite 326,
San Rafael, California 94903. The items of business to be transacted at this
meeting are as follows:
1. Election of the Board of Directors of five people for the ensuing
year.
2. Ratification of the appointment of Deloitte & Touche LLP as
independent auditors of the Company for the 1998 fiscal year.
3. Approval and adoption of an amendment to the Company's
Certificate of Incorporation to increase the number of authorized
shares of common stock, par value $.50 per share, from 5,000,000 to
10,000,000 shares.
4. Transaction of such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has specified April 22, 1998, at the close of business as
the record date for the purpose of determining the stockholders who are entitled
to receive notice of and to vote at the annual meeting. A list of the
stockholders entitled to vote at the annual meeting will be available for the
examination of any stockholder at the meeting and at the offices of the
Company during the ten days immediately preceding the annual meeting.
The Proxy Statement for the annual meeting is set forth on the following pages.
So that as many shares as possible may be represented at this meeting, we urge
you to promptly sign, date, and return your proxy in the enclosed,
self-addressed envelope. If you attend the meeting, you may revoke the proxy and
vote your shares in person if you desire to do so.
Sincerely,
Monica J. Burke
Secretary - Treasurer
Dated: April 28, 1998
<PAGE> 3
PROXY STATEMENT OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 10, 1998
GENERAL INFORMATION
This Proxy Statement and the accompanying Proxy and other enclosures are being
mailed beginning April 28, 1998, to holders of common stock of Valley Forge
Corporation, a Delaware Corporation (the "Company"), in connection with the
annual meeting of stockholders to be held on June 10, 1998, at 10:00 a.m.,
Pacific Standard time, at the Company's offices at 100 Smith Ranch Road, Suite
326, San Rafael, California 94903, or at any adjournment thereof (the
"Meeting"). Proxies are solicited by the Board of Directors to provide all
stockholders of the Company with the opportunity to vote. Shares may only be
voted at the Meeting if the stockholder is present in person or is represented
by a proxy.
COSTS OF SOLICITATION OF PROXIES
The Company will bear the cost of preparing, mailing, and soliciting Proxies. In
addition to solicitations by mail, the directors, officers, and regular
employees of the Company may solicit proxies personally and by telephone,
telegraph, or other means, for which they will receive no compensation in
addition to their normal compensation.
VOTING RIGHTS AND REVOCABILITY OF PROXIES
Only holders of the Company's common stock, par value $.50 per share ("Common
Stock"), of record at the close of business on April 22, 1998, are entitled to
notice of and to vote at the Meeting. Holders of the Common Stock will be
entitled to one vote on all matters properly coming before the Meeting for each
share registered in their names on the record date specified above. On March 31,
1998, 4,146,358 shares of the Company's Common Stock were issued, of which
4,106,839 shares were outstanding and will be entitled to vote at the Meeting
(39,519 shares of Common Stock are treasury shares and are not entitled to
vote). The Company has no other classes of securities issued and outstanding.
On July 28, 1997, the Company's Board of Directors authorized a three-for-two
stock split effected in the form of a 50% stock dividend distributed on
September 16, 1997, to shareholders of record on September 5, 1997. Accordingly,
unless otherwise indicated, all information contained in this proxy reflects
this stock split.
The By-Laws of the Company require that a quorum be present at all meetings of
stockholders before the stockholders may conduct business. A quorum consists of
the holders of record of a majority of the issued and outstanding shares of
Common Stock that are entitled to vote at the meeting and are present in person
or by proxy.
When a proxy is returned properly signed and dated, the person designated as
proxy shall vote the shares represented by the proxy in accordance with the
stockholder's directions. If a proxy is signed, dated, and returned without
specifying choices on one or more matters presented to the stockholders, the
shares will be voted on such matter or matters as recommended by the Company's
Board of Directors.
Abstentions will be treated as shares present and entitled to vote for purposes
of determining the presence of a quorum. Each stockholder is entitled to one
vote, in person or by proxy, for each share of stock held of record in his or
her name on the books of the Company as of the record date on any matter
submitted to the stockholders. The Company's By-Laws do not authorize cumulative
voting. Approval of Item Three requires the affirmative vote of the holders of a
majority of the shares of Common Stock outstanding and entitled to vote at the
Meeting. Abstentions from voting on any matter other than in the election of
directors will have the effect of a vote "AGAINST" the proposal.
A stockholder giving a proxy may revoke it by (i) delivering a written notice of
revocation to the Secretary of the Company at the office of the Company
identified above at any time before the commencement of the Meeting or any
adjournments thereof; (ii) attending the Meeting in person and voting; or (iii)
executing a proxy bearing a date and time later than that of the proxy to be
revoked. Revocation of the proxy will not affect any vote previously taken.
