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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
TALLEY INDUSTRIES, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ X ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1) or
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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: (1)
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4) Proposed maximum aggregate value of transaction:
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(1) Set forth the amount on which the filing fee is calculated and state
how it was determined.
[ ] 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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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[TALLEY INDUSTRIES LOGO]
2702 N. 44th Street
Phoenix, Arizona 85008
NOTICE OF 1994 ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders:
The Annual Meeting of Stockholders of Talley Industries, Inc., a Delaware
corporation, will be held on May 3, 1994, at 11:00 a.m. Mountain Standard
Time, at the Ritz Carlton Hotel, 2401 East Camelback Road, Phoenix, Arizona
85016, for the following purposes:
1. To elect four directors for terms expiring in 1997, with the holders of
the Company's Common Stock having the exclusive right to elect such
directors;
2. To elect two directors for terms expiring at the next Annual Meeting of
Stockholders, with the holders of the Company's Series A Convertible
Preferred Stock, Series B Cumulative Convertible Preferred Stock and
Series D Cumulative Convertible Preferred Stock having the exclusive
right, voting as a single class, to elect such directors pursuant to
the respective certificates of designation of such series of preferred
stock; and
3. To transact any other business which may properly come before the
meeting or any adjournment thereof.
These items are more fully described in the following pages, which are
hereby made a part of this Notice. Only stockholders of record at the close of
business on March 8, 1994 will be entitled to vote by proxy or in person at
the meeting.
Please mark, sign, date and return the enclosed proxy card(s) in the
enclosed envelope, which requires no postage. The proxy card for Common Stock
is white, and the proxy card for Preferred Stock is white with a blue stripe.
If you own both Common and Preferred Stock, please execute and return both
cards. THE PROMPT RETURN OF YOUR SIGNED PROXY, REGARDLESS OF THE NUMBER OF
SHARES YOU HOLD, WILL AID THE COMPANY IN REDUCING THE EXPENSE OF ADDITIONAL
PROXY SOLICITATION. The signed proxy will not be used if you attend the
meeting in person and so request.
By order of the Board of Directors,
Mark S. Dickerson
Secretary
Phoenix, Arizona
March 29, 1994
<PAGE>
TALLEY INDUSTRIES, INC.
2702 NORTH 44TH STREET
PHOENIX, ARIZONA 85008
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PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
MAY 3, 1994
I. SOLICITATION
This Proxy Statement, and the accompanying proxy card(s), are furnished in
connection with the solicitation by the Board of Directors of TALLEY
INDUSTRIES, INC. (the "Company") of proxies from holders of the Company's
Common Stock, Series A Convertible Preferred Stock ("Series A"), Series B
Cumulative Convertible Preferred Stock ("Series B"), and Series D Cumulative
Convertible Preferred Stock ("Series D") (the Series A, Series B and Series D
being collectively referred to herein as the "Preferred Stock") to be voted at
the annual meeting of stockholders to be held at 11:00 a.m. Mountain Standard
Time, at the Ritz Carlton Hotel, 2401 East Camelback Road, Phoenix, Arizona
85016 on Tuesday, May 3, 1994 (and any adjournment thereof), for the purposes
stated in the accompanying Notice of Annual Meeting of Stockholders (the
"Notice of Meeting"). The four directors referred to in paragraph 1 of the
accompanying Notice of Meeting will be elected exclusively by the holders of
the Common Stock (the "Common Stockholders") and the two directors referred to
in paragraph 2 of the Notice of Meeting will be elected exclusively by the
holders of the Preferred Stock (the "Preferred Stockholders"), voting as a
single class. Therefore, separate proxy cards have been supplied for Common
and Preferred Stock. If you hold both Common and Preferred Stock, you will
receive two proxy cards, one white card (for Common Stock) and one white card
with a blue stripe (for Preferred Stock). Such proxies are revocable at any
time prior to being voted either (i) if you attend the meeting in person and
so request, or (ii) upon receipt of written notice by the Secretary of the
Company prior to the meeting (including the filing of a duly executed proxy
bearing a later date). Only stockholders of record at the close of business on
March 8, 1994 will be entitled to vote at the meeting and any adjournment
thereof.
The cost of soliciting proxies will be borne by the Company. The Company
has retained Kissel-Blake, Inc. to assist in the solicitation of proxies at a
fee of $7,000, plus expenses. Without additional compensation, directors,
officers and employees of the Company may solicit proxies by further mailing,
personal conversation, telephone or telecopy.
The Company will reimburse brokerage firms and others for their expenses
in forwarding the annual report of the Company and proxy materials to the
beneficial owners of the Company's Common Stock and Preferred Stock.
Enclosed herewith is a copy of the annual report of the Company for the
fiscal year ended December 31, 1993. The annual report is not to be considered
a part of this proxy soliciting material. This Proxy Statement and the
accompanying proxy card(s) are being mailed to stockholders on or about March
29, 1994.
II. VOTING SECURITIES
On January 31, 1994, the Company had outstanding 10,047,023 shares of
Common Stock, 70,988 shares of Series A, 1,548,317 shares of Series B, and
120,293 shares of Series D. The holders of Common Stock, Series B and Series D
are entitled to one vote per share, and the holders of Series A are entitled
to four-tenths of one vote per share. With certain exceptions, if a quorum is
present at any meeting of the stockholders, matters properly coming before
that meeting (other than election of directors) shall be decided by a majority
of the number of votes present and entitled to vote at the meeting.
Abstentions will be counted as present and entitled to vote for purposes of
such matters and will have the same effect as a vote against such matters.
Broker non-votes, however, will not be counted as present and entitled to vote
on such matters and will have no effect on the outcome of such matters. The
voting for the election of directors may, but need not, be by ballot.
Directors will be elected by a plurality of the votes cast at the
stockholders' meeting. Abstentions may not be specified on the election of
directors. Votes for the election of directors may only be cast for or
withheld. Because the directors will be elected by a plurality vote, votes
withheld and broker non-votes will have no effect on the election of
directors. Votes are counted by the Company's proxy tabulators and inspectors
of election.
III. STOCKHOLDER PROPOSALS
If any stockholder of the Company wishes to submit a proposal to be
inserted in the proxy material for the Annual Meeting of Stockholders in 1995,
such proposal must comply with the requirements of Rule 14a-8 under the
Securities Exchange Act of 1934, as amended, and must be received in writing
by the Secretary of the Company on or before November 29, 1994. The Company
received no such proposals for the 1994 Annual Meeting of Stockholders.
If a stockholder desires to bring business before an annual meeting of
stockholders which is not the subject of a proposal timely submitted for
inclusion in the proxy statement as described above, the stockholder must
follow procedures outlined in the Company's Bylaws. Pursuant to the Company's
Bylaws, a stockholder may propose business to be considered at the meeting,
provided that the stockholder (i) is a stockholder of record at the time of
giving notice to the Company of the proposal and is entitled to vote at the
annual meeting of stockholders to which the proposal relates, and
(ii) complies with the notice procedures of Article II, Section 8 of the
Bylaws. That section provides that the proposing stockholder must deliver
notice of the proposal to the Company's Secretary not earlier than the 90th
day nor later than the 60th day prior to the first anniversary of the
preceding year's annual meeting. The required notice must contain certain
information, including information about the stockholder, as prescribed by the
Bylaws. No proposals were received from any stockholder for consideration at
the 1994 Annual Meeting of Stockholders.
The Bylaws also provide procedures for stockholders to nominate directors
for election at an annual meeting of stockholders. These procedures are
discussed later in this Proxy Statement. See "The Board of Directors and its
Committees -- Nominating Committee."
IV. THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors is responsible for the overall affairs of the
Company. To assist it in carrying out its duties, the Board of Directors has
delegated certain authority to committees. The Board of Directors held six
meetings during 1993.
AUDIT COMMITTEE
The Audit Committee currently consists of six directors -- Messrs. Benson,
Foster, Hoopes, Nielsen, Orlando and Victor -- none of whom are officers or
employees of the Company or its subsidiaries or affiliates. The Committee held
two meetings in 1993. The primary function of the Audit Committee is to
provide an opportunity for direct communication between the Board of Directors
and the Company's independent auditors. The Committee deals with the accuracy
and completeness of the Company's financial statements and related matters. It
meets with the independent auditors and from time to time reviews with
management and the independent auditors the procedures established for the
preparation of the Company's financial reports. Finally, the Committee makes
recommendations to the Board of Directors regarding the appointment of a firm
of independent auditors.
EXECUTIVE COMPENSATION COMMITTEE
The Executive Compensation Committee was organized to establish executive
compensation levels, to administer and manage the Company's incentive
compensation plans and to determine the individuals to whom incentive awards
should be granted and the terms of such awards. The Committee, which held
three meetings in 1993, currently consists of Messrs. MacNaughton, Nielsen,
Stodder and Ulrich. Prior to May 5, 1993, the Committee consisted of Messrs.
MacNaughton, Nielsen, Reddy and Stodder. Mr. Reddy passed away in August 1993.
