<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / 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 sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
TALLEY INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $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:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
TALLEY(tm)
INDUSTRIES
2702 N. 44th Street
Phoenix, Arizona 85008
NOTICE OF 1995 ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders:
The Annual Meeting of Stockholders of Talley Industries, Inc., a Delaware
corporation, will be held on April 4, 1995, at 9:00 a.m. Mountain Standard Time,
at the Camelback Inn, 5402 East Lincoln Drive, Scottsdale, Arizona 85253, for
the following purposes:
1. To elect three directors for terms expiring in 1998, 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 February 28, 1995 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,
/s/ MARK S. DICKERSON
___________________________________
Mark S. Dickerson
Secretary
Phoenix, Arizona
March 3, 1995
<PAGE> 3
TALLEY INDUSTRIES, INC.
2702 NORTH 44TH STREET
PHOENIX, ARIZONA 85008
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
APRIL 4, 1995
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 9:00 a.m. Mountain Standard Time,
at the Camelback Inn, 5402 East Lincoln Drive, Scottsdale, Arizona 85253 on
Tuesday, April 4, 1995 (and any adjournment thereof), for the purposes stated in
the accompanying Notice of Annual Meeting of Stockholders (the "Notice of
Meeting"). The three 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 of such revocation or by filing a duly executed proxy bearing a later
date. Only stockholders of record at the close of business on February 28, 1995
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, 1994. 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 3,
1995.
II. VOTING SECURITIES
On January 31, 1995, the Company had outstanding 10,047,181 shares of
Common Stock, 70,988 shares of Series A, 1,548,187 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 held by all classes of stock present and entitled to vote at the
meeting, voting as a single
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<PAGE> 4
class. 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
three directors referred to in paragraph 1 of the accompanying Notice of Meeting
will be elected exclusively by the Common Stockholders and the two directors
referred to in paragraph 2 of the accompanying Notice of Meeting will be elected
exclusively by the Preferred Stockholders, voting as a single class, as
described in "Election of Directors" below. 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 1996,
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 3, 1995. The Company received
no such proposals for the 1995 Annual Meeting of Stockholders.
If a stockholder desires to bring proper 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 where the proposal will be considered, 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
deadline for a stockholder to deliver notice of a proposal for consideration at
the 1995 Annual Meeting of Stockholders is March 4, 1995. The required notice
must contain certain information, including information about the stockholder,
as prescribed by the Bylaws. As of February 24, 1995, no proposals were received
from any stockholder for consideration at the 1995 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 eight
meetings during 1994. No director attended fewer than 75% of the total number of
meetings of the Board of Directors and Committees on which such director served
other than Mr. Victor.
AUDIT COMMITTEE
The Audit Committee currently consists of six directors -- Messrs. Benson,
Foster, Hoopes, Orlando, Stamatakis and Victor -- none of whom is an officer or
employee of the Company or any of its subsidiaries or affiliates. The Committee
held two meetings in 1994. 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
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<PAGE> 5
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 1994, currently consists of Messrs. Israel, MacNaughton, Stamatakis,
Stodder and Ulrich. See the "Executive Compensation Committee Report" under
"Executive Compensation" below for information on the Committee's 1994
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 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 deadline for a
stockholder to deliver notice of a nomination for the election of directors at
the 1995 Annual Meeting of Stockholders is March 4, 1995. The required notice
must contain certain information, including information about the nominee, as
prescribed in the Bylaws. As of February 24, 1995, no nominations were received
from any stockholder for the election of directors at the 1995 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 Board meeting 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. Since
December 1993, directors of the Company have also served as directors of Talley
Manufacturing; but do not receive any additional compensation for serving as
directors of Talley Manufacturing. Pursuant to a cost sharing agreement with
Talley Manufacturing, Talley Manufacturing either bears or reimburses the
Company for the compensation and expenses of the directors of the Company.
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<PAGE> 6
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, 1994.
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.