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Unless revoked, the shares of Common Stock represented by proxies will be voted
in accordance with the instructions given thereon. In the absence of any
instruction in the Proxy, your shares of Common Stock will be voted in favor (i)
"FOR" the election of the nominees for director set forth herein; (ii) "FOR" the
ratification of the appointment of Deloitte & Touche LLP as the Company's
independent auditors for the fiscal year ending December 31, 1998; and (iii)
"FOR" the approval and adoption of an amendment to the Corporation's Certificate
of Incorporation to increase the number of authorized shares of Common Stock
from 5 million to 10 million.
The Meeting has been called for the purposes set forth in the Notice of Annual
Stockholders' Meeting (the "Notice") to which this Proxy Statement is appended.
The Board of Directors does not anticipate that matters other than those
described in the Notice will be brought before the Meeting for stockholder
action, but if any other matters properly come before the Meeting, votes thereon
will be cast by the proxy holder in accordance with her best judgment.
If a stockholder wishes to give a proxy to someone other than the person
indicated on the accompanying proxy, he must cross out the names appearing on
the proxy and insert the name or names of another person or persons to act as
proxies. The signed proxy must be presented at the Meeting by the person or
persons representing the stockholder.
A copy of the Company's 1997 Annual Report to its stockholders is enclosed
herewith. Stockholders may obtain additional copies of the Annual Report without
charge upon written request to the Company's Secretary at the Company's offices.
ITEM 1. ELECTION OF DIRECTORS
The Company's By-Laws authorize a Board of Directors of five persons. At the
Company's 1997 annual meeting of stockholders, Messrs. Bloom, Desloge, Brining,
Dressel, and Warner were elected.
The Board of Directors has nominated all of its present members for election as
directors for a term of one year or until their successors are elected and
qualified.
All nominees have indicated their willingness to serve and, unless otherwise
specified on the proxy, it is the intention of the proxy holder to vote for the
nominees listed in the following table. No proxy may be voted for more than
five persons. If events not now known or anticipated make any of the nominees
unable to serve, the Proxies will be voted at the discretion of the proxy
holder. In the election of directors, the five persons receiving the highest
number of votes will be elected.
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The following sets forth biographical information of the five nominees for
director and of the Executive Officers of the Company:
<TABLE>
<CAPTION>
YEAR FIRST
NAME AND AGE PRINCIPAL OCCUPATION ELECTED DIRECTOR
<S> <C> <C>
NOMINEES FOR DIRECTORS:
Martin J. Bloom (67) Co-Chairman of the Board since July 1984 1983
100 Smith Ranch Road, Suite 326
San Rafael, CA 94903-1994
Theodore P. Desloge, Jr. (58) Co-Chairman of the Board since July 1984 1983
100 Smith Ranch Road, Suite 326
San Rafael, CA 94903-1994
David R. Brining (55) President, Chief Executive Officer, and Director 1981
100 Smith Ranch Road, Suite 326 of the Company since July 1981
San Rafael, CA 94903-1994
Phillip F. Dressel (61) Retired, formerly President of Consolidated 1985
100 Smith Ranch Road, Suite 326 Flavor Corporation
San Rafael, CA 94903-1994
Dale J. Warner (75) Retired, formerly a Director of Gits Bros. Mfg. 1983
100 Smith Ranch Road, Suite 326 Co., a subsidiary of the Company
San Rafael, CA 94903-1994
EXECUTIVE OFFICER:
Monica J. Burke (46) Vice President Finance, Chief Financial Officer,
and Secretary of the Company
</TABLE>
Mr. Bloom has been a Director of the Company since 1983, Co-Chairman of the
Board since 1984, and is a Director of most of the Company's subsidiaries. He is
a past Director and Chairman of the Board of Park `N Fly, Inc., an operator of
off-airport parking services.
Mr. Desloge has been a Director of the Company since 1983 and Co-Chairman of the
Board since 1984. He is a past Director and President of Park `N Fly, Inc.
Mr. Brining has been President, CEO, and a Director of the Company since 1981.
He has served as a Director or Chairman of each of the Company's subsidiaries
since their acquisition.
Mr. Dressel has been a Director of the Company since 1985. Until January 1996,
he was Chairman of the Board and President of Consolidated Flavor Corporation, a
privately held flavoring business located in St. Louis, Missouri.
Mr. Warner has been a Director of the Company since 1983. He was a Director of
Gits Bros. Mfg. Co until June 1990.
Ms. Burke has served as CFO, V.P. Finance, and Secretary since 1988.
