<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------
SCHEDULE 14D-1
Tender Offer Statement Pursuant to Section 14(d)(1)
of the Securities Exchange Act of 1934
------------------------------------
(AMENDMENT NO. 3)
TALLEY INDUSTRIES, INC.
(Name of Subject Company)
SCORE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
CARPENTER TECHNOLOGY CORPORATION
(Bidders)
Series A Convertible Preferred Stock
(Title of Class of Securities)
87468720
(CUSIP Number of Class of Securities)
Series B $1 Cumulative Convertible Preferred Stock
(Title of Class of Securities)
87468730
(CUSIP Number of Class of Securities)
Common Stock, $1.00 Par value per share
(Including the associated Preferred Stock Purchase Rights)
(Title of Class of Securities)
87468710
(CUSIP Number of Class of Securities)
------------------------------------
JOHN R. WELTY
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
CARPENTER TECHNOLOGY CORPORATION
101 WEST BERN STREET
READING, PENNSYLVANIA 19612-4662
Telephone: (610) 208-2000
(Name, Address and Telephone Number of Persons Authorized to
Receive Notices and Communications on Behalf of Bidders)
------------------------------------
with a copy to:
DECHERT PRICE & RHOADS
4000 BELL ATLANTIC TOWER
1717 ARCH STREET
PHILADELPHIA, PA 19103
(215) 994-4000
ATTENTION: HERBERT F. GOODRICH, JR.
<PAGE>
This Amendment No. 3 to the Schedule 14D-1 relates to a tender offer
by Score Acquisition Corp., a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of Carpenter Technology Corporation, a Delaware
corporation ("Parent"), to purchase all outstanding shares of Series A
Convertible Preferred Stock ("Series A Preferred Shares"), Series B $1
Cumulative Convertible Preferred Stock ("Series B Preferred Shares") and
Common Stock, par value $1.00 per share ("Common Shares"), of Talley
Industries, Inc., a Delaware corporation (the "Company"), including the
associated Preferred Stock Purchase Rights (the "Rights") issued pursuant to
the Rights Agreement between the Company and ChaseMellon Shareholder Services
L.L.C., as Rights Agent, as amended and restated on February 2, 1996,
(collectively, the "Shares"), at a purchase price of $11.70 per Series A
Preferred Share, $16.00 per Series B Preferred Share and $12.00 per Common
Share, net to the seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated October 2,
1997 (the "Offer to Purchase"), and in the related Letter of Transmittal
(which together constitute the "Offer"), copies of which are filed as Exhibit
(a)(1) and (a)(2), respectively, to the Schedule 14D-1 filed with the
Securities and Exchange Commission on October 2, 1997. The purpose of this
Amendment No. 3 is to amend and supplement Items 10 and 11 of the Schedule
14D-1 as described below.
ITEM 10. Additional Information.
(e) The Company and certain of its directors were named as defendants
in a purported class action filed on September 26, 1997 on behalf of the
stockholders of the Company in the Chancery Court of Delaware. On October 8,
1997, the complaint was amended to add Brickell Partners as a newly named
plaintiff and Purchaser and Parent as additional defendants in this purported
class action. This amended action is entitled: Jewish Center of Hyde Park and
Laz Schneider against Jack C. Crim, Alex Stamatakis, Donald J. Ulrich, Paul L.
Foster, Joseph A. Orlando, Fred Israel, John W. Stodder, David Victor, the
Company, the Purchaser and Parent and by Brickell Partners against Jack C.
Crim, John D. McNaughton, Alex Stamatakis, Donald J. Ulrich, Paul L. Foster,
Joseph A. Orlando, Fred Israel, John W. Stodder, David Victor, Neil W. Benson
and the Company, the Purchaser and Parent (C.A. No. 15961 and C.A. No. 15963)
(the "Amended Stockholder Action"). The complaint in the Amended Stockholder
Action alleges breach of fiduciary duty on the part of the Company's Board of
Directors arising out of execution of the Merger Agreement and failure to
disclose material information in the Schedule 14D-1 and Schedule 14D-9 and
seeks declaratory and injunctive relief barring defendants and their counsel,
agents, employees and all persons acting under, in concert with, or for them,
from proceeding with, consummating, or closing the Offer and the Merger, as
well as damages in an unspecified amount. A copy of the Amended Stockholder
Action is filed as Exhibit (g)(2) hereto and incorporated herein by reference,
and the foregoing summary of the Amended Stockholder Action is qualified in
its entirety by reference thereto.
ITEM 11. Material to be Filed as Exhibits.
(g)(2) Amended Class Action Complaint filed by Jewish Center of Hyde
Park and Laz Schneider against Jack C. Crim, Alex Stamatakis, Donald J.
Ulrich, Paul L. Foster, Joseph A. Orlando, Fred Israel, John W. Stodder, David
Victor, the Company, the Purchaser and Parent and by Brickell Partners against
Jack C. Crim, John D. McNaughton, Alex Stamatakis, Donald J. Ulrich, Paul L.
