<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
TALLEY INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
[TALLEY INDUSTRIES LOGO]
2702 North 44th Street, Suite 100A
Phoenix, Arizona 85008
April 11, 1997
Dear Talley Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
Talley Industries, Inc. to be held at Talley Metals Technology, Inc., South
Carolina Highway 172, Hartsville, South Carolina on Thursday, May 8, 1997 at
11:00 a.m.
At this meeting you are being asked to elect three directors. Your Board
urges you to support the Company's nominees by voting FOR Item 1 on the
Company's WHITE proxy card enclosed. An opposing slate of nominees offered by a
group of four dissident stockholders also want your support. Your Board urges
you NOT to support this group's nominees by discarding the proxy card they
intend to send you under a separate cover. We believe that the interests of
these dissidents are not those of the majority of stockholders. You will also be
asked to vote on several stockholder proposals sponsored by these dissidents.
Your Board and Management strongly recommends a vote AGAINST all of these
proposals numbered 2, 3, 4, 5 and 6 on the enclosed WHITE proxy card.
Please read the attached proxy materials carefully to make the best
informed decision possible. Your Company has accomplished a great deal in recent
months and we are excited about its prospects for the future. We believe that
Talley is poised for success as never before.
Thank you for your continued support and interest in Talley Industries.
Sincerely,
Your Board of Directors
<PAGE> 3
TALLEY INDUSTRIES, INC.
NOTICE OF 1997 ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders:
The Annual Meeting of Stockholders of Talley Industries, Inc., a Delaware
corporation, will be held on May 8, 1997, at 11:00 a.m. South Carolina time, at
Talley Metals Technology, Inc., South Carolina Highway 172, Hartsville, South
Carolina 29550, for the following purposes:
1. To elect three directors for terms expiring in 2000; and
2. To transact all other business which may properly come before the
meeting or any adjournment thereof, including the stockholder proposals
referred to under "Other Matters" in the accompanying proxy statement,
if such proposals are properly presented at the meeting and are in
order.
These items are more fully described in the following pages, which are
hereby made a part of this Notice. Only stockholders of record at the close of
business on March 31, 1997 will be entitled to vote by proxy or in person at the
meeting.
Please mark, sign, date and return the enclosed proxy card in the enclosed
envelope, which requires no postage. THE PROMPT RETURN OF YOUR SIGNED PROXY,
REGARDLESS OF THE NUMBER OF SHARES YOU HOLD, WILL AID THE COMPANY IN REDUCING
THE EXPENSE OF ADDITIONAL PROXY SOLICITATION. The signed proxy will not be used
if you attend the meeting in person and so request.
By order of the Board of Directors,
/s/ MARK S. DICKERSON
Mark S. Dickerson
Secretary
Phoenix, Arizona
April 11, 1997
<PAGE> 4
TALLEY INDUSTRIES, INC.
2702 N. 44TH STREET, SUITE 100A
PHOENIX, ARIZONA 85008
------------------------------
PROXY STATEMENT
------------------------------
ANNUAL MEETING OF STOCKHOLDERS
MAY 8, 1997
I. SOLICITATION
This Proxy Statement, and the accompanying proxy card, are furnished in
connection with the solicitation by the Board of Directors of TALLEY INDUSTRIES,
INC. (the "Company") of proxies from holders of the Company's Common Stock,
Series A Convertible Preferred Stock ("Series A"), and Series B Cumulative
Convertible Preferred Stock ("Series B") (the Series A and Series B being
collectively referred to herein as the "Preferred Stock") to be voted at the
annual meeting of stockholders to be held at 11:00 a.m. South Carolina time, at
Talley Metals Technology, Inc., South Carolina Highway 172, Hartsville, South
Carolina 29550, on Thursday, May 8, 1997 (and any adjournment thereof), for the
purposes stated in the accompanying Notice of Annual Meeting of Stockholders
(the "Notice of Meeting").
The three directors referred to in paragraph 1 of the accompanying Notice
of Meeting will be elected by the holders of the Common Stock (the "Common
Stockholders") and the Preferred Stock (the "Preferred Stockholders"), voting as
a single class. The enclosed proxy is revocable at any time prior to being voted
either (i) if you attend the meeting in person and so request, or (ii) upon
receipt of written notice by the Secretary of the Company prior to the meeting
of such revocation or by submitting a proper proxy bearing a later date. If no
instructions are indicated on the enclosed proxy, the shares represented by the
proxy will be voted FOR the election of the nominees for director proposed by
the Board of Directors and set forth herein, and in accordance with the judgment
of the persons named in the proxy as to all other matters as may properly come
before the 1997 Annual Meeting of Stockholders. To the extent no direction is
given when the enclosed proxy is returned, the shares represented by the proxy
will be voted AGAINST the proposals the Company is advised are intended to be
submitted at the meeting by a stockholder as set forth herein if such
stockholder's proposals are properly presented at the meeting in compliance with
the Delaware General Corporation Law and the Company's Bylaws. Only stockholders
of record at the close of business on March 31, 1997 will be entitled to vote at
the meeting and any adjournment thereof.
The cost of soliciting proxies will be borne by the Company. In addition to
solicitations by mail, directors, officers and employees of the Company may
solicit proxies personally or by telegraph, telephone or other electronic means
without additional compensation. The Company has retained Kissel-Blake Inc., a
professional proxy solicitation firm to assist in the solicitation of proxies by
mail, personally or by telephone or other means of communication, for a fee
estimated at $80,000 plus expenses. It is anticipated that approximately 30
persons will be used by Kissel-Blake Inc. in its solicitation efforts. Total
expenditures for the solicitation of proxies (including fees of attorneys,
accountants, public relations or financial advisors, solicitors, printing,
transportation and other costs incidental to the solicitation) are estimated to
be $500,000, and total cash expenditures to date have been approximately
$25,000. The Company also will reimburse brokerage firms and other custodians,
nominees and fiduciaries for reasonable expenses incurred by them in sending
proxy materials to the beneficial owners of the Company's Common Stock and
Preferred Stock.
The Company's stockholders were previously provided with a copy of the
annual report of the Company for the fiscal year ended December 31, 1996. The
annual report is not to be considered a part of this proxy soliciting material.
This Proxy Statement and the accompanying proxy card are first being mailed to
stockholders on or about April 11, 1997.
1
<PAGE> 5
II. VOTING
On March 20, 1997, the Company had outstanding 14,280,453 shares of Common
Stock, 13,793 shares of Series A and 749,616 shares of Series B. The holders of
Common Stock and Series B are entitled to one vote per share, and the holders of
Series A are entitled to four-tenths of one vote per share.
The three directors referred to in paragraph 1 of the accompanying Notice
of Meeting will be elected by the Common Stockholders and the Preferred
Stockholders, voting as a single class. The voting for the election of directors
may, but need not, be by ballot. Assuming a quorum is present at the 1997 Annual
Meeting of Stockholders, directors will be elected by a plurality of the votes
cast at the stockholders' meeting. Abstentions may not be specified on the
election of directors. Votes for the election of directors may only be cast for
or withheld. Because the directors will be elected by a plurality vote, votes
withheld and broker non-votes will have no effect on the election of directors.
Votes will be counted by the Company's proxy tabulators and inspectors of
election.
Assuming a quorum is present at the 1997 Annual Meeting of Stockholders,
the affirmative vote of a majority of the voting power of the Common
Stockholders and Preferred Stockholders, voting as a single class, present in
person or represented by proxy at the meeting and entitled to vote thereon, is
generally required for approval of other business (including the stockholder
proposals referred to under "Other Matters") which may properly come before the
meeting or any adjournment thereof. Abstentions will be counted as present and
entitled to vote for purposes of such matters and will have the same effect as a
vote against such matters. Broker non-votes, however, will be counted as present
for quorum purposes, but will not be counted as entitled to vote on such matters
and will have no effect on the outcome of such matters.