None of the directors, nominees for director, or Executive Officers were
selected pursuant to any arrangement or understanding. There are no family
relationships among directors or Executive Officers of the Company, and as of
the date hereof, no directorships are held by any director with a company which
has a class of securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") or subject to the
requirements of Section 15(d) of the Exchange Act or any company registered as
an investment company under the Investment Company Act of 1940, except for Mr.
Desloge, who is a director of Mississippi Valley Bancshares, a bank holding
company.
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THE BOARD OF DIRECTORS AND COMMITTEES
The Corporation's Board of Directors met twice during 1997. The Board of
Directors has two committees, the Compensation Committee and the Audit
Committee, and does not have a nominating committee. All of the persons who were
directors of the Company during 1997 attended at least 75% of (1) the total
number of Board meetings and (2) the total number of meetings held by all
committees on which they served.
The members of the Audit Committee are Messrs. Brining, Dressel, and Warner. The
Audit Committee met once during 1997. The Audit Committee reviews and reports to
the Board on various auditing and accounting matters, including the annual audit
report from the Company's independent accountants.
The members of the Compensation Committee are Messrs. Bloom, Desloge, and
Dressel. For a description of the functions of the Compensation Committee, see
"Report of the Compensation Committee on Executive Compensation." The Committee
met once during 1997.
TRANSACTIONS WITH DIRECTORS
Since 1994, the Company has borrowed $400,000 from Bloom and Desloge
Enterprises, Inc., a corporation in which Messrs. Bloom and Desloge are each 50%
stockholders. The borrowing was evidenced by short-term notes with original
maturities of 13 weeks which were renewable. At December 31, 1997, the $400,000
note bore interest at 6.66% and was repaid upon maturity on March 31, 1998.
See Director's Compensation for discussion of other transactions with directors.
SECTION 16(a) BENEFICIAL OWNERSHIP
Under Section 16(a) of the Exchange Act, the Company's directors, Executive
Officers, and any persons holding ten percent or more of Common Stock are
required to report their ownership of Common Stock and any changes in that
ownership to the Securities and Exchange Commission (the "SEC") and to furnish
the Company with copies of such reports. Specific due dates for these reports
have been established and the Company is required to report in this Proxy
Statement any failure to file on a timely basis by such persons. Mr. Dressel was
delinquent in filing a Form 4 for one transaction during 1997 in which a trust
for the benefit of his wife acquired 1,245 shares of Common Stock.
SECURITY OWNERSHIP
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of March 31, 1998, by (i) each
stockholder known by the Company to own beneficially more than five percent (5%)
of the outstanding Common Stock, (ii) each director of the Company, (iii) the
Company's Chief Executive Officer, (iv) all Executive Officers and directors of
the Company as a group. No effect has been given to shares reserved for issuance
under outstanding stock options except where otherwise indicated.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED(1) PERCENT(2)
<S> <C> <C>
Martin J. Bloom 936,456(3), (4) 22.80%
Theodore P. Desloge, Jr. 951,718(4) 23.17%
David R. Brining 384,712(5) 9.18%
Phillip F. Dressel 118,573(6) 2.89%
All directors and officers as a group 2,409,459(7) 57.46%
FMR Corp.
82 Devonshire Street
Boston, MA 02109 405,000(8) 9.86%
</TABLE>
(1) Except as otherwise noted, each person has sole voting and investment
power with respect to the shares listed, subject to community property
laws where applicable.
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(2) Includes all issued and outstanding shares of Common Stock and all options
to acquire Common Stock exercisable within 60 days.
(3) Does not include 22,500 shares (.55%) owned by Mr. Bloom's wife with
respect to which Mr. Bloom disclaims beneficial ownership.
(4) Includes 190,278 shares owned by Bloom & Desloge Enterprises, Inc., a
corporation in which Messrs. Bloom and Desloge are each 50% stockholders.
Bloom and Desloge Enterprises, Inc. owns a total of 380,556 shares of
Common Stock.
(5) Includes currently exercisable options to purchase 84,375 shares at $7.39
per share. Does not include 2,137 shares (.05%) owned by Mr. Brining's
wife with respect to which Mr. Brining disclaims beneficial ownership.
(6) Represents shares deposited under trust agreements for the benefit of Mr.
Dressel. Does not include 1,245 shares (.03%) held in trust by Mr.
Dressel's wife with respect to which Mr. Dressel disclaims beneficial
ownership.
(7) Includes options to purchase 2,250 shares at $9.08 per share purchasable
by an officer. In addition to the disclaimed shares described in (2) and
(4) above, does not include 8,100 shares (.20%) held in trust for the
benefit of Mr. Warner's wife with respect to which Mr. Warner disclaims
beneficial ownership.