See the "Executive Compensation Committee Report" under "Executive
Compensation" below for information on the Committee's 1993 compensation
determination for executive officers.
NOMINATING COMMITTEE
The Company does not have a standing Nominating Committee. The function of
nominating directors is carried out by the entire Board of Directors. Pursuant
to the Company's Bylaws, a stockholder may nominate persons for election as
director, provided that the stockholder (i) is a stockholder of record at the
time of the nomination and is entitled to vote at the annual meeting of
stockholders to which the nomination relates, and (ii) complies with the
notice procedures of Article II, Section 8 of the Bylaws. That section
provides that the nominating stockholder must deliver notice of the nomination
to the Company's Secretary not earlier than the 90th day nor later than the
60th day prior to the first anniversary of the preceding year's annual
meeting. The required notice must contain certain information, including
information about the nominee, as prescribed in the Bylaws. No nominations
were received from any stockholder for the election of directors at the 1994
Annual Meeting of Stockholders.
DIRECTOR COMPENSATION
Employee directors receive no compensation for service on the Board or its
committees. Non-employee directors are paid a retainer at the rate of $24,000
per year and fees of $1,000 for each special Board meeting held by telephone
conference and $650 for each committee meeting. Travel and related expenses
incurred by directors in connection with Board or committee meetings are
reimbursed by the Company.
The Talley Industries, Inc. Retirement Plan (Directors Only) (the
"Directors" Retirement Plan'') provides non-employee directors deferred
compensation in recognition of personal services rendered if they have served
as a director of the Company for at least five years. Based upon compensation
received solely for being a director, the Directors' Retirement Plan provides
each non-employee director an annual retirement benefit equal to his eligible
compensation for the full year of service during which his compensation was
the highest within the three years immediately preceding his retirement or
termination. The Directors' Retirement Plan was amended effective as of
January 1, 1991, and lump sum payments of accrued benefits (discounted to
present value and adjusted for tax effects) were paid out during 1991 to all
directors and retired directors who had attained the age of 68. Directors who
retired on or before January 1, 1991 will receive no further payments. The
Company has the right to prospectively amend or discontinue the Directors'
Retirement Plan. In addition, non-employee directors receive benefits under a
medical plan provided by the Company. Effective January 1, 1994, non-employee
directors who have served as a director of the Company for at least five years
will be covered under the Company's group life insurance plan so long as they
continue to serve as a non-employee director and upon resignation from the
Board of Directors on or after attaining age 70, such directors are entitled
to a lump sum payment from the Company of $50,000.
In connection with the refinancing of substantially all of the Company's
debt in October 1993, the Company formed a holding company subsidiary, Talley
Manufacturing and Technology, Inc. ("Talley Manufacturing") to own all of the
capital stock of all of the Company's non-real estate subsidiaries. Directors
of the Company also serve as directors of Talley Manufacturing, for a term
coinciding with their term as a director of the Company. Directors of the
Company do not receive any additional compensation for serving as directors of
Talley Manufacturing. Pursuant to a cost sharing agreement with Talley
Manufacturing, Talley Manufacturing will either bear or reimburse the Company
for the compensation and expenses of the directors of the Company.
V. OTHER RELATIONSHIPS AND CERTAIN TRANSACTIONS
There are no family relationships between any of the executive officers or
directors of the Company.
The Company and certain of its subsidiaries paid legal fees to the law
firm of Meyer, Hendricks, Victor, Osborn & Maledon, of which Mr.Victor is a
member, for services relating to corporate matters and litigation that were
performed during the fiscal year ended December 31, 1993, and paid legal fees
to the law firm of Israel & Raley, Chartered, of which Mr. Israel was a senior
partner until he retired in June 1993, for services relating to government
contract matters that were performed during the same period.
A subsidiary of Stamatakis Industries, Inc., of which Mr. Stamatakis is an
executive officer, filed a petition for reorganization under Chapter 11 of the
Bankruptcy Code in March 1992.
<PAGE>
VI. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of January 31, 1994
regarding the only persons known to the Company to own beneficially more than
5% of the total number of the outstanding shares of any class of the Company's
voting securities:
<TABLE>
<CAPTION>
PERCENT OF
AMOUNT AND AGGREGATE
NATURE OF PERCENT VOTES OF
NAME AND ADDRESS OF BENEFICIAL OF PREFERRED
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP\1/ CLASS STOCK
- - - -------------------- -------------------------------------------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Series A Alexander Bryan 15,028 21.17% .354%
South Street
Middlebury, CT 06762
Irene M. Kaynor 4,402\2/ 6.20% .104%
1001 Fifth Avenue
Apt. 17A
New York, NY 10028
Richard S. Kaynor & 9,621 13.55% .227%
Elizabeth H. Kaynor
4116 Douglas Road
Miami, FL 33133
Sanford B. Kaynor 9,622 13.55% .227%
c/o Fiduciary Trust Co. of New York
P.O. Box 3199
Church Street Station
New York, NY 10008
William A. Kaynor 16,261 22.91% .383%
1001 Fifth Avenue
Apt. 17A
New York, NY 10028
Series B Marshall & Ilsley Trust Company, Trustee 394,794\3/ 25.50% 23.26%
Talley Savings Plus
One E. Camelback Road
Suite 340
Phoenix, AZ 85012
Series D John J. McMullen 120,293\4/ 100.00% 7.09%
One World Trade Center
Suite 3000
New York, NY 10048
Common Stock Marshall & Ilsley Trust Company, Trustee 951,972\3/ 9.48% N/A
Talley Savings Plus
One E. Camelback Road
Suite 340
Phoenix, AZ 85012
- - - ------------------
\1/ In presenting the information set forth in this table and the notes
thereto, the Company has relied in part upon statements of the persons or
entities named therein filed with the Securities and Exchange Commission
("SEC") pursuant to Section 13(d) or 13(g) of the Securities Exchange Act
of 1934. For purposes of this table, Preferred Stock has not been deemed
converted to Common Stock in calculating the beneficial ownership of
Common Stock. Unless otherwise noted below, each beneficial owner has sole
investment and voting power with respect to the shares listed, subject to
community property laws where applicable.
\2/ Ms. Kaynor owns 4,361 shares of Series A directly and 41 shares of Series
A as Trustee for the benefit of Robert M. Kaynor.
\3/ Reported separately are 951,972 shares of Common Stock and 394,794 shares
of Series B which Marshall & Ilsley Trust Company holds as Trustee for the
Talley Savings Plus stock purchase plan. Each share of Series B is
entitled to cast one vote per share and is convertible into 1.3125 shares
of Common Stock. Voting rights with respect to shares of Common Stock and
Series B held by the Talley Savings Plus stock purchase plan that have
been allocated to employee accounts are passed through to employee
participants. Unallocated shares are voted in the same proportion as the
allocated shares for which the trustee received instructions. The trustee
will not vote allocated shares as to which it does not receive
instructions. The trustee has the power to dispose of shares held by the
plan, provided that in the event of a tender or exchange offer, the
trustee will tender or exchange only those allocated shares of Common
Stock or Series B to which it receives such instructions. The trustee will
tender or exchange the unallocated shares in the same proportion as the
allocated shares for which the trustee received instructions.
\4/ Mr. McMullen owns 120,293 shares of Series D, which he acquired in
connection with the Company's acquisition of John J. McMullen Associates,
Inc. and affiliated companies. Each share of Series D is entitled to cast
one vote per share and is convertible, subject to certain limitations,
into 10 shares of Common Stock. The 120,293 shares of Series D
beneficially owned by Mr. McMullen, and all shares of Common Stock
issuable upon conversion thereof, are subject to a Voting Trust Agreement
under which First Interstate Bank of Arizona, N.A. serves as trustee
whereby Mr. McMullen's shares will be voted in the following manner,
except with respect to the special rights of the holders of the Preferred
Stock to elect two directors in the case of certain dividend arrearages as
currently exist, and certain specified matters: (i) shares equal to one
percent of the total votes entitled to be cast by all classes of the
Company's outstanding stock shall be voted as directed by the Company's
chief executive officer; and (ii) all other shares will be voted in
proportion to the votes of the Company's shares not subject to the Voting
Trust Agreement (excluding any shares held by a person that beneficially
owns 10% or more of the Common Stock). Pursuant to the terms of the Voting
Trust Agreement, Mr. McMullen will direct the voting of his shares with
respect to the special rights of the holders of the Preferred Stock to
elect two directors. The Voting Trust Agreement expires by its terms on
February 28, 1998, or earlier upon the occurrence of certain events.