VI. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of January 31, 1995 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 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, 399,394 (3) 25.80% 23.54%
Trustee
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, 818,970 (3) 8.15% N/A
Trustee
Talley Savings Plus
One E. Camelback Road
Suite 340
Phoenix, AZ 85012
</TABLE>
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<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>
Saad A. Alissa 903,700(5) 8.99% N/A
c/o David J. Levenson, Esq.
Venable, Baetjer, Howard & Civiletti
1201 New York Avenue, N.W.
Washington, DC 20005
</TABLE>
- ---------------
(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,
as amended. 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 818,970 shares of Common Stock and 399,394 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 who have
the right to direct the trustee's voting of such shares. Unallocated shares
are voted in the same proportions as the shares with respect to which the
employee participants have the right to direct voting. 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 as to which
it receives such instructions. The trustee will tender or exchange the
unallocated shares in the same proportions as the shares with respect to
which the employee participants have the right to direct voting.
(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.
(5) Mr. Alissa is the beneficial owner of 903,700 shares of Common Stock. This
amount includes 223,600 shares of Common Stock owned by General Investors
Limited ("GIL"), which is wholly owned by Mr. Alissa and 680,100 shares of
Common Stock owned by Financial Investors Limited ("FIL"), which is wholly
owned by Abdullatif Ali Alissa, Est. (the "Establishment"). Mr. Alissa is
President of the Establishment. The Establishment, Mr. Alissa and FIL share
the investment and voting power of the 680,100 shares of Common Stock owned
by FIL. Mr. Alissa and GIL share the investment and voting power of the
223,600 shares of Common Stock owned by GIL. The foregoing information is
based solely upon the filings made by Mr. Alissa and his various affiliates
with the SEC under Section 13 of the Securities Exchange Act of 1934, as
amended.
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<PAGE> 8
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 (excluding the two directors elected by the Preferred Stockholders, as
discussed below). 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 twelve members (including the two directors elected by the
Preferred Stockholders, as discussed below). Each Director usually serves on the
Board of Directors of the Company's Talley Manufacturing subsidiary.
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 1994 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 1995
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.
Fred Israel, John W. Stodder and David Victor (the "Regular Nominees"). All
Regular Nominees are currently directors and (other than Mr. Israel) previously
were elected by the stockholders. Mr. Israel was elected by the Directors to the
Board in 1993 to fill a vacancy created by the death of a director. Each
director elected by the Common Stockholders at the 1995 Annual Meeting of
Stockholders will hold office until the date of the annual meeting of
stockholders in 1998, or until his successor is duly elected and qualified.
- ---------------
(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.
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<PAGE> 9
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:
<TABLE>
<CAPTION>
DIRECTOR
NAME, AGE, AND PRINCIPAL EMPLOYMENT FOR PAST FIVE YEARS SINCE
---------------------------------------------------------------------------- --------
<S> <C>
REGULAR NOMINEES FOR ELECTION (TO BE ELECTED BY VOTE OF COMMON STOCKHOLDERS)
Fred Israel, 67, retired in 1993 as a senior partner of Israel and Raley, 1993
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; a director of
Wheeling Jesuit College, Wheeling, West Virginia; and a director of
MicroAge, Inc. (computer hardware and software development, sales and
service).
John W. Stodder, 72, Corporate finance and merger/acquisition consultant; 1970
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, 52, Member, Meyer, Hendricks, Victor, Osborn & Maledon, P.A. 1985
(attorneys).
SPECIAL NOMINEES FOR ELECTION (TO BE ELECTED BY VOTE OF PREFERRED STOCKHOLDERS)
Paul L. Foster, 66, 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, 67, Independent financial consultant and former President 1992
of Whitehead Associates (venture capital, real estate, securities and
investment).
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1996 ANNUAL MEETING
Jack C. Crim, 64, President and Chief Operating Officer of the Company from 1983
April 1983 to the present; Executive Vice President and Chief Operating
Officer of the Company from May 1982 to 1983.
John D. MacNaughton, Jr., 73, President, The MacNaughton Co., corporate 1970
financial consultants.
