<PAGE> 1
-------------------------
OMB APPROVAL
-------------------------
OMB Number: 3235-0145
Expires: October 31, 1994
Estimated average burden
hours per form......14.90
-------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 2)*
TALLEY INDUSTRIES, INC.
- -------------------------------------------------------------------------------
(Name of Issuer)
COMMON STOCK
- -------------------------------------------------------------------------------
(Title of Class of Securities)
874687 10 6
---------------------------
(CUSIP Number)
PATRICK J. GILMARTIN, ONE WILLIAM STREET, NEW YORK, NY 10004 (212) 425-3220
- -------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
FEBRUARY 7, 1996
-------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
Check the following box if a fee is being paid with this statement / /. (A fee
is not required only if the filing person: (1) has a previous statement on
file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required in the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section
of the Act but shall be subject to all other provisions of the Act (however,
see the Notes).
<PAGE> 2
SCHEDULE 13D
- --------------------- ------------------
CUSIP NO. 874687-10-6 Page 2 of 50 Pages
- --------------------- ------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
JOHN J. MCMULLEN ###-##-####
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
00
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO / /
ITEMS 2(d) or 2(e)
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF -------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 1,905,849
OWNED BY -------------------------------------------------------------
EACH REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 1,905,849
WITH -------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,905,849
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* / /
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
15.94
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE> 3
SCHEDULE 13D
- --------------------- ------------------
CUSIP NO. 874687-10-6 Page 3 of 50 Pages
- --------------------- ------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
FIRST INTERSTATE BANK OF ARIZONA, N.A.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
00
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO / /
ITEMS 2(d) or 2(e)
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF -------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 1,905,849
OWNED BY -------------------------------------------------------------
EACH REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH -------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,905,849
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* / /
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
15.94
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE> 4
SCHEDULE 13D
(Amendment No. 2)
This Amendment No. 2 restates and amends in its entirety the joint
statement of John J. McMullen ("JJM") and First Interstate Bank of Arizona, N.A.
("First Interstate" or the "Trustee") on Schedule 13D dated March 17, 1988, as
amended by Amendment No. 1 dated May 9, 1990.
ITEM 1. SECURITY AND ISSUER.
The security is Common Stock ($1.00 par value) of the issuer.
The name and principal executive office of the issuer are:
Talley Industries, Inc.
2702 N. 44th Street, 100A
Phoenix, Arizona 85008
ITEM 2. IDENTITY AND BACKGROUND.
The individual filing this report is JJM, whose address is: 9204 Sloane
Street, Orlando, Florida 32827. His present principal occupation is as an
investor, including the direct and indirect oversight of a number of operating
businesses he owns in whole or in major part. JJM is a citizen of the United
States.
First Interstate is a national banking association and serves as the
trustee under the below-described "Voting Trust Agreement." The following
information is furnished for said national banking association:
Name: First Interstate Bank
of Arizona, N.A.
Principal Business: Banking
Address of Principal 100 W. Washington
Business and Principal Phoenix, Arizona 85003
Offices:
First Interstate Bank of Arizona, N.A. previously was one of the
issuer's principal bank lenders.
The following information is furnished for the directors of First
Interstate Bank of Arizona, N.A.:
FIRST INTERSTATE BANK OF ARIZONA, N.A.
<PAGE> 5
DIRECTORS
(1) William J. Bogaard: EVP and General Counsel, First Interstate Bancorp,
311 Congress Place, Pasadena, CA 91105
(2) Leroy E. Gardner: 14949 LaCumbre Drive, Pacific Palisades, CA 90272
(3) Robert E. Greene: EVP, Credit Administration, First Interstate Bancorp,
9502 Lemon Street, Villa Park, CA 92667
(4) Steven L. Scheid: SVP, Corporate Planning & Analysis, 5476 East Lupine
Avenue, Scottsdale, AZ 85254
(5) William E. B. Siart: CEO First Interstate Bancorp, 266 Toyopa Drive,
Pacific Palisades, CA 90272
The following information is furnished for the executive officers of
First Interstate Bank of Arizona, N.A.:
FIRST INTERSTATE BANK OF ARIZONA, N.A.
EXECUTIVE OFFICERS
(1) Jeffrey P. Anderson: EVP, Commercial Banking, 9690 North 57th Street,
Paradise, Valley, AZ 85253
(2) James D. Bruner: EVP, Trust and Private Client Services, 11649 North
Miller Road, Scottsdale, AZ 85260
(3) Michael J. Clabby: EVP, Credit Administration, 10889 North 75th Place,
Scottsdale, AZ 85260
(4) Teresa M. Dunaway: SVP, SW Region Finance, 4612 East Onyx, Phoenix, AZ
85028
(5) John S. Lewis: CEO, SW Region Administration, 10865 East El Rancho
Drive, Scottsdale, AZ 85259
(6) Thomas N. Slonaker: EVP, First Interstate Capital Management Group
Administration, 6740 East Maverick Road, Paradise Valley, AZ 85253
First Interstate Bancorp, a Delaware corporation with its principal
business address and principal offices at 707 Wilshire Boulevard, Los Angeles,
California 90017, is the sole shareholder and controlling person of First
Interstate Bank of Arizona, N.A. The
2
<PAGE> 6
following information is furnished for First Interstate Bancorp and each of its
directors and executive officers:
FIRST INTERSTATE BANCORP
(sole shareholder and controlling person of
First Interstate Bank of Arizona, N.A.)
DIRECTORS
(1) John E. Bryson: Chairman and Chief Executive Officer, Southern
California Edison Company, 2244 Walnut Grove Avenue, Rosemead, CA 91770
(2) Edward M. Carson: Chairman and Chief Executive Officer, Retired, First
Interstate Bancorp, 633 West Fifth Street, T71-1, Los Angeles, CA 90071
(3) Dr. Jewel Plummer Cobb: President Emeritus and Trustee Professor,
California State University, Fullerton, 5151 State University Drive,
Room 819, Los Angeles, CA 90032-8500
(4) Ralph P. Davidson: Former Chairman, The John F. Kennedy Center for the
Performing Arts, 4524 Garfield Street, N.W., Washington, DC 20007
(5) Myron DuBain: Chairman and Chief Executive Officer, Retired, Fireman's
Fund Insurance Company, c/o Bay Isle Financial Group, 180 Montgomery
Street, Suite 1240, San Francisco, CA 94104
(6) Don C. Frisbee: Chairman Emeritus, PacifiCorp, 1500 S.W. First Avenue,
Crown Plaza, Suite 1005, Portland, OR 97201
(7) George M. Keller: Chairman and Chief Executive Officer, Retired,
Chevron Corporation, 555 Market Street, Suite 1429, San Francisco, CA
94105
(8) Harold M. Messmer, Jr.: Chairman, President and Chief Executive
Officer, Robert Half International Inc., 2884 Sand Hill Road, Menlo
Park, CA 94025
(9) Dr. William F. Miller: Professor of Public & Private Management,
Stanford University, Littlefield Center, GSB 317, Stanford, CA
94305-5015
(10) William S. Randall: President, First Interstate Bancorp, c/o 7501 East
McCormick Parkway, Scottsdale, AZ 85258
(11) Dr. Steven B. Sample: President, University of Southern California,
University Park - ADM 110, Los Angeles, CA 90089-0012
3
<PAGE> 7
(12) Forrest N. Shumway: Former Vice Chairman and Chairman of the Executive
Committee, Allied-Signal, Inc., 9171 Towne Centre Drive, Suite 410, San
Diego, CA 92122
(13) William E. B. Siart: Chairman and Chief Executive Officer, First
Interstate Bancorp, 633 West Fifth Street, T72-1, Los Angeles, CA 90071
(14) Richard J. Stegemeier: Chairman Emeritus, Unocal Corporation, 376 S.
Valencia Avenue, Room 344, Brea, CA 92621
(15) Daniel M. Tellep: Chairman and Chief Executive Officer, Lockheed Martin
Corporation, 6801 Rockledge Drive, Bethesda, MD 20817
EXECUTIVE OFFICERS
(1) William E. B. Siart: Chairman & Chief Executive Officer, 633 West Fifth
Street, Los Angeles, CA 90071
(2) William S. Randall: President, First Interstate Bancorp, 7501 East
McCormick Parkway, 2nd Floor - South Court, Scottsdale, AZ 85258
(3) Bruce G. Willison: Vice Chairman and Manager, Corporate/Commercial
Banking and Institutional and Corporate Trust/Trust Operations, and
Chairman, President & CEO, First Interstate Bank of California, 707
Wilshire Boulevard, Los Angeles, CA 90017
(4) Linnet F. Deily: Manager, Retail Banking and Personal Trust and Private
Client Services, and Chairman, President & CEO, First Interstate Bank
of Texas, N.A., 1000 Louisiana, Houston, TX 77002
(5) David S. Belles: Executive Vice President & Controller, First
Interstate Bank, 7501 East McCormick Parkway, 2nd Floor - South Court,
Scottsdale, AZ 85258
(6) William J. Bogaard: Executive Vice President & General Counsel, 633
West Fifth Street, Los Angeles, CA 90071
(7) Theodore F. Craver, Jr.: Executive Vice President & Treasurer, 633 West
Fifth Street, Los Angeles, CA 90071
(8) Daniel R. Eitingon: Executive Vice President, Technology Banking, First
Interstate Bank, 7501 East McCormick Parkway, 2nd Floor - South Court,
Scottsdale, AZ 85258
4
<PAGE> 8
(9) Lillian R. Gorman: Executive Vice President, Human Resources, 633 West
Fifth Street, Los Angeles, CA 90071
(10) Robert E. Greene: Executive Vice President & Chief Credit Officer, 633
West Fifth Street, Los Angeles, CA 90071
(11) Steven L. Scheid: Executive Vice President, Financial Planning &
Analysis [and Principal Financial Officer], First Interstate Bank, 7501
East McCormick Parkway, 2nd Floor - South Court, Scottsdale, AZ 85258
(12) Richard W. Tappey: Executive Vice President, Banking Services, 707
Wilshire Boulevard, Los Angeles, CA 90017
Note: All of the above-listed Directors and Executive Officers of First
Interstate Bancorp are U.S. citizens.