Foster, Joseph A. Orlando, Fred Israel, John W. Stodder, David Victor, Neil W.
Benson and the Company, the Purchaser and Parent (dated October 8, 1997, Court
of Chancery of the State of Delaware in and for New Castle County).
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Amendment No. 3 is true,
complete and correct.
CARPENTER TECHNOLOGY CORPORATION
By: /s/ John R. Welty
--------------------------------------
Name: John R. Welty
Title: Vice President, General Counsel
and Secretary
SCORE ACQUISITION CORP.
By: /s/ John R. Welty
--------------------------------------
Name: John R. Welty
Title: Secretary
Dated: October 10, 1997
<PAGE>
Exhibit (g)(2)
IN THE COURT OF CHANCERY IN THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
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JEWISH CENTER OF HYDE PARK and
LAZ SCHNEIDER,
Plaintiffs,
v.
JACK C. CRIM, ALEX, STAMATAKIS, DONALD C.A. No. 15961-NC
J. ULRICH, PAUL L. FOSTER, JOSEPH A.
ORLANDO, FRED ISRAEL, JOHN W. STODDER,
DAVID VICTOR, TALLEY INDUSTRIES, INC.,
SCORE ACQUISITION CORP., and CARPENTER
TECHNOLOGY CORPORATION,
Defendants.
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BRICKELL PARTNERS, a Florida Partnership,
Individually And On Behalf of All Others,
Plaintiff,
v.
JACK C. CRIM, JOHN D. MCNAUGHTON, ALEX C.A. No. 15963 NC
STAMATAKIS, DONALD J. ULRICH, PAUL L.
FOSTER, JOSEPH A. ORLANDO, FRED ISRAEL,
JOHN W. STODDER, DAVID VICTOR, NEIL W.
BENSON and TALLEY INDUSTRIES, INC.,
SCORE ACQUISITION CORP., and
CARPENTER TECHNOLOGY CORPORATION,
Defendants.
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AMENDED CLASS ACTION COMPLAINT
Plaintiffs, as and for their amended class action complaint,
allege upon information and belief, except as to themselves, which they allege
upon knowledge as follows:
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NATURE OF THE ACTION
1. This is a stockholders' class action on behalf of the
holders of the common and preferred stock of Talley Industries, Inc. ("Talley"
or the "Company"), to enjoin certain actions of defendants related to the
proposed acquisition ("Acquisition") of all of the outstanding shares of
Talley stock by Carpenter Technology Corporation, ("Carpenter"). The defendant
directors of Talley have breached their fiduciary duties of loyalty, candor
and care in connection with the proposed acquisition of Talley. Plaintiffs
allege they and the other public stockholders of Talley are entitled to enjoin
the proposed transaction or, alternatively, to rescind the transaction and/or
recover damages in the event that the transaction is consummated.
2. On or around October 2, 1997 Carpenter and Talley mailed
an Offer to Purchase on Schedule 14D-1 (the "14D-1") and a
Solicitation/Recommendation Statement on Schedule 14D-9 (the "14D-9") to
Talley shareholders seeking to implement the Acquisition, to which Carpenter
and Talley had previously agreed on September 25, 1997, and announced to the
public on September 26, 1997, Pursuant to the terms of the Acquisition, Talley
shareholders are to receive $12.00 in cash for each share of their Talley
common stock, $11.00 for each share of Talley's Series A Preferred Shares,
and $16.00 per share for Talley's Series B Preferred Shares. This
consideration is grossly inadequate and unfair compensation given the
intrinsic value of Talley's various business segments.
3. As set forth in detail below, in an effort to obtain
shareholder approval of the Acquisition unfairly and/or to absolve themselves
of their breaches of
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fiduciary duty, defendants have sought to portray the merger as "fair" to
Talley shareholders and have withheld vital information needed by shareholders
to assess and consider properly the Acquisition and related financial data in
the 14D-1 and 14D-9, as more specifically alleged below. Any purported
shareholder "ratification" obtained under these circumstances would be
invalid.
4. In breach of their fiduciary duties when undertaking such
a momentous transaction, Talley's directors and financial advisor have failed
to consider adequately the Company's strategic alternatives under the
circumstances. In this regard, the Individual Defendants failed to maintain a
level playing field among potential acquirors of the Company by failing to
afford third parties access to confidential information on the same terms as
Carpenter.
PARTIES
5. Plaintiffs have been the owners of the common stock of
Talley since prior to the transaction herein complained of and continuously to
date.
6. Defendant Talley is a Delaware corporation. The Company
manufactures and markets solid propellant-actuated devices and high
reliability electronic components under government controls and provides naval
architectural and marine engineering designs.