Alex Stamatakis, 61, President of Stamatakis Industries, Inc. (principally 1994
real estate investments). Mr. Stamatakis was a director of the Company
from October 1985 until he resigned in February 1993.
Donald J. Ulrich, 58, Owner and Vice Chairman of Ventura Coastal Corporation 1991
(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.
</TABLE>
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<PAGE> 10
<TABLE>
<CAPTION>
DIRECTOR
NAME, AGE, AND PRINCIPAL EMPLOYMENT FOR PAST FIVE YEARS SINCE
---------------------------------------------------------------------------- --------
<S> <C>
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1997 ANNUAL MEETING
Neil Benson, 57, Senior Partner, Lewis Golden & Co., Chartered Accountants, 1988
London, England; Chairman of The Davis Service Group PLC, London,
England (support services); 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 (menswear retail and
formal wear hire).
Townsend Hoopes, 72, Distinguished International Executive, Department of 1979
Public Affairs, University of Maryland; retired President of
Association of American Publishers (trade association representing
American book publishers); and Vice Chairman, Reseal International
Corporation (development and marketing of state of the art packaging
technology).
William H. Mallender, 59, Chairman of the Board and Chief Executive Officer 1975
of the Company from April 1983 to present; President and Chief
Executive Officer of the Company from December 1981 to 1983; Executive
Vice President, General Counsel and Secretary of the Company, 1978 to
1981; Vice President, General Counsel and Secretary of the Company,
1973 to 1978; and a director of MicroAge, Inc. (computer hardware and
software development, sales and service).
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION AS DIRECTORS OF
THE THREE 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.
VIII. SECURITY OWNERSHIP OF MANAGEMENT OF THE COMPANY
The following table sets forth information as of January 31, 1995 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 that appears under "Executive Compensation -- Summary
Compensation Table," and all directors and executive officers as a group.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SHARES OF SHARES OF NUMBER OF PERCENT OF
COMMON COMMON SHARES OF SHARES OF
NAME OF BENEFICIAL OWNER STOCK (1) STOCK (2) SERIESB (1) SERIES B (2)
------------------------ --------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
William H. Mallender(3).......................... 431,384 4.19% 7,771 *
Jack C. Crim(4).................................. 319,104 3.12% 9,387 *
Kenneth May(5)................................... 177,522 1.75% 4,012 *
Daniel R. Mullen(6).............................. 176,698 1.74% 3,531 *
Mark S. Dickerson(7)............................. 162,449 1.60% 2,133 *
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 *
Joseph A. Orlando(9)............................. 656 * 500 *
Alex Stamatakis.................................. 5,250 *
John W. Stodder(10).............................. 1,675 * 800 *
Donald J. Ulrich................................. 5,300 *
David Victor..................................... 3,750 *
All Directors and Executive Officers(11)......... 1,308,008 12.19% 29,634 1.91%
</TABLE>
8
<PAGE> 11
- ---------------
(1) The Common Stock listed includes shares under options exercisable on
January 31, 1995 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 January 31, 1995 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 177,644 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 9,791
shares of Common Stock and 4,771 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 10,199 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 151,875 shares of Common Stock under
exercisable options. In addition, 9,003 shares of Common Stock and 4,387
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
12,320 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 86,375 shares of Common Stock under
exercisable options. In addition, 7,824 shares of Common Stock and 3,812
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
5,266 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 86,375 shares of Common Stock which Mr. Mullen has the
right to acquire under exercisable options, and 7,247 shares of Common
Stock and 3,531 shares of Series B are held in trust for the benefit of Mr.
Mullen under the Talley Savings Plus stock purchase plan. The Common Stock
listed includes 4,634 shares which would be received upon conversion of the
Series B.