Neither JJM, nor First Interstate, nor any of its executive officers or
directors, nor First Interstate Bancorp, sole shareholder and controlling person
of First Interstate Bank of Arizona, N.A., or any of its executive officers or
directors has during the last five years been convicted in any criminal
proceeding, or been a party to any civil proceeding which resulted in any
judgment, decree or final order against such corporation or person or to which
such corporation or person is subject, enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities laws
or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The securities originally acquired by JJM on February 29, 1988 (and the
subject of the original Schedule 13D filing) were issued to him by the issuer in
consideration for the issuer acquiring from JJM 100% of the voting securities of
McMullen Holdings Inc., a Delaware corporation ("MHI"), which acquisition by the
issuer occurred through the merger of MHI with a wholly-owned subsidiary of the
issuer.
In connection with JJM's acquisition of voting securities of the
issuer, JJM, the issuer and First Interstate entered into a voting trust
agreement under which First Interstate acquired the power to vote such
securities subject to the terms and conditions of the voting trust agreement.
First Interstate furnished no funds or other consideration in
connection with such acquisition of the power to so vote the securities of the
issuer acquired by JJM in the February 29, 1988 transaction.
Pursuant to the amendment and restatement of the voting trust agreement
dated February 7, 1996 and described under Item 4 below, the Series D Cumulative
5
<PAGE> 9
Convertible Preferred Stock of issuer originally held under the voting trust
agreement will soon be converted into Common Stock of the issuer, and additional
shares of such Common Stock will be issued to the Trustee under the voting trust
agreement. That conversion and issuance will result in an aggregate of 1,905,849
shares of Common Stock held by the Trustee for the benefit of JJM under the
voting trust agreement. First Interstate will furnish no funds or other
consideration in connection with such acquisition of the power to so vote such
1,905,849 shares of Common Stock.
ITEM 4. PURPOSE OF TRANSACTION.
The purpose of the original February 29, 1988 acquisition of the
securities of the issuer by JJM was for investment only. Subject to the
fulfillment of certain earn-out conditions, JJM was entitled to acquire
additional shares of Common or Series D Cumulative Convertible Preferred Stock
of the issuer. Moreover, in connection with and as consideration for the
acquisition of the securities of the issuer by JJM, the issuer acquired from JJM
100% of the voting securities of MHI through the merger of MHI into a
wholly-owned subsidiary of the issuer.
On February 7, 1996 JJM, the issuer and the Trustee amended and
restated the Voting Trust Agreement in its entirety (as so amended and restated,
the "Voting Trust Agreement"). The Voting Trust Agreement (among other things)
provides that: (i) JJM instructs the Trustee to, and the Trustee will, convert
all shares of the Series D Cumulative Convertible Preferred Stock of the issuer
theretofore held by the Trustee under the Voting Trust Agreement into 1,202,930
shares of Common Stock of the issuer to be held under the Voting Trust Agreement
for the benefit of JJM; (ii) the issuer will issue an additional 702,919 shares
of Common Stock to the Trustee under the Voting Trust Agreement to be held for
the benefit of JJM; and (iii) the term of the Voting Trust Agreement is extended
until March 1, 2001, and various other provisions of the Voting Trust Agreement
are amended. The aggregate of 1,905,849 shares of the issuer's Common Stock (the
"Trust Stock") will be held for JJM's benefit under the Voting Trust Agreement
as an investment only, although JJM presently intends to make certain gifts of
Trust Stock and, from time to time, may make sales and other transfers of Trust
Stock and/or voting trust certificates evidencing beneficial ownership of Trust
Stock, all as contemplated and subject to the limitations set forth in the
Voting Trust Agreement. JJM owns no other securities of the issuer beneficially
or of record, and has no present intention to acquire any other such securities
either beneficially or of record.
Except as herein described, the undersigned have no plans or proposals
(nor do any of the directors or executive officers of First Interstate Bank of
Arizona, N.A.) which relate to or would result in:
i) The acquisition by any person of additional securities
of the issuer, or the disposition of securities of the issuer;
6
<PAGE> 10
ii) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the issuer or any of its
subsidiaries;
iii) A sale or transfer of a material amount of assets of the
issuer or any of its subsidiaries;
iv) Any change in the present board of directors or management
of the issuer, including any plans or proposals to change the number or
term of directors or to fill any existing vacancies on the board;
v) Any material change in the present capitalization or
dividend policy of the issuer;
vi) Any other material change in the issuer's business or
corporate structure;
vii) Changes in the issuer's charter, bylaws or instruments
corresponding thereto or other actions which may impede the acquisition
of control of the issuer by any person;
viii) Causing a class of securities of the issuer to be
delisted from a national securities exchange or to cease to be
authorized to be quoted in an interdealer quotation system of a
registered national securities association;
ix) A class of equity securities of the issuer becoming
eligible for termination of registration pursuant to Section 12(g)(4)
of the Act; or
x) Any action similar to any of those enumerated above.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
The securities of the issuer originally acquired by JJM and the subject
of JJM's original 13D filing were 100,000 shares of Series D Cumulative
Convertible Preferred Stock which were voting securities not registered pursuant
to the Securities Exchange Act of 1934, but were convertible by JJM into Common
Stock of the issuer at the rate of 10 shares of Common Stock for every one share
of Series D Cumulative Convertible Preferred Stock.
Under certain earn-out provisions related to JJM's original acquisition
of the Series D Cumulative Convertible Preferred Stock, JJM later acquired
additional shares of Series D Cumulative Convertible Preferred Stock such that
JJM currently is the beneficial owner of 120,293 shares of Series D Cumulative
Convertible Preferred Stock.
7
<PAGE> 11
All voting trust certificates for the Series D Cumulative Convertible
Preferred Stock are currently pledged to Chemical Bank New Jersey as security
for a loan to JJM which has a final maturity in November, 1998.
In connection with JJM's original acquisition of the Series D
Cumulative Convertible Preferred Stock, JJM, the issuer and the Trustee entered
into a voting trust agreement on February 29, 1988. JJM, the issuer and the
Trustee have now amended and restated said agreement (as referred to herein, the
"Voting Trust Agreement") so that, among other things, it will expire on March
1, 2001, but is subject to early termination upon the occurrence of various
events, as set forth in the Voting Trust Agreement.
Under the terms of the Voting Trust Agreement, all of the 120,293
shares of Series D Cumulative Convertible Preferred Stock will be converted into
1,202,930 shares of Common Stock of the issuer. In addition, the issuer will
issue an additional 702,919 shares of Common Stock to the Trustee. Giving effect
to the foregoing, the total securities of the issuer held under the Voting Trust
Agreement for the benefit of JJM will be 1,905,849 shares of the issuer's Common
Stock.
JJM has investment power over the securities held by the Trustee under
the Voting Trust Agreement, subject to the restrictions on transfer and other
limitations set forth in the Voting Trust Agreement. The Trustee has the power
to vote such securities, subject to the restrictions and limitations set forth
in the Voting Trust Agreement. Thus, JJM and the Trustee are each a beneficial
owner of the securities held under the Voting Trust Agreement, as that term is
defined in Rule 13d-3(a).
In view of the foregoing, the following information is furnished with
respect to the interest in securities of the issuer:
(a) The aggregate number and percentage of the class of securities
identified pursuant to Item 1 to be beneficially owned by each person named in
Item 2 is 1,905,849 shares of Common Stock, representing 15.94% of all
then-outstanding securities in such class.
(b) The Trustee under the Voting Trust Agreement referred to above has
the power to vote all shares which it beneficially owns jointly with JJM,
subject to the provisions of the Voting Trust Agreement. JJM has the sole power
to dispose, or to direct the disposition, of all shares beneficially and jointly
owned with the Trustee, subject to the provisions of the Voting Trust Agreement.
(c) As described under Item 4 above, on February 7, 1996, JJM, the
Trustee and the issuer amended and restated the Voting Trust Agreement.
Therefore, the persons named in Item 2 have during the past sixty days agreed to
the transactions described under Item 4 above, whereby JJM and the Trustee will
acquire the beneficial ownership of an additional 702,919 shares of Common Stock
of the issuer (in addition to the
8
<PAGE> 12
1,202,930 shares of Common Stock beneficially owned by JJM and the Trustee prior
to the transactions described under Item 4 above). The transactions were agreed
to on February 7, 1996, and are expected to take effect within the next 10 days,
subject to certain contingencies contained in the Voting Trust Agreement.
(d) Aside from the right of Chemical Bank New Jersey to foreclose on
the voting trust certificates if JJM defaults on his loan from Chemical Bank New
Jersey, no person other than JJM and/or the Trustee has the right to receive, or
the power to direct the receipt of, dividends from, or the proceeds from the
sale of, Trust Stock, all as provided in, and subject to the terms and
conditions of, the Voting Trust Agreement.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDING OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER.
The issuer, JJM and the Trustee amended and restated the Voting Trust
Agreement in its entirety on February 7, 1996, to take effect upon the
fulfillment of certain conditions contained in the Voting Trust Agreement. The
descriptions of the Voting Trust Agreement contained in this Item 6 and
elsewhere in this statement, including without limitation all descriptions of
the provisions governing the voting of Trust Stock and the restrictions and
limitations on the transfer or Trust Stock and beneficial ownership thereof, are
not summaries of all of the terms and conditions of the Voting Trust Agreement,
and reference should be made to the copy of the Voting Trust Agreement, filed as
Exhibit 4 hereto, for complete details of the terms and conditions of the Voting
Trust Agreement. Said descriptions are qualified in their entirety by reference
to that exhibit.
The Voting Trust Agreement provides that the Trustee must vote all
Trust Stock either in the same proportions as all other shares of the
Common Stock are voted with respect to the particular matter, or as
agreed upon by both the issuer and JJM (or, under certain circumstances,
his successor in interest).
The Voting Trust Agreement also restricts transfers of Trust Stock and
voting trust certificates evidencing beneficial ownership of Trust Stock to
defined "Permitted Transfers," including certain transfers to two specified
institutions and limited open-market sales.