7. Defendant Carpenter Technology Corp. ("Carpenter") is a
Delaware corporation based in Reading, Pennsylvania and is engaged in the
manufacture, fabrication and distribution of speciality metals. Carpenter also
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manufacturers engineered products, including structural ceramics and ultra
hard-wear parts.
8. Defendant Score Acquisition Corp. ("Score") is a Delaware
corporation and a wholly-owned subsidiary of Carpenter.
9. Defendants Jack C. Crim, Alex Stamatakis, Donald J.
Ulrich, Paul L Foster, Joseph A. Orlando, Fred Israel, John W. Stodder and
David Victor, are Directors of Talley and voted to approve the Merger.
10. The Individual Defendants are in a fiduciary
relationship with Plaintiff and the other public stockholders of Talley and
owe them the highest obligations of good faith and fair dealing.
CLASS ACTION ALLEGATIONS
11. Plaintiffs bring this action on their own behalf and as
a class action, pursuant to Rule 23 of the Rules of the Court of Chancery, on
behalf of all stock holders of the Company (except the defendants herein and
any person, firm, trust, corporation, or other entity related to or
affiliated with any of the defendants) and their successors in interest, who
are or will be threatened with injury arising from defendants' actions as more
fully described herein.
12. This action is properly maintainable as a class action
because:
(a) The class is so numerous that joinder of all
members is impracticable. As of June 30, 1997, there were approximately
14,113,453 shares of
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Talley common stock outstanding owned by hundreds, if not thousands, of record
and beneficial holders;
(b) There are questions of law and fact which are
common to the class including, inter alia, the following: (i) whether
defendants have breached their fiduciary and other common law duties owed by
them to plaintiff and the members of the class; and (ii) whether the class is
entitled to injunctive relief or damages as a result of the wrongful conduct
committed by defendants.
(c) Plaintiffs are committed to prosecuting this
action and have retained competent counsel experienced in litigation of this
nature. The claims of the plaintiffs are typical of the claims of other
members of the class and plaintiffs have the same interests as the other
members of the class. Plaintiff will fairly and adequately represent the
class.
(d) Defendants have acted in a manner which affects
plaintiff and all members of the class alike, thereby making appropriate
injunctive relief and/or corresponding declaratory relief with respect to the
class as a whole.
(e) The prosecution of separate actions by
individual members of the Class would create a risk of inconsistent or varying
adjudications with respect to individual members of the Class, which would
establish incompatible standards of conduct for defendants, or adjudications
with respect to individual members of the Class which would, as a practical
matter, be dispositive of the interests of other members or substantially
impair or impede their ability to protect their interests.
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SUBSTANTIVE ALLEGATIONS
13. On May 8, 1997, Talley announced that a dissident group
of shareholders, known as the Shareholder Committee to Remove Entrenched and
Arrogant Management, or SCREAM, in its proxy fight with management of the
Company, had succeeded in placing two of its three nominees on the Company's
Board of Directors. SCREAM's nominees, Ralph A. Rockow and Robert T. Craig,
replaced Chairman and Chief Executive William. Mallender and Board member
Townsend Hoopes. SCREAM initiated the proxy contest as a result of its
dissatisfaction with the Company's performance and what it perceived to be the
current management's and Board's attempts to entrench and enrich themselves
despite the Company's lackluster performance.
14, On June 19, 1997 representatives of J.P. Morgan
Securities, Inc. ("J.P. Morgan"), which had been retained by Talley's Board of
Directors (the "Board") to provide a strategic review to the Company,
presented their initial findings to the Board. J.P. Morgan described various
alternatives including a "stay the course" strategy, a sale or spin off of
certain of the Company's businesses, or the sale or liquidation of the entire
Company.
15. Just one week prior to the Company's retention of J.P.
Morgan, an unidentified party made an indication of interest at a specified
value range to purchase Universal Propulsion Inc., one of Talley's
subsidiaries. Defendant Foster responded that Talley would not consider any
proposals until it completed its strategic review. Other third parties made
inquiries about the Company's businesses. The 14D-9 is, however, silent about
the value range offered for the subsidiary, the identity of the
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party making the offer, the identities of the other parties who made
inquiries, and the business segments for which they expressed interest.
Shareholders are also not told that once the Company retained J.P. Morgan and
held a board meeting on July 18, 1997, the Individual Defendants refused to
pursue the earlier indications of interest solely because the inquiries did
not include the purchase of the entire Company. Yet, defendants were advised
that the value of Talley's two primary businesses were worth more if sold
separately than as a whole. In fact, a third party would later offer up to
$175 million for these businesses.
16. On July 18, 1997, Carpenter contacted defendant Foster
and indicated its interest in purchasing Talley's steel businesses for
$110,000,000. On July 22 and July 23, 1997 the Board met to consider Carpenter's
offer as well as others strategic alternatives. Representatives of J.P. Morgan
participated in this meeting. Primarily because of tax reasons, it was
determined that the divestiture of the Company's steel businesses would be
dilutive to Talley's earnings and that Carpenter's offer therefore would be
rejected. The Board did, however, decide to encourage Carpenter to submit an
offer for the entire Company, after voting to put the Company "in play."