(7) The stock listed includes 68,898 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 86,375 shares of Common Stock which Mr. Dickerson has
the right to acquire under exercisable options, and 4,376 shares of Common
Stock and 2,133 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 2,800 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
586,122 shares of Common Stock and 11,000 shares of Series B directly or as
described herein and have rights to acquire 644,750 shares of Common Stock
under exercisable options. In addition, 38,241 shares of Common Stock and
18,634 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 38,895 shares which would
be received upon conversion of the Series B.
9
<PAGE> 12
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") 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.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------------- ---------------------------- -------------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL OTHER
NAME AND PRINCIPAL COMPEN- STOCK OPTIONS/ LTIP COMPEN-
POSITION YEAR SALARY ($) BONUS ($)(1) SATION ($)(2) AWARD(S) ($)(3) SARS (#)(4) PAYOUTS ($)(5) SATION ($)(6)
(A) (B) (C) (D) (E) (F) (G) (H) (I)
- ---------------------- ---- ---------- ------------ ------------- --------------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William H. Mallender, 1994 415,000 329,635 0 0 0 0 625,688
Chairman and CEO 1993 415,000 0 517,051 155,000 150,000 687,500 612,079
1992 415,000 0 0 0 0 59,949 185,575
Jack C. Crim,......... 1994 311,250 247,226 0 0 0 0 186,057
President and COO 1993 311,250 0 387,788 116,250 112,500 515,625 247,608
1992 311,250 0 0 0 0 44,962 116,483
Mark S. Dickerson,.... 1994 165,000 65,530 0 0 0 0 6,622
Vice President, 1993 160,667 0 241,618 58,125 75,000 343,750 6,534
Secretary and 1992 148,000 0 0 0 0 11,990 6,457
General Counsel
Kenneth May,.......... 1994 140,000 55,601 0 0 0 0 9,427
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
Daniel R. Mullen,..... 1994 140,000 55,601 0 0 0 0 9,452
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
</TABLE>
- ---------------
(1) The bonus for 1994 was based on performance in that year but was determined
and paid in 1995 pursuant to the Executive Incentive Plan described in the
Executive Compensation Committee Report below. See "Executive Compensation
Committee Report -- Annual Incentive Compensation."
(2) Amounts shown in 1993 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 a long-term
incentive program (the "Incentive Program") established during the first
quarter of 1993. The Incentive Program provided for a package of stock
awards, cash awards and stock options to each of the Named Executive
Officers (and certain other employees of the Company) that would vest (i.e.,
become payable or exercisable and no longer subject to forfeiture) upon the
attainment of certain specified goals. The awards were made under the
Company's 1983 Restricted Stock Plan, 1983 Long-Term Incentive Plan and 1978
and 1990 Stock Option Plans.
(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 and 1983 Long-Term Incentive Plan.
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 officers were entitled to receive the same
dividends on these shares of Common Stock as all other stockholders;
however, the Company did not pay any dividends in 1993. The restrictions on
these shares of Common Stock expired in December 1993.
10
<PAGE> 13
(4) The stock options were granted in 1993 under the Incentive Program pursuant
to the Company's 1978 and 1990 Stock Option Plans and as a result of the
achievement of the objectives established under the Incentive Program, the
options became exercisable on April 25, 1994.
(5) Long-Term Incentive Plan payouts made in 1993 vested in 1993 and arose from
the achievement of performance objectives established under the Incentive
Program. 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 1992 were made in
cash and were earned and committed in 1989 and arose from the achievement of
performance objectives established for 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 -- "TSP," (the Company's 401(k) plan) 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 under "Retirement Plan" below. The amount reported in
this column for each of the Named Executive Officers is quantified for 1994
as follows: Mr. Mallender: Restoration Benefit Plan, $559,949; insurance
premiums, $61,989; and TSP contributions, $3,750. Mr. Crim: Restoration
Benefit Plan, $167,373; insurance premiums, $14,934; and TSP contributions,
$3,750. Mr. Dickerson: insurance premiums, $5,797; and TSP contributions,
$825. Mr. May: insurance premiums, $5,927; and TSP contributions, $3,500.