III. SUBMISSION OF STOCKHOLDER PROPOSALS
If any stockholder of the Company wishes to submit a proposal to be
inserted in the Company's proxy material for the Annual Meeting of Stockholders
in 1998, such proposal must comply with the requirements of Rule 14a-8 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and must be
received in writing by the Secretary of the Company on or before December 12,
1997.
If a stockholder desires to bring proper business before an annual meeting
of stockholders which is not the subject of a proposal timely submitted for
inclusion in the Company's proxy statement as described above, the stockholder
must follow procedures outlined in the Company's Bylaws. Pursuant to the
Company's Bylaws as currently in effect, a stockholder may propose business to
be considered at the meeting, provided that the stockholder (i) is a stockholder
of record at the time of giving notice to the Company of the proposal and is
entitled to vote at the annual meeting of stockholders where the proposal will
be considered, and (ii) complies with the notice procedures of Article II,
Section 8 of the Bylaws. That section provides that the proposing stockholder
must deliver notice of the proposal to the Company's Secretary not earlier than
the 90th day nor later than the 60th day prior to the first anniversary of the
preceding year's annual meeting. The required notice must contain certain
information, including information about the stockholder, as prescribed by the
Bylaws.
The Bylaws also provide procedures for stockholders to nominate directors
for election at an annual meeting of stockholders. These procedures are
discussed later in this Proxy Statement. See "The Board of Directors and its
Committees -- Nominating Committee." The Bylaws are subject to amendment from
time to time.
IV. THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors is responsible for the management of the business
and affairs of the Company. To assist it in carrying out its duties, the Board
of Directors has delegated certain authority to committees. The Board of
Directors held 13 meetings during 1996.
2
<PAGE> 6
AUDIT COMMITTEE
The Audit Committee currently consists of six directors -- Messrs. Benson,
Foster, Hoopes, Orlando, Stamatakis and Victor -- none of whom is an officer or
employee of the Company or any of its subsidiaries or affiliates. The Audit
Committee held two meetings in 1996. The primary function of the Audit Committee
is to provide an opportunity for direct communication between the Board of
Directors and the Company's independent auditors. The Audit Committee deals with
the accuracy and completeness of the Company's financial statements and related
matters. It meets with the independent auditors and from time to time reviews
with management and the independent auditors the procedures established for the
preparation, review and auditing of the Company's financial reports. Finally,
the Audit Committee makes recommendations to the Board of Directors regarding
the appointment of a firm of independent auditors.
EXECUTIVE COMPENSATION COMMITTEE
The Executive Compensation Committee (the "Committee") was organized to
establish executive compensation levels, to administer and manage the Company's
incentive compensation plans and to determine the individuals to whom incentive
awards should be granted and the terms of such awards. The Committee, which held
two meetings in 1996, currently consists of Messrs. Israel, Stodder and Ulrich.
Prior to July 1996, the Committee consisted of Messrs. Israel, MacNaughton,
Stamatakis, Stodder and Ulrich. See the "Executive Compensation Committee
Report" under "Executive Compensation" below for information on the Committee's
1996 compensation determination for executive officers.
NOMINATING COMMITTEE
The Company does not have a standing Nominating Committee. The function of
nominating directors is carried out by the entire Board of Directors. Pursuant
to the Company's Bylaws, a stockholder may nominate persons for election as
director, provided that the stockholder (i) is a stockholder of record at the
time of the nomination and is entitled to vote at the meeting of stockholders
for the Board seat to which the nomination relates, and (ii) complies with the
notice procedures of Article II, Section 8 of the Bylaws. That section as
currently in effect provides that the nominating stockholder must deliver notice
of the nomination to the Company's Secretary not earlier than the 90th day nor
later than the 60th day prior to the first anniversary of the preceding year's
annual meeting. The required notice must contain certain information, including
information about the nominee, as prescribed in the Bylaws. The Bylaws are
subject to amendment from time to time.
DIRECTOR COMPENSATION
Employee directors receive no compensation for service on the Board or its
committees. Non-employee directors are paid a retainer at the rate of $27,000
per year and fees of $1,000 for each Board meeting in which a director
participates and $650 for each committee meeting in which a director
participates. Travel and related expenses incurred by directors in connection
with Board or committee meetings are reimbursed by the Company.
Pursuant to the Company's 1996 Non-Employee Director Stock Plan (the
"Director Plan"), on the first business day of the month following the Annual
Meeting of Stockholders of the Company for that year, each non-employee director
of the Company is automatically granted 1,000 shares of the Company's Common
Stock, subject to certain restrictions as described below ("Director Restricted
Stock"), and an option to purchase 1,000 shares of the Company's Common Stock
("Director Options").
A director may not sell, transfer, pledge, assign or otherwise alienate,
other than by will or the laws of descent and distribution, any shares of
Director Restricted Stock if such transaction would cause the fair market value
of all shares of the Company's Common Stock then owned by the director to be
less than five times the then current annual cash retainer paid to non-employee
directors. If a director ceases to be a director by reason of death, disability,
completion of his elected term of office, or failure to be reelected as a member
of the Board of Directors, any Director Restricted Stock held by that director
will not be subject to the foregoing restrictions. If the director ceases to be
a director for any reason other than those stated in the preceding
3
<PAGE> 7
sentence, any Director Restricted Stock held by that director as of that date
immediately will be forfeited. A non-employee director will also receive a cash
payment in the year in which the value of the Director Restricted Stock is
included in the director's gross income. The amount of this payment will equal
the income and self-employment taxes (calculated at the highest marginal tax
rate) on the amount included in the director's gross income as a result of the
receipt of the Director Restricted Stock and the cash payment itself.
The exercise price per share of the Director Options is the fair market
value of the Common Stock on the relevant grant date. Directors will be entitled
to exercise Director Options within the time period beginning at the end of the
sixth month following the date the option is granted, and ending on the fifth
anniversary date of its grant, unless the option is earlier terminated,
forfeited, or surrendered.
If a director ceases to be a director by reason of death, disability,
completion of his elected term of office, or failure to be reelected as a member
of the Board of Directors, any Director Options held by that director will
remain exercisable at any time prior to their expiration date or for one (1)
year after the date the director ceases to be a director for such reasons,
whichever period is shorter. If a director ceases to be a director for any
reason other than those stated in the preceding sentence, any Director Options
held by that director as of that date immediately will be forfeited. No Director
Option may be sold, transferred, pledged, assigned, or otherwise alienated,
other than by will or by the laws of descent and distribution.
The Talley Industries, Inc. Retirement Plan (Directors Only) (the
"Directors' Retirement Plan") provides non-employee directors deferred
compensation in recognition of personal services rendered if they have served as
a director of the Company for at least five years. Based upon compensation
received solely for being a director, the Directors' Retirement Plan provides
each non-employee director a retirement benefit based on his years of service as
a director and his eligible compensation for the full year of service during
which his compensation was the highest within the three years immediately
preceding his retirement or termination. The Directors' Retirement Plan was
amended effective as of January 1, 1991 and, as a result, directors who retired
on or before that date and certain other directors do not receive the retirement
benefit. The Company has the right to prospectively amend or discontinue the
Directors' Retirement Plan. In addition, non-employee directors receive benefits
under a medical plan and a business travel and accident insurance policy
provided by the Company. Effective January 1, 1994, each non-employee director
who has served as a director of the Company for at least five years will be
covered under the Company's group life insurance plan so long as he continues to
serve as a non-employee director; when service on the Board of Directors ends on
or after attaining age 70, such directors are entitled to a lump sum payment
from the Company of $50,000.
Each non-employee director who has served as a director of the Company for
at least five years also participates in a charitable awards program. The
program is funded by the Company's group life insurance plan referred to above.