</TABLE>
VII. ELECTION OF DIRECTORS
CURRENT STRUCTURE OF THE BOARD
The Board of Directors of the Company is divided into three separate
classes of directors (except for the directors to be elected by the holders of
Preferred Stock, as described below). Each class is elected for a term of
three years, and the term of office of one of the three classes of directors
expires each year on a rotating basis. In accordance with the Certificate of
Incorporation and the Bylaws of the Company, the Board of Directors may by
resolution establish the number of members of the Board, not to exceed fifteen
members. Vacancies occurring on the Board may be filled by the Board for the
remainder of the full term of office of the director whose absence from the
Board created the vacancy, notwithstanding the fact that the term may extend
beyond the next annual meeting of stockholders.\1/ Currently, the Board of
Directors consists of thirteen members. During 1993, a vacancy created by the
death of a director was filled by the Board. In February 1994, the Board of
Directors increased the number of members of the Board and filled the newly
created position resulting from the increase. Each Director is and will serve
on the Board of Directors of Talley Manufacturing, for a term coinciding with
his term as a Director of the Company.
- - - ------------------
\1/ Vacancies among the directors elected exclusively by the Preferred
Stockholders are filled by the vote of the remaining director so elected.
If not so filled within forty days, such vacancy shall be filled at a
special meeting of the Preferred Stockholders called by the Secretary of
the Company for that purpose.
ELECTION OF DIRECTORS BY PREFERRED STOCKHOLDERS
Messrs. Foster and Orlando (the "Special Nominees") were elected to one-
year terms by the Preferred Stockholders at the 1993 Annual Meeting of
Stockholders. Pursuant to the terms and rights of the Preferred Stock, when
aggregate dividends equivalent to those payable for six or more quarters
became in arrears on the Preferred Stock during 1992, the authorized number of
directors on the Company's Board of Directors was automatically increased by
two, and the Preferred Stockholders, voting as a single class, became entitled
to elect the two additional directors. As noted in Section I above, the
Preferred Stockholders will vote separately to elect two directors at the 1994
Annual Meeting of Stockholders. The Special Nominees have been nominated for
such election. These directors will serve until the next annual meeting of
stockholders, or until their respective successors shall be elected and shall
qualify; provided, however, that when the Preferred Stockholders' right to
elect directors separately as a class terminates, the term of office of each
director so elected shall automatically terminate. This right to elect
additional directors remains vested until all dividends in arrears on the
outstanding Preferred Stock have been paid in full and the full dividends for
the then-current quarterly period have been declared and paid or set aside for
payment. During any period in which the Preferred Stockholders have the right
to elect two directors as described herein, the Preferred Stockholders have no
other right to vote for election of directors, and the remaining members of
the Board of Directors shall be elected exclusively by the Common
Stockholders.
ELECTION OF DIRECTORS BY COMMON STOCKHOLDERS
Nominees for election as directors by the Common Stockholders are Messrs.
Neil Benson, Townsend Hoopes, William H. Mallender and Emiel T. Nielsen, Jr.
(the "Regular Nominees"). All Regular Nominees are currently directors and
previously were elected by the stockholders. Each director elected by the
Common Stockholders at the 1994 Annual Meeting of Stockholders will hold
office until the date of the annual meeting of stockholders in 1997, or until
his successor is duly elected and qualified.
DIRECTORS/NOMINEES
Should any one or more of the Regular or Special Nominees listed below
become unavailable to serve as a director (which the Company does not
anticipate), full discretion is reserved to persons named as proxies to vote
for any other person or persons who may be nominated. The following table
provides biographical information about the Regular Nominees, the Special
Nominees, and those directors whose terms of office are continuing after the
meeting:
DIRECTOR
NAME, AGE, AND PRINCIPAL EMPLOYMENT FOR PAST FIVE YEARS SINCE
- - - -------------------------------------------------------------------- --------
REGULAR NOMINEES FOR ELECTION (TO BE ELECTED BY VOTE OF COMMON STOCKHOLDERS)
Neil Benson, 56, Senior Partner, Lewis Golden & Co., Chartered 1988
Accountants, London, England; Chairman of The Davis Service Group
PLC, London, England (diversified services and automobile sales);
a director of Shaftesbury PLC, London, England (real estate
investment/development); a director of Business Post Group PLC
(package and parcel delivery and distribution); and Chairman of
Moss Bros. Group PLC, London, England (mens wear retail and formal
wear hire).
Townsend Hoopes, 71, Distinguished International Executive, 1979
Department of Public Affairs, University of Maryland; retired
President of Association of American Publishers (trade association
representing American book publishers); and a director and Vice
Chairman, Reseal International Corporation (development and
marketing of state of the art packaging technology).
William H. Mallender, 58, Chairman of the Board and Chief Executive 1975
Officer of the Company from April 1983 to the present; President
and Chief Executive Officer of the Company from December 1981 to
1983; Executive Vice President, General Counsel, and Secretary of
the Company from 1978 to 1981; Vice President, General Counsel,
and Secretary of the Company from 1973 to 1978; and a director of
MicroAge, Inc. (computer hardware and software development, sales
and service).
Emiel T. Nielsen, Jr., 79, retired in 1979 as Vice Chairman of FMC 1979
Corp. (diversified manufacturer); and a director of Bank of the
West, San Francisco, California.
SPECIAL NOMINEES FOR ELECTION (TO BE ELECTED BY VOTE OF PREFERRED
STOCKHOLDERS)
Paul L. Foster, 65, Professor of Finance and former Dean, College of 1992
Business and Administration, Saint Joseph's University,
Philadelphia, Pennsylvania; a director of Wheeling Jesuit College,
Wheeling, West Virginia; a member of the General Accounting Office
Research, Education and Advisory Committee; and retired Rear
Admiral, United States Navy.
Joseph A. Orlando, 66, Independent financial consultant and former 1992
President of Whitehead Associates (venture capital, real estate,
securities and investment).
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1995 ANNUAL MEETING
Fred Israel, 66, retired in 1993 as a senior partner of Israel and 1993
Raley, Chartered (attorneys); a member of the Board of Regents,
Georgetown University, Washington D.C.; a member of the
International Board of Governors of Tel Aviv University, Tel Aviv,
Israel; and a director of MicroAge, Inc. (computer hardware and
software development, sales and service).
John W. Stodder, 71, Corporate finance and merger/acquisition 1970
consultant; manager of private investments; a director and Vice
Chairman of Josten's, Inc. (manufacturer of educational and
motivational products); a director of Trans Leasing International,
Inc. (medical and office products leasing); and a director of
Stevens Graphics Corporation (manufacturer of web-fed printing and
packaging equipment and currency printing systems).
David Victor, 51, Member, Meyer, Hendricks, Victor, Osborn and 1985
Maledon, P.A. (attorneys).
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1996 ANNUAL MEETING
Jack C. Crim, 63, President and Chief Operating Officer of the 1983
Company from April 1983 to the present; Executive Vice President
and Chief Operating Officer of the Company from May 1982 to 1983.
John D. MacNaughton, Jr., 72, President, The MacNaughton Co., 1970
formerly known as MacNaughton Associates (corporate financial
consultants).
Alex Stamatakis, 60, President of Stamatakis Industries, Inc. 1994
(principally real estate investments). Mr. Stamatakis was a
director of the Company from October 1985 until he resigned in
February 1993.
Donald J. Ulrich, Jr., 57, Owner and Vice Chairman of Ventura 1991
Coastal Corporation (fruit processing); Chairman of RSI, Inc.
(medical services); General Partner of RBDGD (real estate
development); Assistant and Chief Operating Officer of Mid-
Atlantic Coca-Cola Bottlers, Inc., Washington, D.C., 1985 to 1988;
Senior Vice President of Bottler and National Sales of Coca-Cola
USA, 1982 to 1985.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION AS DIRECTORS
OF THE FOUR REGULAR NOMINEES AND TWO SPECIAL NOMINEES NAMED HEREIN. UNLESS
INDICATED OTHERWISE ON PROXY CARD(S) THAT HAVE BEEN SIGNED AND RETURNED, THE
PROXY HOLDERS NAMED ON THE PROXY CARD(S) WILL VOTE "FOR" THE ELECTION OF THE
DIRECTORS NAMED HEREIN.
<PAGE>
VIII. SECURITY OWNERSHIP OF MANAGEMENT OF THE COMPANY
The following table sets forth information as of January 31, 1994
regarding the beneficial ownership of the Company's voting securities by the
directors and nominees of the Company, each executive officer named in the
Summary Compensation Table on pages 10-12, and all directors and executive
officers as a group.
Number of Percent of Number of Percent of
Shares of Shares of Shares of Shares of
Common Common Series Series
Name of Beneficial Owner Stock\1/ Stock\2/ B\1/ B\2/
- - - ------------------------------- ---------- ---------- --------- ----------
William H. Mallender\3/ 440,663 4.28% 8,466 *
Jack C. Crim\4/ 314,433 3.08% 9,936 *
Kenneth May\5/ 173,897 1.72% 3,343 *
Daniel R. Mullen\6/ 173,079 1.71% 2,883 *
Mark S. Dickerson\7/ 166,841 1.65% 1,862 *
Neil W. Benson 1,000 *
Paul L. Foster 10,000 *
Townsend Hoopes\8/ 1,969 * 1,500 *
Fred Israel 2,000 *
John D. MacNaughton, Jr. 9,250 *
Emiel T. Nielsen, Jr. 1,250 *
Joseph A. Orlando\9/ 656 * 500 *
Alex Stamatakis 5,250 *
John W. Stodder\10/ 1,675 * 800 *
Donald J. Ulrich, Jr. 4,500 *
David Victor 3,750 *
All Directors and Executive
Officers\11/ 1,310,662 12.23% 29,290 1.89%
- - - ------------------
\1/ The Common Stock listed includes shares under options exercisable on
March 8, 1994 and options which will become exercisable within 60 days
thereafter, and shares that would be received upon conversion of Series B
which is convertible into Common Stock as of March 8, 1994 and within 60
days thereafter. Unless otherwise noted below, each beneficial owner of
Common Stock and Series B has sole investment and voting power with
respect to the shares listed, subject to community property laws where
applicable.
