INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities and Exchange Act of 1934
File by registrant [X]
File by a party other than the regristrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive addtional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
VALLEY FORGE SCIENTIFIC CORP.
(Name of Registrant as Specified in its Charter)
VALLEY FORGE SCIENTIFIC CORP.
(Name of Person(s) Filing Proxy Statement)
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
Act Rule 14a-6(i)(3)
(1) Title of each class of securities to which transaction applies:
______________________________________________________________
(2) Aggregate number of securities to which transaction applies:
______________________________________________________________
(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.
______________________________________________________________
(4) Proposed maximum aggregate value of transaction:
______________________________________________________________
(5) Total fee paid:
______________________________________________________________
[ ] 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:
__________________________________________________________
(2) Form, Schedule or Registration Statement No.:
__________________________________________________________
(3) Filing Party:
_________________________________________________________
(4) Date Filed:
_________________________________________________________
<PAGE 1>
VALLEY FORGE SCIENTIFIC CORP.
136 Green Tree Road
Oaks, Pennsylvania 19456
________________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
June 23, 1998
________________________________________
To the Shareholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Valley Forge Scientific Corp. (the "Company") will be held at the Valley Forge
Hilton, at 251 West DeKalb Pike, King of Prussia, Pennsylvania on June 23, 1998
at 4:00 P.M. local time, for the following purposes:
1. To elect six directors of the Company to serve for the following year
and until their successors have been elected and qualified;
2. To receive reports of Officers; and
3. To transact such other business as may properly come before the meeting.
The Board of Directors has fixed the close of business on May 18, 1998 as
the record date for determining shareholders entitled to notice of the meeting
and to vote at such meeting or any adjournment thereof, and only shareholders
of record at the close of business on May 18, 1998 are entitled to notice of and
vote at such meeting.
A copy of the Company's Annual Report for the fiscal year ended September
30, 1997, is enclosed herewith.
You are cordially invited to attend the meeting. Whether or not you plan to
attend, you are urged to complete, date and sign the enclosed proxy and return
it promptly. If you receive more than one form of proxy, it is an indication
that your shares are registered in more than one account, and each such proxy
must be completed and returned if you wish to vote all of your shares eligible
to be voted at the meeting.
By Order of the Board of Directors
Thomas J. Gilloway, Secretary
Dated: Oaks, Pennsylvania
May 18, 1998
PLEASE COMPLETE AND RETURN THE PROXY IN THE ENCLOSED ENVELOPE WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE
MEETING, YOUR PROXY WILL BE RETURNED TO YOU UPON REQUEST TO THE SECRETARY
OF THE COMPANY.
<PAGE 2>
VALLEY FORGE SCIENTIFIC CORP.
136 Green Tree Road
Oaks, Pennsylvania 19456
_______________
PROXY STATEMENT
The enclosed proxy is solicited pursuant to this proxy statement (to be
mailed on or about May 18, 1998) by the Board of Directors of Valley Forge
Scientific Corp. (the "Company") for use at the 1997 Annual Meeting of
Shareholders to be held at the time and place shown in the attached Notice
of Annual Meeting of Shareholders. Shares represented by the properly
executed proxies, if returned in time, will be voted at the meeting as
specified, or, if not otherwise specified, in favor of the election of
directors of the nominees named herein. Such proxies are revocable at
any time before they are exercised by written notice to the Secretary
of the Company. Management is not aware at the date hereof of any matters
to be presented at this meeting other than the election of directors.
If any other materials are properly presented, the persons named in the
proxy will vote thereon according to their best judgment.
RECORD DATE
The record date for determining the holders of common stock ("Common
Stock") of the Company who are entitled to notice and to vote at the annual
meeting was May 18, 1998.
VOTING SECURITIES
At May 18, 1998, the Company had 8,229,384 shares of Common Stock
outstanding. Holders of record of Common Stock as of such date will be
entitled to one vote for each share held.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth as of March 31, 1998, certain information
with respect to the beneficial ownership of Common Stock, by each person known
to the Company to own beneficially 5% or more of the outstanding Common Stock,
by each director and nominee, and by all officers and directors as a group.