The plan provides for an additional $50,000 death benefit for each director
covered for charitable purposes. This coverage will remain in effect even if the
director no longer serves as a non-employee director. Upon the death of a
director, the Company donates one-half of the $50,000 benefit to one or more
qualifying organizations designated by the director. The remaining one-half of
the benefit is contributed to the Talley Industries, Inc. Foundation. If a
director does not designate a qualifying charity, the entire $50,000 benefit is
contributed to the Talley Industries, Inc. Foundation. Individual directors
derive no financial benefit from this program since all charitable deductions
relating to the contributions accrue solely to the Company and the cost of the
program to the Company is insignificant.
In connection with the refinancing of substantially all of the Company's
debt in October 1993, the Company formed a holding company subsidiary, Talley
Manufacturing and Technology, Inc. ("Talley Manufacturing") to own all of the
capital stock of all of the Company's non-real estate subsidiaries. Since
December 1993, directors of the Company have also served as directors of Talley
Manufacturing, but do not receive any additional compensation for serving as
directors of Talley Manufacturing. Pursuant to a cost sharing agreement between
the Company and Talley Manufacturing, Talley Manufacturing either bears or
reimburses the Company for the compensation and expenses of the directors of the
Company.
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<PAGE> 8
V. OTHER RELATIONSHIPS AND CERTAIN TRANSACTIONS
There are no family relationships between any of the executive officers or
directors of the Company.
The Company and certain of its subsidiaries paid legal fees to the law firm
of Osborn Maledon, P.A., of which Mr. Victor is Of Counsel, for services
relating to corporate matters and litigation that were performed during the
fiscal year ended December 31, 1996. The Company and certain of its subsidiaries
also paid legal fees to the law firm of Meyer, Hendricks, Victor, Ruffner &
Bivens, P.L.C., of which Mr. Victor was a member until May 1996, for services
relating to corporate matters and litigation that were performed during the
fiscal year ended December 31, 1996.
The Company paid $189,000 in consulting fees and related expenses to Mr.
Stamatakis for services relating to international business matters that were
performed during the fiscal year ended December 31, 1996. Mr. Stamatakis
traveled to Europe and the Far East on behalf of the Company to explore possible
opportunities for the sale of its products and services. A subsidiary of
Stamatakis Industries, Inc., of which Mr. Stamatakis is an executive officer,
filed a petition for reorganization under Chapter 11 of the Bankruptcy Code in
March 1992.
On February 7, 1996, the Company entered into an agreement with John J.
McMullen providing for the immediate conversion of the 120,293 shares of the
Company's Series D Cumulative Convertible Preferred Stock (the "Series D
Preferred Stock") owned by Mr. McMullen into 1,202,930 shares of Common Stock
and the issuance of an additional 702,919 shares of Common Stock in
consideration of Mr. McMullen's commitment immediately to convert the Series D
Preferred Stock and certain other commitments. The Series D Preferred Stock was
held in a voting trust agreement ever since Mr. McMullen acquired the Series D
Preferred Stock in exchange for the naval engineering business he sold to the
Company in 1988. The shares of Common Stock will continue to be subject to the
voting trust, which has been extended under the agreement until March 2001 and
revised in various respects to tighten the transfer restrictions and alter the
voting provisions. Wells Fargo Bank of Arizona, N.A. (formerly First Interstate
Bank of Arizona, N. A.) ("Wells Fargo"), serves as the voting trustee. Among
other things, the amended voting trust agreement permits only limited sales of
Common Stock prior to expiration of the trust on March 1, 2001 (subject to
earlier termination in certain specified circumstances). An Amended and Restated
Voting Trust Agreement was signed by all the parties on February 7, 1996, and
the conversion of the Series D Preferred Stock and the issuance of the
additional shares of Common Stock were completed on February 16, 1996.
In March 1996, Mr. McMullen, the Company and Wells Fargo agreed to permit
up to 1,202,930 shares of Common Stock to be transferred to a brokerage firm as
security for a loan to Mr. McMullen, pursuant to customary margin loan
arrangements. Pursuant to such agreement, Mr. McMullen transferred to the
brokerage firm during June and July 1996 record ownership of 1,202,930 shares of
Common Stock (the "Pledged Shares"). The Pledged Shares are held by the
brokerage firm for the benefit of Mr. McMullen, and the Pledged Shares continue
to be voted in accordance with the Amended and Restated Voting Trust Agreement.
Except in the case of a default under the margin loan arrangements or joint
instruction from both Mr. McMullen and the Company, the Pledged Shares will be
returned to Wells Fargo, as voting trustee, when the margin loan is repaid.
On February 7, 1996, Mr. McMullen extended until January 31, 2001 and
modified his consulting arrangement with Talley Manufacturing. A company owned
by Mr. McMullen will provide various consulting services for the Company's naval
engineering subsidiary. Mr. McMullen will also serve as the chairman of that
subsidiary, but he will not have any executive duties. Talley Manufacturing will
pay, or will cause to be paid to, Mr. McMullen's company a consulting fee of
$400,000 per year.
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<PAGE> 9
VI. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of March 20, 1997 regarding
the only persons known to the Company to own beneficially more than five percent
of the total number of the outstanding shares of any class (or series in the
case of the Preferred Stock) of the Company's voting securities:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT
TITLE OF NAME AND ADDRESS OF BENEFICIAL OF
CLASS/SERIES BENEFICIAL OWNER OWNERSHIP(1) CLASS/SERIES
- ------------- ----------------------------------- ---------------------- ------------
<S> <C> <C> <C>
Series A Sanford B. Kaynor 9,622 69.76%
c/o Fiduciary Trust Co. of
New York
P. O. Box 3199
Church Street Station
New York, NY 10008
Series B Elliott Associates, L.P. 153,100 20.42%
712 Fifth Avenue
36th Floor
New York, NY 10019
Common Stock Marshall & Ilsley Trust Company of 1,883,906(2) 12.84%
Arizona, Trustee
Talley Savings Plus Plan
One East Camelback Road
Suite 340
Phoenix, AZ 85012
John J. McMullen 1,705,849(3) 11.95%
9204 Sloane Street
Orlando, FL 32827
Saad A. Alissa 1,121,000(4) 7.85%
P. O. Box 192
Alkhobar 81962
Saudi Arabia
</TABLE>
- ---------------
(1) In presenting the information set forth in this table and the notes thereto,
the Company has relied in part upon statements of the persons or entities
named therein filed with the Securities and Exchange Commission ("SEC")
pursuant to Section 13(d) or 13(g) of the Exchange Act. For purposes of this
table, Preferred Stock has not been deemed converted to Common Stock in
calculating the beneficial ownership of Common Stock. Unless otherwise noted
below, each beneficial owner has sole investment and voting power with
respect to the shares listed, subject to community property laws where
applicable.
(2) Marshall & Ilsley Trust Company of Arizona holds the Common Stock as Trustee
for the Talley Savings Plus plan (the Company's 401(k) plan). Voting rights
with respect to shares of Common Stock held by the Talley Savings Plus plan
that have been allocated to employee accounts are passed through to employee
participants who have the right to direct the trustee's voting of such
shares. Allocated shares as to which the Trustee does not receive
instructions and unallocated shares are voted by the Trustee in its sole
discretion. The trustee has the power to dispose of shares held by the plan,
including the power to accept or reject tender, exchange, conversion and
other offers made by the Company itself (or by certain Company affiliates)
and relating to plan shares. However, in the event of other tender or
exchange offers for plan shares, the trustee will tender or exchange only
those allocated shares of Common Stock as to which it receives such
instructions. The trustee will tender or exchange the unallocated shares in
the same proportions as the shares with respect to which the employee
participants have the right to direct voting.