\2/ Percentages indicated by an asterisk are less than one percent (1%) of
the class.
\3/ The stock listed includes 183,094 shares of Common Stock and 3,000 shares
of Series B owned by Mr. Mallender directly, 233,750 shares which Mr.
Mallender has the right to acquire under exercisable options and 12,707
shares of Common Stock and 5,466 shares of Series B held in trust for the
benefit of Mr. Mallender under the Talley Savings Plus stock purchase
plan. The Common Stock listed includes 11,112 shares which would be
received upon conversion of the Series B. The stock listed does not
include any of the shares subject to the Voting Trust Agreement described
in footnote 4 in Section VI above.
\4/ Mr.Crim owns 145,906 shares of Common Stock and 5,000 shares of Series B
directly, and has the right to acquire 144,000 shares of Common Stock
under exercisable options. In addition, 11,486 shares of Common Stock and
4,936 shares of Series B are held in trust for the benefit of Mr.Crim
under the Talley Savings Plus stock purchase plan. The Common Stock
listed includes 13,041 shares which would be received upon conversion of
the Series B.
\5/ Mr. May owns 78,057 shares of Common Stock and 200 shares of Series B
directly, and has the right to acquire 84,100 shares of Common Stock
under exercisable options. In addition, 7,352 shares of Common Stock and
3,143 shares of Series B are held in trust for the benefit of Mr. May
under the Talley Savings Plus stock purchase plan. The Common Stock
listed includes 4,388 shares which would be received upon conversion of
the Series B.
\6/ The stock listed includes 78,442 shares of Common Stock held by Mr.
Mullen in a revocable living trust with respect to which Mr. Mullen
shares investment power and voting power with his wife. In addition, the
stock listed includes 84,100 shares of Common Stock which Mr. Mullen has
the right to acquire under exercisable options, and 6,753 shares of
Common Stock and 2,883 shares of Series B held in trust for the benefit
of Mr. Mullen under the Talley Savings Plus stock purchase plan. The
Common Stock listed includes 3,784 shares which would be received upon
conversion of the Series B.
\7/ The stock listed includes 75,898 shares of Common Stock held by Mr.
Dickerson in a revocable living trust with respect to which Mr. Dickerson
shares investment power and voting power with his wife. In addition, the
stock listed includes 84,100 shares of Common Stock which Mr. Dickerson
has the right to acquire under exercisable options, and 4,399 shares of
Common Stock and 1,862 shares of Series B held in trust for the benefit
of Mr. Dickerson under the Talley Savings Plus stock purchase plan. The
Common Stock listed includes 2,444 shares which would be received upon
conversion of the Series B.
\8/ The Common Stock listed includes 1,969 shares which would be received
upon conversion of the Series B.
\9/ The Common Stock listed includes 656 shares which would be received upon
conversion of the Series B.
\10/ These shares are held in two separate trust funds in broker name with
respect to which Mr. Stodder shares investment power and voting power
with his wife. The Common Stock listed includes 1,050 shares which
would be received upon conversion of the Series B.
\11/ The current executive officers (five persons) and directors as a group
own 599,472 of Common Stock and 11,000 shares of Series B directly or
as described herein and have rights to acquire 630,050 shares of Common
Stock under exercisable options. In addition, 42,697 shares of Common
Stock and 18,290 shares of Series B are held in trust for the benefit
of the executive officers of the Company under the Talley Savings Plus
stock purchase plan. The Common Stock listed includes 38,443 shares
which would be received upon conversion of the Series B.
<PAGE>
IX. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table describes all compensation awarded to, earned by or
paid to the Company's chief executive officer (the "CEO") and the four most
highly compensated executive officers of the Company other than the CEO
(collectively, the "Named Executive Officers"), by the Company and Talley
Manufacturing during the three most current fiscal years. The Executive
Compensation Committee Report set forth below describes the compensation
policies applicable to the Company's executive officers (including the Named
Executive Officers) and discusses the Committee's bases for the CEO's
compensation for the last completed fiscal year.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------------ -------------------------------------
Awards Payouts
--------------------------- -------
SECURITIES
Other Annual RESTRICTED UNDERLYING LTIP ALL OTHER
Name and Compensation STOCK AWARD(S) OPTIONS/ PAYOUTS COMPENSATION
Principle Position Year Salary ($) Bonus ($) ($)\1/\2/ ($)\3/ SARS (#)\4/ ($)\5/ ($)\2/\6/
(A) (B) (C) (D) (E) (F) (G) (H) (I)
- - - --------------------- ---- ---------- --------- ------------ -------------- ----------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William H. Mallender,
Chairman and Chief 1993 415,000 0 517,051 155,000 150,000 687,500 612,079
Executive Officer 1992 415,000 0 0 0 0 59,949 185,575
1991 415,000 0 -- 0 0 105,218 --
Jack C. Crim,
President and 1993 311,250 0 387,788 116,250 112,500 515,625 247,608
Chief Operating 1992 311,250 0 0 0 0 44,962 116,483
Officer 1991 311,250 0 -- 0 0 78,913 --
Mark S. Dickerson,
Vice President
Secretary and 1993 160,667 0 241,618 58,125 75,000 343,750 6,534
General Counsel 1992 148,000 0 0 0 0 11,990 6,457
1991 140,000 0 -- 0 0 21,044 --
Kenneth May,
Vice President and 1993 136,667 0 241,618 58,125 75,000 343,750 9,246
Controller 1992 126,667 0 0 0 0 11,990 8,975
1991 120,000 0 -- 0 0 21,044 --
Daniel R. Mullen,
Vice President and 1993 134,000 0 241,618 58,125 75,000 343,750 9,173
Treasurer 1992 118,833 0 0 0 0 11,990 8,772
1991 112,500 0 -- 0 0 21,044 --
- - - ------------------
\1/ Amounts shown as "Other Annual Compensation" represent payments for the
benefit of each Named Executive Officer for estimated tax liability
resulting from the awards of Common Stock in 1993 pursuant to the
Incentive Program described in the Executive Compensation Committee Report
below. See "Executive Compensation Committee Report -- Incentive
Compensation."
\2/ The 1991 information for "Other Annual Compensation" and "All Other
Compensation" is omitted pursuant to the transitional provisions in the
revised rules on executive officer and director compensation disclosure
adopted by the SEC in October 1992.
\3/ In 1993, the Company awarded the Named Executive Officers a total of
115,000 shares of restricted Common Stock under the Incentive Program
pursuant to the Company's 1983 Restricted Stock Plan. See "Executive
Compensation Committee Report -- Incentive Compensation." The amount
reported in the table represents the market value of the Common Stock on
the date of grant. These Common Stock grants were earned and vested on the
date of grant, but were subject to certain restrictions including a
requirement that the executive officer remained in the Company's employ
through December 15, 1993. The number and value of these stock holdings as
of December 31, 1993 for each Named Executive Officer are as follows: Mr.
Mallender, 40,000 shares, $235,000; Mr. Crim, 30,000 shares, $176,250; Mr.
Dickerson, 15,000 shares, $88,125; Mr. May, 15,000 shares, $88,125; and
Mr. Mullen, 15,000 shares, $88,125. The officers will receive the same
dividends on these shares of Common Stock as all other stockholders;
however, the Company did not pay any dividends in 1993.
\4/ The stock options were granted in 1993 under the Incentive Program
pursuant to the Company's 1978 and 1990 Stock Option Plans and became
exercisable upon the achievement of performance objectives. See "Stock
Options -- Options Granted" and "Executive Compensation Committee Report
-- Incentive Compensation."
\5/ Long-Term Incentive Plan payouts made in 1993 were earned and committed in
1993 and arose from the achievement of performance objectives established
for fiscal years 1993-1997 under the Incentive Program. See "Long-Term
Incentive Compensation" and "Executive Compensation Committee Report --
Incentive Compensation." The amount reported consists of cash and the
market value of the Common Stock awarded to each executive officer on the
date of grant. The cash and market value of the Common Stock for each
Named Executive Officer are as follows: Mr. Mallender, $250,000 cash,
$437,500 stock; Mr. Crim $187,500 cash, $328,125 stock; Mr. Dickerson,
$125,000 cash, $218,750 stock; Mr. May, $125,000 cash, $218,750 stock; and
Mr. Mullen $125,000 cash and $218,750 stock. Long-Term Incentive Plan
payouts made in 1991 and 1992 were made in cash and were earned and
committed in 1988 and 1989 and arose from the achievement of performance
objectives established for 1988 and 1989 under the Long-Term Incentive
Plan.