Amount of
Name and Address of Beneficial Percentage
Beneficial Owners (1) Ownership Owned
- --------------------- --------- ----------
Jerry L. Malis (2)(3) 1,282,276 15.3%
Thomas J. Gilloway(2)(3) 1,001,375 12.0%
Dr. Leonard I. Malis(2) 892,242 10.7%
Bernard H. Shuman(2)(4) 126,467 1.5%
Bruce A. Murray(2)(5) 11,500 *
Robert H. Dick(2)(6) 2,000 *
All officers and directors
as a group (6 persons) 3,305,860 38.6%
- --------------
* less than 1%
(1) Except as indicated in the footnotes to this table, the persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock shown as beneficially owned by them.
(2) The mailing address of Messrs. Malis, Gilloway, Shuman, Murray and Dick
and Dr. Malis, directors of the Company, is 136 Green Tree Road, P.O. Box
1179, Oaks, Pennsylvania 19456-1179.
(3) Includes 50,000 shares of Common Stock which may be purchased by each of
Jerry L. Malis and Thomas J. Gilloway through the exercise of stock options
issued pursuant to the Company's Non-Qualified Stock Option Plan at a per
share exercise price of $1.56; 50,000 shares of Common Stock which may be
purchased by each of Jerry L. Malis and Thomas J. Gilloway through the
exercise of stock options at a per share exercise price of $3.625; and
50,000 shares of Common Stock which may be purchased by each of Jerry L.
Malis and Thomas J. Gilloway through the exercise of stock options at a
per share exercise price of $2.375.
<PAGE 3>
(4) Includes 25,000 shares of Common Stock which may be purchased by Mr.
Shuman through the exercise of stock options issued pursuant to the
Company's Non-Qualified Stock Option Plan at a per share exercise price
of $2.31. The record owner of 101,467 shares of Common Stock is The
Bernard H. Shuman Living Trust, a trust in which Mr. Shuman is designated
as the sole trustee and for which he possesses the power to vote the
shares.
(5) Includes 5,000 shares of Common Stock which may be purchased by Mr.
Murray through the exercise of stock options issued pursuant to the
Company's Non-Qualified Stock Option Plan at a per share exercise price
of $3.625; 1,000 shares of Common Stock which may be purchased at a per
share exercise price of $4.25; 1,000 shares of Common Stock which may be
purchased at a per share exercise price of $2.50; 2,500 shares of Common
Stock which may be purchased at a per share exercise price of $2.31; and
2,000 shares of Common Stock which may be purchased at a per share
exercise price of $3.375.
(6) Includes 2,000 shares of Common Stock which may be purchased by Mr. Dick
through the exercise of stock options issued pursuant to the Company's
Non-Qualified Stock Option Plan at a per share exercise price of $3.375.
PROPOSALS TO BE ACTED UPON AT THE ANNUAL MEETING
PROPOSAL 1 - ELECTION OF DIRECTORS
The Company's by-laws provide that the Board of Directors shall consist of
not fewer than 3 members. The Board of Directors has fixed the number of
Directors at six. Jerry L. Malis, Thomas J. Gilloway, Leonard I. Malis,
Bruce A. Murray, Bernard H. Shuman and Robert H. Dick, who have each been
nominated for election as a director by the Board of Directors, were elected
to serve their present terms on June 25, 1997. All directors hold office
until the next annual meeting of shareholders, or until their successors
are elected and qualified.
It is the intention of the persons named in the accompanying proxy to
vote, unless otherwise instructed, for the election as directors of the six
nominees named hereinafter. All nominees have expressed their willingness to
serve as directors. If any of the nominees should be unable to serve, the
proxies will be voted for the election of such other person or persons as
shall be determined by the person in the proxy in accordance with their
judgment. The Company is not aware of any reason why any of the nominees, if
elected, should be unable to serve as a director. The vote of a plurality of
a quorum of stockholders present in person or by proxy at the annual meeting of
shareholders is required for the election of the nominees.
