UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14 (A) of the Securities
Exchange Act of 1934
Filed by 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 or sec. 240. 14a-12
VALLEY FORGE SCIENTIFIC CORP.
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(Named of Registrant as Specified in its Charter)
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(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 in the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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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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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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VALLEY FORGE SCIENTIFIC CORP.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held Wednesday, March 10, 2004
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To the Stockholders of
Valley Forge Scientific Corp.:
The Annual Meeting of Stockholders (the "Annual Meeting") of Valley
Forge Scientific Corp., a Pennsylvania corporation, will be held at the Hampton
Inn at Route 422 and Egypt Road, Oaks, Pennsylvania on Wednesday, March 10, 2004
at 10:00 a.m. local time, for the following purposes:
1. To elect five directors for a one-year term until their
respective successors are duly elected and qualified; and
2. To consider and act upon any other matter which may properly
come before the meeting or any adjournments or postponements
thereof. The Board of Directors is presently unaware of any
other business to be presented to a vote of stockholders at
the Annual Meeting.
The Board of Directors has fixed the close of business on February 2,
2004 as the record date for determining the stockholders entitled to notice of
and to vote at the Annual Meeting. Only stockholders of record of our common
stock, no par value, at the close of business on that date are entitled to
notice of and vote at the Annual Meeting and any adjournments or postponements
thereof.
The enclosed proxy is solicited by the Board of Directors. You are
requested to complete and sign the enclosed form of proxy and mail it promptly
in the enclosed postage-prepaid envelope. Any proxy may be revoked by delivery
of a later dated proxy. Stockholders of record who attend the Annual Meeting may
vote in person, even if they have previously delivered a signed proxy.
By Order of the Board of Directors,
/s/ MARGUERITE RITCHIE
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MARGUERITE RITCHIE,
Oaks, Pennsylvania Secretary
February 5, 2004
IMPORTANT
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. EVEN IF YOU
PLAN TO BE PRESENT, PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY AT
YOUR EARLIEST CONVENIENCE IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES. IF YOU ATTEND THE MEETING, YOU MAY VOTE EITHER IN
PERSON OR BY PROXY.
VALLEY FORGE SCIENTIFIC CORP.
136 Green Tree Road
Oaks, Pennsylvania 19456
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PROXY STATEMENT
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2004 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 10, 2004
February 5, 2004
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Valley Forge Scientific Corp., a
Pennsylvania corporation, for use at its Annual Meeting of Stockholders (the
"Annual Meeting"), to be held at 10:00 a.m., local time, on Wednesday, March 10,
2004, at the Hampton Inn, Route 422 and Egypt Road, Oaks, Pennsylvania, and at
any adjournments or postponements thereof. This proxy statement and the Notice
of Annual Meeting of Stockholders and the proxy are being mailed to stockholders
on or about February 6, 2004. At the Annual Meeting, stockholders will be asked
to vote upon (i) the election of five directors of the Company; and (ii) any
other matters properly brought before the Annual Meeting. Unless the context
requires otherwise, references to "we", "us", "our" and "Valley Forge
Scientific" refer to Valley Forge Scientific Corp.
VOTING
Voting Securities. The Board of Directors has fixed the close of
business on February 2, 2004 as the record date for the determination of
stockholders entitled to notice of and to vote at the Annual Meeting (the
"Record Date"). Only stockholders of record of the Company's common stock, no
par value, (the "Common Stock") at the close of business on the Record Date will
be entitled to notice of and to vote at the Annual Meeting. As of the Record
Date, there were 7,913,712 shares of Common Stock outstanding and entitled to
vote at the Annual Meeting. Holders of Common Stock outstanding as of the close
of business on the Record Date will be entitled to one vote for each share held
by them.
The presence, in person or by proxy, of holders of at least a majority
of the total number of outstanding shares of Common Stock entitled to vote is
necessary to constitute a quorum for the transaction of business at the Annual
Meeting. Votes may be cast FOR or WITHHOLD FROM each nominee. Votes cast FOR the
nominees will count as "yes votes"; votes that are WITHHOLD FROM the nominees
will be excluded entirely from the vote and will have no effect. Abstentions and
"broker non-votes" are each included in the number of shares present at the
Annual Meeting for purposes of establishing a quorum. Abstentions and broker
non-votes will have no effect on the outcome of the election of directors. A
broker non-vote occurs when a broker submits a proxy card with respect to shares
held in a fiduciary capacity (typically referred to as being held in "street
name") but declines to vote on a particular matter because the broker has not
received voting instructions from the beneficial owner. Under the rules that
govern brokers who are voting with respect to shares held in street name,
brokers have the discretion to vote such shares on routine matters.
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Voting of Proxies. STOCKHOLDERS OF THE COMPANY ARE REQUESTED TO
COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE
ENCLOSED POSTAGE-PREPAID ENVELOPE. SHARES REPRESENTED BY A PROPERLY EXECUTED
PROXY RECEIVED PRIOR TO THE VOTE AT THE ANNUAL MEETING AND NOT REVOKED WILL BE
VOTED AT THE ANNUAL MEETING AS DIRECTED ON THE PROXY. IF A PROPERLY EXECUTED
PROXY IS SUBMITTED AND NO INSTRUCTIONS ARE GIVEN, THE PROXY WILL BE VOTED FOR
THE ELECTION OF THE FIVE NOMINEES FOR DIRECTORS OF THE COMPANY NAMED IN THIS
PROXY STATEMENT. IT IS NOT ANTICIPATED THAT ANY MATTER OTHER THAN THAT SET FORTH
IN THIS PROXY STATEMENT WILL BE PRESENTED AT THE ANNUAL MEETING. IF OTHER
MATTERS ARE PRESENTED, PROXIES WILL BE VOTED IN ACCORDANCE WITH THE DISCRETION
OF THE PROXY HOLDERS. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMEND A VOTE FOR
THE NOMINEES.
A stockholder of record may revoke a proxy at any time before it has
been exercised by filing a written revocation with the Secretary of the Company
at the address of the Company set forth above, by filing a duly executed proxy
bearing a later date, or by appearing in person and voting by ballot at the
Annual Meeting. Any stockholder of record as of the Record Date attending the
Annual Meeting may vote in person whether or not a proxy has been previously
given, but the presence (without further action) of a stockholder at the Annual
Meeting will not constitute revocation of a previously given proxy.
Solicitation of Proxies. We will bear the cost of soliciting proxies.
In addition to soliciting stockholders by mail, we will request banks, brokers
and other custodians, nominees and fiduciaries to solicit customers for whom
they hold our stock and will reimburse them for their reasonable out-of-pocket
costs. We may use the services of our officers, directors and others to solicit
proxies, personally or by telephone, without additional compensation.