\6/ The amount reported in the "All Other Compensation" column includes the
Company's 50% matching contributions to the Talley Savings Plus stock
purchase plan, the Company's 401(k) plan ("TSP") and insurance premiums
paid in excess of those paid on behalf of other employees. This column
also includes payments to Mr. Mallender and Mr. Crim under the Restoration
Benefit Plan described on page 13 below. The amount reported in this
column for each of the Named Executive Officers is quantified for 1993 as
follows: Mr. Mallender: Restoration Benefit Plan, $583,760; insurance
premium, $23,822; and TSP contributions, $4,497. Mr. Crim: Restoration
Benefit Plan, $233,760; insurance premiums, $9,351; and TSP contributions,
$4,497. Mr. Dickerson: insurance premiums, $5,731; and TSP contributions,
$803. Mr. May: insurance premiums, $5,829; and TSP contributions, $3,417.
Mr. Mullen: insurance premiums, $5,823; and TSP contributions, $3,350.
</TABLE>
EXECUTIVE EMPLOYMENT CONTRACTS
Mr. Mallender is employed by the Company pursuant to a written employment
contract for a term expiring on May 21, 2000. The contract permits the Company
to terminate his services at any time upon six months' notice. Such
termination entitles Mr. Mallender to a lump sum payment equal to two years of
employment compensation including salary and any bonus and incentive awards.
In the event of a Change in Control of the Company (as defined in the
employment contract), Mr. Mallender will be entitled to receive a lump sum
equal to 2.5 times his then existing employment compensation (including salary
and any bonus and incentive awards, adjusted for tax payments in certain
circumstances) if he elects to terminate the employment agreement within
twenty-four months after such Change in Control or if the Company terminates
Mr. Mallender's employment following such Change in Control. The base salary
payable to Mr. Mallender under his employment contract is $415,000. In
addition, any change to any pension or retirement plan of the Company will not
affect benefits payable to Mr. Mallender or his designees. Mr. Mallender and
his family, legal representatives, assignees and other beneficiaries are also
entitled to participate and receive benefits under pension or retirement
plans, or group life, health or accident plans available generally to
executives of the Company and their families, legal representatives, assignees
and other beneficiaries. Finally, if Mr. Mallender should be unable to perform
his duties because of death or mental or physical incapacity, a disability
pension equal to his then existing salary is payable for a period of one year.
Mr. Crim, President and Chief Operating Officer, was a party to an employment
agreement on substantially similar terms, pursuant to which his annual base
salary was set at $311,250, which expired by its terms on March 31, 1993.
RESTRUCTURING OF EMPLOYMENT OBLIGATIONS
As a result of the restructuring and refinancing of substantially all of
the Company's debt completed in October 1993, effective January 1, 1994, all
of the executive officers and employees of the Company became employees of
Talley Manufacturing, and all compensation of such executive officers and
employees will be paid by Talley Manufacturing and all employee benefit plan
funding obligations will be assumed by Talley Manufacturing. Executive
officers of the Company will no longer receive separate compensation from the
Company for their services.
<PAGE>
RETIREMENT PLAN
The following table shows the estimated annual benefits payable under the
Company's Retirement Plan (the "Retirement Plan") for participating employees,
including the Named Executive Officers, in specified salary and years of
service classifications for retirement at age 65 in 1994.
PENSION PLAN TABLE
YEARS OF SERVICE\1/
--------------------------------------------------
REMUNERATION\2/ 15 20 25 30 AND OVER
---------------------- ---------- ---------- ---------- --------------
$125,000 $24,096 $32,128 $40,161 $ 48,193
$150,000 $29,258 $39,008 $48,761 $ 58,513
$175,000 $34,416 $45,888 $57,361 $ 68,833
$200,000 $39,576 $52,768 $65,961 $ 79,153
$225,000 $44,736 $59,648 $74,561 $ 89,473
$250,000 $49,112 $65,482 $81,853 $ 98,223
$300,000\3/ $50,910 $67,880 $84,850 $101,820
$500,000\3/ $50,910 $67,880 $84,850 $101,820
$750,000\3/ $50,910 $67,880 $84,850 $101,820
The compensation covered by the Retirement Plan includes all wages,
salaries and bonuses. The compensation of the Named Executive Officers used to
calculate the benefits in this table would be the salaries and bonuses
reported in columns (c) and (d) of the Summary Compensation Table. Benefits
under the Retirement Plan are not subject to deduction for Social Security or
other offset amounts.
The Internal Revenue Code places certain limitations on pensions which may
be paid to certain highly compensated employees under qualified plans.
Retirement benefits under the Retirement Plan which exceed such limitations
may be paid by the Company outside the Plan as an operating expense under the
Restoration Benefit Plan adopted during the fiscal year ended March 31, 1976,
as amended and restated effective January 1, 1985, amended on January 2, 1990,
and amended on March 25, 1991. The retirement benefits provided for by the
Restoration Benefit Plan are contractual obligations of the Company.
Currently, the only participants in the Restoration Benefit Plan are Mr.
Mallender and Mr. Crim.
The foregoing table was calculated on a straight-life annuity basis. Key
employees selected by the Committee may, upon retirement from the Company,
receive supplemental annuity payments from the Company in addition to payments
received under the Retirement Plan. The supplemental annuity payments will be
made in amounts necessary to increase the joint-life annuity payable under the
Retirement Plan to the amount that would be payable under a single-life
annuity, with such supplemental payments being made on a joint-life basis.
- - - ------------------
\1/ As of December 31, 1993, the full years of credited service for each of
the Named Executive Officers were as follows: Mr. Mallender -- 22 years;
Mr. Crim -- 11 years; Mr. Dickerson -- 15 years; Mr. May -- 15 years, Mr.
Mullen -- 11 years.
\2/ For purposes of this table it is assumed that the employee's final five
year average compensation will be 86% of his final earnings. For pay
levels over the limit of $235,840 established by Section 401(a)(17) of the
Internal Revenue Code, actual maximum pay limits for 1989 through 1993
were used to calculate the final five year average.
\3/ Benefits payable under the Retirement Plan are identical for these three
salary levels, because the underlying compensation for 1989-1993 exceeded
the applicable Internal Revenue Service compensation limits. See the
discussion of the Restoration Benefit Plan, below.
<PAGE>
STOCK OPTIONS
Options Granted. The following table provides information on stock options
granted during fiscal year 1993 under the Incentive Program to the Named
Executive Officers.
<TABLE>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation for Option
Individual Grants Term\1/
---------------------------------------------------------------- ------------------------
% of Total
Number of Options
Securities Granted to Exercise
Underlying Options Employees in Price ($) Per Expiration
Name Granted (#)\2/ 1993\3/ Share Date 5% ($) 10% ($)
(a) (b) (c) (d) (e) (f) (g)
- - - ------------------------ ------------------ ------------- ------------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Mr. Mallender 150,000 26.32 4.25 12/31/1998 208,500 472,500
Mr. Crim 112,500 19.74 4.25 12/31/1998 156,375 354,375
Mr. Dickerson 75,000 13.16 4.25 12/31/1998 104,250 236,250
Mr. May 75,000 13.16 4.25 12/31/1998 104,250 236,250
Mr. Mullen 75,000 13.16 4.25 12/31/1998 104,250 236,250
- - - ------------------
\1/ The amounts shown as "potential realizable value" are based on arbitrarily
assumed annualized rates of Common Stock price appreciations of 5% and 10%
over the full term of the options, as required by current regulations of
the SEC. Actual value realized, if any, upon option exercise will depend
on the market value of the Common Stock on the date of exercise. Annual
compounding over the term of the option results in total appreciation of
33% (at 5% per year) and 74% (at 10% per year). If the Common Stock were
to increase at such rates from the price at December 31, 1993 ($5.875 per
share) over the term of the option, the resulting stock price at 5% and
10% appreciation would be $7.50 and $9.46, respectively.
\2/ These options were granted under the Incentive Program pursuant to the
Company's 1978 and 1990 Stock Option Plans and have exercise prices equal
to the market value of Common Stock on the date of grant. As a result of
the achievement of objectives established under the Incentive Program, the
options may be exercised at any time after April 25, 1994 through December
31, 1998. See "Executive Compensation Committee Report -- Incentive
Compensation." A Named Executive Officer may pay the exercise price and
any withholding taxes payable with respect to the exercise of the options,
at his election, either in cash or, subject to certain limitations, by his
delivery of shares of Common Stock previously held by him at their fair
market value. In the event the executive officer elects to pay all or a
portion of the exercise price or withholding tax by delivering shares of
Common Stock, he will be deemed, with respect to options awarded under the
Company's 1990 Stock Option Plan and to the extent shares are available
under the Plan, to have received simultaneously and automatically the
grant of an option for the purchase of a number of shares of Common Stock
equal to the number of shares so delivered with the new exercise price at
the market value of the Common Stock on the date of issuance.