The directors and executive officers of the Company are as follows:
Director
Name Age Position(s) Since
- ---- --- ----------- --------
Jerry L. Malis 65 Chairman of the Board and President 1980
Thomas J. Gilloway 60 Executive Vice President, Secretary, 1984
Treasurer and Director
Leonard I. Malis 78 Director 1989
Bruce A. Murray 61 Director 1992
Bernard H. Shuman 73 Vice President and Director 1994
Robert H. Dick 54 Director 1997
Jerry L. Malis has served as President or Vice-President and a Director
of the Company since its inception in March 1980. As of June 30, 1989,
Mr. Malis was elected as Chairman of the Board of the Company. He has
published over fifty articles in the biological science, electronics and
engineering fields, and has been issued twelve United States patents. Mr. Malis
coordinates and supervises the development, engineering and manufacturing of
the Company's products and is in charge of the daily business operations of the
Company. He devotes substantially all his business time to the business of the
Company.
<PAGE 4>
Thomas J. Gilloway has been Executive Vice President and a Director of the
Company since December 1984, and as of June 30, 1989 was appointed Secretary and
Treasurer of the Company. From the Company's inception in March 1980 to December
21, 1984, Mr. Gilloway served in capacities as a Vice-President and Treasurer.
Mr. Gilloway received his undergraduate degree from LaSalle University in 1959
and his graduate degree from Temple University in 1963. Prior to his involvement
with the Company, Mr. Gilloway was employed in a marketing capacity for Scott
Paper Company, C.R. Bard, Inc., and CheckPoint Systems as Director of Marketing.
He is involved with marketing, regulatory and contract administration matters
for the Company and devotes substantially all his business time to the business
of the Company.
Leonard I. Malis, M.D., a consultant to the Company since its inception in
March 1980, has been a director since June 30, 1989. Dr. Malis was Professor
and Chairman of the Department of Neurosurgery at Mount Sinai School of
Medicine, New York, New York, from 1971 until 1993, and is currently Professor
and Chairman Emeritus at Mount Sinai School of Medicine. Dr. Malis designed
and built the first commercial bipolar coagulator in 1955, and his original
units were the standard in neurosurgery for many years. Dr. Malis has been
issued five United States patents and has designed and trademarked over one
hundred instruments. He has published over one hundred articles in medical
journals and reviews and is the author of ten chapters in textbooks on
neurosurgery.
Bruce A. Murray has been a director of the Company since October 14, 1992.
He is a Managing Member of The Change Management Group, LLC, a management
consulting company; and a Principal of Adair & Murray Associates, Inc., a
management consulting company. From 1991 to May 1993, he was a senior
consultant with the management consulting firm of Rath and Strong. From 1984
to August 1991, Mr. Murray held positions within the Pfizer Hospital Products
Group, as Director of Engineering-Surgical Products, Corporate Vice President -
Research and Development, and Senior Vice President and Business Manager -
Surgical Products. He has also held senior management positions with Valleylab,
Inc., Picker Corporation Electronics Division, Ball Brothers Research
Corporation and IIT Research Institute. Mr. Murray received both his B.S.
in Engineering and his M.B.A. from the Illinois Institute of Technology, and
is an adjunct instructor in business strategies at the University of
Colorado.
Bernard H. Shuman has been a director and Vice President of the Company
since September 1, 1994. Mr. Shuman is currently Vice President-Technology.
Prior to September 1, 1994, Mr. Shuman served as President and director of
Diversified Electronic Corporation ("Diversified"), a specialty electronics
manufacturer which merged into the Company on August 31, 1994.
Robert H. Dick has been a director of the Company since 1997. He is a
partner in Boles & Company, an investment banking firm. Prior to becoming a
partner in Boles & Company in April 1996, he was President, CEO and CFO of two
Boles & Company clients: BioMagnetic Therapy Systems, Inc. (from September 1995
to April 1996) and Pharmx, Inc. (from May 1994 to May 1995). From April 1987
to May 1994, Mr. Dick served as Vice President-International for Codman &
Shurtleff, Inc., a Johnson & Johnson subsidiary, where he was responsible for
new business development and sales and marketing in non-U.S. markets. Mr. Dick
has also held other business development and sales and marketing positions
with Codman & Shurtleff, Inc., and product management positions with USCI
Surgical Products, a division of C.R. Bard.
Jerry L. Malis and Dr. Leonard I. Malis are brothers. The Company's
executive officers are elected annually by the Company's directors and shall
continue to serve until their successors are elected and qualified.
Section 16(a) Beneficial Ownership Reporting Compliance.