Annual Report Accompanies Proxy Statement. Our 2003 Annual Report,
including our audited financial statements for the fiscal year ended September
30, 2003, is being mailed to stockholders concurrently with this Proxy
Statement.
PROPOSAL 1
ELECTION OF DIRECTORS
We have a Board of Directors consisting of five directors who serve
until the next annual meeting of stockholders and until their respective
successors are duly elected and qualified. At each annual meeting of
stockholders, directors are elected for a term of one year to succeed those
directors whose terms expire at that annual meeting.
The term of each of the current directors will expire on the date of
the upcoming Annual Meeting on March 10, 2004. Accordingly, five persons are to
be elected to serve as directors at the meeting. Valley Forge Scientific's
nominees for election by the stockholders to those positions are Jerry L. Malis,
Leonard I. Malis, Bruce A. Murray, Robert H. Dick and Louis Uchitel. If elected,
the nominees will serve as directors until our Annual Meeting of Stockholders in
2005 and until their successors are elected and qualified. If any of the
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nominees declines to serve or becomes unavailable for any reason, or if a
vacancy occurs before the election (although we know of no reason to anticipate
that this will occur), the proxies may be voted for such substitute nominee(s)
as we may designate.
Our Board of Directors deems all of the foregoing directors to be
"independent directors" under Rule 4200(a)(14) of the Nasdaq Stock Market except
Jerry L. Malis and Leonard I. Malis.
The Board of Directors recommends a vote "FOR" the nominees in the
paragraph above.
If a quorum is present, the five nominees receiving the highest number
of votes will be elected as directors.
Information Regarding Nominees for Directors and Executive Officers
The following table sets forth the nominees for director to be elected
at the Annual Meeting as well as the executive officers of Valley Forge
Scientific Corp. and information with respect to their ages and background. Each
of the nominees for director has consented to be named in this proxy statement
and to serve if elected.
Name Age Position with Valley Forge Scientific
---- --- -------------------------------------
Jerry L. Malis 71 Chairman of the Board, Chief Executive Officer
and President
Leonard I. Malis 84 Director
Bruce A. Murray 67 Director
Robert H. Dick 60 Director
Louis Uchitel 78 Director
Marguerite Ritchie 65 Vice President-Operations, Secretary
Michael Ritchie 40 Vice President-General Manager, Treasurer
Jerry L. Malis, has served as our Chief Executive Officer, President or
Vice-President and a Director since our inception in March 1980. As of June 30,
1989, Mr. Malis was elected as our Chairman of the Board. 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 our products and is
in charge of our daily business operations. He devotes substantially all his
business time to the business of the Valley Forge Scientific.
Leonard I. Malis, M.D., an advisor to Valley Forge Scientific 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 of the Department of Neurosurgery. 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 a textbook on neurosurgery.
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Bruce A. Murray, a member of our audit committee and chairman of the
compensation committee, has been a director since October 14, 1992. He was a
Managing Member of The Change Management Group, LLC, a management consulting
company, and was a Principal of Adair & Murray Associates, Inc., a management
consulting company. Mr. Murray has 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.
Robert H. Dick, a member of our audit committee and the compensation
committee, has been a director since June 25, 1997. Mr. Dick has served as
President of R.H. Dick & Company since January 1998, which is an investment
banking and management consulting firm based in Ocala, Florida. From 1996 to
1998, Mr. Dick was a partner with Boles, Knop & Company, Inc., an investment
banking firm in Middleburg, Virginia. Prior to that, Mr. Dick served as interim
President, Chief Executive Officer and Chief Financial Officer of Biomagnetic
Therapy Systems, Inc. (September 1995 - March 1996) and PharmX, Inc. (May 1994 -
April 1995). Both companies were clients of Boles, Knop & Company. From 1982
until 1994, Mr. Dick served in various executive roles with Codman & Shurtleff,
Inc., a subsidiary of Johnson & Johnson and a manufacturer of surgical
instruments, implants, equipment and other surgical products. Mr. Dick's
positions with Codman included Director, Vice-President - New Business
Development, Vice President - U.S. Sales and Marketing, and Vice President -
International. Mr. Dick retired from Johnson & Johnson in April 1994. From 1978
to 1982, Mr. Dick was President & Chief Executive Officer of Applied
Fiberoptics, Inc., a company designing, manufacturing and marketing fiberoptic
products for medical and defense applications, and surgical microscopes for
microsurgery. Mr. Dick also serves on the board of Span-America Medical Systems,
Inc., which designs and manufactures wound management products.
Louis Uchitel, chairman of our audit committee and a member of the
compensation committee, has been a director since June 12, 2001. He is a
certified public accountant and the Secretary and Treasurer of Quaker State
Environmental Equipment, Inc., a lessor of solid waste equipment. Mr. Uchitel
was formerly the Executive Vice President and Chief Financial Officer of
Accurate Industries, Inc.
Marguerite Ritchie, Secretary of Valley Forge Scientific, has been
employed by us since 1985. In addition to being Secretary, Ms. Ritchie is
Vice-President of Operations in charge of our production and regulatory matters.
Prior to becoming Vice-President of Operations, she held several other
administrative and operations positions with Valley Forge Scientific.
Michael Ritchie, Treasurer of Valley Forge Scientific, has been
employed by us since 1994. In addition to being the Treasurer of the Company,
Mr. Ritchie is Vice-President-General Manager responsible for financial
reporting and contract administration. Mr. Ritchie has also held positions of
General Manager and Purchasing Manager. He received a B.S. degree in accounting
from LaSalle University and a B.S. degree in engineering from Drexel University.
Jerry L. Malis and Dr. Leonard I. Malis are brothers. Michael Ritchie
is the son of Marguerite Ritchie.
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The Board Meetings and Committees
Our Board of Directors held five meetings during the fiscal year ended
September 30, 2003. Each of the directors attended more than 75% of the
aggregate of the total number of meetings of the Board of Directors and
committees of which he is a member which were held during the period he was a
director or committee member.
We have standing Audit and Compensation Committees. During the 2003
fiscal year, the members of the Audit Committee consisted of Messrs. Uchitel (as
Chairman), Murray and Dick. Each of the members of the Audit Committee is an
"independent director" as defined under Rule 4200(a)(14) of the Nasdaq Stock
Market. The Audit Committee reviews the results of the annual audit of our
accounts conducted by our independent auditors and the recommendations of the
auditors with respect to accounting systems and controls. The Audit Committee
has a written charter adopted by the Board of Directors, which charter is
attached as Appendix A to this Proxy Statement. During the fiscal year ended
September 30, 2003, the Audit Committee held six meetings. The Audit Committee's
report on our audited financial statements for the fiscal year ended September
30, 2003 appears elsewhere in this Proxy Statement.