17. By so acting, the Board set out on a course that could
lead to a sale of the Company. Inexplicably, the Board ignored the possibility
of seeking competing bids and did not authorize J.P. Morgan to solicit other
potential bids for Talley, despite its ability to do so and despite earlier
indication of interest from other third parties. Thus, the Board deprived
itself of critical information necessary to be adequately
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informed, which it could have obtained at relatively little additional cost
and with no disruption to its business since it already was engaged in
discussions with Carpenter, and customary confidentiality arrangements (of the
type ultimately extended to Carpenter) could easily have been utilized to
facilitate expressions of interest by other potential purchasers,
18. On July 23, 1997, the Company announced its financial
results for the first six months and second quarter of 1997. In particular,
for the six months ended June 30, 1997, Talley earned $4.6 million, or 29
cents per share on revenue of $176.2 million. Talley reported a net loss of
$1.6 million, or 18 cents per share, on revenue of $189 1 million for the
first six months of 1996. The per share loss for the 1996 six-month period was
$1.16 after a charge of 98 cents per share on account of the value of
additional shares of common stock issued during the six-month period to induce
conversion of preferred stock. The 1996 first half loss reflected various
charges and costs associated with the Company's litigation with TRW and the
repurchase of senior debentures. Commenting on the foregoing, Foster stated:
We are please at the strong operating
performance at our business units for the
first half of 1997. We look forward to the
sale of the final real estate parcel and
completing, within the next few weeks, our
planned exit from the business. We remain
committed to building an automotive air
bag business and are continuing our
research and development efforts and
capital spending programs to create an
opportunity for Talley in this critical
safety product area.
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19. On August 1, 1997, Talley received from Carpenter a
nonbinding indication of interest to purchase all of Talley's outstanding
common stock for $10 per share. Carpenter indicated that it would consider
increasing the proposed price if it received additional information concerning
Talley's air bag business since a proper valuation of that business was
assertedly not possible based on publicly available information. Defendant
Foster rejected the offer, without Board consultation, that same day. On
August 4, 1997, Carpenter and the Company executed a confidentiality agreement
whereby Carpenter was permitted to conduct limited due diligence of Talley's
air bag business. Talley had previously rejected Carpenter's request for a
period of exclusive due diligence on the grounds that the $10 per share offer
was insufficient to grant such a request.
20. On August 7, 1997, after conducting its due diligence of
Talley's air bag business, Carpenter increased its offer to $12 per share,
subject to further due diligence. Talley granted Carpenter's request for a 45
day period of due diligence, but agreed to only a limited exclusivity
provision. The confidentiality agreement provided that Talley would not
initiate, solicit, or encourage other offers for the Company during this
period, but that it could participate in discussions or negotiations with, and
provide confidential information to a third party if defendant Foster
determined in good faith, after receiving advice from the Company's financial
advisor, that such third party had submitted a bona fide proposal or
indication of interest that was, or could reasonably be expected to lead to,
an acquisition proposal that was financially superior to Carpenter's $12 per
share proposal.
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21. By proposing such an agreement, defendants tilted the
playing field by locking-up a transaction with Carpenter. William Danzell, one
of two shareholders who organized SCREAM, aptly observed that the Individual
Defendants:
decided to sell the company and only let
Carpenter in the door. Without having
market forces, you have a very low
valuation placed on the company.
Further, according to Danzell, who is knowledgeable of the matters complained
of herein as a consequence of SCREAM's two member representation on the
Talley Board, 64 "reputable investment banks and other companies" asked to be
part of the sale process and were rebuffed by the Individual Defendants and
J.P. Morgan.
22. During the next several weeks Carpenter and Talley
representatives met several times and exchanged, on an exclusive and
preferential basis, non-public information about the two companies' strategic
plans and products. The individual defendants performed no market solicitation
or meaningful exploration of strategic alternatives.
23. From August 11, 1997 until the execution of the
definitive merger agreement on September 25, 1997, Talley and J.P. Morgan
received a number of inquiries from third parties concerning the Company as a
whole and certain of the Company's businesses. The Company also received
requests for confidential information from certain of these third parties.
In response to these requests, as disclosed in the 14D-9, defendants erected
unreasonable barriers by telling the third parties that "if they were
interested in receiving such non-public information they would need to be as
specific as possible as to the nature of their interest, in particular with
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respect to their valuation assumptions." Since the Company did not impose any
of these conditions on Carpenter as a prerequisite to its receiving
confidential information, these conditions can only be viewed as a further
attempt to grant Carpenter favorable and preferential treatment vis-a-vis
other potential acquirers and a breach of the Individual Defendants' duty to
maximize shareholder value.