(8) Based solely upon a Schedule 13G dated February 14, 1998. Of the 405,000
shares shown as beneficially owned by FMR Corp., 405,000 are beneficially
owned by Fidelity Management Research Company ("Fidelity Research"), a
wholly-owned subsidiary of FMR Corp. and investment advisor of investment
companies. FMR Corporation and its chairman, Edward C. Johnson 3rd, each
has sole power to dispose of the shares owned by Fidelity Research, but
neither FMR Corp. nor Mr. Johnson has the sole power to vote or to direct
the voting of such shares.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
EXECUTIVE OFFICERS' COMPENSATION
The following table shows certain summary information concerning compensation
paid or accrued by the Company to or on behalf of the Company's Chief Executive
Officer and the other named executive officer ("Executive Officers") of the
company whose compensation exceeds $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------------- LONG-TERM
NAME AND FISCAL OTHER ANNUAL COMPENSATION ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS COMPENSATION(2)
<S> <C> <C> <C> <C> <C> <C>
David R. Brining, 1997 $317,050 $263,600 $ 6,328 0 $ 20,500
CEO(3) 1996 300,067 77,250 6,203 0 17,149
1995 276,317 135,725 6,600 0 17,073
Monica J. Burke, 1997 119,583 62,500 0 0 15,060
CFO(3) 1996 114,583 19,675 0 4,500 13,256
1995 109,667 31,500 0 0 13,514
</TABLE>
(1) In August 1987 and incident to the relocation of the corporate
headquarters from St. Louis, Missouri to San Rafael, California, the
Company accepted a $75,000 demand, non-interest bearing note from Mr.
Brining. The amounts included under Other Annual Compensation represent
interest calculated at the prime rate on the demand note. In January 1998,
Mr. Brining paid the note in full.
(2) Represents amounts contributed to the Company's two profit sharing plans.
(3) Mr. Brining and Ms. Burke also serve as officers of each of the Company's
subsidiaries.
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OPTION GRANTS IN 1997
None to Named Executives.
OPTION EXERCISES AND HOLDINGS
The following table provides information with respect to the Executive Officers
concerning the exercise of options during the fiscal year ended December 31,
1997, and unexercised options held by the Executive Officers as of December 31,
1997:
Aggregated Option(1) Exercises in Fiscal Year 1997
and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED,
NUMBER OF UNEXERCISED IN THE MONEY
SHARES OPTIONS HELD AT YEAR END OPTIONS HELD AT YEAR END(2)
NAMED ACQUIRED ON VALUE ----------------------------- ------------------------------
EXECUTIVES EXERCISE REALIZED EXERCISABLE UNEXERCISABLE Exercisable UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
David R. Brining 0 $ 0 84,375 28,125 $589,359 $196,453
Monica J. Burke 10,125 88,898 1,125 3,375 5,957 17,871
</TABLE>
(1) The Company has no plans pursuant to which stock appreciation rights
(SARs) may be granted.
(2) Value of unexercised "in the money" options is the difference between the
market price of the Common Stock on December 31, 1997 ($14.375 per share)
and the exercise price of the option, multiplied by the number of shares.
EMPLOYMENT AGREEMENTS
There are no employment contracts or termination agreements with the Executive
Officers.
STOCK OPTIONS
The Board of Directors adopted the Company's 1987 Stock Option Plan ("Stock
Option Plan") on May 29, 1987, which was most recently amended, restated, and
approved by the Company's shareholders at the 1996 Annual Meeting of
Shareholders. As of March 31, 1998, there were 1,125,000 shares of Common Stock
reserved for issuance under the Stock Option Plan, of which 419,750 shares had
been issued upon exercise of options, 307,875 shares were subject to outstanding
options, and 397,375 were available for granting new options.
The purpose of the Stock Option Plan is to enable the Company and its
subsidiaries to attract, retain and motivate officers, directors, employees, and
independent contractors by providing for or increasing their proprietary
interests in the Company and, in the case of non-employee directors, to attract
such directors and further align their interests with those of the Company's
shareholders by providing for or increasing their proprietary interests in the
Company. The Stock Option Plan authorizes the grant of options which qualify as
incentive stock options ("Incentive Stock Options") under Section 422 of the
Internal Revenue Code of 1986, as amended, and options which do not qualify as
Incentive Stock Options ("Nonqualified Stock Options").
The Stock Option Plan is currently administered by the Compensation Committee of
the Company. The Compensation Committee has full power and authority in its
discretion to take any and all action required or permitted to be taken under
the Stock Option Plan, including the selection of participants to whom stock
options may be granted, the determination of the number of shares which may be
covered by stock options, the exercise price, and other terms and conditions
thereof.