Mr. Mullen: insurance premiums, $5,952; and TSP contributions, $3,500. The
1994 payment to Mr. Mallender under the Restoration Benefit Plan includes
$390,704 paid to Mr. Mallender in lieu of an annuity called for by the
Restoration Benefit Plan. Mr. Crim (as he was entitled to do) elected not to
receive a lump sum $260,000 payment in 1994 under the Restoration Benefit
Plan, but rather to have the Company purchase an insurance policy as
provided for by the Restoration Benefit Plan. The Company owns the policy
and any remainder under the policy will revert to the Company. The remainder
is estimated at this time to at least equal the single premium paid for the
policy. The income imputed to Mr. Crim for this policy is included in the
amount of insurance premiums paid on his behalf.
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.
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 was
paid by Talley Manufacturing and all employee benefit plans (other than plans
that provide for the issuance of
11
<PAGE> 14
Common Stock or Preferred Stock) were assumed by Talley Manufacturing. Executive
officers of the Company no longer receive separate compensation from the Company
for their services.
RETIREMENT PLAN
The following table shows the estimated annual benefits payable under the
Retirement Plan of Talley Manufacturing (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 1995.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE (1)
-------------------------------------------------------------
REMUNERATION (2) 15 20 25 30 AND OVER
- --------------- ------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
$125,000........................ $24,847 $ 33,129 $ 41,411 $ 49,693
$150,000........................ $30,205 $ 40,273 $ 50,341 $ 60,410
$175,000........................ $33,448 $ 44,600 $ 55,751 $ 66,902
$200,000........................ $38,212 $ 51,049 $ 63,885 $ 76,721
$225,000........................ $42,930 $ 57,451 $ 71,973 $ 86,494
$250,000........................ $47,648 $ 63,854 $ 80,060 $ 96,266
$300,000........................ $52,775 $ 70,813 $ 88,850 $ 106,887
$500,000........................ $66,070 $ 91,390 $116,711 $ 142,031
$750,000........................ $89,678 $128,114 $166,549 $ 204,985
</TABLE>
- ---------------
(1) As of December 31, 1994, the full years of credited service for each of the
Named Executive Officers were as follows: Mr. Mallender -- 23 years; Mr.
Crim -- 12 years; Mr. Dickerson -- 16 years; Mr. May -- 16 years, Mr.
Mullen -- 12 years.
(2) For purposes of this table it is assumed that final average compensation
will be 89.3% of the final earnings. In calculating the benefits shown
above, pay was limited to $150,000 for accruals after January 1, 1994. For
accruals during the 5 year period January 1, 1989 to December 31, 1993 pay
was limited to $235,840. For accruals prior to January 1, 1989 pay was not
limited. The remuneration shown was discounted at 6% per year in order to
determine the benefits accrued during the various periods if the
remuneration was above the pay caps set by Section 401(a)(17) of the
Internal Revenue Code.
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 are
paid by Talley Manufacturing outside the Retirement 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, amended on March 25, 1991 and amended on June 30, 1994. The retirement
benefits provided for by the Restoration Benefit Plan are contractual
obligations of Talley Manufacturing. 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 Talley Manufacturing 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
12
<PAGE> 15
Plan to the amount that would be payable under a single-life annuity, with such
supplemental payments being made on a joint-life basis.
STOCK 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, 1994. (1)
YEAR-END OPTIONS/SAR VALUES (2)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED STOCK IN-THE-MONEY STOCK OPTIONS
OPTIONS AT DECEMBER 31, 1994 AT DECEMBER 31, 1994 (3)
(#) ($)
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Mr. Mallender.............................. 233,750 0 525,000 0
Mr. Crim................................... 151,875 0 393,750 0
Mr. Dickerson.............................. 86,375 0 262,500 0
Mr. May.................................... 86,375 0 262,500 0
Mr. Mullen................................. 86,375 0 262,500 0
</TABLE>
- ---------------
(1) None of the Named Executive Officers exercised any stock options during
1994. 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, 1994, as required by SEC
regulations. The number of stock options exercisable, for purposes of
determining beneficial ownership in the table under "Security Ownership of
Management of the Company" above, include options exercisable as of January
31, 1995, and within 60 days thereafter.