JJM and the issuer also agreed to a five-year consulting agreement (the
"Consulting Agreement") by and among Talley Manufacturing and Technology, Inc.,
a Delaware corporation (a wholly-owned subsidiary of the issuer; hereinafter,
"Talley Manufacturing") and McMullen Consultants Inc., a Delaware corporation
(wholly owned by JJM), attached as Exhibit 5. Pursuant to said agreement, JJM,
through McMullen Consultants Inc., will serve as a consultant to JJM Associates,
Inc., a wholly-owned subsidiary of Talley
9
<PAGE> 13
Manufacturing ("JJMA"). In addition, the Board of Directors of JJMA has adopted
a resolution naming JJM as the Chairman of JJMA with such duties as the Board of
Directors of JJMA may from time to time determine. Such duties will not include
executive functions.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
The following exhibits are filed herewith:
EXHIBIT 4 Amended and Restated Voting Trust
Agreement dated February 7, 1996 by
and among the issuer, John J.
McMullen and First Interstate Bank of
Arizona, N.A., as Trustee
EXHIBIT 5 Consulting Agreement dated February
7, 1996 by and among Talley
Manufacturing and McMullen
Consultants Inc.
10
<PAGE> 14
Signature
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: February 13, 1996
John J. McMullen
----------------------------
John J. McMullen
<PAGE> 15
Signature
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: February 13, 1996
FIRST INTERSTATE BANK OF ARIZONA, N.A.
By: Kathleen Jakubowicz
---------------------------
Name: Kathleen Jakubowicz
Title: Assistant Vice-President
<PAGE> 1
EXHIBIT 4
AMENDED AND RESTATED VOTING TRUST AGREEMENT
This Amended and Restated Voting Trust Agreement ("Agreement")
is made as of February 7, 1996 by and among Talley Industries, Inc., a Delaware
corporation ("Talley" or the "Company"); John J. McMullen for
himself and on behalf of his permitted transferees as beneficial owners of the
Talley capital stock represented by voting trust certificates issued hereunder
(the "Stockholder"); and First Interstate Bank of Arizona, N.A., as
trustee hereunder, and its successors in trust (the "Trustee").
WHEREAS, the Stockholder and the Company, among others, were parties to
that certain Agreement and Plan of Merger dated as of February 29, 1988 (the
"Merger Agreement"); and
WHEREAS, pursuant to the Merger Agreement shares of the Company's
Series D Preferred Stock (" Series D Preferred Stock") were issued to the
Stockholder and/or the Trustee and shares of the Company's Common Stock ("Common
Stock") are issuable upon conversion of the Series D Preferred Stock on terms
and conditions set forth therein; and
WHEREAS, the parties pursuant to the Merger Agreement previously
executed and delivered that certain Voting Trust Agreement made as of February
29, 1988; and
WHEREAS, the parties acknowledge that amending and restating said
Voting Trust Agreement in its entirety as set forth in this Agreement is in
their mutual best interest because of a number of factors, including the terms
and conditions of the Series D Preferred Stock, the current uncertainties
prevailing as to a number of matters affecting Talley's business and prospects
as heretofore publicly disclosed by Talley, various uncertainties regarding the
future tax treatment of the Series D Preferred Stock and other matters affecting
the parties; and
WHEREAS, Talley has agreed to issue 702,919 shares of Common Stock (the
"Consideration Shares") to the Trustee under this Agreement in consideration of
the several undertakings of the Stockholder herein contained and other
consideration, and Talley, the Stockholder and the Trustee agree that the
Consideration Shares and the Common Stock issued upon conversion of the Series D
Preferred Stock (such Common Stock together with the Consideration Shares being
collectively the "Company Stock") shall also be held by the Trustee subject to
this Agreement; and
WHEREAS, the Trustee has consented to act under this Agreement, as so
amended and restated, for the purposes herein provided,
It is therefore agreed by the parties that said Voting Trust Agreement
is hereby amended and restated in its entirety as of February 7, 1996, to be and
read as follows:
<PAGE> 2
1. Agreement.
(a) Copies of this Agreement, and of every agreement supplemental
and/or amendatory hereto, shall be filed in the principal office of the Company
in Phoenix, Arizona and its registered office in the State of Delaware and shall
be open to the inspection of any stockholder of the Company or holder of voting
trust certificates hereunder, daily during business hours. All voting trust
certificates issued as hereinafter provided shall be issued, received, and held
subject to all the terms of this Agreement. Each person or entity initially
entitled to receive voting trust certificates issued hereunder, and persons or
entities thereafter receiving voting trust certificates as a result of a
Permitted Transfer as defined in Section 8 hereof, upon accepting the voting
trust certificates issued hereunder, shall be bound by the provisions of this
Agreement, and shall be deemed for all purposes to be a "Successor
Stockholder" hereunder. At the request of the Trustee or the Company, each
such Successor Stockholder shall promptly execute and deliver an appropriate
written confirmation of the foregoing.
(b) The amendment and restatement effected by this Agreement as of
February 7, 1996 shall take effect upon the receipt by the Company of a
"fairness opinion" from Bear Stearns & Co. or another reputable firm of
investment bankers to the effect that the transactions contemplated by this
Agreement are fair from a financial point of view to the Company and its
shareholders, which opinion is expected to be received on or before February 9,
1996. Unless said opinion has been received by February 20, 1996, or such other
date as may be specified in writing by all parties, then said amendment and
restatement shall be of no effect whatsoever.
2. Conversion of Preferred Stock. All outstanding voting trust
certificates representing beneficial interest in the stock held by the Trustee
under this Agreement shall have continuing validity in accordance with the terms
of this Agreement until surrendered and replaced as provided herein. The
Stockholder hereby irrevocably instructs the Trustee, and the Trustee hereby
agrees, promptly to exercise the right to convert all shares of Series D
Preferred Stock held by the Trustee hereunder as Company Stock (namely, 120,293
such shares) into an aggregate of 1,202,930 shares of Common Stock immediately
after this Agreement becomes effective (as set forth in Section 1(b) above), in
accordance with the conversion procedures set forth in the filed Certificate of
Designation pertaining to the Series D Preferred Stock (the "Series D
Certificate"). The Company shall effect such conversion and shall issue and
deliver to the Trustee certificate(s) representing said 1,202,930 shares of
Common Stock. Such conversion shall be effected immediately upon receipt of the
"fairness opinion" described in 1(b) above. The Trustee shall hold the same
subject to the terms of this Agreement, and upon surrender of voting trust
certificates evidencing the beneficial interest in the shares of Series D
Preferred Stock so converted shall issue and deliver to the Stockholder and to
any Successor Stockholder entitled thereto voting trust certificates evidencing
the beneficial interest in such Common Stock.
- 2 -
<PAGE> 3
3. Issuance Of Stock To Trustee.
(a) The shares of Common Stock issued upon conversion of Series
D Preferred Stock pursuant to Section 2 of this Agreement and all Consideration
Shares shall be issued to and held by the Trustee in the name of "First
Interstate Bank of Arizona, N.A., as Voting Trustee," for the benefit of the
Stockholder and Successor Stockholders. The Company shall cause the
Consideration Shares to be issued or transferred, and one or more share
certificates therefor delivered, to the Trustee hereunder concurrently with the
conversion of the Series D Preferred Stock pursuant to Section 2 of this
Agreement, against receipt of an appropriate investment letter from the Trustee
and the Stockholder unless, and to the extent, in the opinion of counsel
reasonably satisfactory to the parties hereto, Consideration Shares can be
offered and sold without the necessity of registration under the Securities Act
of 1933, as amended. On receipt by the Trustee from the Company or its transfer
agent of all share certificates hereunder, the Trustee shall hold the same and
the shares in the Company evidenced thereby as Company Stock subject to the
terms of this Agreement, and shall thereupon issue and deliver to the
Stockholder or Successor Stockholders entitled thereto voting trust certificates
in the form herein provided representing beneficial ownership (in accordance
with the provisions of this Agreement) of the pertinent portion of the shares of
Company Stock so held by the Trustee against surrender by the Stockholder or
Successor Stockholder of voting trust certificates evidencing the beneficial
interest in shares of Series D Preferred Stock, as set forth in Section 2 above.
(b) The Trustee shall maintain at its principal corporate trust
office (and at such other corporate trust office as the Trustee may designate by
an instrument in writing signed by it and sent by mail to the registered holders
of voting trust certificates) voting trust certificate transfer records in which
the Trustee shall register the names of the holders of voting trust certificates
issued hereunder. Such transfer records shall be open for inspection by such
registered holders during regular business hours of the Trustee upon reasonable
notice to the Trustee.
4. Voting Trust Certificates. The voting trust certificates shall
be in the following form:
- 3 -
<PAGE> 4
No. . . . . . . . . .Shares
TALLEY INDUSTRIES, INC.
A Delaware Corporation
Voting Trust Certificate for Capital Stock
This certifies that , or registered assigns, is
entitled to all the benefits arising from the deposit with the Trustee
under the Voting Trust Agreement hereinafter mentioned, of certificates
for shares of the of Talley Industries, Inc., a
Delaware corporation (hereinafter called the "Company"), as provided in
such Voting Trust Agreement and subject to the terms thereof. The
registered holder hereof is entitled to receive payment equal to the
amount of cash dividends, if any, received by the Trustee upon the
number of shares of capital stock of the Company in respect of which
this certificate is issued. Dividends received by the Trustee in Common
Stock, Series D Preferred Stock or other Company capital stock having
general voting powers in a transaction nontaxable to the recipient
shall be evidenced by voting trust certificates in form similar hereto.
Until the Trustee shall have delivered the Company Stock held under
such Voting Trust Agreement to the holders of the trust certificates,
or to the Company, as specified in such Voting Trust Agreement, and
subject to the limitations set forth in the Voting Trust Agreement, the
Trustee shall possess and shall be entitled to exercise all rights and
powers of an absolute owner of such stock, including the right to vote
thereon for every purpose, and to execute consents in respect thereof
for every purpose, it being expressly stipulated that no voting right
passes to the owner hereof, or his assigns, under this certificate or
any agreement, expressed or implied. In exercising its rights and
powers hereunder, including without limitation voting and executing
consents with respect to the Company Stock, the Trustee shall act and
vote as provided in such Voting Trust Agreement.