\3/ The Company granted options representing 570,000 shares to employees in
fiscal year 1993 under the Incentive Program.
</TABLE>
<PAGE>
Year-end Options. The following table shows the number of shares of Common
Stock represented by outstanding stock options held by each of the Named
Executive Officers as of December 31, 1993.\1/
YEAR-END OPTIONS/SAR VALUES\2/
[CAPTION]
Number of Securities Value of Unexercised In-
Underlying Unexercised Stock The-Money Stock Options at
Options at December 31, 1993 December 31, 1993\3/
(#) ($)
---------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- - - ---- ------------ -------------- ----------- -------------
Mr. Mallender 83,750 150,000 0 243,750
Mr. Crim 23,625 128,250 0 182,813
Mr. Dickerson 6,825 79,550 0 121,875
Mr. May 6,825 79,550 0 121,875
Mr. Mullen 6,825 79,550 0 121,875
- - - ------------------
\1/ None of the Named Executive Officers exercised any stock options during
1993. No Stock Appreciation Rights ("SARs") are held by any of the Named
Executive Officers.
\2/ The numbers in this table are as of December 31, 1993, as required by SEC
regulations. The number of stock options exercisable, for purposes of
determining beneficial ownership in the table on pages 9 and 10 above,
include options exercisable as of the record date, March 8, 1994, and
within 60 days thereafter.
\3/ An "in-the money" stock option is an option for which the market price on
December 31, 1993 of the Common Stock underlying the option exceeds the
exercise price of such option. These values have not been realized. Actual
value realized, if any, upon option exercise will depend on the market
value of the Common Stock on the date of exercise.
LONG-TERM INCENTIVE COMPENSATION
The following table provides information on awards to the Named Executive
Officers during 1993 under the Incentive Program pursuant to the Company's
1983 Long-Term Incentive Plan.
<TABLE>
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<CAPTION>
Estimated Future Payouts
Number of Performance Under Non-Stock Price-Based Plans
Shares, or Other --------------------------------------------------
Units or Period Until Threshold Target Maximum
Other Maturation or ($ or # of ($ or # of ($ or # of
Name Rights (#)\1/ Payout Units)\2/ Units)\3/ Units)\4/
(a) (b) (c) (d) (e) (f)
- - - --------------------- ----------------------------------- ----------------- -------------- -------------- ------------------
<S> <C> <C> <C> <C> <C>
Mr. Mallender 2,500 Cash Performance Units 1993-97 -- -- $250,000
100,000 Stock Performance Units 1993-97 -- -- 100,000 shares
Mr. Crim 1,875 Cash Performance Units 1993-97 -- -- $187,500
75,000 Stock Performance Units 1993-97 -- -- 75,000 shares
Mr. Dickerson 1,250 Cash Performance Units 1993-97 -- -- $125,000
50,000 Stock Performance Units 1993-97 -- -- 50,000 shares
Mr. May 1,250 Cash Performance Units 1993-97 -- -- $125,000
50,000 Stock Performance Units 1993-97 -- -- 50,000 shares
Mr. Mullen 1,250 Cash Performance Units 1993-97 -- -- $125,000
50,000 Stock Performance Units 1993-97 -- -- 50,000 shares
- - - ------------------
\1/ The units reported are 1993-97 Cash Performance Units and 1993-97 Stock
Performance Units awarded under the Incentive Program pursuant to the
Company's 1983 Long-Term Incentive Plan. See "Executive Compensation
Committee Report -- Incentive Compensation." The maximum value of each
Cash Performance Unit was $100, with the amount awarded to be determined
by the Executive Compensation Committee (the "Committee") upon the
achievement of certain goals as described below. Each Stock Performance
Unit consisted of one share of Common Stock and a corresponding obligation
of the Company to pay (with certain limitations) the additional income tax
(computed at a combined federal and state income tax rate estimated by the
Committee and "grossed up" for federal and state income taxes thereon) on
the recipients resulting from the award to them of the Common Stock. These
tax payments are included in column (e) of the Summary Compensation Table.
The Stock Performance Units also were to vest upon the achievement of
certain goals to be specified by the Committee. The ultimate goal was the
overall refinancing of the Company's indebtedness. The Committee
contemplated that this goal would be achieved during fiscal years 1993-97.
Various "sub-goals" were also established in the form of particular
incremental accomplishments that would help in the Company's
rehabilitation and progress toward the ultimate goal. The achievement of
one of those sub-goals was to give rise to the exercise by the Committee
of its discretion to vest a percentage of the awards in an amount less
than 100%, as determined by the Committee at the time to reflect
appropriately the importance to the Company of the sub-goal, the efforts
of the executive officers in achieving the sub-goal, and the relative
benefits to the Company of the terms on which the sub-goal was
accomplished. No more than 75% of the total awards could vest on account
of accomplishments short of the overall refinancing goal.
\2/ No threshold amounts are defined in the Long-Term Incentive Plan.
\3/ Although a target was established for maximum benefits, no target amount
was assigned to achievement of the "sub-goals." The determination of the
achievement of sub-goals was within the discretion of the Committee.
\4/ The ultimate goal specified for vesting was achieved in October 1993. As a
result, the Cash and Stock Performance Units vested 100% and the Company
paid these long-term incentive awards in 1993. The amounts included in
this column are also included in column (h) of the Summary Compensation
Table. See also "Executive Compensation Committee Report -- Incentive
Compensation."
</TABLE>
EXECUTIVE COMPENSATION COMMITTEE REPORT
The Executive Compensation Committee, at the request of the Board of
Directors, has prepared the following report relating to the compensation
policies and decisions made by the Committee with regard to compensation of
the Company's executive officers in 1993.
Compensation Policy. This report describes the Company's compensation
policy, as formulated by the Executive Compensation Committee and approved by
the Board of Directors, and resulting actions taken by the Company for the
fiscal year ended December 31, 1993. The Committee strives to devise and
implement executive compensation programs which (1) relate the pay levels of
executives to the annual and long term performance of the Company; (2) ensure
the Company's ability to attract and retain top quality executives; (3) align
the interests of executives with the long term interests of stockholders; and
(4) motivate key senior officers to achieve strategic business initiatives and
reward them for their achievement. In prior years, the Company has used a
variety of compensation plans and programs to accomplish these objectives,
including stock options, cash bonuses and awards of performance units based on
objectives such as specified increases in earnings per share, return on
equity, and growth in net earnings.
Effective for fiscal years of the Company beginning after 1993, recently
enacted Section 162(m) of the Internal Revenue Code generally prohibits the
Company from deducting compensation paid to certain executive officers to the
extent the compensation, including stock-based compensation, exceeds
$1,000,000 per year. At this time, given that Section 162(m) was only recently
enacted and the amount of the compensation paid to the executive officers of
the Company, the Committee does not have a policy to address the limitations
of Section 162(m). However, the Committee does consider the net cost to the
Company in making all compensation decisions.
Base Compensation. Salary increases were awarded to three of the Named
Executive Officers listed in the Summary Compensation Table -- Messrs.
Dickerson, May and Mullen. The increases were determined by evaluating the
responsibilities of the position held and the experience and performance of
the individual. The Committee also considered that despite increased
responsibilities and workload due to significant staff reductions and added
duties in recent years, these executive officers had not received an increase
in their salaries for three years except for a cost of living increase in
1992. The base salary for Mr. Mallender, the Chief Executive Officer, is
established pursuant to an amendment, dated December 1, 1988, to his
employment contract with the Company. Since that time, Mr. Mallender has not
received any increase in his base salary.
Incentive Compensation. During the first quarter of 1993, the Committee
established an incentive program pursuant to which awards were made under the
Company's 1983 Restricted Stock Plan, 1983 Long-Term Incentive Plan and 1978
and 1990 Stock Option Plans for the executive officers of the Company (and
certain others) (the "Incentive Program"). The Incentive Program provided for
a package of stock awards, cash awards and stock options for these individuals
that would vest (i.e., become payable or exercisable and no longer subject to
forfeiture) upon the attainment of certain specified goals described below
during fiscal years 1993-97. Awards and payments to the Named Executive
Officers for 1993 under the Incentive Program are shown in the Summary
Compensation Table on pages 10-12, the Stock Option Table on page 14 and the
Long-Term Incentive Compensation Table on pages 15 and 16.
The Committee retained the authority to determine when, and to what
extent, the vesting events and accomplishments were achieved during the five-
year period. Any unvested portion of an award was to be forfeited in 1997 or
earlier if the executive terminated his employment (with certain exceptions).
The specified goals were related to the implementation of the Company's
restructuring and rehabilitation strategy. Certain intermediate goals were to
lead to partial vesting of the awards (as determined by the Committee). For
example, refinancing and/or extension of certain senior bank debt or
subsidiary debt could result in partial vesting of the awards. No vesting
percentages were assigned to particular intermediate goals. The Company's
achievement of an overall refinancing of its indebtedness (if consistent with
the Company's overall goals, including rebuilding stockholder value, as
determined by the Committee) was the goal that was to result in 100% vesting.