24. According to the 14D-9, on August 22, 1997, Talley
received from a third party it has not identified an offer to purchase a
majority of the Company's outstanding common stock for $12 in cash per share.
The letter also stated that the offer would be conditioned on the third
party's obtaining financing and inclusion in any merger agreement of
acceptable termination provisions. On August 27, 1997, representatives of J.P,
Morgan, acting on behalf-of the individual defendants, rejected this offer.
25. On September 16, 1997, defendants received another
letter from this unidentified third party offering to purchase at specified
value ranges the government products and services segment and the industrial
products and services segment of Talley. This letter also requested permission
to conduct due diligence. In a subsequent telephone conversation with
defendant Foster, the representative of the undisclosed third party indicated
that it had not made an offer for Talley's air bag business because sufficient
public information was not available to value that portion of the Company
properly. Defendant Foster offered to permit limited due diligence on the air
bag business ot the Company but refused to permit this unidentified suitor to
conduct due diligence of the other business segments because it deemed the
proposal of
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September 16, 1997, insufficient. Defendants' failure to permit this third
party to conduct due diligence is inexcusable in light of the fact that
Carpenter, after it conducted its own due diligence, increased its initial
offer for the Company by 20 percent. In breach of their fiduciary duties to
maximize shareholder value, the Individual Defendants failed to permit this
third party to conduct some form of due diligence of the entire Company.
26. Defendants' conduct is even more egregious in light of
the amount that was offered for the two segments. Undisclosed to shareholders,
but known to defendants, the third party had offered up to $130 million for
Talley's government products business and up to $45 million for its industrial
products segment. Since these values were based on limited due diligence and
did not include the air bag business, defendants' failure to permit the offer
or to pursue its proposal deprived Talley shareholders of the opportunity to
receive the maximum value for their shares.
27. On September 25, 1997, the Board met to consider the
terms of the proposed Carpenter transaction. At this meeting, Mr. Rockow and
Mr. Craig, SCREAM's nominees on the Board, made a motion to adjourn the
meeting for two weeks to provide additional time to consider the proposed
transaction. The motion was defeated by a vote of 8 to 2. Thereafter, J.P.
Morgan delivered its oral opinion to the Board that the proposed Carpenter
transaction at the indicated values was fair to the stockholders of Talley
from a financial point of view. The Individual Defendants decided -- with
nothing more than the opinion of J.P. Morgan and without permitting other
potential acquirers to bid for the Company, despite expressions of interest to
do so -- to approve the proposed transaction and to recommend that the
Company's shareholders
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accept Carpenter's offer. Directors Rockow and Craig voted against the
proposed transaction.
28. On September 26, 1997, Talley and Carpenter announced
that they had entered into a definitive merger agreement whereby Carpenter
will acquire Talley in a transaction in which the common and preferred
shareholders will receive approximately $184 million in cash. Under the terms
of the Acquisition as presently proposed, Carpenter will commence a cash
tender offer for all of Talley's outstanding common and preferred shares.
Carpenter will pay $12 per share for Talley's 14,113,623 common shares and
260,550 exercisable common stock options outstanding. Carpenter will also pay
$11.70 for Talley's 13,793 Series A Preferred shares, and $16 per share for
Talley's 749,486 Series B preferred shares outstanding. The tender offer will
be followed by a merger in which remaining Talley shares will be converted
into the right to receive the foregoing amounts of cash.
29. In response, the two founders of SCREAM, Saad Alissa and
William B. Danzell, issued a press release criticizing the proposed
transaction as inadequate. The press release stated that the founders of
SCREAM "consider this offer unsatisfactory and simply will not support it at
such a low price because the breakup value of the Company, we believe, is
significantly higher." The press release also noted that the Individual
Defendants had failed to seek out competing bids and stated "Talley has thus
far prevented other companies from extending bids or evaluating the individual
segments, Carpenter is the only one that has been allowed access."
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30. On or about October 2, 1997, Talley and Carpenter
disseminated the 14D-1 and 14D-9 to shareholders purporting to describe, inter
alia, the Acquisition, the history of negotiations between the companies, the
opinion of Talley's financial advisor and certain other purportedly relevant
information.
31. The Merger agreement creates disabling conflicts of
interest by conferring extraordinary benefits on certain of the Individual
Defendants and executive officers of Talley. The 14D-9 discloses that "each
stock option, whether vested or not, outstanding immediately prior to the
Effective Time [of the Merger will] be canceled in exchange for a cash payment
by the Company." Furthermore, the 14D-9 also discloses that Carpenter will
honor all existing employment, severance, consulting or other compensation
agreements, plans or contracts between the Company and any of its officers,
directors and employees.