The members of the Compensation Committee are Messrs. Murray (as
Chairman), Dick and Uchitel. Each of the members of the Compensation Committee
is an "independent director" as defined under Rule 4200(a)(14) of the Nasdaq
Stock Market. The Compensation Committee reviews and approves our executive
compensation and benefit policies and administers our 2001 Stock Plan. During
the fiscal year ended September 30, 2003, the Compensation Committee held two
meetings. The Compensation Committee's report on executive compensation appears
elsewhere in this Proxy Statement.
Director Nominations
Nominations of candidates for election as directors may be made by the
Board of Directors or by stockholders. Our "independent directors", as
determined under Nasdaq rules, are responsible for among other things, the
selection and recommendation to the Board of Directors of nominees for election
as directors.
Stockholders may nominate candidates for election as directors if they
follow the procedures and conform to the deadlines specified in our Bylaws. The
complete description of the requirements for stockholder proposals, including
nomination of director candidates, is contained in the Bylaws. In summary,
assuming (i) we held an annual meeting the previous year and (ii) the date of
the next meeting is within 30 days of the date of the meeting for the previous
year, a stockholder desiring to nominate one or more candidates for election at
the next annual meeting must submit written notice of such nomination to the
Corporate Secretary at least 120 days in advance of the date that we released
our proxy statement in connection with the annual meeting held in the previous
year. That deadline for submission of any director nominations by stockholders
for the next annual meeting is also set forth in the Proxy Statement for each
annual meeting.
Stockholders nominating candidates for election as directors are also
required to provide the following information with respect to their nominees:
o the stockholder's name and address;
o a representation that the stockholder is a stockholder of
record on the date of the nomination;
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o a representation that the stockholder intends to appear in
person or through a qualified representative at the annual
meeting to nominate the person(s) specified in the notice;
o a description of all arrangements or understandings between
the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the
nominations are to be made by the stockholder;
o any other information relating to each nominee that would be
required to be disclosed in a proxy statement filed pursuant
to the Securities and Exchange Commission's ("SEC") proxy
rules; and
o the consent of each nominee to serve as a director if so
elected.
The Board of Directors has not determined whether it needs to adopt any
formal policies with respect to the consideration by stockholders of director
candidates. In the event of any stockholder recommendations, the independent
directors would evaluate the person recommended in the same manner as other
persons considered. Recommendations must be accompanied by a detailed and
complete written resume of each recommended candidate, including all business,
education and other qualifications, and any other material information the
stockholder wants the Board of Directors to consider. After reviewing the
materials submitted by a stockholder, if the independent directors believe that
the person merits additional consideration, the independent directors (or one or
more individual independent directors) would interview the potential nominee and
conduct appropriate reference checks. The independent directors, by majority
vote, would then determine whether to recommend to the Board of Directors that
the Board of Directors nominate and recommend election of such person at the
next annual meeting. Stockholders may submit in writing recommendations for
consideration by the Board of Directors to the attention of our Corporate
Secretary at Valley Forge Scientific Corp., 136 Green Tree Road, Suite 100, P.O.
Box 1179, Oaks, PA 19456-1179.
In evaluating potential director nominees, the independent directors
consider the following factors:
o commitment to ethical conduct as evidenced through the
person's business associations, service as a director or
executive officer of other organizations, and/or education;
o objective perspective and mature judgment developed through
business experiences and/or educational endeavors;
o the candidate's ability to work with other members of the
Board of Directors and management to further our goals and
increase stockholder value;
o the ability and commitment to devote sufficient time to carry
out the duties and responsibilities as a director;
o demonstrated experience at policy making levels in various
organizations and in areas that are relevant to our
activities; and
o the skills and experience of the potential nominee in relation
to the capabilities already present on the Board of Directors.
The goal is to recommend candidates for the Board of Directors that
bring a variety of perspectives and skills derived from high quality business
and professional experience. At the same time, the Board of Directors recognize
that larger numbers of directors create additional challenges and expense and
believe that the current right size for our Board of Directors is five members.
Other than the foregoing, there are no stated minimum criteria for
director nominees, although the Board of Directors may also consider such other
factors as it may deem to be in the best interests of Valley Forge Scientific
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and its stockholders. The Board of Directors requires that at least one member
of the Board of Directors should meet the criteria for an "audit committee
financial expert" as defined by SEC rules, and that a majority of the members of
the Board of Directors should meet the definition of "independent director"
under the Nasdaq rules.
If any member of the Board of Directors is not interested in continuing
to serve or if the Board of Directors determines that there is a need for
directors with different skills or perspectives, the members of the Board of
Directors are polled to determine if they know of potential candidates meeting
these criteria. We have not required the services of third parties to identify
potential nominees, although we reserve the right to retain a search firm in the
future, if necessary. We would typically engage a third party to perform a
background check, using publicly available information, to determine whether a
new candidate for election as director has any issues that should be considered
in the Board of Directors' evaluation of his or her candidacy.
Prior to 120 days in advance of the date of the Proxy Statement for
last year's annual meeting, we did not receive any recommendations from
stockholders for potential director candidates to be nominated at the Annual
Meeting.
Communications with the Board Of Directors
Stockholders may communicate with any and all members of our Board of
Directors by transmitting correspondence by mail or facsimile addressed to one
or more directors by name (or to the Chairman, for a communication addressed to
the entire Board) at the following address and fax number:
Name of the Director(s)
c/o Corporate Secretary
Valley Forge Scientific Corp.
136 Green Tree Road, Suite
100, P.O. Box 1179
Oaks, PA 19456-1179
Fax: (610) 666-7565
Communications from our stockholders to one or more directors will be
collected and organized by our Corporate Secretary under procedures approved by
our independent directors. The Corporate Secretary will forward all
communications to the Chairman of the Board of Directors or to the identified
director(s) as soon as practicable, although communications that are abusive, in
bad taste or that present safety or security concerns may be handled
differently. If multiple communications are received on a similar topic, the
Corporate Secretary may, in his or her discretion, forward only representative
correspondence.
The Chairman of the Board of Directors will determine whether any
communication addressed to the entire Board of Directors should be properly
addressed by the entire Board of Directors or a committee thereof. If a
communication is sent to the Board of Directors or a committee, the Chairman of
the Board or the Chairman of that committee, as the case may be, will determine
whether a response to the communication is warranted. If a response to the
communication is warranted, the content and method of the response will be
coordinated with our counsel.
We do not have a formal policy regarding attendance by members of the
Board of Directors at our Annual Meeting of Stockholders, but strongly encourage
directors to attend. We make every effort to schedule our Annual Meeting of
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Stockholders at a time and date to permit attendance by directors, taking into
account the directors' schedules and the timing requirements of applicable law.