For the 1997 fiscal year, Robert H. Dick failed to file one report with the
Securities and Exchange Commission involving one transaction and Leonard I.
Malis failed to file one report with the Securities and Exchange Commission
involving two transactions regarding the Common Stock of the Company.
<PAGE 5>
Meetings of the Board of Directors
During the fiscal year ended September 30, 1997 there were five (5)
meetings of the Company's Board of Directors. In December 1997, the Company
established an Audit Committee, comprised of board members Bruce A. Murray,
Robert H. Dick and Jerry L. Malis.
Executive Compensation
The following table sets forth the compensation paid by the Company to its
executive officers for the three fiscal years ended September 30, 1997.
SUMMARY COMPENSATION TABLE
Number of Shares of
Common Stock
Name and Underlying
Principal Position Fiscal Year Salary (1) Options Granted
- -------------------------------------------------------------------------------
Jerry L. Malis, 1997 $ 179,951 ---
President 1996 163,592 ---
1995 163,592 50,000
Thomas J. Gilloway, 1997 $153,598 ---
Executive Vice
President 1996 139,634 ---
1995 139,634 50,000
Bernard H. Shuman 1997 $105,000 ---
Vice President
- Technology 1996 105,000 25,000
(1) Non-cash compensation did not exceed the lesser of $50,000 or 10% of the
cash compensation for the named individual.
Effective July 1, 1994, the Company entered into employment agreements with
Jerry L. Malis, President, and Thomas J. Gilloway, Executive Vice President for
a term of 63 months. The agreements provide for annual base salaries to Mr.
Malis and Mr. Gilloway of $148,720 and $126,940, respectively, in 1994, with
annual base salary increases of 10% commencing on October 1, 1994. For the
year ended September 30, 1996, Messrs. Malis and Gilloway waived their right
to the 10% increase of base salary for that year. The base salaries for the
years ended September 30, 1996 and 1995 were $163,592 for Jerry L. Malis and
$139,634 for Thomas J. Gilloway. The base salaries for Jerry L. Malis and
Thomas J. Gilloway for the year ended September 30, 1997 were $179,951 and
$153,598, respectively. The agreements also provide that Messrs. Malis and
Gilloway may each receive such other cash and stock bonuses as may be
determined from time to time by the Board of Directors. The employment
agreements may be terminated for cause. In addition, the agreements provide
that in the event of a change of control (as defined in the Securities
Exchange Act of 1934) of the Company, the employee may terminate his employment
for "good reason" and shall be entitled to receive a payment equal to the
lesser of (i) 2.99 times the employee's average annual compensation (including
bonuses, if any) during the three years preceding the date of termination; or
(ii) the compensation payable for the remaining term of the agreement. The term
"good reason" includes the assignment to the employee of duties inconsistent
with the employee's then position, a relocation of the Company's office more
than 30 miles from the Company's present offices, a failure of the Company to
continue in effect any benefit or compensation plan, depriving the employee of
any fringe benefit, or the failure of any successor entity to assume the
employment agreement.
On August 31, 1994, the Company entered into an employment agreement with
Bernard H. Shuman, Vice President-Technology, for a term of 59 months. The
agreement provides for an annual salary to Mr. Shuman of $50,000 for the
period from September 1, 1994 to July 31, 1995, and a salary of $105,000 for
each twelve month period thereafter. The agreement provides that Mr. Shuman
may receive additional compensation and benefits as may be determined from
time to time by the Board of Directors. The agreement provides for certain
death and disability benefits. The employment agreement may be terminated for
cause.
<PAGE 6>
Directors' Compensation
Directors of the Company do not receive any compensation for their services
as members of the Board of Directors, but Directors who are not officers of the
Company are entitled to reimbursement for expenses incurred in connection with
their attendance at meetings and are entitled to participate in the Company's
Stock Option Plan.
401(k) Plan and Profit-Sharing Plan
Effective January 1, 1990, the Company adopted a 401(k) Plan and Profit
Sharing Plan that covers full-time employees who have attained age 21 and
have completed at least one year of service with the Company. Under the 401(k)
Plan, an employee may contribute an amount up to 25% of his compensation to the
401(k) Plan on a pre-tax basis not to exceed $9,500 per year (adjusted for cost
of living increases). Amounts contributed to the 401(k) Plan are
non-forfeitable.