Talley Fails To Disclose The Subsequent Negotiations
And/Or Any Counter-Offers To The Merger Price
32. The 14D-9 fails to disclose relevant information
regarding how the price was determined. The 14D-9 fails to disclose the
substance of the negotiations between Carpenter and Talley, particularly what
prices and counter-offers were proposed by Talley This information is
particularly relevant given the fact that Talley's shareholders had recently
expressed their dissatisfaction with the Company's stock price performance by
electing SCREAM's nominees to the Board. Talley shareholders would reasonably
want to know what the Company's management believed the Company was worth.
Furthermore, defendants failed to disclose the substance of the other
expressions
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of interest by third parties and any valuations of the Company they might have
offered, such as that offered for two of Talley's businesses. Given the lack
of information provided concerning the price and negotiations, investors are
unable to consider the Acquisition properly because they have no way of
knowing where the ultimate merger price stands in relation to Talley's initial
demands or what SCREAM's nominees believe the Company is worth. Publicly,
Danzell has stated that, "if you look at the different segments of the
business and add the values, I think we are looking at about $18 per share."
33. The 14D-9 also fails to disclose the reasons given by
Mr. Rockow and Mr. Craig for voting against the Acquisition as presently
proposed. Indeed, no explanation or rationale for their decision is offered.
Since Mr. Rockow and Mr. Craig were elected directors in the recent proxy
fight initiated by the dissident shareholders of Talley, the public
stockholders would need to know the reasons these directors opposed the
proposed transaction in order for them to make an informed decision about the
Merger. Messrs. Rockow and Craig asserted that competing offers had been
frustrated and higher values could be obtained if the Company were sold in
parts.
34. Furthermore, the 14D-9 fails to disclose the substance
of the proposals Talley received from other potential acquirors, particularly
how the terms of the September 16, 1997 offer for Talley's government products
and services segment and industrial products and services segment in its offer
of September 16, 1997. Accordingly, Talley shareholders cannot determine what
the intrinsic value of Talley
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common shares is and whether the Carpenter Acquisition is preferable to other
alternatives or is fair.
The 14D-1 and 14D-9 Fails To Disclose Material
Information Necessary For Talley Shareholders
To Make An Informed Decision
35. The 14D-1 and 14D-9 were mailed to Talley shareholders
on or about October 2, 1997, two days after the end of the Company's third
fiscal quarter. However, the 14D-l and 14D-9 do not provide any detailed or
meaningful information on Talley's most recent financial and operating results
although such information is clearly relevant in assessing the value of
Talley. Furthermore, such information was likely provided to J.P. Morgan and
Carpenter in connection with each's due diligence investigation of the
Company. Accordingly, the shareholders of Talley will be forced to decide
whether to irrevocably divest themselves of their valuable investment in
Talley on the basis of incomplete information that is material to an informed
evaluation of the Company.
The Individual Defendants Failed
To Act In A Properly Informed
Manner In The Best Interests Of The Shareholders
36. The Talley Board initiated a process to sell the Company
which imposed heightened fiduciary responsibilities and requires enhanced
scrutiny by the Court. However, the terms of the proposed Acquisition were not
the result of an auction process or active market check; they were arrived at
without a full and thorough
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investigation by the Individual Defendants; and they are intrinsically unfair
and inadequate from the standpoint of the Talley shareholders.
37. The Individual Defendants failed to make an informed
decision, as no market check of the Company's value was obtained. In agreeing
to the merger, the Individual Defendants failed to properly inform themselves
of Talley's highest transactional value.
38. The Individual Defendants have violated their fiduciary
duties owed to the public shareholders of Talley. The Individual Defendants'
agreement to the terms of the Acquisition, its timing, and the failure to
auction the Company and permit other bidders a fair opportunity to submit and
pursue offers, and defendants' failure to provide a market check demonstrate a
clear absence of the exercise of due care and of loyalty to Talley's public
shareholders.
39. The Individual Defendants' fiduciary obligations under
these circumstances require them to:
(a) Undertake an appropriate evaluation of Talley's
net worth as a merger/acquisition candidate; and
(b) Actively evaluate the proposed transaction and
engage in a meaningful auction with third parties in an attempt to obtain the
best value for Talley's public shareholders.
40. The Individual Defendants have breached their fiduciary
duties by reason of the acts and transactions complained of herein, including
their decision to merge with Carpenter without making the requisite effort to
obtain the best offer
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possible, and not making all material information available to Talley
shareholders in connection with the transaction.
41. The consideration to be paid to class members in the
proposed merger is unfair and inadequate because, among other things:
(a) The intrinsic value of Talley's common stock is
materially in excess of the amount offered for those securities in the merger
giving due consideration to the anticipated operating results, net asset
value, cash flow, and profitability of the Company; and
(b) The merger price is not the result of an
appropriate consideration of the value of Talley because the Talley Board
approved the Acquisition without undertaking steps to accurately ascertain
Talley's value through open bidding or at least a "market check mechanism".
42. By reason of the foregoing, each member of the Class
will suffer irreparable injury and damages absent injunctive relief by this
Court.