At the time the Incentive Program was adopted, it was anticipated that the
Company's rehabilitation strategy would likely be achieved in increments over
a period of several years and accordingly, that the awards would vest in
corresponding increments. In fact, the Company achieved its goal of
refinancing substantially all of its debt in October 1993 and, as a result,
the awards vested 100% at that time. The efforts of the Named Executive
Officers to negotiate and implement a creative strategy to take advantage of
favorable financial markets, as well as the results achieved, substantially
exceeded the expectations of the Committee.
The Incentive Program was intended to be an integrated incentive
compensation program to retain, motivate and reward executives who contribute
to the success of the Company's restructuring and rehabilitation strategy. The
mix of cash and equity awards (both contingent grants of Common Stock and
stock options) was considered to be consistent with the approach taken by many
restructuring companies. In determining the amount of awards to each
executive, the Committee considered the executive's position and tenure with
the Company, his past performance and his ability to contribute to the success
of the Company's restructuring and rehabilitation strategy. In addition to
these factors, in the case of Mr. Mallender, the Committee considered the
unique efforts required of Mr. Mallender to achieve this strategy.
The foregoing report has been furnished by the Company's Executive
Compensation Committee:
John D. MacNaughton, Jr. Emiel T. Nielsen, Jr.
Donald J. Ulrich, Jr. John W. Stodder
<PAGE>
X. FIVE YEAR SHAREHOLDER RETURN COMPARISON.
The following graphs compare the cumulative five-year total shareholder
returns on the Company's Common Stock, on an indexed basis, with the Standard
& Poors 500 Stock Index, a selected peer group of issuers and the Investor's
Business Daily Diversified Operations Index. In connection with the
preparation of the proxy statement for last year's annual meeting of
stockholders, at the request of the Board of Directors, the international
compensation and benefits consulting firm of Godwins Inc. selected a peer
group of companies which have been used for purposes of the comparison that
appears below.\1/ In February 1994, the Board of Directors reevaluated using
the peer group as a basis of comparison. The Board concluded that the
calculation of the total shareholder return of the peer group has become more
complicated and expensive than it initially anticipated and that these
complications have diminished the value of the peer group as a basis of
comparison. The performance of the peer group is only included now to comply
with the rules of the SEC. The Board determined that the Investor's Business
Daily Diversified Operations Index is a more appropriate basis of comparison.
This index consists of over 100 diversified industrial companies, which
includes the Company. The table assumes an initial $100 investment and the
cumulative total returns are calculated assuming the reinvestment of
dividends.
PERFORMANCE GRAPH
-----------------
FIVE YEAR SHAREHOLDER RETURN COMPARISON
---------------------------------------
AMONG THE COMPANY, THE DIVERSIFIED OPERATIONS INDEX,
STANDARD & POOR'S ("S&P") 500 INDEX AND THE INDUSTRY PEER GROUP
---------------------------------------------------------------
1988 1989 1990 1991 1992 1993
---- ---- ---- ---- ---- ----
The Company $100 80 47 28 25 48
Diversified Operations Index $100 112 92 107 115 124
S&P 500 Index $100 132 128 166 179 197
Industry Peer Group $100 119 76 110 156 211
- - - ------------------
\1/ From a base of approximately 20,000 publicly traded companies, Godwins
Inc. selected these 28 companies, which have (1) annual revenues between
$200 million and $500 million, and (ii) at least half of their standard
industrial classification ("SIC") codes matching the Company's SIC codes.
Companies with insufficient data were eliminated, and appropriate
adjustments were made for varying fiscal year ends. Stock performance was
weighted according to the respective company's stock market capitalization
at the beginning of each period for which a return is calculated and the
revenues from the Company's fifteen prevalent SIC codes. The Industry Peer
Group consists of Acme Electric Corp.; Allen Group; Amphenol Corp.; Andrew
Corp.; Augat Inc.; Birmingham Steel Corp.; BMC Industries Inc.; Coherent
Inc.; CTS Corp.; Curtiss-Wright Corp.; Ecoscience Corp.; Esco Electronics
Corp.; Excel Industries, Inc.; Geneva Steel Co.; Jan Bell Marketing, Inc.;
Kysor Industrial Corp.; Laclede Steel Co.; Lennar Corp.; M/A-Com Inc.;
Oregon Steel Mills Inc.; Scientific-Atlanta Inc.; Sensormatic Electronics
Corp.; Sparton Corp.; Superior Industries Intl. Inc.; Trico Products
Corp.; UNC Inc.; United Industries Corp.; and Walbro Corp.With one
exception, the Industry Peer Group used in the proxy statement for last
year's annual meeting of stockholders consisted of the same group of
companies. One of these companies, American Steel & Wire Corp. was
acquired during 1993 by Birmingham Steel Corp., which itself is included
in the group.
XI. THE COMPANY'S CERTIFYING ACCOUNTANT
Price Waterhouse has served as the Company's independent public
accountants since July 1991 and has been selected to serve in that capacity
during fiscal year 1994. Representatives of Price Waterhouse are expected to
be present at the annual meeting and will have an opportunity to make a
statement if they so desire, and to respond to appropriate questions.
XII. COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the SEC and the New York Stock
Exchange. Officers, directors and greater than ten-percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during fiscal year
1993, all filings required by its officers, directors and greater than ten-
percent beneficial owners were timely filed.
XIII. OTHER MATTERS
As of the date of this proxy statement, management of the Company knows of
no business that will be presented for consideration at the meeting other than
that which has been referred to above. As to other business, if any, that may
properly come before the meeting, it is intended that proxies in the enclosed
form will be voted in respect thereof in accordance with the judgment of the
person or persons voting the proxies.
Phoenix, Arizona
Dated: March 29, 1994
<PAGE>
APPENDIX I - FORM OF COMMON STOCK PROXY FOR STOCKHOLDERS OF RECORD
TALLEY INDUSTRIES, INC.
PROXY-ANNUAL MEETING OF STOCKHOLDERS-MAY 3, 1994
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The stockholder(s) signing this proxy hereby appoint(s) Messrs. William
H. Mallender and Mark S. Dickerson, or any of them, as attorneys and proxies
of such stockholder(s), with full power of substitution to each of them, for
and in the name and stead of the undersigned to appear and vote, as
designated on the reverse side of this proxy, all of the shares of common
stock of Talley Industries, Inc., which such stockholder(s) would be
entitled to vote if personally present at the Annual Meeting of Stockholders
of Talley Industries, Inc., to be held on May 3, 1994 at 11:00 a.m. at The
Ritz Carlton Hotel, 2401 E. Camelback Road, Phoenix Arizona, 85016, and at
any and all adjournments thereof.
Please complete, sign and date this proxy and return it promptly in the
enclosed envelope whether you plan to attend the meeting or not. This proxy
will not be used if you attend the meeting in person and so request.
The Board of Directors recommends a vote "FOR" each of the nominees for
Director listed on the reverse side.
(Continued and to be signed and dated on reverse side)
- - - ----------------------------------------------------------------------------
FOLD AND DETACH HERE
[TALLEY INDUSTRIES LOGO]
YOUR VOTE IS IMPORTANT TO THE COMPANY
PLEASE COMPLETE, SIGN AND DATE THIS PROXY CARD ON THE REVERSE SIDE AND
RETURN THE CARD BY TEARING OFF THE TOP PORTION OF THIS SHEET AND RETURNING
IT IN THE ENCLOSED ENVELOPE.
- - - ----------------------------------------------------------------------------
<PAGE>
- - - ----------------------------------------------------------------------------
The shares represented by this proxy will be voted in the
manner directed by the stockholder(s). If no direction
is given when the duly executed proxy is returned, such
shares will be voted "FOR" the election of the four
nominees named. COMMON STOCK
-------------- -----------------------------
COMMON DIVIDEND REINVESTMENT
Item 1 - ELECTION OF FOUR DIRECTORS to Item 2 - In their discretion
serve until the annual meeting in 1997 and the proxies appointed herein
until their successors are duly elected and are authorized to vote upon
qualified. any other business as may
properly come before the
meeting or any adjournments
thereof.
FOR all nominees WITHHOLD NOMINEES - Neil Benson, Townsend
listed at the AUTHORITY to vote Hoopes, William H.
right (except for all nominees Mallender and Emiel T.
as marked to the listed at right Nielsen, Jr.
contrary hereon)
INSTRUCTION: To withhold authority
to vote for any individual nominee(s)
write the name of the nominee(s) on
the space below:
/ / / / _____________________________________
I WILL ATTEND THE MEETING / /
(Please sign as your name appears on
this proxy. If signing for an estate,
trust or corporation, title or
capacity should be stated. If shares
are held jointly, each holder should
sign. Attorneys should submit powers
of attorney.)