(3) An "in-the-money" stock option is an option for which the market price on
December 31, 1994 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.
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 1994.
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, 1994. 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.
Section 162(m) of the Internal Revenue Code, enacted in 1993, 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, final regulations have not been adopted and the amount of the
compensation paid to the executive
13
<PAGE> 16
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. None of the Named Executive Officers listed in the
Summary Compensation Table were awarded salary increases in 1994. 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.
Annual Incentive Compensation. During the first quarter of 1994, the
Committee adopted an Executive Incentive Plan which provides for annual cash
bonuses to key employees, including the Named Executive Officers, who make
substantial contributions to the operation, management and profits of the
Company. The amount of a participant's bonus is based on the Company's
achievement of specified financial and strategic objectives, including net
earnings, cash flow return on investment and stock performance. The financial
objectives account for 60% of the bonus and the strategic goals account for the
remaining 40% of the bonus. The Committee determined the participants and
recommended specific financial and strategic objectives to the Board of
Directors. The Board of Directors approved the Committee's recommendations and
established threshold, target and maximum levels for each objective. A bonus
based on the achievement of the financial objectives and, as applicable, the
strategic goals is calculated on a straight interpolation of actual performance
for performance between the threshold and target levels or between the target
and maximum levels. In addition, the Committee assigned to each participant
under the Executive Incentive Plan a minimum, target and maximum bonus level
expressed as a percentage of that participant's base salary. The bonus level
varies from participant to participant to reflect the participant's position and
tenure with the Company, his past performance and his ability to contribute to
the future success of the Company. In addition to these factors, in the case of
Mr. Mallender, the Committee considered his leadership and dedication to enhance
the long-term value of the Company. The bonus level percentages assigned to the
Named Executive Officers, other than Mr. Mallender, range from 12.5% to 100% of
their base salary. Mr. Mallender's assigned minimum, target, and maximum bonus
percentages were 25%, 50% and 100%, respectively. Bonuses to the Named Executive
Officers for 1994 are shown in the Bonus column of the Summary Compensation
Table.
The foregoing report has been furnished by the Company's Executive
Compensation Committee:
Fred Israel
John D. MacNaughton, Jr.
Alex Stamatakis
John W. Stodder
Donald J. Ulrich
14
<PAGE> 17
X. FIVE YEAR STOCKHOLDER RETURN COMPARISON
The following graph compares the cumulative five-year total stockholder
returns on the Company's Common Stock, on an indexed basis, with the Standard &
Poor's 500 Stock Index and the Investor's Business Daily Diversified Operations
Index. The Investor's Business Daily Diversified Operations Index is an index
that 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.
<TABLE>
<CAPTION>
Diversified
Measurement Period Operations
(Fiscal Year Covered) Company Index S&P 500 Index
<S> <C> <C> <C>
1989 100 100 100
1990 59 83 97
1991 35 96 126
1992 31 103 136
1993 59 111 150
1994 78 109 152
</TABLE>
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 1995. 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, as amended, 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 stockholders 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 1994,
all filings required by its officers, directors and greater than ten-percent
stockholders under Section 16(a) of the Securities Exchange Act of 1934, as
amended, 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 3, 1995
15
<PAGE> 18
Talley(TM)
Industries
William H. Mallender 2702 North 44th Street
Chairman of the Board March 3, 1995 Phoenix, Arizona 85008
(602) 957-7711
To Participants in the Talley Savings Plus 401-K Plan:
As a participant in the Talley Savings Plus 401-K Plan, you can vote at the
upcoming annual meeting of Talley Industries, Inc. by completing and signing the
voting instruction cards included in this mailing (also known as "proxy cards").
I hope you will take advantage of this opportunity to direct, on a confidential
basis, the manner in which shares of company Common Stock and Series B Preferred
Stock allocated to your account under the Talley Savings Plus 401-K Plan
("Plan") will be voted.