43. Carpenter is named as a defendant in this action so that
the Court may afford complete relief.
44. Plaintiff and other members of the Class have no
adequate remedy at law.
WHEREFORE, plaintiffs and members of the Class demand judgment
against defendants as follows:
a. Declaring that this action is properly maintainable as a
class action and certifying plaintiffs as the
representatives of the Class;
-18-
<PAGE>
b. Preliminarily and permanently enjoining defendants and their
counsel, agents, employees and all persons acting under, in
concert with, or for them, from proceeding with,
consummating, or closing the proposed transaction;
c. In the event that the proposed transaction is consummated,
rescinding it and setting it aside, or awarding rescissory
damages to the Class;
d. Awarding compensatory damages against defendants,
individually and severally, in an amount to be determined at
trial, together with pre-judgment and post-judgment interest
at the maximum rate allowable by law, arising from the
proposed transaction;
e. Awarding plaintiffs their costs and disbursements and
reasonable allowances for fees of plaintiffs' counsel and
experts and reimbursement of expenses; and
f. Granting plaintiffs and the Class such other and further
relief as the Court may deem just and proper.
Dated: October 8, 1997
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.
By:
-----------------------------------------
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiffs
-19-
<PAGE>
OF COUNSEL:
BERNSTEIN LIEBHARD & LIFSHITZ
274 Madison Avenue
New York, NY 10016
(212) 779-1414
WECHSLER HARWOOD HALEBIAN
& FEFFER LLP
805 Third Avenue
New York, NY 10022
(212) 935-7400
LOWEY DANNENBERG BEMPORAD & SELINGER, P.C.
The Gateway
One North Lexington Avenue
White Plains, NY 10602
(914) 997-0500
WEISS & YOURMAN
10940 Wilshire Blvd.
24th Floor
Los Angeles, CA 90024
STULL, STULL & BRODY
6 East 45th Street
New York, NY 10017
-20-
<PAGE>
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- --------------------------------------------x
JEWISH CENTER OF HYDE PARK and
LAZ SCHNEIDER,
Plaintiffs,
v. C.A. No. 15961 NC
JACK C. CRIM, et al.,
Defendants.
- --------------------------------------------x
BRICKELL PARTNERS,
Plaintiff,
v. C.A. No. 15963 NC
JACK C CRIM, et al.,
Defendants.
- --------------------------------------------x
MOTION FOR PRELIMINARY INJUNCTION
Plaintiffs hereby move, pursuant to Court of Chancery Rule 65, for an
Order:
1. Preliminarily enjoining defendants and all persons acting
in concert with them from proceeding with, consummating or otherwise closing
the tender offer by Score Acquisition Corp. ("Score") for all issued and
outstanding shares of Talley Industries, Inc, ("Talley") and the proposed
subsequent merger (the "Merger") between Score and Talley; and
2. Requiring Score, its parent Carpenter Technology
Corporation, and Talley to supplement their publicly disseminated information
issued in connection with the tender offer by disclosing all material facts
and correcting the omissions and misrepresentations described in plaintiffs'
Amended Class Action Complaint in this action
<PAGE>
The grounds for this Motion are set forth in
plaintiffs' Amended Class Action Complaint and will be more fully set forth in
plaintiffs' opening brief in support of this motion.
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.
By: xxxxxxxxxxxxxxxxxxxxxxxx
------------------------------------------
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiffs
OF COUNSEL:
BERNSTEIN LIEBHARD & LIFSHITZ
274 Madison Avenue
New York, NY 10016
WECHSLER HARWOOD HALEBIAN & FEFFER LLP
805 Third Avenue, 7th Floor
New York, NY 10022
LOWEY DANNENBERG BEMPORAD
& SELINGER, P.C.
The Gateway
One North Lexington Avenue
White Plains, NY 10602
(914) 997-0500
WEISS & YOURMAN
10940 Wilshire Blvd.
24th Floor
Los Angeles, CA 90024
STULL, STULL & BRODY
6 East 45th Street
New York, NY 10017
<PAGE>
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ------------------------------------------- x
JEWISH CENTER OF HYDE PARK and
LAZ SCHNEIDER,
Plaintiffs,
v. C.A. No. 15961 NC
JACK C. CRIM, et al.,
Defendants.
- ------------------------------------------- x
BRICKELL PARTNERS,
Plaintiff,
v. C.A. No. 15963 NC
JACK C. CRIM, et al.,
Defendants.