Under the Profit Sharing Plan, a participant in the plan participates in
the Company's contributions to the Plan as of December 31 in any year, with
allocations to individual accounts based on annual compensation. An
employee does not fully vest an interest in the plan until completion of three
years of employment. The Board of Directors determines the Company's
contributions to the plan on a discretionary basis. The Company has not
made any contributions to date.
Certain Relationships and Related Transactions
Since the late 1960's, Dr. Leonard I. Malis, a director of the Company,
on an individual basis, has been a party to royalty arrangements with Johnson &
Johnson Professional, Inc. ("J&J"), formerly known as Codman & Shurtleff, Inc.,
a principal customer of the Company. Dr. Malis has developed and in the future
may develop passive hand instruments for J&J with no pecuniary benefits to the
Company.
The Company has entered into a five year lease commencing on July 1, 1995
for approximately 4,200 square feet of office and warehouse space at a base
monthly rent of $4,362 with GMM Associates, a Pennsylvania general partnership,
whose partners are Jerry L. Malis, Thomas J. Gilloway and Leonard I. Malis,
principal shareholders, directors and/or officers of the Company. The related
expense for this lease for the year ended September 30, 1997 was $52,937.
The Company believes the rental payments reflect fair rental value for the
space.
For fiscal 1997, the Company paid legal fees in the amount of $75,216 to a
law firm in which a son-in-law of Jerry L. Malis is a partner.
INDEPENDENT PUBLIC ACCOUNTANT
Samuel Klein & Company, a certified public accounting firm, was selected
by the Board of Directors to audit the financial statements of the Company for
the fiscal year ended September 30, 1997. A representative of Samuel Klein &
Company is not expected to be present at the Annual Meeting of Shareholders.
The Auditing Committee of the Board has not had an opportunity to consider
the selection of the Company's public accountant for fiscal year 1998.
COST OF SOLICITATION
The cost of soliciting proxies in the accompanying form has been or will
be borne by the Company.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the next annual meeting
of shareholders, to be held in 1999, must be received by the Company at 136
Green Tree Road, Oaks, Pennsylvania 19456 by September 30, 1998.
<PAGE 7>
It is important that your shares be represented at the meeting. If you
are unable to be present in person, you are respectfully requested to sign the
enclosed proxy and return it in the enclosed stamped and addressed envelope as
promptly as possible.
By Order of the Board of Directors,
Thomas J. Gilloway, Secretary
Dated: May 18, 1998
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
VALLEY FORGE SCIENTIFIC CORP.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS-June 23, 1998
THE UNDERSIGNED HEREBY APPOINTS JERRY L. MALIS AND THOMAS J. GILLOWAY,
EACH WITH THE POWER TO APPOINT HIS SUBSTITUTE, AND HEREBY AUTHORIZES
THEM TO REPRESENT AND TO VOTE, AS DESIGNATED BELOW, ALL THE SHARES OF
COMMON STOCK OF VALLEY FORGE SCIENTIFIC CORP. HELD ON RECORD BY THE
UNDERSIGNED ON MAY 18, 1998 AT THE ANNUAL MEETING OF SHAREHOLDERS TO
BE HELD ON JUNE 23, 1998 OR ANY ADJOURNMENT THEREOF.
1. ELECTION OF DIRECTORS:
[ ] FOR ALL NOMINEES: [ ] WITHHOLD AUTHORITY
listed below to vote for all nominees
(except as marked to listed below
the contrary below)
Jerry L. Malis, Thomas J. Gilloway, Leonard I. Malis
Bruce A. Murray, Bernard H. Shuman, Robert H. Dick
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, PLACE AN 'X' IN THE BOX ON THE LEFT AND STRIKE A LINE THROUGH
THE
NOMINEE'S NAME LISTED ABOVE.
____________________________________________________________________________
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH
OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. THIS PROXY
WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DISCRETION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSAL 1.
Please date and sign exactly as name(s) appear hereon.
If signing for an estate, trust or corporation, title
or capacity should be stated. If shares are jointly
held, each shareholder should sign.
_____________________________________________________
(Signature of Stockholder)
DATED: , 1998
Please date and sign this proxy and return it
promptly in the enclosed envelope.