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<PAGE> 10
(3) Mr. McMullen acquired the Common Stock upon the conversion of the Series D
Preferred Stock that he owned and the issuance by the Company of an
additional 702,919 shares of Common Stock in consideration of Mr. McMullen's
commitment immediately to convert the Series D Preferred Stock and certain
other commitments. Mr. McMullen acquired the Series D Preferred Stock in
exchange for the naval engineering business he sold to the Company in 1988.
All of the shares of Common Stock owned by Mr. McMullen will continue to be
subject to a voting trust originally established in 1988 when Mr. McMullen
acquired his Series D Preferred Stock. Wells Fargo serves as trustee. A
brokerage firm, however, holds 1,002,930 shares of Common Stock as a
security for a loan to Mr. McMullen, pursuant to customary margin loan
arrangements. The shares of common stock held by the brokerage firm continue
to be voted in accordance with the voting trust. Pursuant to the terms of
the voting trust, Mr. McMullen's shares will be voted either in the same
proportions as all other shares of the Common Stock are voted with respect
to a particular matter, or as agreed upon by both the Company and Mr.
McMullen (or, under certain circumstances, his successor in interest). The
voting trust expires by its terms on March 1, 2001, or earlier upon the
occurrence of certain events. The business address of Wells Fargo is 100 W.
Washington, Phoenix, Arizona 85003.
(4) Mr. Alissa is the beneficial owner of 1,121,000 shares of Common Stock. This
amount includes 365,900 shares of Common Stock owned by General Investors
Limited ("GIL"), which is wholly owned by Mr. Alissa and 721,100 shares of
Common Stock owned by Financial Investors Limited ("FIL"), which is wholly
owned by Abdullatif Ali Alissa, Est. (the "Establishment"). Mr. Alissa is
President of the Establishment. The Establishment, Mr. Alissa and FIL share
the investment and voting power of the 721,100 shares of Common Stock owned
by FIL. Mr. Alissa and GIL share the investment and voting power of the
365,900 shares of Common Stock owned by GIL. The foregoing information is
based solely upon the filings made by Mr. Alissa and his various affiliated
entities with the SEC under Section 13 of the Exchange Act.
VII. ELECTION OF DIRECTORS
CURRENT STRUCTURE OF THE BOARD
The Board of Directors of the Company is divided into three separate
classes of directors. Each class is elected for a term of three years, and the
term of office of one of the three classes of directors expires each year on a
rotating basis. In accordance with the Certificate of Incorporation and the
Bylaws of the Company, the Board of Directors may by resolution establish the
number of members of the Board, not to exceed fifteen members. Vacancies
occurring on the Board may be filled by the Board for the remainder of the full
term of office of the director whose absence from the Board created the vacancy,
notwithstanding the fact that the term may extend beyond the next annual meeting
of stockholders.
In December 1996, the Preferred Stockholders' right to elect two directors
separately as a class terminated upon the Company's cure of its prior dividend
arrearage on the Preferred Stock and the term of office of each director
previously so elected (Messrs. Paul L. Foster and Joseph A. Orlando)
automatically terminated. At the same time the Board of Directors appointed
Messrs. Foster and Orlando as regular members of the Board. Currently, the Board
of Directors consists of eleven members. Neil W. Benson (whose term will expire
with the 1997 annual meeting) is not standing for re-election. Accordingly,
there will be ten Board members after giving effect to the election of the
directors at the annual meeting. Each Director currently serves on the board of
directors of the Company's Talley Manufacturing subsidiary.
7
<PAGE> 11
DIRECTORS/NOMINEES
Nominees by the Board of Directors for election as directors are Messrs.
Paul L. Foster, Townsend Hoopes and William H. Mallender. All of these nominees
are currently directors and (other than Mr. Foster) previously were elected by
the Common Stockholders. Mr. Foster (who had been previously elected a director
by the Preferred Stockholders) was elected by the Board of Directors in December
1996. Each director elected at the 1997 Annual Meeting of Stockholders will hold
office until the date of the annual meeting of stockholders in 2000, or until
his successor is duly elected and qualified. If no instructions are indicated on
the enclosed proxy, the shares represented by the enclosed proxy will be voted
FOR the election of the nominees for director proposed by the Board of
Directors. Should any one or more of the nominees become unavailable to serve as
a director (which the Company does not anticipate), full discretion is reserved
to persons named as proxies to vote for any other person or persons who may be
nominated. The following table provides biographical information about the
nominees, and those directors whose terms of office are continuing after the
meeting:
<TABLE>
<CAPTION>
DIRECTOR
NAME, AGE, AND PRINCIPAL EMPLOYMENT FOR PAST FIVE YEARS SINCE
-------------------------------------------------------------------------- --------
<S> <C>
NOMINEES FOR ELECTION
Paul L. Foster, 68, Professor of Finance and former Dean, College of 1992
Business Administration, Saint Joseph's University, Philadelphia,
Pennsylvania; a director of Wheeling Jesuit College, Wheeling, West
Virginia; a member of the General Accounting Office Research,
Education and Advisory Committee; and retired Rear Admiral, United
States Navy.
Townsend Hoopes, 74, Distinguished International Executive, Department of 1979
Public Affairs, University of Maryland; Vice Chairman, Oz/One Inc.
from 1995 to present (health delivery services); Vice Chairman, AIDS
Therapy Institute (non-profit corporation); retired President of
Association of American Publishers (trade association representing
American book publishers); and former Under Secretary of the United
States Air Force.
William H. Mallender, 61, Chairman of the Board and Chief Executive 1975
Officer of the Company from April 1983 to present; President and
Chief Executive Officer of the Company from December 1981 to 1983;
Executive Vice President, General Counsel and Secretary of the
Company, 1978 to 1981; Vice President, General Counsel and Secretary
of the Company, 1973 to 1978; and a director of MicroAge, Inc.
(computer hardware and software development, sales and service).
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION AS DIRECTORS
OF THE NOMINEES NAMED ABOVE.
8
<PAGE> 12
<TABLE>
<S> <C>
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1998 ANNUAL MEETING
Fred Israel, 69, Retired in 1993 as a senior partner of Israel and Raley, 1993
Chartered (attorneys); a member of the International Board of
Governors of Tel Aviv University, Tel Aviv, Israel; a member of the
Board of Visitors, University of Maryland -- School of Music, College
Park, Maryland; a director and Chairman of the Academic Committee of
Wheeling Jesuit College, Wheeling, West Virginia; and a director of
MicroAge, Inc. (computer hardware and software development, sales and
service).
Joseph A. Orlando, 69, Independent financial consultant and former 1992
President of Whitehead Associates (venture capital, real estate, and
securities investments).
John W. Stodder, 73, Corporate finance and merger/acquisition consultant; 1970
manager of private investments; Vice Chairman, Emeritus of Josten's,
Inc. (manufacturer of educational and motivational products); a
director of Trans Leasing International, Inc. (medical and office
products leasing); and a director of Stevens International, Inc.
(manufacturer of web-fed printing and packaging equipment and
currency printing systems).
David Victor, 54, Of Counsel, Osborn Maledon, P.A. (attorneys). Prior to 1985
joining this law firm in May 1996, Mr. Victor had been a member of
Meyer, Hendricks, Victor, Ruffner & Bivens, P.L.C. since May 1995
(attorneys). Prior to May 1995, Mr. Victor was a member of Meyer,
Hendricks, Victor, Osborn & Maledon, P.A. (attorneys).
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1999 ANNUAL MEETING
Jack C. Crim, 66, President and Chief Operating Officer of the Company 1983
from April 1983 to the Present; and Executive Vice President and
Chief Operating Officer of the Company from May 1982 to 1983.
Alex Stamatakis, 63, Chairman of the Board of Stamatakis Industries, Inc. 1994
(principally real estate investments). Mr. Stamatakis was a director
of the Company from October 1985 until February 1993.