This certificate is issued, received, and held under, and the
rights of the owner hereof are subject to, the terms of that certain
Amended and Restated Voting Trust Agreement dated as of February 7,
1996 between the Company, First Interstate Bank of Arizona, N.A., and
its successors in trust, and John J. McMullen for himself and on behalf
of his permitted transferees thereunder (copies of which Voting Trust
Agreement, and of every agreement supplementing and/or amending the
same, are on file in the principal office of the Company in Phoenix,
Arizona and shall be open to
- 4 -
<PAGE> 5
the inspection of any stockholder of the Company or holder of any
voting trust certificate issued under said Agreement, daily during
business hours).
In the event of the dissolution or total or partial liquidation
of the Company, the moneys, securities, or property received by the
Trustee in respect of the stock deposited under such Voting Trust
Agreement shall be distributed among the registered holders of trust
certificates in proportion to their interests as shown by the books of
the Trustee.
In the event that any dividend or distribution other than in
cash or stock of the Company having general voting powers or any
dividend or distribution in a transaction taxable to the recipient is
received by the Trustee, the Trustee shall distribute the same to the
registered holders of voting trust certificates, on the date of such
distribution, or to the registered certificate holders at the close of
business on the date fixed by the Trustee for taking a record to
determine the certificate holders entitled to such distribution,
pursuant to the provisions of Section 7 of the Voting Trust Agreement,
but subject to applicable law. Such distribution shall be made to the
certificate holders ratably in accordance with the number and kind of
shares of Company Stock represented by their respective voting trust
certificates.
Stock certificates for the number of shares of Company Stock
then represented by this certificate, or the net proceeds in cash or
property of such shares, shall be due and deliverable hereunder upon
the termination of such Voting Trust Agreement as provided therein.
The Voting Trust Agreement shall continue in full force and
effect until the earliest of (i) March 1, 2001, or (ii) the date on
which the number of shares of Company Stock subject to the Voting Trust
Agreement (assuming for purposes of this calculation that all Company
Stock subject to the Voting Trust Agreement that is convertible into
Common Stock has been converted) shall first be less than 100,000
shares of Common Stock (adjusted as set forth in the Voting Trust
Agreement to account for certain dilutive or contradilutive events or
transactions affecting the Common Stock), or (iii) the date on which
William H. Mallender shall cease to serve as chief executive officer of
the Company or in a position of similar authority with the Company and
shall not have been replaced by a person satisfactory to John J.
McMullen (or such other person as John J. McMullen shall specify in
writing for the purpose of exercising such right in the event of his
death or incapacity, such designation to survive such death or
incapacity and to be with right of substitution) in his sole discretion
or (iv) the date 30 days after the public announcement that any person
or entity
- 5 -
<PAGE> 6
(or "group" of persons or entities) beneficially owns (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934) in excess of 25%
of the then-outstanding Common Stock of the Company, unless the same
shall have been approved in a resolution duly adopted by the Board of
Directors of the Company or (v) the earlier of the date that the Board
of Directors of the Company shall recommend to the shareholders of the
Company acceptance of a tender offer for in excess of 50% of the
then-outstanding shares of Common Stock or the date that a single
person or entity shall directly or indirectly beneficially own (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) in
excess of 50% of such then-outstanding Common Stock or (vi) unless the
Stockholder or Stockholder Designee shall consent in writing, the date
that the Trustee shall have received notice from the Company that any
person holding directly or indirectly in excess of 1,000,000 shares of
Common Stock of the Company (adjusted as provided in Section 14 hereof)
shall have been elected to the Board of Directors of the Company
pursuant to an agreement with the Company that the Company will support
such election.
Transfer of this certificate is limited as set forth in the
Voting Trust Agreement. Subject to such limitations on transfer and
sale, this certificate is transferable, absolutely or as security, on
the books of the Trustee at its principal corporate trust office in
Phoenix, Arizona (or elsewhere as designated by the Trustee), by the
holder hereof, either in person or by attorney duly authorized, in
accordance with the rules established for that purpose by the Trustee
and on surrender of this certificate properly endorsed. Title to this
certificate when duly endorsed shall, to the extent permitted by law
and permitted by the Voting Trust Agreement, be transferable with the
same effect as in the case of a negotiable instrument. Each holder
hereof agrees that delivery of this certificate, duly endorsed by any
holder hereof, shall vest title hereto and all rights hereunder, and
beneficial ownership of the shares of capital stock of the Company
represented hereby, in the transferee; provided, however, that the
Trustee may treat the registered holder hereof, or when presented duly
endorsed in blank the bearer hereof, as the absolute owner hereof, and
of all rights and interest represented hereby, for all purposes
whatsoever, and the Trustee shall not be bound or affected by any
notice to the contrary, or by any notice of any trust, whether express
or implied, or constructive, or of any charge or equity respecting the
title or ownership of this certificate, or the Company Stock
represented hereby; provided, however, that no delivery of stock
certificates hereunder, or the proceeds thereof, shall be made without
surrender hereof properly endorsed.
- 6 -
<PAGE> 7
This certificate shall not be valid for any purpose until duly
signed by the Trustee.
The word "Trustee" as used in this certificate means the
Trustee or the successor Trustee acting under such Voting Trust
Agreement.
In witness whereof the Trustee has signed this certificate on
, .
FIRST INTERSTATE BANK OF
ARIZONA, N.A., Trustee
By:
------------------------
Its
------------------------
(Form of Assignment):
For value received hereby assigns the within
certificate, and all rights and interests represented thereby, to
and appoints attorney to transfer this
certificate on the books of the Trustee mentioned therein, with full
power of substitution.
Dated: By:
----------------------- ------------------------
Signature Guaranteed:
----------------------
(Signature guarantee should be made by a guarantor institution
participating in the securities transfer agents medallion program or in
such other guarantee program acceptable to the Trustee.) Note: The
Signature(s) on this assignment must correspond with the name(s) as
written on the face of the within registered certificate in every
particular without alteration or enlargement or any change whatsoever.
5. Transfer Of Certificates.
(a) Subject to the limitations on sale and transfer set forth
in this Agreement, the voting trust certificates shall be transferable at the
principal corporate
- 7 -
<PAGE> 8
trust office of the Trustee (and at such other corporate trust office as the
Trustee may designate by an instrument in writing signed by it and sent by mail
to the registered holders of voting trust certificates), on the books of the
Trustee, by the registered owner thereof, either in person or by attorney
thereto duly authorized upon surrender thereof, according to the rules
established for that purpose by the Trustee; and the Trustee may treat the
registered holder as owner thereof for all purposes whatsoever, but it shall not
be required to deliver stock certificates hereunder without the surrender of
such voting trust certificates, or if delivery of such stock certificates is not
in connection with a Permitted Transfer as defined in Section 8(e) below.
(b) If a voting trust certificate is lost, stolen, mutilated,
or destroyed, the Trustee, in its discretion, may issue a duplicate of such
certificate upon receipt of: (1) evidence of such fact satisfactory to it; (2)
indemnity satisfactory to it; (3) the existing certificate, if mutilated; and
(4) its reasonable fees and expenses in connection with the issuance of a new
trust certificate. The Trustee shall not be required to recognize any transfer
of a voting trust certificate not made in accordance with the provisions hereof,
unless the person claiming such ownership shall have produced indicia of title
satisfactory to the Trustee, and shall in addition deposit with the Trustee
indemnity satisfactory to it.
6. Termination Procedure.
(a) Upon the termination of this Agreement as hereinafter
provided, the Trustee, at such time as it may choose during the period
commencing 20 days before and ending 20 days after such termination, shall mail
written notice of such termination to registered holders of the voting trust
certificates, at the addresses appearing on the transfer books of the Trustee.
After the date specified in any such notice (which date shall be fixed by the
Trustee), the voting trust certificates shall cease to have any effect, and the
holders of such voting trust certificates shall have no further rights under
this Agreement, other than the right to receive certificates for shares of stock
of the Company or other property distributable under the terms hereof and upon
the surrender of such voting trust certificates.
(b) Within 30 days after the termination of this Agreement, the
Company shall deliver to the Trustee, and the Trustee shall deliver to the
registered holders of all voting trust certificates, certificates for the number
of shares of the capital stock of the Company beneficially represented thereby,
upon the surrender of such voting trust certificates properly endorsed, such
delivery to be made in each case at the principal corporate trust office of the
Trustee.
(c) At any time subsequent to 30 days after the termination of
this Agreement, the Trustee may deposit with the Company stock certificates
representing the number of shares of each class of Company Stock beneficially
represented by the voting
- 8 -
<PAGE> 9
trust certificates then outstanding, with authority in writing to the Company to
deliver such stock certificates in exchange for voting trust certificates
beneficially representing a like number of shares of the capital stock of the
Company; and upon such deposit all further liability of the Trustee for the
delivery of such stock certificates and the delivery or payment of dividends
upon surrender of the voting trust certificates shall cease, and the Trustee
shall not be required to take any further action hereunder.
7. Dividends.
(a) The holder of each voting trust certificate shall be
entitled to receive payments equal to the cash dividends, if any, received by
the Trustee prior to the termination of this Agreement upon the shares of
Company Stock beneficially represented by each such voting trust certificate,
such payment to be made by the Trustee to the person or persons entitled thereto
within three business days after receipt of such cash dividend by the Trustee
unless and except to the extent that the Trustee has given the Company the
instructions contemplated by Section 7(d) hereof. If any dividend in respect of
the Company Stock deposited with the Trustee is paid, in whole or in part, in
capital stock of the Company having general voting powers, in a transaction
nontaxable to the recipient, the Trustee shall likewise hold, subject to the
terms of this Agreement, the capital stock so received by the Trustee on account
of such dividend (which shall thereupon also be deemed to be "Company
Stock"), and the holder of each voting trust certificate beneficially
representing Company Stock on which such stock dividend has been paid shall
receive an additional voting trust certificate issued under this Agreement for
the number of shares and class of stock received by the Trustee as such dividend
with respect to the Company Stock beneficially represented by such holder's
voting trust certificate. Holders entitled to receive the dividends described
above shall be those registered as such on the transfer books of the Trustee at
the close of business on day fixed by the Company for the taking of a record to
determine those holders of its stock entitled to receive such dividends, or if
the Trustee has fixed a date, as hereinafter in this paragraph provided, for the
purpose of determining the holders of voting trust certificates entitled to
receive such payment or distribution, then registered as such at the close of
business on the date so fixed by the Trustee, but in all events subject to
applicable law.