If any option granted under the Stock Option Plan shall for any reason expire,
be canceled, or otherwise terminate without having been exercised in full, the
shares not purchased under such option shall again become available for the
Stock Option Plan. Generally, the exercise price of each option is determined by
the Board of Directors or the Compensation Committee and is not less than 100%
of the fair market value of the Common Stock subject to the option on the date
the option is granted. Typically, the purchase price of Common Stock acquired
pursuant to an option shall be paid in cash or check payable to the order of the
Company at the time the option is exercised. In general, no option under the
Stock Option Plan may extend more than ten years from the date of grant.
Except in the case of a reincorporation merger, the Stock Option Plan and any
option or portion thereof not exercised
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<PAGE> 9
will terminate upon the occurrence of a terminating event, including, but not
limited to, a liquidation, reorganization, merger, or consolidation of the
Company with another corporation as a result of which the Company is not the
surviving or resulting corporation, or a sale of substantially all the assets of
the Company to another person, or a reverse merger in which the Company is the
surviving corporation but the shares of the Company's stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property (a "Triggering Event"). The Committee shall notify each optionee
not less than thirty days prior thereto of the pendency of a Triggering Event.
Upon delivery of such notice, any option outstanding shall be exercisable in
full and not only as to those shares with respect to which installments, if any,
have then accrued, subject, however, to earlier expiration or termination as
provided elsewhere in the Stock Option Plan and subject to the consummation of
the Triggering Event. The Board of Directors may also suspend or terminate the
Stock Option Plan at any time. Unless sooner terminated, the Stock Option Plan
shall terminate ten years from its effective date, June 12, 1996.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Company establishes, implements, and monitors
general policies regarding compensation for the Company's employees, adopts and
amends employee compensation plans, and approves specific compensation levels
for the Company's executive officers, including the named Executive Officers.
Currently, the members of the Compensation Committee are Martin J. Bloom,
Theodore P. Desloge, Jr., and Phillip F. Dressel. Each member of the
Compensation Committee is a non-employee director of the Company.
Set forth below is a report of the Compensation Committee addressing the
Company's compensation policies for 1997 applicable to the Company's executives,
including the Executive Officers.
The Report of the Compensation Committee on Executive Compensation shall not be
deemed incorporated by reference by any general statement incorporating by
reference this Proxy Statement into any filing under the Securities Act of 1933
(the "Securities Act") or under the Exchange Act, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Company's compensation programs reflect the philosophy that executive
compensation levels should be linked to Company performance, yet be competitive
and consistent with that provided to others holding positions of similar
responsibility in the recreational products and manufactured industrial products
industries. The Company's compensation plans are designed to assist the Company
in attracting and retaining qualified employees critical to the Company's
long-term success, while enhancing employees' incentives to perform to their
fullest abilities to increase profitability and thus maximize shareholder value.
Salary Compensation
The Company pays cash salaries which it believes are competitive with salaries
paid to executives of other similar sized companies in the recreational products
or manufactured industrial products industries based upon the individual's
experience and past and potential contribution to the Company. The Compensation
Committee receives information about the compensation practices of those similar
companies from outside consultants.
Mr. Brining's annual base salary was $317,050 for 1997. This amount represents
an increase of $16,983, or 5.7%, over Mr. Brining's base salary for 1996. The
Compensation Committee sought to set Mr. Brining's base compensation at a level
that was competitive with the base compensation paid to chief executive officers
by similar sized companies in the recreational or manufactured industrial
products industries.
Subsidiary Incentive Compensation Plan
In 1990, as a result of Mr. Brining's recommendation and efforts, the Company
developed and implemented the Subsidiary Incentive Compensation Plan (the "Bonus
Plan") whereby individual compensation is directly linked to the performance of
the Company's subsidiary (the "Subsidiaries" or "Subsidiary"). The Bonus Plan
and the Company's salary deferral 401(k) Plan (the "401(k) Plan"), and the
Company's Profit Sharing Plan (the "Profit Sharing Plan") are the three programs
under which employees of the Company or the Subsidiaries may receive cash
contributions and/or bonuses. The Executive Officers are not eligible to receive
bonuses under this Bonus
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<PAGE> 10
Plan. However, the Executive Officers are eligible for bonuses under the Valley
Forge Corporate Incentive Compensation Plan (the "Corporate Bonus Plan").