Donald J. Ulrich, 60, Owner and Vice Chairman of Ventura Coastal 1991
Corporation (fruit processing); Chairman of RSI, Inc. (medical
services); General Partner of RBDGD (real estate development); Chief
Operating Officer of Mid-Atlantic Coca-Cola Bottlers, Inc.,
Washington, D.C., 1985 to 1988; and Senior Vice President of Bottler
and National Sales of Coca-Cola USA, 1982 to 1985.
</TABLE>
Saad A. Alissa, a stockholder of the Company, has indicated that he intends
to nominate three persons for election to the Board of Directors at the 1997
Annual Meeting of Stockholders: Robert T. Craig, age 69, a retired businessman;
Ralph A. Rockow, age 63, a businessman; and George A. Sawyer, age 66, a
businessman.
9
<PAGE> 13
VIII. SECURITY OWNERSHIP OF MANAGEMENT OF THE COMPANY
The following table sets forth information as of March 20, 1997 regarding
the beneficial ownership of the Company's voting securities by the directors and
nominees of the Company, each executive officer named in the Summary
Compensation Table that appears under "Executive Compensation -- Summary
Compensation Table" (collectively, the "Named Executive Officers") and all
directors and executive officers as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENT OF SHARES OF
NAME OF BENEFICIAL OWNER COMMON STOCK(1) COMMON STOCK(2)
- --------------------------------------------------------- ------------------- --------------------
<S> <C> <C>
William H. Mallender(3).................................. 433,925 3.02%
Jack C. Crim(4).......................................... 293,208 2.05%
Daniel R. Mullen(5)...................................... 171,998 1.20%
Kenneth May(6)........................................... 145,348 1.02%
Mark S. Dickerson(7)..................................... 134,717 *
Neil W. Benson(8)........................................ 3,000 *
Paul L. Foster(8)........................................ 12,000 *
Townsend Hoopes(8)....................................... 3,800 *
Fred Israel(8)........................................... 4,000 *
Joseph A. Orlando(8)..................................... 3,250 *
Alex Stamatakis(8)....................................... 7,250 *
John W. Stodder(8)(9).................................... 5,950 *
Donald J. Ulrich, Jr.(8)................................. 7,300 *
David Victor(8).......................................... 5,750 *
All Directors and Executive Officers(10)................. 1,231,496 8.57%
</TABLE>
- ---------------
(1) The Common Stock listed includes shares under options exercisable on March
20, 1997 and options which will become exercisable within 60 days
thereafter. None of the executive officers or directors owns any shares of
Preferred Stock. Unless otherwise noted below, each beneficial owner of
Common Stock has sole investment and voting power with respect to the
shares listed, subject to community property laws where applicable.
(2) Percentages indicated by an asterisk are less than one percent of the
class.
(3) The stock listed includes 326,144 shares of Common Stock owned by Mr.
Mallender directly, 83,750 shares which Mr. Mallender has the right to
acquire under exercisable options and 24,031 shares of Common Stock held in
trust for the benefit of Mr. Mallender under the Talley Savings Plus plan.
150,000 of the shares owned by Mr. Mallender directly are required, except
for death, disablement, change of control and certain other circumstances,
to be held for at least a minimum period. See "Executive
Compensation -- Executive Compensation Committee Report -- Stock Based
Incentive Compensation."
(4) The stock listed includes 270,906 shares of Common Stock owned by Mr. Crim
directly and 22,302 shares of Common Stock held in trust for the benefit of
Mr. Crim under the Talley Savings Plus plan. 112,500 of the shares owned by
Mr. Crim directly are required, except for death, disablement, change of
control and certain other circumstances, to be held for at least a minimum
period. See "Executive Compensation -- Executive Compensation Committee
Report -- Stock Based Incentive Compensation."
(5) The stock listed includes 148,242 shares of Common Stock held by Mr. Mullen
in a revocable living trust with respect to which Mr. Mullen shares
investment power and voting power with his wife and 5,200 shares held by a
custodian for his two sons under the Uniform Transfers to Minor Act
("UTMA"). Mr. Mullen disclaims beneficial ownership of all shares held for
his sons under the UTMA. The stock listed also includes 18,556 shares of
Common Stock held in trust for the benefit of Mr. Mullen under the Talley
Savings Plus plan. 75,000 of the shares held by Mr. Mullen in the revocable
living trust are required, except for death, disablement, change of control
and certain other
10
<PAGE> 14
circumstances, to be held for at least a minimum period. See "Executive
Compensation -- Executive Compensation Committee Report -- Stock Based
Incentive Compensation."
(6) The stock listed includes 125,500 shares of Common Stock owned by Mr. May
directly and 19,848 shares of Common Stock held in trust for the benefit of
Mr. May under the Talley Savings Plus plan. 75,000 of the shares owned by
Mr. May directly are required, except for death, disablement, change of
control and certain other circumstances, to be held for at least a minimum
period. See "Executive Compensation -- Executive Compensation Committee
Report -- Stock Based Incentive Compensation."
(7) The stock listed includes 122,698 shares of Common Stock held by Mr.
Dickerson in a revocable living trust with respect to which Mr. Dickerson
shares investment power and voting power with his wife. In addition, the
stock listed includes 12,019 shares of Common Stock held in trust for the
benefit of Mr. Dickerson under the Talley Savings Plus plan. 75,000 of the
shares held by Mr. Dickerson in the revocable living trust are required,
except for death, disablement, change of control and certain other
circumstances, to be held for at least a minimum period. See "Executive
Compensation -- Executive Compensation Committee Report -- Stock Based
Incentive Compensation."
(8) The stock listed includes 1,000 shares of Director Restricted Stock and
1,000 shares of Common Stock under exercisable options granted pursuant to
the Director Plan.
(9) The stock listed includes 3,950 shares of Common Stock held in two separate
trust funds in broker name with respect to which Mr. Stodder shares
investment power and voting power with his wife.
(10) The current executive officers (five persons) and directors as a group own
1,041,990 shares of Common Stock directly or as described herein and have
rights to acquire 92,750 shares of Common Stock under exercisable options.
In addition, 96,756 shares of Common Stock are held in trust for the
benefit of the executive officers of the Company under the Talley Savings
Plus plan.
IX. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION COMMITTEE REPORT
The Committee, at the request of the Board of Directors, has prepared the
following report relating to the compensation policies and decisions made by the
Committee with regard to compensation of the Company's Named Executive Officers
in 1996.
Compensation Policy. The Committee strives to devise and implement
executive compensation programs which (i) align the interests of executives with
the long-term interests of stockholders; (ii) motivate key senior officers to
achieve strategic business initiatives and reward them for their achievement;
and (iii) ensure the Company's ability to attract and retain top quality
executives.
The components of the Company's executive compensation package are
specifically designed to meet these three objectives: (i) salary and related
benefits are intended to ensure competitive base compensation; (ii) annual cash
bonus incentives reward the achievement of specific strategic business
objectives; and (iii) stock-based compensation is granted to motivate and reward
results that benefit stockholders.
The Committee reviews each of these components annually, based upon the
financial and operating performance of the Company, a review of competitive
compensation information and the recommendations of compensation consultants.
Each component of the Company's executive compensation package is discussed in
detail below.
Competitive Compensation Component
Salary and Related Benefits. Each executive officer receives salary and
benefits based on competitive compensation information, his position and tenure
with the Company, his past performance and his ability to contribute to the
future success of the Company. The Committee establishes salary and benefits
levels within the competitive range of the salary and benefits levels of the
executive officers of similarly-sized and structured companies.
11
<PAGE> 15
The Committee reviews the salaries of the Named Executive Officers every
two years and utilizes the input of its compensation consultants to determine if
the salaries are set at competitive levels. The base salary for Mr. Mallender,
the Chief Executive Officer, is established pursuant to an amendment, dated
April 1, 1995, to his employment contract with the Company. The salaries of the
Named Executive Officers were not reviewed in 1996 and so no changes were made.