(b) If any dividend in respect of the Company Stock deposited
with the Trustee is paid other than in cash or in capital stock having general
voting powers, or is paid in a transaction taxable to the recipient, then the
Trustee shall distribute the same among the holders of voting trust certificates
registered as such at the close of business on the day fixed by the Trustee for
taking a record to determine the holders of voting trust certificates entitled
to receive such distribution, but in all events subject to applicable law. Such
distribution shall be made to such holders of voting trust certificates ratably,
in accordance with the number and kind of shares of Company Stock beneficially
represented by their respective voting trust certificates.
- 9 -
<PAGE> 10
(c) The transfer books of the Trustee may be closed temporarily
by the Trustee for a period not exceeding 20 days preceding the date fixed for
the payment or distribution of dividends or the distribution of assets or
rights, or any other time in the discretion of the Trustee. In lieu of providing
for the closing of the books against the transfer of voting trust certificates,
and except as may otherwise be provided by applicable law, the Trustee may fix a
date not exceeding 20 days preceding any date fixed by the Company for the
payment or distribution of dividends, or for the distribution of assets or
rights, as a record date for the determination of the holders of voting trust
certificates entitled to receive such payment or distribution, and the holders
of voting trust certificates of record at the close of business on such date
shall exclusively be entitled to participate in such payments or distribution,
but in all events subject to applicable law.
(d) In lieu of receiving cash dividends upon Company Stock and
paying the same to the holders of voting trust certificates pursuant to the
provisions of this Agreement, the Trustee may instruct the Company in writing to
pay such dividends to the holders of the voting trust certificates. Upon receipt
of such written instructions, the Company shall pay such dividends directly to
the holders of the voting trust certificates as their interests may appear. Upon
such instructions being given by the Trustee to the Company, and until revoked
by the Trustee, all liability of the Trustee with respect to such dividends
shall cease. The Trustee may at any time revoke such instructions and by written
notice to the Company direct it to make dividend payments to the Trustee.
8. Sale or Transfer of Voting Trust Certificates and Company Stock.
(a) The Stockholder or Successor Stockholders shall be
permitted to transfer or sell voting trust certificates to third parties only in
accordance with the provisions of this Agreement as so described in (b) below,
and only if such transfer or sale is a "Permitted Transfer" (as defined in
Section (e) below). The Stockholder or Successor Stockholders shall also be
permitted to direct the Trustee to distribute shares of Common Stock held with
respect to voting trust certificates held by the Stockholder or Successor
Stockholders as so described in (c) below, but only to the Stockholder or
Successor Stockholders (and not to any person or entity other than the
Stockholder or Successor Stockholders), and only if such distribution is a
"Permitted Transfer."
At least 10 business days prior to any Permitted Transfer, the
Stockholder or Successor Stockholder shall give written notice to the Company
and the Trustee of the same, describing the arrangements for the Permitted
Transfer in reasonable detail, representing the number of shares of Company
Stock to be the subject of the Permitted Transfer and instructing the Trustee to
cancel the voting trust certificates for the number of shares transferred in the
Permitted Transfer. Each Successor Stockholder agrees to abide by the
restrictions on sales and transfers set forth in this Agreement, and the written
notice described immediately above shall be accompanied by the proposed
- 10 -
<PAGE> 11
transferee's written acknowledgement of and agreement that when the transferee
determines to transfer the Common Stock to be received by it (if Common Stock is
received by the transferee), it will instruct its broker that such sale(s) must
be "Qualified Sale(s)" (as defined in Section (d) below).
(b) In the event of a Permitted Transfer of voting trust
certificates, the transfer of the same shall be carried out as set forth in
Section 5 of this Agreement.
(c) In the event of a Permitted Transfer of shares of Common
Stock to a Stockholder or Successor Stockholder, within two business days after
receipt of the notice given pursuant to subsection (a) above and the voting
trust certificates representing the shares of Company Stock to be the subject of
the Permitted Transfer, or, if later, within two business days after the
Valuation Date, if any, the Trustee shall (i) give to the Company written
confirmation that voting trust certificates representing beneficial ownership of
said Company Stock have been surrendered to the Trustee and (ii) deliver to the
Company for cancellation one or more certificates for Common Stock registered in
the name of the Trustee for a number of shares at least equal to the number of
shares covered by the notice of Permitted Transfer. Upon receipt of the
foregoing from the Trustee, the Company shall register the transfer of the
shares constituting the Permitted Transfer, issue a certificate or certificates
for such shares in the name of the transferee identified in the notice given
pursuant to (a) above, deliver such certificate(s) to the Trustee or otherwise
as instructed by the Stockholder or Successor Stockholder making the Permitted
Transfer, cancel the share certificates delivered by the Trustee, and issue and
deliver to the Trustee a certificate or certificates in the name of the Trustee
for that number of shares of Common Stock, if any, by which the number of shares
of Common Stock represented by share certificates delivered by the Trustee to
the Company in connection with such Permitted Transfer. The Trustee shall
promptly issue and deliver to the transferring Stockholder or Successor
Stockholder a voting trust certificate for the shares of Company Stock
represented by any such share certificate(s) issued by the Company to the
Trustee.
(d) As used herein, the following terms shall have the meaning
appearing after such terms.
(1) "Immediate Family" means the Stockholder, his
spouse, children and other lineal descendants and their respective
spouses and one or more trusts or other entities established by the
Stockholder exclusively for the benefit of some or all of said persons.
(2) "Charitable Entity" means one or more private tax
exempt foundations established by the Stockholder, other entities
selected by the Stockholder which are exempt from tax pursuant to
Section 503(c) of the Internal Revenue Code, or are foreign charitable
or educational institutions, and one or
- 11 -
<PAGE> 12
more trusts or other entities established by the Stockholder,
exclusively for the benefit of some or all of the foregoing.
(3) "Sale" or "transfer" (and derivative words)
shall also be deemed to include an option, pledge or other agreement
whereby the Stockholder is (or could become) obligated to sell or
transfer.
(4) "Permitted Transfer" means a transfer described in Section
8(e).
(5) "Qualified Sales" means open market sales of Common
Stock through a broker in the ordinary course of business on the New
York Stock Exchange ("NYSE"), effected by such broker in a
manner reasonably calculated to ensure that no single purchaser
purchases more than 10,000 shares in a single transaction.
(6) "Valuation Date" shall mean the date specified in
the notice given pursuant to Section 8(a) above for the purpose of
determining the valuation of the Company Stock to be transferred in a
particular Permitted Transfer for the purposes of Section 8(e)(1) or
(2).
(e) For the purposes hereof, "Permitted Transfers" are
the following transfers (and no others), each of the listed categories to be
separate and distinct and not cumulative:
(1) One or more transfers of Company Stock to the United States
Naval Academy or its Alumni Foundation (or voting trust certificates
representing Company Stock) having an aggregate value of up to
$1,000,000 based on the average of the closing prices of Common Stock
on the NYSE for the ten (10) trading days preceding the Valuation Date
of such transfers(s), provided that each such transfer is subject to
the undertaking of the transferee that such transferee will sell all
shares of Common Stock so received only in Qualified Sales. The
Stockholder may revise the number of shares transferred under this
clause (1) and the number of shares transferred under clause (2) below,
provided that the aggregate of the transfers under both clauses (1) and
(2) does not exceed $1,500,000 in value.
(2) One or more transfers of Company Stock to Boston College
(or voting trust certificates representing Company Stock) having an
aggregate value of up to $500,000 based on the average of the closing
prices of Common Stock on the NYSE for the ten (10) trading days
preceding the Valuation Date of such transfers(s), provided that each
such transfer is subject to the undertaking of the transferee that such
transferee will sell all shares of Common Stock only in Qualified
Sales. The Stockholder may revise the number of shares transferred
- 12 -
<PAGE> 13
under this clause (2) and the number of shares transferred under clause
(1) above, provided that the aggregate of the transfers under
both clauses (1) and (2) does not exceed $1,500,000 in value.
(3) One or more distributions of Common Stock by the Trustee to
one or more of the Stockholder and Successor Stockholders for sale by
such distributee in Qualified Sales provided that:
(i) the aggregate number of shares of Common Stock so
distributed to the Stockholder and/or Successor Stockholders
for sale in Qualified Sales, shall not exceed 100,000 shares of
Common Stock during any one calendar year; and
(ii) each such distribution of Common Stock from the Trustee to
the Stockholder and/or Successor Stockholders is subject to the
undertaking of the Stockholder and/or such Successor
Stockholders (hereby given by the Stockholder and/or Successor
Stockholders) that such Stockholder and/or Successor
Stockholders will sell all such shares of Common Stock only in
Qualified Sales.
(4) Distributions of Common Stock to the Stockholder (or
executor or personal representative of the Stockholder) for sale in
Qualified Sales in order to obtain funds solely to pay inheritance and
similar taxes of the estate of John J. McMullen and/or his spouse, but
subject to the undertaking of the Stockholder or his estate (hereby
given by or on behalf of the Stockholder and his estate) that all sales
of such shares of Common Stock will be Qualified Sales.