To facilitate attendance and reduce travel costs, we generally schedule our
Annual Meeting of Stockholders to occur immediately before a periodic meeting of
the Board of Directors. Of the five directors then in office, four attended the
2003 Annual Meeting of Stockholders.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not
intend to bring any other business before the meeting and so far as is known to
the Board, no matters are to be brought before the Annual Meeting except as set
forth above. However, as to any other business that may properly come before the
Annual Meeting, or any adjournment thereof, it is intended that proxies, in the
form enclosed, will be voted in respect thereof, in accordance with the judgment
of the persons voting such proxies.
STOCK OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth as of January 15, 2004 certain
information with respect to the beneficial ownership of our Common Stock by (i)
each of the named executive officers and Directors, (ii) all executive officers
and Directors as a group, and (iii) each person known by us to beneficially own
more than 5% of Valley Forge Scientific's Common Stock based on certain filings
made under Section 13 of the Securities Exchange Act of 1934, as amended
("Exchange Act"). All such information provided by the stockholders who are not
executive officers or Directors reflects their beneficial ownership as of the
dates specified in the footnotes to the table.
Amount of
Name and Address of Beneficial Percentage
Beneficial Owners (1) Ownership Owned
--------------------- --------- -----
(i) Executive Officers and Directors
Jerry L. Malis (2)(3) 1,232,276 15.4%
Dr. Leonard I. Malis (2)(6) 961,242 12.1%
Louis Uchitel (2) (7) 260,000 3.3%
Bruce A. Murray (2)(4) 46,000 *
Robert H. Dick (2)(5) 44,000 *
Marguerite Ritchie (8) 20,650 *
Michael Ritchie (9) 23,000 *
(ii) All Executive Officers and Directors
as a Group (7 persons) 2,587,168 31.6%
(iii) Certain Beneficial Owners
Russell U. Schenkman (10) 651,375 8.2%
Daniel Boyer, Ross L. Campbell,
W. Ward Carey, Phillip N. Hudson and
James I. Steele (11) 781,740 9.9%
--------------------
* less than 1%
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(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, Murray, Dick, Uchitel and Dr.
Malis, directors of the Company, is 136 Green Tree Road, P.O. Box 1179,
Oaks, Pennsylvania 19456-1179.
(3) Includes 100,000 shares issuable to Mr. Malis subject to options
exercisable currently or within 60 days. Also includes 200,000 shares
held in the Malis Family, L.P., a limited partnership in which Jerry L.
Malis is the general partner and possesses voting and investment power.
(4) Represents 46,000 shares issuable to Mr. Murray subject to options
exercisable currently or within 60 days.
(5) Represents 44,000 shares issuable to Mr. Dick subject to options
exercisable currently or within 60 days.
(6) Includes 400,000 shares held in the Leonard and Ruth Malis Family,
L.P., a limited partnership in which Dr. Malis is a general partner and
possesses voting and investment power.
(7) Includes 30,000 shares issuable to Mr. Uchitel subject to options
exercisable currently or within 60 days and includes 15,000 shares
owned by Mr. Uchitel's daughter for which Mr. Uchitel possesses shared
investment power.
(8) Includes 19,750 shares issuable to Ms. Ritchie, subject to options
exercisable currently or within 60 days.
(9) Represents 23,000 shares issuable to Mr. Ritchie subject to options
exercisable currently or within 60 days.
(10) Russell U. Schenkman is the sole trustee of the Frances W. Gilloway
Marital Trust and the Frances W. Gilloway Residue Trust (the "Trusts"),
which are the record owners of 601,375 shares of the Common Stock and
options to purchase 50,000 shares of Common Stock exercisable currently
or within 60 days. The Trusts were created under the will of Thomas J.
Gilloway to, among other things, own certain shares of the Common Stock
beneficially owned by Mr. Gilloway. Mr. Schenkman in his capacity as
trustee of the Trusts possesses sole voting and investment power with
respect to the shares and therefore is deemed to beneficially own,
under applicable regulations of the SEC, the 651,375 shares owned of
record by the Trusts. Mr. Schenkman disclaims beneficial ownership of
all shares owned of record by the Trusts. The address of Mr. Schenkman
is 13 Roszel Road, Princeton, New Jersey 08540. Based on information
set forth in a Schedule 13G filed under the Exchange Act on January 16,
2002.
(11) These five persons have formed a stockholders' committee and have
agreed to operate as a "group" for purposes of Section 13(d) of the
Exchange Act. The beneficial ownership of each of these persons based
on the information set forth in a Schedule 13D filed under the Exchange
Act on February 22, 2002 is set forth below. Daniel Boyer, whose
address is c/o Boenning & Scattergood, 601 High Street, Pottstown, PA
19464, beneficially owns 317,390 shares, including the following shares
that he shares voting and investment power: 74,390 shares owned by his
wife, Ute Boyer; 75,650 shares owned by his daughter, Kim Boyer; and
55,200 shares owned by his son, Alex Boyer. Ross L. Campbell, whose
address is 675 Lewis Lane, Ambler, PA 19002, beneficially owns 158,100
shares, which includes 12,000 shares held by him as co-trustee for
which he shares voting and investment power and the following shares
for which he shares voting and dispositive power: 15,000 shares owned
by his wife, Marcia W. Campbell; 6,000 shares owned by his daughter,
Jan Campbell; and 6,000 shares owned by his son Ross L. Campbell, Jr.
W. Ward Carey, whose address is 21 E. 66th Street, New York, NY 10021
beneficially owns 113,000 shares, which includes: 7,400 shares as to
which he shares voting and investment power with his wife, Patricia
Carey; 6,000 shares as to which he shares voting and investment power
with his son, Alexander Carey; 16,700 shares as to which he shares
voting and investment power with his daughter, Daphne Carey; and 2,900
shares as to which he shares voting and investment power with his
daughter, Cynthia A. Carey. Phillip N. Hudson, whose address is P.O.
Box 160892, San Antonio, TX 78280, beneficiary owns 140,600 shares.
James I. Steele, whose address is 30982 Clubhouse Lane, Evergreen, CO
80439, beneficially owns 52,650 shares, including the following shares
that he shares voting and investment power: 10,850 shares owned by his
mother, F. Irene Steele; and 4,000 shares owned by his wife, Peggy
Steele.
---------------
-9-
EXECUTIVE COMPENSATION
AND OTHER MATTERS
Summary Compensation Table
The following table sets forth the aggregate compensation paid by
Valley Forge Scientific with respect to the three fiscal years ended September
30, 2003 to the Chief Executive Officer.
Number of Shares of
Name and Common Stock Underlying
Principal Position Fiscal Year Salary Bonus Options Granted
--------------------------------------------------------------------------------------------
Jerry L. Malis, 2003 $220,000 0 --
Chief Executive 2002 199,000 $25,000 --
Officer and President 2001 199,000 0 50,000
Aggregate Fiscal Year End Option Values
The following table sets forth the value on September 30, 2003 of
unexercised options for the Chief Executive Officer.