Since 1976 the Company has had a "restoration plan," under which retirement
benefits cut back by the Internal Revenue Code (the "Code") are restored.
Restoration plan benefits, which had heretofore covered only the Chief Executive
Officer (as required by his employment contract) and the Chief Operating
Officer, were extended in 1996 to the other Named Executive Officers and to
certain other executives of the Company.
Performance-Based Compensation Components
The annual cash bonus and stock-based components of compensation reward the
achievement of specific objectives and performance that increases the value of
the Company for its owners.
1996 saw successes on many fronts. Management favorably resolved a six year
contract dispute with TRW Inc. ("TRW"), for which the Company received
approximately $156 million in cash. To enable the Company to quickly and
effectively redeploy these funds, management implemented a near-complete
withdrawal from the real estate market. The tax benefits from this sale,
together with the TRW payment, allowed the elimination of almost all of the
Company's most expensive debt and the five year dividend arrearage on the
outstanding preferred stock. Also, the improvement in the Company's balance
sheet and cash position paved the way for growing the Company's most promising
businesses, including a re-entry into the airbag business. In addition, a
substantial part of the Series A, B and D Preferred Stock was converted into
common.
Management's strategy not only rehabilitated the Company, but positioned
the Company to realize strong revenue and profit growth in large and growing
markets. The Committee determined that it was appropriate to recognize and
reward these accomplishments.
Annual Incentive Compensation. The executive incentive plan is consistent
with the Committee's overriding policy of incentive compensation arrangements.
The amount of a participant's cash bonus is based on the Company's achievement
of specified financial and strategic objectives, including net earnings, return
on investments and stock performance. Bonus targets for Messrs. Mallender and
Crim are 50% of annual salary; target bonuses for other executives range from
7.5% to 25% of annual salary. Actual bonuses may vary from zero to two times the
target percentages. In determining the bonus for Mr. Mallender, the Committee
considered his ability to satisfy the annual goals established by the Committee.
The performance factors underlying those goals, and contributing to the annual
bonus award for Mr. Mallender on account of 1996, are the same specified
financial and strategic objectives referred to above that apply to all of the
executives included in the executive incentive plan. Based on the executive
incentive plan for 1996, awards to the Named Executive Officers are $311,058 to
Mr. Mallender, $232,508 to Mr. Crim, $56,556 to Mr. Dickerson, $47,130 to Mr.
May and $47,130 to Mr. Mullen.
Stock-Based Incentive Compensation. Stock-based compensation will
increasingly be emphasized by the Committee as a means of providing incentives
for improved long-term performance and enhancing stockholder value. As many
studies have demonstrated, stock-based incentive compensation helps to align the
interests of management with the long-term interests of the Company's
stockholders. The long-term nature of stock-based compensation also helps to
retain key executives for an extended period.
In 1993 the Committee approved stock grants and options to the Named
Executive Officers and to certain other involved executives, following the
successful 1992 restructuring of debt necessitated by the crash of the real
estate market. Prior to 1993 and since that time, the Committee put a freeze on
long-term incentive bonuses. For the year 1996, recognizing the achievements
cited above, the Committee approved payment of "qualified" incentive bonuses to
the Named Executive Officers and certain other key executives. The qualification
on these incentive bonuses was that they were required to be used in total to
acquire the Company's Common Stock, and, except for death, disablement, change
of control and certain other circumstances, required each recipient to hold the
stock for at least a minimum period.
12
<PAGE> 16
The "qualified" incentive bonuses thus awarded emphasized that a
significant amount of the compensation of the Named Executive Officers and other
key executives must be linked to the success of stockholders. Also, the 1996
incentive awards increased the stock ownership of the Named Executive Officers
to a level in line with those of comparable companies, and brought total average
compensation of the Named Executive Officers approximately in line with
comparable companies for the 1990-1996 period. The payment to Mr. Mallender also
recognized his significant individual role in the Company's accomplishments
during the last several years. In particular, the incentive award to Mr.
Mallender reflected the special leadership contributions he had made during the
1990-1996 period resulting in several Company accomplishments finalized during
1996 and directly affecting the Company's performance: namely; the complete
resolution of the TRW litigation and the receipt by the Company of approximately
$156 million in cash upon the resolution; the near-complete exit during 1996
from the real estate market; and the dramatic reduction of the Company's debt
during 1996 and the improvement in the Company's liquidity and financial
position. Further, the award is directly related to the Company's stock
performance on a prospective basis because the award requires Mr. Mallender to
retain the shares of the Company's Common Stock acquired by him with the net
proceeds of the award for a minimum period (except under certain specified
circumstances), thereby aligning Mr. Mallender's interests directly with those
of all stockholders.
Under the Company's 1996 Comprehensive Stock Plan, approved by stockholders
at last year's annual meeting, the Committee intends to tailor long-term
incentive and other stock-based compensation programs to continue to encourage
key executives to increase their long-term holdings of the Company's Common
Stock and to increase the market value of those shares to the benefit of all
stockholders. Also, because the number of key executives is relatively small for
a highly diversified company, the Committee intends to design such programs to
provide these key executives with specific and direct incentives to remain with
the Company and its subsidiaries.
In the absence of unusual circumstances, the Committee intends to design
awards under the 1996 Comprehensive Stock Plan so that they will qualify as
"performance based compensation" and, provided the other requirements of Section
162(m) of the Code are satisfied, will not be subject to the deduction limit of
Section 162(m) of the Code. A portion of the long-term incentive bonuses paid
during 1996 -- which was used to acquire the Company's Common Stock -- was not
deductible pursuant to Section 162(m). To encourage exercise of the option
awards, the 1996 cash payment enabled recipients to exercise their stock options
on a tax-free basis. The Committee believes the annual bonuses, as currently
structured, best serve the interests of the Company and its stockholders by
allowing the Company to maximize the incentive elements of the executive
officers' total compensation packages, whether or not limited by Section 162(m).
The foregoing report has been furnished by the Company's Executive
Compensation Committee: Fred Israel, John W. Stodder, and Donald J. Ulrich.
EXECUTIVE COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In addition to the three current Committee members identified above in the
Executive Compensation Committee Report, Mr. Stamatakis served as a member of
the Committee from May 1994 until July 1996. The Company paid $189,000 in
consulting fees and related expenses to Mr. Stamatakis for services relating to
international business matters that were performed during the fiscal year ended
December 31, 1996. Mr. Stamatakis traveled to Europe and the Far East on behalf
of the Company to explore possible opportunities for the sale of its products
and services. Mr. Stamatakis was an officer of two of the Company's subsidiaries
from 1963 to 1971, but he has not served as a Company employee since that time.
SUMMARY COMPENSATION TABLE
The following table describes all compensation awarded to, earned by or
paid to the Company's chief executive officer (the "CEO") and the four most
highly compensated executive officers of the Company other than the CEO during
the three most current fiscal years. The Executive Compensation Committee Report
set forth above describes the compensation policies applicable to the Company's
executive officers (including the Named Executive Officers) and discusses the
Committee's bases for the CEO's compensation for the last completed fiscal year.