(5) The sale or transfer of voting trust certificates to a
member of the Immediate Family or to a Charitable Entity, provided that
after each such sale or transfer, the voting trust certificates sold or
transferred (and the Common Stock held by the Trustee and beneficially
represented by such voting trust certificates) shall remain subject in
all respects to this Agreement; and, in the event a Charitable Entity
receives voting trust certificates, distributions of Common Stock
(beneficially represented by the voting trust certificates held by such
Charitable Entity) to such Charitable Entity for sale in Qualified
Sales as, when and to the extent necessary in order to meet
diversification or other requirements of law applicable to such
Charitable Entity, or to avoid taxes and penalties that would otherwise
be imposed upon such Charitable Entity, but subject to the undertaking
of such Charitable Entity (hereby given by such Charitable Entity) that
all sales of such shares of Common Stock will be Qualified Sales.
- 13 -
<PAGE> 14
(6) The pledge by the Stockholder of voting trust certificates
to secure either a bona fide loan made to the Stockholder, or a
guarantee by the Stockholder in whole or substantial part of a loan
made to a third party.
(7) The distribution to a pledgee of Common Stock beneficially
represented by voting trust certificates which have been pledged by the
Stockholder to secure either a bona fide loan made to the Stockholder,
or a guarantee by the Stockholder in whole or substantial part of a
loan made to a third party, following a foreclosure upon such
certificates arising from a bona fide default not cured by the
Stockholder (and he hereby agrees to use best efforts promptly to cure
any such default to avoid any such foreclosure), whereupon such pledgee
(or its nominee) shall be entitled to sell the shares of Common Stock
so distributed to it, but without the necessity of effecting such
sale(s) in Qualified Sales. The Company and the Trustee agree to
cooperate as reasonably requested by the Stockholder in connection with
the consummation of any such secured loan arrangements. The Stockholder
covenants that the form and substance of all such loan documents will
conform substantially to normal and customary documentation for similar
transactions.
(8) Such further sales, transfers and/or distributions of
shares of Common Stock at the request of the Stockholder or Successor
Stockholder as are consistent with the purpose and intent of this
Agreement and as are satisfactory to the Stockholder (or Stockholder
Designee appointed pursuant to Section 11(c)) and the Company, in the
sole discretion of each, provided that written confirmation of the
terms and conditions of the same shall be given first to the Trustee in
reasonable detail, signed on behalf of each.
(f) Following a Permitted Transfer that results in the
distribution of Company Stock to a person or entity, such Company Stock held by
such person or entity shall be free and clear of any restrictions contained in
this Agreement except for the obligation (if applicable) to transfer Company
Stock only in Qualified Sales.
(g) The Trustee shall have no responsibility for interpreting
or enforcing the foregoing provisions of this Section 8 where the Trustee
notifies the Company and the Stockholder or Successor Stockholder in writing of
any conflicting direction received by the Trustee or any unresolved ambiguity
relating to a proposed Permitted Transfer, whereupon the Trustee shall be
entitled to defer action on account of such proposed Permitted Transfer until
the Trustee shall have received either (i) an opinion of its own counsel or (ii)
a joint instruction from the Company and the Stockholder or Successor
Stockholder, in which event the Trustee shall be fully protected in relying upon
either (i) or (ii).
- 14 -
<PAGE> 15
(h) In no event shall the Company, the Trustee, the Stockholder
or any other Successor Stockholder have any responsibility or liability on
account of any transfer tax, income, gift or inheritance tax, gross receipts tax
or other impost or duty relating to the sale or transfer of any voting trust
certificate or shares of Common Stock by the Stockholder or Successor
Stockholder (other than the Stockholder or Successor Stockholder effecting the
Permitted Transfer), or otherwise imposed on the Stockholder or Successor
Stockholder on account of any of the transactions contemplated by this
Agreement.
(i) The Trustee shall have no responsibility for enforcing the
undertaking of any transferee that said transferee will sell all shares of
Common Stock distributed by the Trustee only in Qualified Sales.
9. Dissolution of Company. In the event of the dissolution or
total or partial liquidation of the Company, whether voluntary or involuntary,
the Trustee shall receive the moneys, securities, rights, or property to which
the holders of the Company Stock deposited hereunder are entitled, and shall
promptly distribute the same among the registered holders of voting trust
certificates in proportion to their interests, as shown by the books of the
Trustee.
10. Reorganization of Company. In case the Company is merged
into or consolidated with another corporation, or all or substantially all of
the assets of the Company are transferred to another corporation or entity, then
in connection with such transfer the term "Company" for all purposes of
this Agreement shall be taken to include such successor corporation or entity,
and the Trustee shall receive and hold under this Agreement any securities of
such successor corporation received on account of the ownership, as Trustee
hereunder, of the Company Stock held hereunder prior to such merger,
consolidation, and transfer. Voting trust certificates issued and outstanding
under this Agreement at the time of such merger, consolidation, or transfer may
remain outstanding, or the Trustee may, in its discretion, substitute for such
voting trust certificates new voting trust certificates in appropriate form, and
the terms "stock", "Company Stock" and "capital stock"
as used herein shall be taken to include any securities which may be received by
the Trustee in lieu of all or any part of the Company Stock.
11. Rights of Trustee.
(a) Until the actual delivery to the holders of voting trust
certificates issued hereunder of certificates evidencing Company Stock in
exchange therefor, and until the surrender of the voting trust certificates for
cancellation, the Trustee shall have the right, subject to the restrictions and
provisions of this Section 11, to exercise, in person or by its nominees or
proxies, all stockholders' voting rights and powers in respect of all Company
Stock deposited hereunder, and to take part in or consent to any
- 15 -
<PAGE> 16
corporate or stockholders' action of any kind whatsoever. The right to vote
shall include the right to vote for the election of directors, and in favor of
or against any resolution or proposed action of any character whatsoever, which
may be presented at any meeting or require the consent of stockholders of the
Company; provided, however, that for so long as the Company Stock includes any
shares of Series D Preferred Stock, such right to vote shall be exercised by the
Trustee with respect to any matter set forth in Sections (E.1) and (E.4) of the
Series D Certificate as directed in a written notice to the Trustee from the
holders of the respective voting trust certificates beneficially representing
the shares of Series D Preferred Stock to be so voted.
(b) Except with respect to matters set forth in Sections (E.1)
and (E.4) of the Series D Certificate, in exercising its rights and powers
hereunder, and in voting all shares of Company Stock held by it
hereunder or executing consents in respect thereof, either in person or by its
nominees or proxies, or in taking any other action with respect to all
shares of Company Stock, the Trustee shall act and vote as follows:
(1) as directed in a written notice delivered to the Trustee by
the Stockholder or "Stockholder Designee" (as defined in (c) below) at
least five business days before the date on which the relevant vote is
to be taken or the deadline for the relevant consent or other action,
and confirming that a copy has simultaneously been delivered to the
Company, which direction shall be followed by the Trustee for the
shares of Company Stock beneficially represented by the voting trust
certificates owned by the Stockholder and all Successor Stockholders,
but such direction must be either (as elected by the Stockholder or
Stockholder Designee under the written notice described above):
(i) in the same proportions as all other shares of Company
capital stock of the same class (and not constituting Company
Stock) are voted affirmatively or negatively or acted upon by
written consent with respect to the particular matter
(disregarding shares not so voted or acted upon); or
(ii) as agreed upon in writing by both the Company and the
Stockholder or Stockholder Designee, in the sole discretion of
each (and subject to the receipt by the Trustee of a notice
from the Company indicating agreement regarding the same).
(2) In the event the Trustee shall not have timely received a proper
election notification under (b)(1) above from the Stockholder or
Stockholder Designee, then all shares of the Company Stock
shall be voted or acted upon by the Trustee as specified by (b)(1)(i)
above.
(c) The "Stockholder Designee" shall mean: (i) For so long as either
John J. McMullen or his estate owns, directly or indirectly, at least 25% in
value of all voting
- 16 -
<PAGE> 17
trust certificates, the Stockholder Designee shall be the individual whom the
Stockholder may, but is not required to, designate in a written notice to both
the Trustee and the Company; or (ii) if at any time neither John J. McMullen nor
his estate owns, directly or indirectly, at least 25% in value of all voting
trust certificates, then from that time forward the Stockholder Designee (and
not the Stockholder) shall direct the written notice and make the election
specified in (b)(1) above, and the registered holders of the voting trust
certificates shall, (by written designation executed by a majority in value of
all then-outstanding voting trust certificates, which designation shall be
delivered for the Trustee and the Company) select a "Stockholder Designee" with
respect to all shares of Company Stock.
(d) The Trustee shall not be personally responsible with respect to any
action taken pursuant to its vote or other action so made in any matter or act
committed or omitted to be done under this Agreement.
12. Trustee.
(a) The Trustee (and any successor Trustee) may at any time
resign by mailing to the registered holders of voting trust certificates and to
the Company a written resignation, to take effect as soon as practicable
thereafter upon acceptance of appointment by a successor Trustee. The Company
shall have the right to designate by notice to each Stockholder a successor
Trustee, who shall be reasonably acceptable to the Stockholders upon notice of
resignation of the Trustee. Such designation may be made by a filing in the
principal office of the Company in Phoenix, Arizona, with written notice to all
holders of voting trust certificates hereunder. If a successor Trustee has not
been appointed within 30 days after such notice of resignation has been given,
the Trustee may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
(b) The rights, powers, and privileges of the Trustee named
hereunder shall be possessed by the successor Trustee, with the same effect as
though such successor had originally been a party to this Agreement. The word
"Trustee" as used in this Agreement means the Trustee or any successor
Trustee acting hereunder, and shall include both the single and the plural
number.