DATED: ________________________, 1994
_____________________________________
Signature
_____________________________________
Signature
Please mark your choice like this / X /
- - - ----------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
APPENDIX II - FORM OF PREFERRED STOCK PROXY FOR STOCKHOLDERS OF RECORD
TALLEY INDUSTRIES, INC.
PROXY-ANNUAL MEETING OF STOCKHOLDERS-MAY 3, 1994
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The stockholder(s) signing this proxy hereby appoint(s) Messrs. William
H. Mallender and Mark S. Dickerson, or any of them, as attorneys and proxies
of such stockholder(s), with full power of substitution to each of them, for
and in the name and stead of the undersigned to appear and vote, as
designated on the reverse side of this proxy, all of the shares of preferred
stock of Talley Industries, Inc., which such stockholder(s) would be
entitled to vote if personally present at the Annual Meeting of Stockholders
of Talley Industries, Inc., to be held on May 3, 1994 at 11:00 a.m. at The
Ritz Carlton Hotel, 2401 E. Camelback Road, Phoenix Arizona, 85016, and at
any and all adjournments thereof.
Please complete, sign and date this proxy and return it promptly in the
enclosed envelope whether you plan to attend the meeting or not. This proxy
will not be used if you attend the meeting in person and so request.
The Board of Directors recommends a vote "FOR" each of the nominees for
Director listed on the reverse side.
(Continued and to be signed and dated on reverse side)
- - - ----------------------------------------------------------------------------
FOLD AND DETACH HERE
[TALLEY INDUSTRIES LOGO]
YOUR VOTE IS IMPORTANT TO THE COMPANY.
PLEASE COMPLETE, SIGN AND DATE THIS PROXY CARD ON THE REVERSE SIDE AND
RETURN THE CARD BY TEARING OFF THE TOP PORTION OF THIS SHEET AND RETURNING
IT IN THE ENCLOSED ENVELOPE.
- - - ----------------------------------------------------------------------------
<PAGE>
- - - ----------------------------------------------------------------------------
The shares represented by this proxy will be voted in the
manner directed by the stockholder(s). If no direction is
given when the duly executed proxy is returned, such
shares will be voted "FOR" the election of the two
nominees named. PREFERRED STOCK
_____________ _____________ _______________________
PREFERRED A PREFERRED B DIVIDEND REINVESTMENT
Item 1 - ELECTION OF TWO DIRECTORS to serve Item 2 - In their discretion
until the annual meeting in 1995 and until the proxies appointed herein
their successors are duly elected and are authorized to vote upon
qualified; provided, however, that when the any other business as may
Preferred Stockholders' right to elect properly come before the
directors separately as a class terminates, meeting or any adjournments
the term of office of each director so thereof.
elected shall automatically terminate.
FOR all nominees WITHHOLD NOMINEES - Paul L. Foster and
listed at the AUTHORITY to vote Joseph A. Orlando.
right (except for all nominees
as marked to the listed at right INSTRUCTION: To withhold authority
contrary hereon) to vote for any individual nominee(s)
write the name of the nominee(s) on
the space below:
/ / / / _____________________________________
I WILL ATTEND THE MEETING / /
(Please sign as your name appears on
this proxy. If signing for an estate,
trust or corporation, title or
capacity should be stated. If shares
are held jointly, each holder should
sign. Attorneys should submit powers
of attorney.)
DATED: ________________________, 1994
_____________________________________
Signature
_____________________________________
Signature
Please mark your choice like this / X /
- - - ----------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
APPENDIX III - FORM OF COMMON STOCK PROXY FOR TALLEY SAVINGS PLUS 401-K PLAN
TALLEY SAVINGS PLUS 401-K PLAN
Voting Instructions to Trustee For Annual Meeting of Stockholders,
May 3, 1994
As a participant in the Talley Savings Plus 401-K Plan of Talley
Industries, Inc., and affiliated companies, you have the right to give
written instructions to the Plan Trustee as to the voting of certain shares
of the Company's common stock allocated to your account at the Company's
Annual Meeting of Stockholders to be held on May 3, 1994 and at any and all
adjournments thereof. In this connection, please indicate your voting
choices on the reverse side of this card, sign and date it, and return this
card promptly in the postage paid envelope provided.
(Continued and to be signed and dated on reverse side)
- - - ----------------------------------------------------------------------------
FOLD AND DETACH HERE
[TALLEY INDUSTRIES LOGO]
YOUR VOTE IS IMPORTANT TO THE COMPANY
PLEASE COMPLETE, SIGN AND DATE THIS PROXY CARD ON THE REVERSE SIDE AND
RETURN THE CARD BY TEARING OFF THE TOP PORTION OF THIS SHEET AND RETURNING
IT IN THE ENCLOSED ENVELOPE.
- - - ----------------------------------------------------------------------------
<PAGE>
- - - ----------------------------------------------------------------------------
The shares represented by this instruction card will be
voted in the manner directed by the stockholder(s). If
no direction is given when the duly executed instruction
card is returned, such shares will be voted "FOR" the
election of the four nominees named. COMMON STOCK
ALL SHARES OF COMMON STOCK ALLOCATED TO MY ACCOUNT
Item 1 - ELECTION OF FOUR DIRECTORS to Item 2 - In his discretion
serve until the annual meeting in 1997 and the Trustee appointed herein
until their successors are duly elected and is authorized to vote upon
qualified. any other business as may
properly come before the
meeting or any adjournments
thereof.
FOR all nominees WITHHOLD NOMINEES - Neil Benson, Townsend
listed at the AUTHORITY to vote Hoopes, William H.
right (except for all nominees Mallender and Emiel T.
as marked to the listed at right Nielsen, Jr.
contrary hereon)
INSTRUCTION: To withhold authority
to vote for any individual nominee(s)
write the name of the nominee(s) on
the space below:
/ / / / _____________________________________
I WILL ATTEND THE MEETING / /
(Please sign as your name appears on
this proxy. If signing for an estate,
trust or corporation, title or
capacity should be stated. If shares
are held jointly, each holder should
sign. Attorneys should submit powers
of attorney.)
DATED: ________________________, 1994
_____________________________________
Signature
_____________________________________
Signature
Please mark your choice like this / X /
- - - ----------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
APPENDIX IV - FORM OF SERIES B PREFERRED STOCK PROXY FOR TALLEY SAVINGS PLUS
401-K PLAN
TALLEY SAVINGS PLUS 401-K PLAN
Voting Instructions to Trustee For Annual Meeting of Stockholders,
May 3, 1994
As a participant in the Talley Savings Plus 401-K Plan of Talley
Industries, Inc., and affiliated companies, you have the right to give
written instructions to the Plan Trustee as to the voting of certain shares
of the Company's Series B preferred stock allocated to your account at the
Company's Annual Meeting of Stockholders to be held on May 3, 1994 and at
any and all adjournments thereof. In this connection, please indicate your
voting choices on the reverse side of this card, sign and date it, and
return this card promptly in the postage paid envelope provided.
(Continued and to be signed and dated on reverse side)
- - - ----------------------------------------------------------------------------
FOLD AND DETACH HERE
[TALLEY INDUSTRIES LOGO]
YOUR VOTE IS IMPORTANT TO THE COMPANY.
PLEASE COMPLETE, SIGN AND DATE THIS PROXY CARD ON THE REVERSE SIDE AND
RETURN THE CARD BY TEARING OFF THE TOP PORTION OF THIS SHEET AND RETURNING
IT IN THE ENCLOSED ENVELOPE.
- - - ----------------------------------------------------------------------------
<PAGE>
- - - ----------------------------------------------------------------------------
The shares represented by this instruction card will be
voted in the manner directed by the stockholder(s). If
no direction is given when the duly executed instruction
card is returned, such shares will be voted "FOR" the
election of the two nominees named. PREFERRED STOCK
ALL SHARES OF SERIES B PREFERRED STOCK ALLOCATED TO MY ACCOUNT
Item 1 - ELECTION OF TWO DIRECTORS to serve Item 2 - In his discretion
until the annual meeting in 1995 and until the Trustee appointed herein
their successors are duly elected and is authorized to vote upon
qualified; provided, however, that when the any other business as may
Preferred Stockholders' right to elect properly come before the
directors separately as a class terminates, meeting or any adjournments
the term of office of each director so thereof.
elected shall automatically terminate.
FOR all nominees WITHHOLD NOMINEES - Paul L. Foster and
listed at the AUTHORITY to vote Joseph A. Orlando.
right (except for all nominees
as marked to the listed at right INSTRUCTION: To withhold authority
contrary hereon) to vote for any individual nominee(s)
write the name of the nominee(s) on
the space below:
/ / / / _____________________________________
I WILL ATTEND THE MEETING / /
(Please sign as your name appears on
this proxy. If signing for an estate,
trust or corporation, title or
capacity should be stated. If shares
are held jointly, each holder should
sign. Attorneys should submit powers
of attorney.)
DATED: ________________________, 1994
_____________________________________
Signature
_____________________________________
Signature
Please mark your choice like this / X /
- - - ----------------------------------------------------------------------------
FOLD AND DETACH HERE