13
<PAGE> 17
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------
ANNUAL COMPENSATION AWARDS
------------------------------- -------------------------
OTHER SECURITIES PAYOUTS
ANNUAL RESTRICTED UNDERLYING ------- ALL OTHER
COMPEN- STOCK OPTIONS/ LTIP COMPEN-
NAME AND PRINCIPAL SALARY BONUS SATION AWARD(S) SARS PAYOUTS SATION
POSITION YEAR ($) ($)(1) ($)(2) ($) (#) ($)(3) ($)(4)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- ------------------------ ---- ------- ------- --------- ---------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William H. Mallender,... 1996 495,000 311,058 1,082,070 0 0 637,500 1,434,507
Chairman and CEO 1995 475,000 300,861 0 0 0 0 246,639
1994 415,000 329,635 0 0 0 0 625,688
Jack C. Crim,........... 1996 370,000 232,508 811,553 0 0 478,125 1,048,894
President and COO 1995 355,313 224,886 0 0 0 0 215,976
1994 311,250 247,226 0 0 0 0 186,057
Mark S. Dickerson,...... 1996 180,000 56,556 543,215 0 0 318,750 13,618
Vice President, 1995 176,250 54,702 0 0 0 0 7,466
Secretary and 1994 165,000 65,530 0 0 0 0 6,622
General Counsel
Kenneth May,............ 1996 150,000 47,130 545,144 0 0 318,750 14,210
Vice President and 1995 147,500 45,585 0 0 0 0 9,679
Controller 1994 140,000 55,601 0 0 0 0 9,427
Daniel R. Mullen,....... 1996 150,000 47,130 544,587 0 0 318,750 14,132
Vice President and 1995 147,500 45,585 0 0 0 0 9,707
Treasurer 1994 140,000 55,601 0 0 0 0 9,452
</TABLE>
- ---------------
(1) The bonus for 1996 was based on performance in that year but was determined
and paid in 1997 pursuant to the Executive Incentive Plan described in the
Executive Compensation Committee Report above. See "Executive Compensation
Committee Report -- Annual Incentive Compensation." The bonuses for 1995 and
1994 were based on performance in each of those years but were determined
and paid in 1996 and 1995, respectively, pursuant to incentive plans similar
to the Executive Incentive Plan.
(2) The amount reported as "Other Annual Compensation" represents payments for
the benefit of each Named Executive Officer for estimated tax liability
resulting from a "qualified" incentive bonus paid in 1996. See "Executive
Compensation Committee Report -- Stock Based Incentive Compensation." The
amount reported also represents payments for the benefit of each Named
Executive Officer (other than Mr. Mallender and Mr. Crim) for estimated tax
liability resulting from certain FICA earnings for each officer under the
Retirement Plan, and the Executive Restoration Plan, described under
"Retirement Plan" below.
(3) The amount reported represents a "qualified" incentive bonus paid in 1996.
See "Executive Compensation Committee Report -- Stock Based Incentive
Compensation."
(4) The amount reported in the "All Other Compensation" column includes the
Company's 50% matching contributions to the Talley Savings Plus plan ("TSP")
and insurance premiums (life, medical and long-term disability) paid in
excess of those paid on behalf of other employees. This column also includes
current (i.e., present value) payments to Mr. Mallender and Mr. Crim under
the Restoration Benefit Plan described under "Retirement Plan" and
"Executive Employment Contract" below. Except for these present value
payments, Mr. Mallender and Mr. Crim will not receive any other retirement
income under the Restoration Benefit Plan. The amount reported in this
column for each of the Named Executive Officers is quantified for 1996 as
follows: Mr. Mallender: Restoration Benefit Plan, $1,399,728; insurance
premiums, $31,029; and TSP contributions, $3,750. Mr. Crim: Restoration
Benefit Plan, $1,030,064; insurance premiums, $15,080; and TSP
contributions, $3,750. Mr. Dickerson: insurance premiums, $9,868; and TSP
contributions, $3,750. Mr. May: insurance premiums, $10,460; and TSP
contributions, $3,750. Mr. Mullen: insurance premiums, $10,382; and TSP
contributions, $3,750.
14
<PAGE> 18
EXECUTIVE EMPLOYMENT CONTRACT
Mr. Mallender is employed by the Company pursuant to a written employment
contract for a term expiring on May 21, 2000. The contract permits the Company
to terminate his services at any time upon six months' notice. Such termination
entitles Mr. Mallender to a lump sum payment equal to two years of employment
compensation including salary and any bonus and incentive awards. In the event
of a Change in Control of the Company (as defined in the employment contract),
Mr. Mallender will be entitled to receive a lump sum equal to 2.5 times his then
existing employment compensation (including salary and any bonus and incentive
awards, adjusted for tax payments in certain circumstances) if he elects to
terminate the employment agreement within 24 months after such Change in Control
or if the Company terminates Mr. Mallender's employment following such Change in
Control. The base salary payable to Mr. Mallender under his employment contract
is $495,000. In addition, any change to any pension or retirement plan of the
Company will not affect benefits payable to Mr. Mallender or his designees. Mr.
Mallender and his family, legal representatives, assignees and other
beneficiaries are also entitled to participate and receive benefits under
pension or retirement plans, or group life, health or accident plans available
generally to executives of the Company and their families, legal
representatives, assignees and other beneficiaries. Finally, if Mr. Mallender
should be unable to perform his duties because of death or mental or physical
incapacity, a disability payment equal to his then existing salary is payable
for a period of one year.
RETIREMENT PLAN
The following table shows the estimated annual benefits payable under the
Company's Retirement Plan (the "Retirement Plan") for participating employees,
including the Named Executive Officers, in specified remuneration and years of
service classifications for retirement at age 65 in 1997. The amounts shown
include the additional benefits payable under the Executive Restoration Benefit
Plan described below. Except for the present value payments reported in column
(i) of the Summary Compensation Table, Mr. Mallender and Mr. Crim will not
receive any other retirement income under the Restoration Benefit Plan described
below.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE(1)
--------------------------------------------------------------
REMUNERATION(2) 15 20 25 30 AND OVER
- ----------------------------------- --------- --------- --------- -----------
<S> <C> <C> <C> <C>
$125,000......................... $ 24,593 $ 32,790 $ 40,988 $ 49,186
$150,000......................... $ 29,951 $ 39,935 $ 49,918 $ 59,902
$175,000......................... $ 35,309 $ 47,079 $ 58,848 $ 70,618
$200,000......................... $ 40,667 $ 54,223 $ 67,779 $ 81,334
$225,000......................... $ 46,025 $ 61,367 $ 76,709 $ 92,051
$250,000......................... $ 51,383 $ 68,511 $ 85,639 $ 102,767
$300,000......................... $ 62,100 $ 82,800 $ 103,500 $ 124,119
$500,000......................... $ 104,965 $ 139,953 $ 174,941 $ 209,929
</TABLE>
- ---------------
(1) As of December 31, 1996, the full years of credited service for each of the
Named Executive Officers were as follows: Mr. Mallender -- 25 years; Mr.
Crim -- 14 years; Mr. Dickerson -- 18 years; Mr. May -- 18 years; and Mr.
Mullen -- 14 years.
(2) For purposes of this table it is assumed that final average compensation
will be 89.3% of the final earnings.
The compensation covered by the Retirement Plan includes all wages,
salaries and bonuses. The compensation of the Named Executive Officers used to
calculate the benefits in this table would be the salaries and bonuses reported
in columns (c), (d) and (h) of the Summary Compensation Table. Benefits under
the Retirement Plan are not subject to deduction for Social Security or other
offset amounts.
15
<PAGE> 19
The Internal Revenue Code places certain limitations on pensions which may
be paid to certain highly compensated employees under qualified plans.
Retirement benefits under the Retirement Plan which exceed such limitations are
paid by Talley Manufacturing outside the Retirement Plan as an operating expense
under the Restoration Benefit Plan and the Executive Restoration Benefit Plan.
The Restoration Benefit Plan was adopted during the fiscal year ended March 31,
1976, was amended and restated effective January 1, 1985, and was thereafter
amended several times. As of December 31, 1996, the only participants in the
Restoration Benefit Plan are Mr. Mallender and Mr. Crim. The Executive
Restoration Benefit Plan became effective on January 1, 1996. As of December 31,
1996, the participants in the Executive Restoration Benefit Plan are a number of
key employees selected by the Committee, including Mr. Dickerson, Mr. May and
Mr. Mullen. The retirement benefits provided by these restoration benefit plans
are contractual obligations of Talley Manufacturing.