Number of Shares of Common Stock
Underlying Unexercised Aggregate Value of Unexercised
Name Options at September 30, 2003 Options at September 30, 2003
---- ----------------------------- -----------------------------
Jerry L. Malis (1) 100,000 $18,750
---------------
(1) On each of June 5, 2000 and October 24, 2002, options to purchase
50,000 shares of Common Stock, which were previously issued to Mr.
Malis, expired in accordance with their terms unexercised. Mr. Malis'
options consist of the following:
- 50,000 shares granted on December 22, 1994 at $2.375 per
share, expiring December 22, 2004, of which 50,000 shares are
exercisable; and
- 50,000 shares granted on December 12, 2000 at $1.125 per share
expiring December 12, 2010, of which 50,000 shares are
exercisable.
Directors' Compensation
Our directors, who are neither employees of Valley Forge Scientific or
an immediate family member of an officer of Valley Forge Scientific, are paid
$750 for each meeting of the Board of Directors and each meeting of a committee
of the Board of Directors that they attend. In addition, all directors are
entitled to reimbursement for travel and lodging expenses incurred in connection
with their attendance at meetings.
Non-Employee Directors' Stock Option Plan. We have adopted the 2000
Non-Employee Directors' Stock Option Plan which provides that each our directors
who is neither an employee of Valley Forge Scientific or an immediate family
member of an officer of Valley Forge Scientific, will be granted options to
purchase 10,000 shares of our Common Stock each year he or she is elected,
-10-
appointed, or re-elected as a Board member. In addition, each of our
non-employee Directors who served in such position on December 12, 2000, the
effective date of this plan, received a grant of options as of that date. The
exercise price of options granted under this plan is equal to the fair market
value of the common stock on the date of grant. All options granted under this
plan vest upon issuance.
EQUITY COMPENSATION PLAN INFORMATION
We currently maintain two compensation plans that provide for the
issuance of our Common Stock to officers and other employees, directors and
consultants. These consist of the 2001 Stock Plan and the 2000 Non-Employee
Directors' Stock Option Plan, which have been approved by our stockholders. The
following table sets forth information regarding outstanding options and shares
reserved for issuance under the foregoing plans as of September 30, 2003.
Number of shares of
Common Stock
available for future
Number of shares of issuance under equity
Common Stock to be compensation plans at
issued upon exercise of Weighted average September 30, 2003
outstanding options, exercise price of (excluding shares
warrants and rights at outstanding options reflected in the first
Plan Category September 30, 2003 warrants and rights column)
------------- ----------------------- ------------------- ----------------------
Equity compensation
plans approved by
security holders 479,850 $2.04 195,500
Equity compensation
plans not approved by
security holders 0 0 0
------- ----- -------
Total: 479,850 $2.04 195,500
======= ===== =======
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
All executive officer compensation decisions are made by the
Compensation Committee. The Compensation Committee also reviews and makes
recommendations to the Board of Directors regarding the compensation of our
senior management and key employees, including salaries and bonuses. The current
members of the Compensation Committee are Messrs. Murray, Dick and Uchitel, none
of whom is an officer of Valley Forge Scientific.
-11-
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since the late 1960's, Dr. Leonard I. Malis, one of our directors, on
an individual basis has entered into consulting and other agreements with Codman
& Shurtleff, Inc., our principal customer. Since 1983, Dr. Malis has had an
agreement with Codman & Shurtleff, Inc. under which Dr. Malis receives royalty
payments for the use of his Malis(R)trademark on products sold by Codman &
Shurtleff, Inc. Dr. Malis has developed and in the future may develop hand
instruments for Codman & Shurtleff, Inc. with no pecuniary benefit to Valley
Forge Scientific.
We have entered into a five year lease commencing on July 1, 2000 for
approximately 4,200 square feet of office and warehouse space at a base monthly
rent of $4,716 with GMM Associates, a Pennsylvania general partnership. Two of
the partners of GMM Associates are Jerry L. Malis and Leonard I. Malis,
principal shareholders as well as directors of Valley Forge Scientific. The
related expense for this lease for the year ended September 30, 2003 was
$59,608. We believe the rental payments reflect fair rental value for the space.
For the year ended September 30, 2003, we paid legal fees and costs in
the amount of $85,919 to a law firm in which a son-in-law of Jerry L. Malis is a
partner.
We have retained R. H. Dick & Company, an investment banking and
business consulting company, owned by Robert H. Dick, one of our directors, to
perform investment banking and business consulting services. For the years ended
September 30, 2003, 2002 and 2001, we incurred consulting expenses from these
services of $10,000, $10,000 and $15,000, respectively.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires our directors and executive
officers, and persons who own more than 10% of a registered class of our equity
securities, to file reports of ownership of, and transactions in, our securities
with the Securities and Exchange Commission and the Nasdaq Stock Market. Such
directors, executive officers and 10% stockholder are also required to furnish
us copies of all Section 16(a) forms they file.
Based solely upon a review of reports furnished to us, and on written
representations from certain reporting persons, we believe that, with respect to
the fiscal year ended September 30, 2003, each of our directors, executive
officers and 10% stockholders of our securities has made timely filings of all
reports required by Section 16 of the Exchange Act.
CODE OF ETHICS
We have adopted a Code of Ethics and Business Conduct applicable to our
directors, officers (including our Chief Executive Officer) and employees. A
copy of the Code of Ethics and Business Conduct is filed as Exhibit 14.1 to our
Annual Report on Form 10-K for the fiscal year ended September 30, 2003 and will
be available on our website at http://www.vlfg.com. We intend to post on our
website any amendments to, or waivers from, our Code of Ethics and Business
Conduct promptly following any such amendment or waiver.
-12-
REPORT OF THE COMPENSATION COMMITTEE
Objective of Valley Forge Scientific's Compensation Program. Valley
Forge Scientific's executive compensation program is intended to attract, retain
and reward executives who are capable of leading Valley Forge Scientific
effectively and continuing our growth in the competitive marketplace for
electrosurgical equipment. Valley Forge Scientific's objective is to utilize a
combination of cash and equity-based compensation to provide appropriate
incentives for executives.
Like many other public companies, Valley Forge Scientific will use a
three-pronged approach to its compensation for its executives for the following
twelve months. First, the executive's base salary is intended to create a
reasonably competitive minimum level of compensation for each executive for the
following twelve months. Second, Valley Forge Scientific maintains an incentive
bonus program for executive officers and certain other members of management
under which discretionary bonuses may be offered based upon the achievement of
corporate and individual performance goals. The objective of the incentive bonus
program is to reward executives for their past twelve months' performance.