- -------------------------------------------
MOTION FOR EXPEDITED PROCEEDINGS
Plaintiffs, by their attorneys, respectfully move the Court to
schedule their Motion for Preliminary Injunction, served and filed herewith,
for a hearing prior to October 30, 1997, the presently-scheduled date for the
closing of a tender offer by Score Acquisition Corp. ("Score"), a wholly-owned
subsidiary of Carpenter Technology Corporation ("Carpenter"), for all the
issued and outstanding shares of Talley Industries, Inc. ("Talley") and the
proposed subsequent merger ("Merger") between Score and Talley. As grounds for
this Motion, plaintiffs represent as follows:
1. Plaintiffs allege that they are stockholders of Talley.
They bring this action on behalf of all Talley stockholders, contending that
the defendant directors of Talley, aided and abetted by Carpenter, have
breached their fiduciary duties to plaintiffs and the proposed class by
failing to obtain the best available transaction in a sale of Talley and by
failing to include in documents disseminated by Talley and Score,
<PAGE>
in connection with the tender offer which is the first step in a two-step
acquisition by Carpenter of Talley, information material to the tendering
decision of Talley shareholders. These allegations are particularized in
plaintiffs' Amended Class Action Complaint filed on October 9, 1997
("Complaint").
2. Among other things, the Complaint alleges that in
approving Carpenter's proposed acquisition of Talley over the opposing votes
of two Talley directors, the individual defendants failed in their
responsibility to obtain the best available transaction for Talley
stockholders in that: they granted Carpenter access to due diligence
information in an amount and manner not granted to competing bidders; they
refused to pursue competing offers to acquire Talley or a substantial portion
of its assets in a manner designed to obtain the best available transaction;
and they refused to pursue adequately a sale of Talley's assets
notwithstanding firm offers for the acquisition of certain Talley divisions.
In particular: the cash Carpenter will pay for all of Talley's shares under
the proposed transaction is approximately $184 million; the director
defendants refused to pursue an offer to acquire two Talley divisions at a
price of $175 million, which was made without due diligence solely based on
public information.
3. The Complaint further alleges that Score's tender
offer offering circular ("Offering Circular") and Talley's 14D-9 SEC filing,
both of which have been disseminated to Talley stockholders in connection with
the tender offer, omit material information in a number of respects:
(a) although these documents disclose that two
Talley directors voted against the Carpenter transaction, they fail to
disclose that the reasons these directors articulated for their opposition
were that greater value could be obtained
<PAGE>
by selling Talley in parts and that Talley had frustrated other potential
bidders' efforts to acquire all or substantial parts of Talley;
(b) although these documents disclose that Talley
received an offer for two divisions which the individual defendants declined
to pursue, they do not state that this offeror offered $175 million for the
two divisions alone, which compares favorably to the approximately $184
million Carpenter is paying for all of Talley's stock in the proposed
transaction; and
(c) although these documents were mailed to Talley
shareholders on or about October 2, 1997, two days after the end of Talley's
third fiscal quarter, they do not provide any meaningful information on
Talley's financial and operating results for the quarter, even though this
information was known or knowable;
4. In short, the Complaint alleges that Talley's directors
failed to obtain the best transaction available in a change of control/sale of
the company context (which allegations are supported by the views of two
Talley directors), and that Talley shareholders are being denied information
material to their decision of whether or not to accept the consideration
offered in the Carpenter transaction.
5. Absent injunctive relief, plaintiffs and Talley
shareholders are at risk of irreparable injury. See QVC Network, Inc. v.
Paramount Communications, Inc., Del. Ch., 635 A.2d 12451, 1273 n. 50 (1993)
(loss of opportunity to obtain best available transaction constitutes
irreparable injury); Robert M. Bass Group, Inc. v. Evans, Del. Ch., 552 A.2d
1227, 1246 (1988) (same); Arnold v. Society for Savings Bancorp, Inc., Del.
Supr., 678 A.2d 533 (1996) (corporate charter provisions pursuant to 8 Del. C.
Section 102(b)(7) precludes damage remedy for disclosure violations not
amounting to bad faith or disloyal conduct).
<PAGE>
6. Since the tender offer is scheduled to close on
October 30, 1997, plaintiffs request that the Court hear their preliminary
injunction motion sufficiently prior to that date to permit a decision and
Order if the Court is persuaded the transaction should be enjoined.
7. Plaintiffs have not previously applied for this
relief.
WHEREFORE, plaintiffs respectfully request the Court to
enter an Order in the form attached hereto.
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.
By: xxxxxxxxxxxxxxxx
-------------------------------------------
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
OF COUNSEL: Attorneys for Plaintiffs
BERNSTEIN LIEBHARD & LIFSHITZ
274 Madison Avenue
New York, NY 10016
WECHSLER HARWOOD HALEBIAN & FEFFER LLP
805 Third Avenue, 7th Floor
New York, NY 10022
LOWEY DANNENBERG BEMPORAD
& SELINGER, P.C.
The Gateway
One North Lexington Avenue
White Plains, NY 10602
(914) 997-0500
WEISS & YOURMAN
10940 Wilshire Blvd.
24th Floor
Los Angeles, CA 90024
STULL, STULL & BRODY
6 East 45th Street
New York, NY 10017