Valley Forge Corporate Incentive Compensation Plan
The Compensation Committee authorized the payment of bonus compensation in 1997
to Mr. Brining and Ms. Burke based upon the Company's achievement of sales and
return on equity objectives set by the Compensation Committee no more frequently
than annually. The specific bonuses for Mr. Brining and Ms. Burke were 83% and
52%, respectively, of his and her base salaries.
401(k) Plan
The Company adopted the salary deferral 401(k) Plan in August 1992 that benefits
all employees at the corporate headquarters and certain domestic subsidiaries in
which the Company has an ownership interest in excess of 80%. The 401(k) Plan is
a pretax salary deduction retirement program with a mandatory matching funds
feature. It encourages participants to adopt a regular savings program to defer
part of their pretax compensation to provide security for their retirement.
Employees who meet certain service and length of employment requirements are
eligible to participate. The Company provides matching contributions of 100% of
the employee's own contributions into the 401(k) Plan, up to 3% of each
employee's covered compensation. For 1997, the Company made matching
contributions to the 401(k) Plan of $4,800 and $4,268 for the benefit of Mr.
Brining and Ms. Burke, respectively.
Profit Sharing Plan
The Company sponsors a profit sharing plan for the benefit of the corporate
headquarters and two Subsidiaries. The Chief Executive Officer of the Company
makes a discretionary allocation of the compensation amount calculated pursuant
to the Corporate Bonus Plan to be contributed to the Profit Sharing Plan (the
"Profit Sharing Amount") for the benefit of the eligible employees of the
corporate headquarters at the close of the fiscal year. The Profit Sharing
Amount is distributed to eligible employees in proportion primarily to the
employee's base salary of such year. The Company made a profit sharing
contribution of 6.1% of the Executive Officers' aggregate base salary to the
Executive Officers for 1997 from the Profit Sharing Amount.
Stock-Based Compensation
The Company also believes that stock ownership by directors, officers,
employees, and consultants provides valuable long-term incentives for such
persons who will benefit as the Common Stock price increases and that
stock-based performance compensation arrangements are beneficial in aligning
employees' and stockholders' interests. Further, the Company believes that the
Company's policy of encouraging stock ownership serves an important function in
attracting, retaining, and motivating such persons, and accordingly, in the
growth and success of the Company. To facilitate these objectives, the Company
adopted the Stock Option Plan in 1987, which was most recently amended and
restated in 1996.
Through the Stock Option Plan, stock options have been granted to employees of
the Company, including the Executive Officers. Non-employee directors and
consultants are eligible to participate in the Stock Option Plan, but at the
present time there are no outstanding stock options held by such persons and
none have ever been exercised. The Stock Option Plan is administered by the
Compensation Committee.
Other Compensation
The Executive Officers also participate in the Company's broad-based employee
benefit plans, such as the Company's medical, supplemental disability, and term
life insurance plans.
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Currently, the Company's compensation programs described above, including stock
option plans, will not qualify for the exception to the $1,000,000 limit under
Section 162(m) of the Internal Revenue Code on total compensation for named
executives as structured. The Compensation Committee has no plans to revise the
Company's compensation programs to qualify for the exception since the level of
total compensation for each named executive is not currently subject to this
limit nor is it expected to exceed this limit in the foreseeable future.
COMPENSATION COMMITTEE
Martin J. Bloom, Chairman
Theodore P. Desloge, Jr.
Phillip F. Dressel
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Desloge and Mr. Bloom are members of the Compensation Committee and their
compensation arrangements are discussed under Directors' Compensation.
PERFORMANCE GRAPH
The Performance Graph shall not be deemed incorporated by reference by any
general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent Valley Forge Corporation specifically incorporates
this information by reference, and shall not otherwise be deemed filed under
such Acts.
The graph on the following page compares the Company's cumulative total
shareholder return on Common Stock with (i) the cumulative total return of the
American Stock Exchange ("AMEX") market index; and (ii) the cumulative total
return of peer companies ("Peer Group") selected by the Company in good faith1
over the period from December 31, 1992 through December 31, 1997. Each member of
the Peer Group is a publicly traded, diversified manufacturing company whose
three principal lines of business match three of the Company's top four
principal lines of business, and whose revenues are less than $2.2 billion. The
graph assumes an initial investment of $100 and reinvestment of dividends. This
graph is not necessarily indicative of future price performance.
- --------
1 The Peer Group includes Augat Inc. (through 12/11/96), Bel Fuse Inc., Joslyn
Corp. (through 10/31/95), La Barge Inc., Molex Inc., Powell Industries Inc., and
Thomas & Betts Corp. Augat Inc. is included in the Peer Group composite until
its acquisition on December 11, 1996, by Thomas & Betts Corp. (also a member of
the Peer Group). Joslyn Corp. is included in the Peer Group composite until its
acquisition on October 31, 1995, by Danaher Corp. Assumes $100 invested on
12/31/92 in Valley Forge common stock, Peer Group Companies (weighted by market
capitalization), and the American Stock Exchange index (AMEX). Assumes
reinvested dividends. Fiscal year ends December 31.