Finally, Valley Forge Scientific utilizes stock options granted under our 2001
Stock Plan as a long-term incentive for the executive officers as well as for
many of our other employees. The Board of Directors believe that stock options
are important in aligning management and stockholder interests and in
encouraging management to adopt a longer-term perspective. Accordingly, options
generally provide for incremental vesting over a four-year period.
Compensation Committee Procedures. Valley Forge Scientific's executive
compensation program is administered under the direction of our Compensation
Committee, which is currently composed of our three independent directors. The
Compensation Committee meets periodically and may consult by telephone at other
times.
Factors Considered in Setting Compensation of the Chief Executive
Officer and President. Jerry L. Malis has served as our President and Chief
Executive Officer since 1989. The Compensation Committee considers Valley Forge
Scientific's financial performance, as measured by sales and earnings growth, to
be a significant determinant in Mr. Malis' overall compensation package. In
making its determination, however, the Compensation Committee also considers a
number of other factors which are not subject to precise quantitative
measurement and which the Committee believes can only be properly assessed over
the long term.
Compensation Decisions for Chief Executive Officer. Each year the
Compensation Committee reviews the performance of our Chief Executive Officer.
For fiscal 2003, the Committee approved Mr. Malis' annual base salary of
$220,000.
Submitted by the Compensation Committee
For fiscal 2003
Bruce A. Murray, Chairman
Robert H. Dick
Louis Uchitel
-13-
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees Valley Forge Scientific's financial
reporting process on behalf of the Board of Directors. Management has the
primary responsibility for the financial statements and the reporting process,
including internal control systems. Samuel Klein and Company, our independent
auditors, is responsible for expressing an opinion as to the conformity of our
audited financial statements with generally accepted accounting principles.
The Audit Committee consists of three directors each of whom, in the
judgment of the Board of Directors, is an "independent director" as defined in
Rules 4200(a)(14) and 4350(d)(2) of the Nasdaq Stock Market. The Audit Committee
acts pursuant to a written charter that has been adopted by the Board of
Directors.
The Audit Committee has reviewed and discussed the audited financial
statements for the fiscal year ended September 30, 2003 with Valley Forge
Scientific's management and with the independent auditors. The Audit Committee
has discussed and reviewed with the independent auditors all matters required to
be discussed under Statement on Auditing Standards No. 61 (Communication with
Audit Committees). The Audit Committee has met with Samuel Klein and Company,
with and without management present, to discuss the overall scope of Samuel
Klein and Company's audit, the results of its examinations, its evaluations of
Valley Forge Scientific's internal controls and the overall quality of its
financial reporting.
The Audit Committee has received from the auditors a formal written
statement describing all relationships between the auditors and Valley Forge
Scientific that might bear on the auditors' independence consistent with
Independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committees), discussed with the auditors any relationships that may impact their
objectivity and independence, and satisfied itself as to the auditors'
independence.
Based on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors (and the Board has approved)
that Valley Forge Scientific's audited financial statements be included in
Valley Forge Scientific's Annual Report on Form 10-K for the fiscal year ended
September 30, 2003 for filing with the Securities and Exchange Commission.
Submitted by the Audit Committee
For fiscal 2003
Louis Uchitel, Chairman
Robert H. Dick
Bruce A. Murray
-14-
INDEPENDENT AUDITORS
The Audit Committee has not had the opportunity to consider the
selection of our independent auditors for the year ended September 30, 2004. The
accounting firm of Samuel Klein and Company has served as our independent
auditors since 1992. A representative of Samuel Klein and Company is not
expected to be present at the Annual Meeting.
Audit Fees. During fiscal 2003 and 2002, the aggregate fees and
expenses billed for professional services rendered by Samuel Klein and Company
for the audit of the Company's annual financial statements and review of the
Company's quarterly financial statements totaled $81,950 and $83,525,
respectively.
Audit - Related Fees. Samuel Klein and Company did not bill the Company
for any professional services during fiscal 2003 and 2002 that are reasonably
related to the performance of the audit or review of the Company's financial
statements and are not reported under the heading "Audit Fees", above.
Tax Fees. During fiscal 2003 and 2002, the aggregate fees and expenses
billed for professional services rendered by Samuel Klein and Company to the
Company for tax compliance, tax advice and tax planning totaled $4,114 and
$5,000, respectively.
All Other Fees. Samuel Klein and Company did not bill the Company for
any professional services during fiscal 2003 and 2002 other than those reported
under the heading "Audit Fees" and "Tax Fees", above.
Our Audit Committee's policy is to pre-approve all audit and
permissible non-audit services provided by our independent auditors. These
services may include audit services, audit-related services, tax services and
other services. Pre-approval is generally provided for up to one year and any
pre-approval is detailed as to the particular service or category of service.
The independent auditor and management are required to periodically report to
the Audit Committee regarding the extent of services provided by the independent
auditor in accordance with this pre-approval.
STOCKHOLDER PROPOSALS TO BE PRESENTED
AT NEXT ANNUAL MEETING
For a proposal of a stockholder to be included our proxy statement for
Valley Forge Scientific's 2005 Annual Meeting of Stockholders, it must be
received at our principal executive offices on or before October 10, 2004. Such
proposal must also comply with the requirements as to form and substance
established by the Securities and Exchange Commission for such a proposal to be
included in the proxy statement.
In addition, our Bylaws provide that any stockholder wishing to
nominate a director or have a stockholder proposal considered at an annual
meeting must provide written notice of such nomination or proposal and
appropriate supporting documentation, as set forth in the Bylaws, to Valley
Forge Scientific's principal executive offices not less than 120 calendar days
prior to the anniversary date of the date our proxy statement was released to
stockholders in connection with the previous year's annual meeting. Any such
proposal should be mailed to: Valley Forge Scientific Corp., P.O. Box 1179,
Oaks, Pennsylvania 79456-1179, Attention: Corporate Secretary.
-15-
FORM 10-K ANNUAL REPORT
A copy of the our Annual Report on Form 10-K for the fiscal year ended
September 30, 2003, as filed with the Securities and Exchange Commission, is
available to stockholders. A stockholder may obtain a copy of the Form 10-K
without charge and a copy of any exhibit thereto upon payment of a reasonable
charge limited to our costs of providing such exhibits by writing to Investor
Relations, Valley Forge Scientific Corp., P.O. Box 1179, 136 Green Tree Road,
Oaks, Pennsylvania 19456.
By Order of the Board of Directors,
/s/ MARGUERITE RITCHIE
-----------------------------------------
February 5, 2004 MARGUERITE RITCHIE,
Secretary
-16-
Appendix A
VALLEY FORGE SCIENTIFIC CORP.