13. Term. This Agreement shall expire and terminate on the
earliest to occur of: (i) March 1, 2001, or (ii) the date on which the number of
shares of Company Stock subject to this Agreement (assuming for purposes of this
calculation that all Company Stock that is convertible into Common Stock has
been converted) shall first be less than 100,000 shares of Common Stock
(adjusted as set forth in this Agreement to account for certain dilutive or
contradilutive events or transactions affecting the Common Stock) or (iii) the
date on which William H. Mallender shall cease to serve as chief executive
officer of the Company or in a position of similar authority with the Company
and shall
- 17 -
<PAGE> 18
not have been replaced by a person satisfactory to the Stockholder (or such
other person as the Stockholder shall specify in writing for the purpose of
exercising such right in the event of his death or incapacity, such designation
to survive such death or incapacity and to be with right of substitution) in his
sole discretion or (iv) the date 30 days after the public announcement that any
person or entity (or "group" of persons or entities) beneficially owns (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) in excess of
25% of the then-outstanding Common Stock of the Company, unless the same shall
have been approved in a resolution duly adopted by the Board of Directors of the
Company or (v) the date that the Trustee shall have received notice from the
Company either that the Board of Directors of the Company has recommended to the
shareholders of the Company acceptance of a tender offer for in excess of 50% of
the then-outstanding shares of Common Stock or that a single person or entity
shall directly or indirectly beneficially own (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934) in excess of 50% of such then-outstanding
Common Stock, or (vi) unless the Stockholder or Stockholder Designee shall
consent in writing, the date that the Trustee shall have received notice from
the Company that any person holding directly or indirectly in excess of
1,000,000 shares of Common Stock of the Company (adjusted as provided in Section
14 hereof) shall have been elected to the Board of Directors of the Company
pursuant to an agreement with the Company that the Company will support such
election. The Company and each Stockholder hereby agree to give written notice
to the Trustee (and to each Stockholder and the Company) promptly upon becoming
aware of the occurrence of any event specified in (ii), (iii), (iv), (v) or (vi)
above.
14. Antidilution Provision. If during the term of this
Agreement the Company shall (A) take any action entitling the holders of the
Common Stock to receive a dividend payable in shares of Common Stock, (B)
subdivide its outstanding shares of Common Stock into a greater number of
shares, (C) combine its outstanding shares of Common Stock into a smaller number
of shares or (D) issue by reclassification of its Common Stock any shares of
capital stock of the Company of any class or series, the references in this
Agreement (and in any instrument or document delivered or deliverable hereunder)
to numbers of shares of Common Stock shall be automatically adjusted to equal
the product obtained by multiplying each such referenced number of shares by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after occurrence of the event described in subsection
(A), (B), (C) or (D) of this sentence, and the denominator which is the number
of shares of Common Stock outstanding immediately prior to occurrence of such
event.
15. Certain Company Covenants. The Company hereby covenants, for the
benefit of the Stockholder and the Trustee:
(a) The Company shall hold the Stockholder and the Trustee
harmless from and against any and all liabilities, costs and expenses (including
reasonable attorney fees) arising from any litigation or claim asserted against
the Stockholder or the Trustee
- 18 -
<PAGE> 19
by a Company stockholder in such stockholder's name or in the name of the
Company to the effect that the Company's consummation of the transactions
contemplated by this Agreement abridge any securities or other law applicable to
the Company, or fiduciary or other duties owed to other stockholders of the
Company, or the provisions of the Company's certificate of incorporation as
amended or its bylaws as amended; provided that the Stockholder or the Trustee
shall cooperate as reasonably requested by the Company in minimizing any such
liabilities, costs and expenses (including acceptance by the Stockholder and/or
the Trustee of joint representation by counsel for the Company with respect to
any such litigation or claim, if appropriate).
(b) In connection with the Company's undertaking under Section
8(e)(7) above to cooperate as reasonably requested by Stockholder in connection
with Stockholder's secured loan arrangements, the Company shall: (i) to ensure
that Stockholder's beneficial interest in the "Consideration Shares" is
"marginable," promptly register Consideration Shares under the Securities Act of
1933, as amended, and maintain such registration in effect, for so long as the
Consideration Shares are not freely salable under Rule 144 (under said Act)
without regard to volume limitations and manner-of-sale limitations under Rule
144; and (ii) direct the Company's counsel to provide such opinion(s) as may be
reasonably requested by the secured lender(s) pursuant to such arrangements. In
connection with the foregoing, Stockholder and his counsel shall cooperate with
the Company and its counsel as reasonably requested in order to minimize the
costs and other burdens to the Company of (i) and (ii) above, including the
mutual effort to satisfy the requirements of the secured lender(s) on a basis
(if feasible) that would confer registration rights upon the secured lender in
lieu of immediate registration of Consideration Shares.
(c) If and to the extent share certificates evidencing some or
all of the Consideration Shares held by the Trustee are "legended" pursuant to
the investment letter referred to in Section 3(a) above or otherwise, and upon
the request of Stockholder from time to time, the Company shall cause one or
more unlegended certificates to be issued to the Trustee in exchange for
legended certificates upon receipt by the Company and the Trustee of an opinion
of counsel reasonably acceptable to them that such Consideration Shares are
freely salable under Rule 144 (under the Securities Act of 1933, as amended)
without regard to volume limitations and manner-of-sale limitations under Rule
144.
16. Compensation and Reimbursement of Trustee. The Trustee
shall receive its customary fees and charges for serving hereunder. The Trustee
shall have the right to incur and pay such reasonable expenses and charges, to
employ and pay such agents, attorneys, and counsel as it may deem necessary and
proper for carrying this Agreement into effect. All such fees and charges and
any such expenses or charges incurred by and due to the Trustee shall be paid by
the Company.
- 19 -
<PAGE> 20
17. Notice.
(a) Unless otherwise in this Agreement specifically provided,
any notice to or communication with the holders of the voting trust certificates
(and Stockholders) hereunder shall be deemed to be sufficiently given or made if
mailed, certified or registered mail (return receipt requested) to the addresses
of the holders of voting trust certificates (or Stockholders), as shown on the
transfer books of the Trustee, which shall in all cases be deemed to be the
addresses of voting trust certificate holders (and Stockholders) for all
purposes under this Agreement, without regard to what other or different
addresses the Trustee may have for any voting trust certificate holder on any
other books or records of the Trustee. Holders of voting trust certificates (and
Stockholders) may change their addresses for notice hereunder by notice in
writing to the Trustee (with a copy to the Company). Every notice so given shall
be effective, whether or not received, on the date five (5) days after mailing
postage prepaid, and such date shall be the date such notice is deemed given for
all purposes.
(b) Any notice to the Company hereunder shall be sufficient if
mailed, certified or registered mail (return receipt requested) to the Company
addressed as follows:
Talley Industries Inc.
2702 N. 44th Street, 100A
Phoenix, Arizona 85008
Att'n: Secretary
or to such other address as the Company may designate by notice in writing to
the Trustee. A copy of each such notice shall be sent simultaneously to:
David Victor, Esq.
Meyer, Hendricks, Victor
Ruffner & Bivens, P.L.C.
2929 N. Central Avenue, Suite 1800
Phoenix, Arizona 85012-2762
and/or to such other or additional address as the Company may designate by
notice in writing to the Trustee.
(c) Any notice to the Trustee hereunder shall be mailed,
registered or certified mail (return receipt requested) to the Trustee,
addressed to it at such addresses as may from time to time be furnished in
writing to the Company by the Trustee, and if no such address has been so
furnished by the Trustee, then to the Trustee in care of the Company. A copy of
any notice from the Company to the Trustee in its capacity as
- 20 -
<PAGE> 21
record holder of any Company Stock shall be mailed concurrently with such notice
to the Trustee, registered or certified mail (return receipt requested) to
counsel for John J. McMullen at the following address or to such other address
as may from time to time be furnished in writing to the Company:
Patrick J. Gilmartin, Esq.
Gilmartin, Poster & Shafto
One William Street
New York, NY 10004
[signature page follows]
- 21 -
<PAGE> 22
IN WITNESS WHEREOF the Company, John J. McMullen as sole Stockholder on
the date of this Agreement, and the Trustee have duly signed this Agreement, as
of the date first set forth in the recitals above.
TALLEY INDUSTRIES, INC.
By
---------------------------
Its
---------------------------
FIRST INTERSTATE BANK OF
ARIZONA, N.A., as Trustee
By
---------------------------
Its
---------------------------
John J. McMullen
---------------------------
John J. McMullen
- 22 -
<PAGE> 23
IN WITNESS WHEREOF the Company, John J. McMullen as sole Stockholder on
the date of this Agreement, and the Trustee have duly signed this Agreement, as
of the date first set forth in the recitals above.
TALLEY INDUSTRIES, INC.
By Mark S. Dickerson
---------------------------
Its Vice President and Secretary
---------------------------
FIRST INTERSTATE BANK OF
ARIZONA, N.A., as Trustee
By
---------------------------
Its
---------------------------
---------------------------
John J. McMullen
- 22 -
<PAGE> 24
IN WITNESS WHEREOF the Company, John J. McMullen as sole Stockholder on
the date of this Agreement, and the Trustee have duly signed this Agreement, as
of the date first set forth in the recitals above.
TALLEY INDUSTRIES, INC.
By
---------------------------
Its
---------------------------
FIRST INTERSTATE BANK OF
ARIZONA, N.A., as Trustee
By Kathleen Jackubowicz
---------------------------
Its Assistant Vice President
---------------------------
---------------------------
John J. McMullen
- 22 -
<PAGE> 1
EXHIBIT 5
CONSULTING AGREEMENT
THIS AGREEMENT made and entered into this 7th day of February, 1996 by
and between TALLEY MANUFACTURING AND TECHNOLOGY, INC., a Delaware corporation
with an office at 2702 North 44th Street, Phoenix, Arizona 85008 (hereinafter
called the "Company"), and McMULLEN CONSULTANTS INC., a Delaware corporation
with an office at 200 Plaza Drive, Secaucus, New Jersey 07096 (hereinafter
called "Consultant").
RECITALS
A. The Company is the owner of JOHN J. MCMULLEN ASSOCIATES, INC.
("JJMA") a corporation engaged in the business of naval architecture and marine
engineering with a significant amount of U.S. Navy business, and is seeking to
control the costs and enhance the revenues of such business and of certain other
enterprises owned by the Company which do a significant amount of business with
various agencies and bureaus within the U.S. Department of Defense, and the
Company is desirous of finding opportunities to expand its business operations
into other defense-oriented activities.
B. Consultant and personnel associated with Consultant possess a high
degree of entrepreneurial and financial experience which the Company wishes to
have available to it for its business improvement and expansion.