Enclosed with this letter is the Proxy Statement, which describes the
matters to be voted upon, two voting instruction cards, which will permit you to
direct the voting of the shares of Common and Series B Preferred Stock allocated
to your account, the 1994 Annual Report to Stockholders and a stamped,
pre-addressed return envelope. AFTER YOU HAVE REVIEWED THE PROXY STATEMENT AND
THE ANNUAL REPORT, I URGE YOU TO MARK, DATE, SIGN AND RETURN BOTH OF THE
ENCLOSED VOTING INSTRUCTION CARDS TO MARSHALL & ILSLEY TRUST COMPANY, THE PLAN
TRUSTEE. THE WHITE CARD IS FOR COMMON STOCK AND THE WHITE CARD WITH A BLUE
STRIPE IS FOR SERIES B PREFERRED STOCK.
I want to emphasize that your voting instructions will remain completely
confidential. Only a few employees of Marshall & Ilsley Trust Company who
tabulate the voting instructions will have access to your cards. Marshall &
Ilsley Trust Company will certify the results to the Company. No person
associated with the Company will be allowed to see the individual voting
instructions.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF
THE THREE REGULAR AND TWO SPECIAL NOMINEES FOR DIRECTOR LISTED IN THE PROXY
STATEMENT.
If your voting instructions are not received, the shares allocated to your
account will not be voted. While I hope that you will vote in the manner
recommended by the Board of Directors, the most important thing is that you vote
in whatever manner you deem appropriate. Please take a moment to do so.
Sincerely,
/s/ WILLIAM H. MALLENDER
------------------------
William H. Mallender
Chairman of the Board
<PAGE> 19
TALLEY INDUSTRIES, INC.
PROXY - ANNUAL MEETING OF STOCKHOLDERS - APRIL 4, 1995
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 April 4, 1995 at 9:00 a.m. at the Camelback Inn, 5402 East
Lincoln Drive, Scottsdale, Arizona 85253, 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 the reverse side)
- FOLD AND DETACH HERE -
Talley(TM)
Industries
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.
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 UNTIL THE ANNUAL MEETING IN 1996 AND
UNTIL THEIR SUCCESSORS ARE DULY ELECTED AND QUALIFIED; 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.
/ / FOR all nominees listed at the right (except as marked to the contrary
hereon)
/ / WITHHOLD AUTHORITY to vote for all nominees listed at the right
NOMINEES - Paul L. Foster and Joseph A. Orlando.
INSTRUCTION: To withhold authority to vote for any individual nominee(s) write
the name of the nominee(s) on the space below:
- ----------------------------------------------
ITEM 2 - In their discretion the proxies appointed herein are authorized to vote
upon any other business as may properly come before the meeting or any
adjournments thereof.
/ / 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: , 1995
----------------------------
- ----------------------------------------
Signature
- ----------------------------------------
Signature
PLEASE MARK YOUR CHOICE LIKE THIS /X/
- FOLD AND DETACH HERE -
<PAGE> 20
TALLEY INDUSTRIES, INC.
PROXY - ANNUAL MEETING OF STOCKHOLDERS - APRIL 4, 1995
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 April 4, 1995 at 9:00 a.m. at the Camelback Inn, 5402 East
Lincoln Drive, Scottsdale, Arizona 85253, 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 the reverse side)
- FOLD AND DETACH HERE -
Talley(TM)
Industries
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.
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 THREE NOMINEES
NAMED.
COMMON STOCK
-------------------- ---------------------
COMMON DIVIDEND REINVESTMENT
ITEM 1 - ELECTION OF THREE DIRECTORS TO SERVE UNTIL THE ANNUAL MEETING IN 1998
AND UNTIL THEIR SUCCESSORS ARE DULY ELECTED AND QUALIFIED.