CHARTER OF THE AUDIT COMMITTEE OF THE
BOARD OF DIRECTORS
January 2004
I. STATEMENT OF POLICY
This Charter specifies the scope of the responsibilities of the Audit
Committee (the "Committee") of the Board of Directors (the "Board") of Valley
Forge Scientific Corp. (the "Company"), and how the Committee carries out those
responsibilities, including its structure, processes, and membership
requirements.
The primary purpose of the Committee is to oversee the accounting and
financial reporting processes of the Company and the audits of the Company's
financial statements. The Committee shall also review the qualifications,
independence and performance, and approve the terms of engagement, of the
Company's auditors, review the performance of the Company's internal audit
function and prepare any reports required of the Committee under the rules of
the Securities and Exchange Commission ("SEC"). Consistent with these tasks, the
Committee should encourage continuous improvement of, and should foster
adherence to, the Company's financial policies, procedures and practices at all
levels. The Committee's primary duties and responsibilities are to:
A. Serve as an independent and objective party to monitor the Company's
accounting and financial reporting process, internal control systems,
and audits of the Company's financial statements.
B. Review and evaluate the audit efforts and independence of the
Company's auditors.
C. Provide an open avenue of communication among the independent
auditors, financial and senior management, and the Board.
The Committee will primarily fulfill these responsibilities, and others
as may be prescribed by the Board from time to time, by carrying out the
activities enumerated in Section IV of this Charter.
The Company shall provide appropriate funding, as determined by the
Committee, to permit the Committee to perform its duties under this Charter, to
compensate its advisors and to compensate any registered public accounting firm
engaged for the purpose of rendering or issuing an audit report or related work
or performing other audit, review or attest services for the Company. The
Committee, in its discretion, has the authority to initiate investigations and
hire advisors or experts to assist the Committee, as it deems necessary, to
fulfill its duties under this Charter. The Committee may also perform such other
activities consistent with this Charter, the Company's Bylaws and governing law,
as the Committee or the Board deems necessary or appropriate.
A-1
II. ORGANIZATION AND MEMBERSHIP REQUIREMENTS
The Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall satisfy the independence and
experience requirements of The Nasdaq Stock Market. These requirements require,
among other things, that the Committee shall not include any member who:
A. has participated in the preparation of the financial statements of
the Company, or any current subsidiary, at any time during the past
three years;
B. accepts any consulting, advisory or other compensatory fee, directly
or indirectly, from the Company, other than in his or her capacity as a
member of the Committee, the Board or any other committee of the Board;
or
C. is an affiliate of the Company or any subsidiary of the Company,
other than a person who would be considered to be an affiliate solely
by being a director, and who meets the independence requirements of The
Nasdaq Stock Market.
Notwithstanding the foregoing, one director who does not meet the independence
criteria of Nasdaq, but is not a current employee or officer (or immediate
family member of an employee or officer), may be appointed to the Committee,
subject to the approval of the Board, pursuant to and subject to the limitations
under the "exceptional and limited circumstances" exception provided under the
Nasdaq rules.
All members of the Committee must be able to read and understand
fundamental financial statements, including a balance sheet, income statement,
and cash flow statement. In addition, at least one member must have past
employment experience in finance or accounting, professional certification in
accounting, or other comparable experience or background resulting in the
individual's financial sophistication, including being or having been a chief
executive, chief financial, or other senior officer with financial oversight
responsibilities.
The members of the Committee shall be elected by the Board and shall
serve until their successors shall be duly elected and qualified, or their
earlier resignation or removal. Unless a chairman is elected by the full Board,
the members of the Committee may designate a chairman by majority vote of the
full Committee membership.
III. MEETINGS
The Committee shall meet as often as it determines, but no less
frequently than quarterly. The Committee may form and delegate authority to
sub-committees, or to one or more members of the Committee, when appropriate.
The Committee shall meet with management, internal auditors, and the independent
auditors in separate executive sessions as appropriate. The Committee shall meet
with the independent auditors and management on a periodic basis to review the
Company's financial statements and financial reports. The Committee shall
maintain written minutes of its meeting, which minutes will be filed with the
minutes of the meetings of the Board.
A-2
IV. COMMITTEE AUTHORITY AND RESPONSIBILITIES
To fulfill its responsibilities and duties the Committee shall:
A. Oversight of Independent Auditors
1. Be directly and solely responsible for the
appointment, compensation, retention and oversight of any independent auditor
(including resolution of disagreements between management and the independent
auditor regarding financial reporting) engaged by the Company for the purpose of
preparing or issuing an audit report or related work, with each such auditor
reporting directly to the Committee.
2. Periodically review and discuss with the independent
auditor (i) the matters required to be discussed by Statement on Auditing
Standards No. 61, as amended, and (ii) any formal written statements received
from the independent auditor consistent with and in satisfaction of Independence
Standards Board Standard No. 1, as amended, including without limitation,
descriptions of (x) all relationships between the auditor and the Company, (y)
any disclosed relationships or services that may impact the independent
auditor's objectivity and independence and (z) whether any of the Company's
senior finance personnel were recently employed by the independent auditor.
3. Evaluate annually the qualifications, performance and
independence of the independent auditor, including a review of whether the
independent auditor's quality-control procedures are adequate and a review and
evaluation of the lead partner of the independent auditor, taking into account
the opinions of management and the Company's internal auditors, and report to
the Board on its conclusions, together with any recommendations for additional
action.
4. Consult with the independent auditor to assure the
rotation of the lead audit partner having primary responsibility for the audit
and the audit partner responsible for reviewing the audit every five years,
consider issues related to the timing of such rotation and the transition to new
lead and reviewing partners.
5. Approve in advance the engagement of the independent
auditor for all audit services and non-audit services, based on independence,
qualifications and, if applicable, performance, and approve the fees and other
terms of any such engagement; provided, however, that (i) the Committee may
establish pre-approval policies and procedures for any engagement to render such
services, provided that such polices and procedures (x) are detailed as to
particular services, (y) do not involve delegation to management of the
Committee's responsibilities hereunder, and (z) provide that, at its next
scheduled meeting, the Committee is informed as to each such service for which
the independent auditor is engaged pursuant to such policies and procedures, and
(ii) the Committee may delegate to one or more members of the Committee the
authority to grant pre-approvals for such services, provided that (a) the
decisions of such member(s) to grant any such pre-approval shall be presented to
the Committee at its next scheduled meeting and (b) the Committee has
established policies and procedures for such pre-approval of services consistent
with the requirements of clauses (i)(x) and (y) above.
6. Discuss with the independent auditor prior to the
audit the planning and staffing of the audit.
A-3
7. Approve as necessary the termination of the
engagement of the independent auditor.
8. Regularly review with the independent auditor any
significant difficulties encountered during the course of the audit, any
restrictions on the scope of work or access to required information and any
significant disagreement among management and the independent auditor in
connection with the preparation of the financial statements. Review with the
independent auditor any accounting adjustments that were noted or proposed by
the auditor but that were "passed" (as immaterial or otherwise), any
"management" or "internal control" letter or schedule of unadjusted differences
issued, or proposed to be issued, by the auditor to the Company, or any other
material written communication provided by the auditor to the Company's
management.