1
<PAGE> 2
C. In consideration of the mutual benefits and agreements set out
herein, the Company and Consultant have made the agreement set forth herein.
1. Engagement. The Company hereby engages the services of
Consultant to provide the services hereinafter specified (the "Services") for
the compensation and on the terms and conditions set forth in this Agreement.
Consultant accepts such engagement and agrees to provide such Services for said
compensation and on such terms and conditions.
2. Effective Date and Term. This Agreement shall be effective
as of the first day of February, 1996 and shall continue in force and effect for
five (5) years until January 31, 2001 unless sooner terminated under the
provisions hereof.
3. Services of Consultant.
(a) Consultant, acting as an independent contractor and
consultant, shall on request of the Company or JJMA provide the following
services to the Company or JJMA by means of members of the Consultant's staff
designated by the Consultant for the particular task: assist the Company in
seeking and finding business opportunities for the Company to exploit including
analyzing the investment required and the potential return of each such business
opportunity; as and when requested by the Company assist the Company from time
to time in making presentations to potential clients of JJMA and other
enterprises owned by the Company which do business with agencies of the U.S.
Government, and provide such other consulting services as the
2
<PAGE> 3
Company and the Consultant may mutually agree are within the general scope of
the foregoing listed specific service description.
(b) During the term of this Agreement, and for so long as he is
willing and able to do so, the Company and the Consultant agree that Dr. John J.
McMullen shall serve as Chairman of JJMA with such duties as may be delegated to
him from time to time by the Board of Directors of JJMA, and shall be otherwise
available at reasonable times by telephone for consultation with officers and
employees of the Company and/or its subsidiaries.
4. Compensation and Expense Reimbursement.
(a) As a consulting fee, the Company shall pay, or shall cause
one or more of its subsidiaries to pay, to Consultant a fee of $400,000 per year
for each year of the term of this Agreement, payable in equal installments on
the fifteenth (15th) day and last day of each month during the term of this
Agreement.
(b) Consultant shall also be reimbursed for reasonable
out-of-pocket expenses incurred in carrying out its duties pursuant to this
Agreement. All such reimbursements will be made within 30 days of receipt by the
Company of Consultant's itemization of such expenses.
5. Secretarial Services. The Company shall supply to Consultant the
exclusive services of two secretaries employed by JJMA and carried on its
payroll, but seconded to Consultant. All costs related to such secretaries
incurred by JJMA or the
3
<PAGE> 4
Company, including but not limited to salary, benefits, extraordinary medical
claims and severance pay, shall be reimbursed to the Company by Consultant.
6. Early Termination. This Agreement may be terminated by
either party prior to January 31, 2001 by written notice given to the other in
the event any of the following should occur: (a) a material default by either
party in performing its material obligations under this Agreement, such default
continuing for a period of thirty (30) days following notice of default by the
non-defaulting party to the defaulting party, and the non-defaulting party then
giving a notice of election to terminate; (b) the other party shall become
unable or fail to pay its debts generally as they become due, or admit in
writing its inability to pay its debts, or make a general assignment for the
benefit of creditors; (c) any proceeding shall be instituted by or against the
other party seeking (i) to adjudicate it a bankrupt or insolvent, or (ii)
reorganization, arrangement, adjustment or composition of it or its debts under
any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or (iii) appointment of a receiver, trustee, or other similar official
for it or for any substantial part of its property, and such proceeding shall
not have been dismissed within forty-five (45) days after the date such
proceeding was commenced; or (iv) the other party shall take any action to
authorize or consent to any action described in clause (c) above.
4
<PAGE> 5
7. Covenant Not to Compete; Confidentiality. During the term of
this Agreement and for a period of three (3) years after the termination of this
Agreement, neither Consultant nor McMullen shall engage in any activity that
competes with any line of business engaged in by JJMA, including, but not
limited to the business of commercial ship and detail design, naval ship and
combat systems and marine technical and management services (collectively,
"Line of Business"), whether acting as an officer, director, employee,
consultant, shareholder, owner, partner, fiduciary or in any other individual or
representative capacity whatsoever, and shall not otherwise use to its or his
own advantage, or to the advantage of any other person, corporation, or other
entity, or disclose to any other person, corporation, or other entity, any
non-public information as to the clients, customers, prospects, properties,
prices, sales practices, manner of operation, plans, trade secrets, patents,
processes, relationships with clients and customers or any other non-public
information concerning the Company or JJMA and/or their respective businesses or
solicit or induce (or seek to induce) any employee of JJMA to leave such
employment. Notwithstanding the foregoing, Consultant and Dr. John J. McMullen
may invest its or his assets in such form or manner as deemed appropriate;
provided, however, that such investments shall not require any substantial
services on the part of Consultant or Dr. McMullen in the operation of the
affairs of the company or entity in which such investments are made if such
company or entity competes with
5
<PAGE> 6
a Line of Business. The parties acknowledge the foregoing covenants are
reasonable in scope and necessary for the Company to receive the full benefit of
the consulting services to be provides hereunder. The Company shall have the
option in its sole discretion to reduce the scope and extent of the foregoing
covenants, by written notice to Consultant, either before or after adjudication
of the legality or enforceability of said covenants, whereupon said covenants
shall be valid and enforceable against Consultant and McMullen.
If a court should conclude that the foregoing covenants are
unenforceable according to their terms either because of their duration, the
geographic area covered thereby or the scope of the subject matter covered, the
parties hereby agree that the court shall reduce such duration, geographic area
or scope so that the resulting duration, geographic area and scope shall be the
maximum that such court shall conclude is enforceable, which reduction shall be
performed as follows: in the case of duration, the duration hereof shall be
reduced by one month at a time until it shall be the maximum enforceable
duration; in the case of geographic area, such area shall be reduced by
eliminating individual states one at a time therefrom until such area shall be
of maximum enforceable geographical coverage, commencing with the state in which
the least volume of JJMA revenues is generated during a fiscal year immediately
preceding such determination and eliminating additional states one at a time in
inverse order of the volume of JJMA revenues generated by
6
<PAGE> 7
business activity of JJMA in each such state during such fiscal year; in the
case of the scope of subject matter, the parties agree that the scope of such
covenants shall be reduced to the minimum extent necessary in order for such
covenants to be enforced. The parties acknowledge that damages may not be an
adequate remedy for breaches of the foregoing covenants. In addition to such
other remedies as may be available under applicable law, the parties acknowledge
that the remedies of specific performance and/or injunctive relief shall be
available and proper in the event of Consultant's or Mcmullen's actual or
imminent refusal or failure to perform its or his obligations hereunder.
8. Relationship of Parties. This instrument does not create and shall
not be construed as creating joint venture, partnership, or association between
the Company and Consultant. Consultant is and shall be during the entire term of
this Agreement an independent contractor.
9. Not Personal Services. In addition to other provisions herein
contained, this Agreement shall not be terminated in the event of the death or
disability of Dr. John J. McMullen.
10. No Assignments. This Agreement is personal to each of the parties
hereto, and neither party may assign or delegate any of its rights or
obligations hereunder without first obtaining the written consent of the other;
provided, however, that the Company may in connection with a merger,
consolidation, sale or other disposition of all or substantially all of its
assets
7
<PAGE> 8
assign its respective rights and delegate its obligations hereunder, but in such
case shall remain obligated as surety for the performance of the assignee.
11. Binding Effect. This Agreement shall bind and benefit Consultant
and the Company and their respective successors and assigns.
12. Notice. Any notice required or permitted to be given under
this Agreement shall be sufficient if in writing and if sent by registered mail
to the attention of the President at the office of Consultant, in the case of
the Consultant; or to the attention of its Chairman of the Board at its
principal office in the case of the Company.
13. Integration Clause; Oral Modification. This Agreement
represents the entire agreement of the parties with respect to the subject
matter hereof, and all agreements entered into prior hereto are revoked and
superseded by this Agreement, and no representations, warranties, inducements or
oral agreements halve been made by any of the parties except as expressly set
forth herein, or in other contemporaneous written agreements. This Agreement may
not be changed, modified or rescinded except in writing, signed by all parties
hereto, and any attempt at oral modification of this Agreement shall be void and
of no effect.
14. Governing Law. This Agreement shall be deemed to be made under, and
shall be construed in accordance with and shall be governed by, the laws of the
State of Arizona, and suit to enforce any provision of this Agreement or to
obtain any remedy
8
<PAGE> 9
with respect hereto may be brought in Superior Court, Maricopa County, Arizona,
and for this purpose each party hereby expressly and irrevocably consents to the
jurisdiction of said court.
15. Attorneys' Fees. In the event suit is brought (or
arbitration instituted) or an attorney is retained by any party to this
Agreement to enforce the terms of this Agreement or to collect any moneys due
hereunder, or to collect money damages for breach hereof, the prevailing party
shall be entitled to recover, in addition to any other remedy, reimbursement for
reasonable attorneys' fees, court costs, costs of investigation and other
related expenses incurred in connection therewith.
16. Waiver. Failure of any party to exercise any right or option
arising out of a breach of this Agreement shall not be deemed a waiver of any
right or option with respect to any subsequent or different breach, or the
continuance of any existing breach.
17. Counterparts. This Agreement may be executed in any number of
counterparts, all such counterparts shall be deemed to constitute one and the
same instrument, and each of said counterparts shall be deemed an original
hereof.
18. Captions. Captions and section headings used herein are for
convenience only and are not a part of this Agreement and shall not be deemed to
limit or alter any provisions hereof and shall not be deemed relevant in
construing this Agreement.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
day, month and year first written above.
TALLEY MANUFACTURING AND
TECHNOLOGY, INC., a Delaware
corporation
By Mark S. Dickerson
----------------------------
Its: Vice President and Secretary
McMULLEN CONSULTANTS INC.
By
----------------------------
10
<PAGE> 11
IN WITNESS WHEREOF, the parties have signed this Agreement
as of the day, month and year first written above.
TALLEY MANUFACTURING AND
TECHNOLOGY, INC., a Delaware
corporation
By
------------------------------
Its:
McMULLEN CONSULTANTS INC.
By John J. McMullen
------------------------------
President
10