/ / FOR all nominees listed at the right (except as marked to the contrary
hereon)
/ / WITHHOLD AUTHORITY to vote for all nominees listed at the right
NOMINEES - Fred Israel, John W. Stodder and David Victor
INSTRUCTION: To withhold authority to vote for any individual nominee(s) write
the name of the nominee(s) on the space below:
- ----------------------------------------------
ITEM 2 - In their discretion the proxies appointed herein are authorized to vote
upon any other business as may properly come before the meeting or any
adjournments thereof.
/ / 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: , 1995
----------------------------
- ----------------------------------------
Signature
- ----------------------------------------
Signature
PLEASE MARK YOUR CHOICE LIKE THIS /X/
- FOLD AND DETACH HERE -
<PAGE> 21
TALLEY SAVINGS PLUS 401-K PLAN
VOTING INSTRUCTIONS TO TRUSTEE FOR ANNUAL MEETING OF STOCKHOLDERS,
APRIL 4, 1995
As a participant in the Talley Savings Plus 401-K Plan, 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 April 4,
1995 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 the reverse side)
- FOLD AND DETACH HERE -
Talley(TM)
Industries
YOUR VOTE IS IMPORTANT TO THE COMPANY.
PLEASE COMPLETE, SIGN AND DATE THIS INSTRUCTION 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.
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 UNTIL THE ANNUAL MEETING IN 1996 AND
UNTIL THEIR SUCCESSORS ARE DULY ELECTED AND QUALIFIED; 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.
/ / FOR all nominees listed at the right (except as marked to the contrary
hereon)
/ / WITHHOLD AUTHORITY to vote for all nominees listed at the right
NOMINEES - Paul L. Foster and Joseph A. Orlando.
INSTRUCTION: To withhold authority to vote for any individual nominee(s) write
the name of the nominee(s) on the space below:
- ----------------------------------------------
ITEM 2 - In his discretion the Trustee appointed herein is authorized to vote
upon any other business as may properly come before the meeting or any
adjournments thereof.
/ / I WILL ATTEND THE MEETING
(Please sign as your name appears on this instruction card. 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: , 1995
----------------------------
- ----------------------------------------
Signature
- ----------------------------------------
Signature
PLEASE MARK YOUR CHOICE LIKE THIS /X/
- FOLD AND DETACH HERE -
<PAGE> 22
TALLEY SAVINGS PLUS 401-K PLAN
VOTING INSTRUCTIONS TO TRUSTEE FOR ANNUAL MEETING OF STOCKHOLDERS,
APRIL 4, 1995
As a participant in the Talley Savings Plus 401-K Plan, 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 April 4, 1995
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 the reverse side)
- FOLD AND DETACH HERE -
Talley(TM)
Industries
YOUR VOTE IS IMPORTANT TO THE COMPANY.
PLEASE COMPLETE, SIGN AND DATE THIS INSTRUCTION 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.
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 THREE NOMINEES NAMED.
COMMON STOCK
ALL SHARES OF COMMON STOCK ALLOCATED TO MY ACCOUNT
ITEM 1 - ELECTION OF THREE DIRECTORS TO SERVE UNTIL THE ANNUAL MEETING IN 1998
AND UNTIL THEIR SUCCESSORS ARE DULY ELECTED AND QUALIFIED.
/ / FOR all nominees listed at the right (except as marked to the contrary
hereon)
/ / WITHHOLD AUTHORITY to vote for all nominees listed at the right
NOMINEES - Fred Israel, John W. Stodder and David Victor
INSTRUCTION: To withhold authority to vote for any individual nominee(s) write
the name of the nominee(s) on the space below:
- ----------------------------------------------
ITEM 2 - In his discretion the Trustee appointed herein is authorized to vote
upon any other business as may properly come before the meeting or any
adjournments thereof.
/ / I WILL ATTEND THE MEETING
(Please sign as your name appears on this instruction card. 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: , 1995
----------------------------
- ----------------------------------------
Signature
- ----------------------------------------
Signature
PLEASE MARK YOUR CHOICE LIKE THIS /X/
- FOLD AND DETACH HERE -