9. Review with the independent auditor the critical
accounting policies and practices used by the Company, all alternative
treatments of financial information within generally accepted accounting
principles ("GAAP") that the independent auditor has discussed with management,
the ramifications of the use of such alternative disclosures and treatments and
the treatment preferred by the independent auditor.
10. Periodically consult with the independent auditors
out of the presence of management about internal controls and the accuracy of
the Company's financial statements.
B. Review of Financial Reporting, Policies and Processes
1. Review and discuss with management and the
independent auditor (i) the Company's annual audited financial statements, (ii)
any reports or other financial information submitted to any governmental body or
the public, and (iii) any certification, report, opinion or review rendered by
the independent auditor, and recommend to the Board whether the audited
financial statements should be included in the Company's Annual Report on Form
10-K.
2. Review and discuss with management and the
independent auditor the Company's quarterly financial statements prior to the
filing of the Company's Form 10-Qs, including a discussion of the matters
required to be discussed by Statement of Auditing Standards No. 61, as amended.
These meetings should include a discussion of the independent auditor's judgment
of the quality of the Company's accounting and any uncorrected misstatements as
a result of the auditor's quarterly review.
3. Periodically meet separately with management and with
the independent auditor. Consider the independent auditors' judgments about the
quality and appropriateness of the Company's accounting principles as applied in
its financial reporting.
4. Review with management and the independent auditor
any significant judgments made in management's preparation of the financial
statements and the view of each as to appropriateness of such judgments.
5. Review with management its assessment of the
effectiveness and adequacy of the Company's internal control structure and
procedures for financial reporting ("Internal Controls"). Once a management
report (and independent auditor attestation) is required by SEC rules, review
with the independent auditor the attestation to and report on the assessment
made by management, and consider with management and the independent auditor
whether any changes to the Internal Controls are appropriate in light of
management's assessment or the independent auditor's attestation.
A-4
6. Review with management and the independent auditor
the effect of regulatory and accounting initiatives on the financial statements.
Review any major issues regarding accounting principles and financial statement
presentations, including any significant changes in selection of an application
of accounting principles. Consider and approve, if appropriate, changes to the
Company's auditing and accounting principles and practices as suggested by the
independent auditor or management.
7. Review any special audit steps adopted in light of
material control deficiencies. Review with the independent auditor and
management the extent to which changes or improvements in financial or
accounting practices, as approved by the Committee, have been implemented.
8. Review the regular Management Letter to management
prepared by the independent auditors and management's response.
9. In consultation with the independent auditors, review
the integrity of the Company's financial reporting processes, both internal and
external.
10. Provide oversight and review the Company's asset
management policies, including an annual review of the Company's investment
policies and performance for cash and short-term investments.
C. Risk Management, Related Party Transactions, Legal Compliance
and Ethics
1. Review with the chief executive and chief financial
officer of the Company any report on significant deficiencies in the design or
operation of the Internal Controls that could adversely affect the Company's
ability to record, process, summarize or report financial data, any material
weaknesses in Internal Controls identified to the auditors, and any fraud,
whether or not material, that involves management or other employees who have a
significant role in the Company's Internal Controls.
2. Review and approve any related-party transactions,
after reviewing each such transaction for potential conflicts of interests and
other improprieties.
3. Establish procedures for the receipt, retention and
treatment of complaints received by the Company regarding accounting, internal
accounting controls or auditing matters, and the confidential, anonymous
submission by employees of the Company of concerns regarding questionable
accounting or auditing matters. Adopt, as necessary, appropriate remedial
measures or actions with respect to such complaints or concerns.
4. Discuss with management and the independent auditor
any correspondence with regulators or governmental agencies that raise material
issues regarding the Company's financial statements or accounting policies.
5. Prepare the report required by the rules of the SEC
to be included in the Company's annual proxy statement.
6. Review and reassess the Charter's adequacy as
appropriate.
7. Review whether management has set an appropriate
corporate "tone" for quality financial reporting, sound business practices and
ethical behavior.
A-5
8. Review management's monitoring of compliance with the
Foreign Corrupt Practices Act.
9. Review, with the Company's counsel, legal compliance
matters including corporate securities trading policies.
10. Review, with the Company's counsel, any legal matter
that could have a significant impact on the Company's financial statements.
11. Perform any other activities consistent with this
Charter, the Company's Bylaws and governing law, as the Committee or the Board
deems necessary or appropriate.
12. If necessary, initiate special investigations, and if
appropriate, hire special counsel or experts to assist the Committee.
A-6
VALLEY FORGE SCIENTIFIC CORP.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR THE ANNUAL MEETING OF STOCKHOLDERS.
TO BE HELD ON MARCH 10, 2004
The undersigned stockholder of Valley Forge Scientific Corp. (the
"Company") hereby appoints Jerry L. Malis, or his true and lawful agent and
proxy with full power of substitution in each, to represent and to vote on
behalf of the undersigned all shares of common stock of the Company which the
undersigned is entitled to vote at the Annual Meeting of Stockholders of the
Company to be held at the Hampton Inn at Route 422 and Egypt Road, Oaks,
Pennsylvania on Wednesday, March 10, 2004, at 10:00 a.m., local time, and at any
adjournment thereof, upon the following proposals more fully described in the
Notice of Annual Meeting of Stockholders and Proxy Statement for the meeting
(receipt of which is hereby acknowledged):
(Continued, and to be signed and dated, on reverse side)
(Continued from other side)
PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE
MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X]
(1) ELECTION OF DIRECTORS NOMINEES
[ ] Jerry L. Malis
[ ] VOTE FOR ALL NOMINEES [ ] Leonard I. Malis
[ ] Bruce A. Murray
[ ] WITHOLD AUTHORITY FOR ALL NOMINEES [ ] Robert H. Dick
[ ] Louis Uchitel
[ ] FOR ALL EXCEPT (see instructions below)
INSTRUCTIONS: To withhold authority to vote for any individual nominees(s), mark
"FOR ALL EXCEPT" and fill in the circle next to such nominee you wish to
withhold, as shown here. [X]
(2) In his discretion, the proxy is authorized to vote upon other matters 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 direction is made, this proxy will
be voted FOR the nominees listed in Proposal 1.
To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that changes
to the registered name(s) on the account may not be submitted via this method.
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Signature of Shareholder ____________________ Date: _______________
Signature of Shareholder ____________________ Date: _______________
Note: This proxy must be signed exactly as the name appears hereon. When shares
are held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as such. If
the signer is a corporation, please sign full corporate name by duly authorized
officer, giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.