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11
PERFORMANCE GRAPH
COMPARES THE CUMULATIVE TOTAL SHAREHOLDER RETURN AMONG
VALLEY FORGE CORPORATION, PEER GROUP INDEX, AND AMEX MARKET INDEX.
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Valley Forge $100.00 $111.97 $153.21 $160.15 $180.02 $267.22
Peer Group 100.00 106.29 123.77 139.43 180.87 211.03
AMEX 100.00 119.52 108.63 137.32 146.10 171.48
</TABLE>
DIRECTORS' COMPENSATION
The Company entered into consulting agreements with Messrs. Bloom and Desloge in
1983. Pursuant to the terms of the agreements, Messrs. Bloom and Desloge are to
provide the Company with advice on any corporate acquisitions, retention of
corporate assets, evaluation of key personnel, evaluation of the operations of
subsidiaries, supervision of new product development, and general strategic
planning. The agreements are renewable annually on December 31 with the
consulting fee for the succeeding year set at that time. The Company agreed to a
fee of $75,000 for Mr. Bloom and $50,000 for Mr. Desloge for 1997. The Company
has also retained Mr. Warner in a consulting role for a fee of $8,400, which is
renewable each year. In addition, the Company generally pays directors $500 for
each board meeting attended.
ITEM 2 - RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Audit Committee of the Board of Directors has selected Deloitte & Touche
LLP, independent auditors, to audit the accounts of the Company and its
Subsidiaries for its current fiscal year ending December 31, 1998. Although the
appointment of independent auditors is not required to be approved by
stockholders, the Board believes that stockholders should participate in the
appointment through ratification. If a majority of the stockholders voting do
not ratify the appointment, the Audit Committee of the Board of Directors will
reconsider its action.
A representative of Deloitte & Touche LLP is expected to be present at the
meeting and will have an opportunity to make a statement if he desires to do so
and to be available to respond to appropriate questions.
On June 6, 1997, Valley Forge Corporation selected Deloitte & Touche LLP as the
certifying accountants to audit the Registrant's financial statements. The
Registrant's former auditors, Coopers & Lybrand L.L.P., were dismissed effective
the same day. The Board of Directors of Valley Forge Corporation approved the
decision to dismiss Coopers & Lybrand L.L.P. and to appoint Deloitte and Touche
LLP.
In connection with the audits of the two most recent years and the subsequent
interim period, there were no disagreements with Coopers & Lybrand L.L.P. on any
matters of accounting principles or practices, financial statement disclosure,
or auditing scope or procedure.
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Coopers & Lybrand L.L.P.'s report on the financial statements for the past two
years contained no adverse opinion or disclaimer of opinion and was not
qualified or modified as to uncertainty, audit scope, or accounting principles.
The Board of Directors recommends that you VOTE FOR ratification of its
appointment of Deloitte & Touche LLP as the Company's independent auditors.
ITEM 3 - AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Company's Board of Directors has unanimously approved and proposes and
recommends the adoption of an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of Common Stock from 5
million shares to 10 million shares. No increase is proposed in the number of
preferred shares that are currently authorized.
The first paragraph of Article IV of the Certificate of Incorporation would be
amended to read as follows:
The Corporation is authorized to issue two classes of capital stock,
designated Common Stock and Preferred Stock. The total number of
shares of stock which the Corporation shall have authority to issue
is Eleven Million (11,000,000) shares, consisting of Ten Million
(10,000,000) shares of Common Stock, par value $.50 (the "COMMON
STOCK") and One Million (1,000,000) shares of Preferred Stock, no
par value (the "PREFERRED STOCK"). Shares of Common Stock and
Preferred Stock are referred to herein as the "SHARES".
When the Company reincorporated in Delaware in June 1997, its certificate of
incorporation authorized 5 million shares of Common Stock, of which
approximately 2.8 million shares were outstanding. On July 28, 1997, the
Company's Board of Directors authorized a 3-for-2 Common Stock split effected in
the form of a 50% stock dividend distributed on September 16, 1997, to
stockholders of record on September 5, 1997. Upon completion of the stock split,
the number of shares of outstanding Common Stock increased to approximately 4.1
million shares. As a result, the Company would not have enough authorized but
unissued shares of Common Stock to effect further stock splits if the Board of
Directors desired to authorize such an action.
Therefore, to have sufficient number of shares of Common Stock available for
issuance in connection with subsequent stock splits, acquisitions, financings,
compensation and benefit plans, and other proper corporate purposes, the Board
of Directors recommends increasing the number of authorized shares. Although the
Company has no specific plans at this time for the use of the additional Common
Stock, having such additional authorized shares available for issuance in the
future would give the Company greater flexibility and would allow such shares to
be issued without the expense and delay of a special shareowners' meeting. The
additional Common Stock would be identical to the Common Stock the Company now
has authorized. Holders of Common Stock do not have preemptive rights to
subscribe to additional securities that may be issued by the Company. Although
the Board of Directors has no present intention of doing so, the additional
shares of Common Stock could be used to make it more difficult to effect a
change in control of the Company. The Company has other defenses available
against coercive or unfair acts of third parties that are designed to effect a
change in control of the Company. Presently, the Board of Directors knows of no
such attempt to obtain control of the Company.
The Board of Directors Recommends a Vote "FOR" the Amendment of Article IV of
the Company's Certificate of Incorporation to increase the number of authorized
shares of Common Stock from 5,000,000 to 10,000,000 shares.
STOCKHOLDER PROPOSALS
Stockholders are entitled to submit proposals on matters appropriate for
stockholders' action, consistent with regulations of the Securities and Exchange
Commission. Should a stockholder intend to present a proposal at next year's
annual meeting, it must be received by the Secretary of the Company at the
Company's principal office on or before January 2, 1999, in order to be included
in the Company's Proxy Statement and form of proxy relating to that meeting.
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<PAGE> 14
OTHER BUSINESS
The Board of Directors knows of no matters to be presented for action at the
Meeting other than as set forth in this Proxy Statement. If other matters
properly do come before the Meeting, the persons named in the accompanying proxy
will vote said proxy in accordance with their judgment. It is important that
proxies be returned promptly. Therefore, stockholders are urged to promptly
sign, date, and return the proxy in the attached stamped and addressed envelope.
Proxies, ballots, and voting tabulations identifying stockholders are secret and
will not be available to anyone, except as actually necessary to meet legal
requirements.
Stockholders may obtain without charge, copies of the Company's annual report on
Form 10-K for the year ended December 31, 1997, and all financial statements and
schedules thereto as filed with the SEC by writing the Company's Secretary, Ms.
Monica J. Burke, 100 Smith Ranch Road, Suite 326, San Rafael, California 94903.
BY ORDER OF THE BOARD OF DIRECTORS
MONICA J. BURKE
SECRETARY - TREASURER
Date: April 28, 1998
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VALLEY FORGE CORPORATION PROXY
THIS PROXY CARD IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF VALLEY
FORGE CORPORATION. The undersigned, revoking all previous proxies, hereby
appoints Monica J. Burke as Proxy with the power to appoint her substitute, and
hereby authorizes her to represent and vote, as designated below, all of the
shares of Common Stock of Valley Forge Corporation (the "Company") held of
record by the undersigned on April 22, 1998, at the annual meeting of
stockholders to be held on June 10, 1998, or at any adjournment thereof.
ITEM 1. ELECTION OF DIRECTORS
_____ FOR all nominees listed below (except as marked to the contrary
below).
_____ WITHHOLD AUTHORITY to vote for all nominees listed below.
INSTRUCTIONS: To withhold authority to vote for any nominee, strike a
line through the nominee's name in the list below:
Martin J. Bloom Theodore P. Desloge, Jr.
David R. Brining Phillip F. Dressel Dale J. Warner
ITEM 2. RATIFICATION OF APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE
COMPANY'S INDEPENDENT AUDITORS FOR 1998
______ FOR ______ AGAINST ______ ABSTAIN
ITEM 3. APPROVAL AND ADOPTION OF AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM
5 MILLION TO 10 MILLION
______ FOR ______ AGAINST ______ ABSTAIN
In her discretion, the Proxy is authorized to vote upon such other
business as may properly come before the annual meeting or any adjournment
thereof.
THIS PROXY CARD, WHEN PROPERLY EXECUTED, DATED, AND RETURNED, WILL BE
VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO
DIRECTION IS MADE, THIS PROXY CARD WILL BE VOTED FOR ALL THE NOMINEES FOR
DIRECTOR DESIGNATED IN ITEM 1, FOR ITEM 2, AND FOR ITEM 3.
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS BELOW. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee, or guardian, please give full title as such. If a
corporation, please sign in full corporate name by the President or other
authorized officer. If a partnership, please sign in the partnership name by an
authorized partner.
DATED: _____________________, 1998
___________________________________
Signature
___________________________________
Signature if held jointly
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