The foregoing table was calculated on a straight-life annuity basis. Key
employees (other than Mr. Mallender and Mr. Crim) selected by the Committee may,
upon retirement from the Company, receive supplemental annuity payments from
Talley Manufacturing in addition to payments received under the Retirement Plan.
The supplemental annuity payments will be made in amounts necessary to increase
the joint-life annuity payable under the Retirement Plan to the amount that
would be payable under a single-life annuity, with such supplemental payments
being made on a joint-life basis.
STOCK OPTIONS
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of stock options during fiscal year
1996 and the number of shares of Common Stock represented by outstanding stock
options held by each of the Named Executive Officers as of December 31, 1996.(1)
AGGREGATED OPTION/SAR EXERCISES
IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTIONS/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED STOCK IN-THE-MONEY STOCK OPTIONS
SHARES OPTIONS AT DECEMBER 31, 1996 AT DECEMBER 31, 1996(3)
ACQUIRED VALUE (#) ($)
ON EXERCISE REALIZED(2) ----------------------------- -----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- ----------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Mallender............ 150,000 600,000 83,750 0 0 0
Mr. Crim................. 112,500 450,000 0 0 0 0
Mr. Dickerson............ 75,000 300,000 0 0 0 0
Mr. May.................. 75,000 300,000 0 0 0 0
Mr. Mullen............... 75,000 300,000 0 0 0 0
</TABLE>
- ---------------
(1) No Stock Appreciation Rights ("SARs") are held by any of the Named Executive
Officers.
(2) The value realized upon exercise is the difference between the closing price
of the Common Stock on the New York Stock Exchange on the exercise date
($8.25) and the exercise price of the option.
(3) In accordance with SEC regulations, the value of the unexercised
"in-the-money" stock options is calculated by multiplying the number of
underlying shares by the difference between the closing price of the Common
Stock on the New York Stock Exchange on December 31, 1996 ($7.375) and the
exercise price of these shares.
16
<PAGE> 20
X. OTHER MATTERS
As of the date of this proxy statement, management of the Company knows of
no business that will be presented for consideration at the meeting other than
that which has been referred to above and the following five proposals, which
Saad A. Alissa, a stockholder of the Company, has advised the Company that he
intends to present at the meeting. Mr. Alissa has also indicated that he intends
to nominate three persons for election to the Board of Directors at the meeting.
See "Election of Directors." If any of such stockholder's proposals are properly
presented at the meeting in compliance with the Delaware General Corporation Law
and the Company's Bylaws, to the extent no direction is given when the enclosed
proxy is returned, the shares represented by the proxy will be voted AGAINST any
and all of such proposals as are so presented by that stockholder. As to other
business, if any, that may properly come before the meeting, it is intended that
proxies in the enclosed form will be voted in respect thereof in accordance with
the judgment of the person or persons voting the proxies.
The Board of Directors of the Company recommends a vote AGAINST all five of
Mr. Alissa's proposals, for the reasons outlined below. The stockholders should
be aware that Mr. Alissa's proposals are only recommendations that the Board of
Directors take the steps necessary to effectuate Mr. Alissa's proposals. In the
case of Mr. Alissa's proposals dealing with amendments to the Company's
Certificate of Incorporation, these amendments can only be accomplished by a
super-majority vote of the stockholders at another meeting of the stockholders.
Elimination of classified board of directors (Item 2 on the Company's proxy
card):
A classified board of directors is commonplace among large and well-run
public companies in the United States. More than half of the companies
comprising the Standard & Poor's 500 have classified boards. While a classified
board provision does extend the time required to replace an entire board of
directors, a classified board does, in the Company's judgment, facilitate
continuity and stability by ensuring that at any one time a majority of the
directors will have prior experience as directors of the Company and will be
familiar with its business and operations.
Provision to allow holders of ten (10%) percent of shares to call stockholder
meetings (Item 3 on the Company's proxy card):
Since 1976, the Company's Certificate of Incorporation and Bylaws have
specified that only the Board of Directors, the Chairman of the Board or the
President of the Company can call a special meeting of stockholders. Under the
Delaware General Corporation Law, special meetings can only be called by a
company's board of directors unless the company has elected to give such power
to other persons in its certificate of incorporation or bylaws. The Company
believes that provisions giving such power to ten percent stockholders are not
commonly adopted by companies because they leave a company vulnerable to the
risk that a stockholder will call for excessive or unnecessary meetings
resulting in a significant waste of time and money for the company. An annual
meeting of stockholders is held every year by the Company and is required to be
held every year. Any stockholder has the right to have a proposal brought before
the stockholders at the annual meeting. See "Submission of Stockholder
Proposals." Mr. Alissa himself has twice availed himself of this opportunity, in
1996 and again this year. If a matter arises that warrants immediate stockholder
action, the Board of Directors can and will call a special meeting of
stockholders. However, management believes that a requirement to hold a special
meeting any time one is requested by any holder(s) of ten percent of the stock
would cause unnecessary expense and risk disruption of business operations.
Elimination of super-majority requirements (Item 4 on the Company's proxy card):
The Company's Certificate of Incorporation and Bylaws have included for
many years provisions that require an 80% stockholder vote to eliminate or
change certain fundamental corporate governance provisions which the Company
views as especially important to protect against abusive or unfair takeover
tactics. As in the case of the shareholder rights plan (discussed below), these
provisions, in the Company's view, are not intended as, and cannot properly be
used as, a shield against a fair and fully funded takeover offer that benefits
all stockholders equally. Instead, the Board, consistent with its fiduciary
duties, would be required to evaluate such an offer to determine if it is in the
best interests of the Company and its stockholders.
17
<PAGE> 21
Retention of an independent investment banking firm (Item 5 on the Company's
proxy card):
This proposal by Mr. Alissa has become moot and, accordingly, should be
rejected. As outlined in the Company's 1996 Annual Report to Stockholders, 1996
saw several watershed accomplishments for the Company, including the successful
and complete resolution of the TRW litigation, the disposition of virtually all
of the real estate segment, the reduction of the Company's long-term debt by
more than half and the significant improvement in the Company's liquidity and
financial position. The Company is now in a position to consider a number of
promising initiatives and alternatives for enhancing stockholder value.
To make sure that the Board of Directors has the best possible tools
available with which to make these critical decisions, the Board has engaged J.
P. Morgan Securities Inc. to advise the Board with respect to strategic
financial alternatives that may be available to the Company. Three investment
banking firms were interviewed and J. P. Morgan was selected because they, among
other reasons, have no prior investment banking relationship with the Company,
which will mean that they can bring to bear an entirely fresh and objective
perspective upon these critical issues. J. P. Morgan has already commenced its
work.
Note: Apparently, Mr. Alissa agrees that this proposal is now moot, and he
has indicated that he does not intend at this time to present this proposal at
the annual meeting. Therefore, the enclosed Company proxy will be voted on Item
5 only if this proposal is in fact presented by Mr. Alissa at the meeting. If
Mr. Alissa's proposal is not in fact presented at the annual meeting, then any
votes specified with respect to Item 5 on the enclosed Company proxy will not be
used for any purpose, discretionary or otherwise.
Elimination of the shareholder rights ("poison pill") plan (Item 6 on the
Company's proxy card):
The Company, like a great many publicly held companies in the U.S., has in
place a shareholders' rights plan. A proposal from Mr. Alissa seeking
elimination of the rights plan was voted down by stockholders at the April 1996
annual meeting.
The Company firmly believes that its shareholder rights plan will not stand
in the way of a fair takeover that benefits all stockholders, and will only
hinder a takeover attempt that seeks to acquire the Company for less than it is
worth, or that treats stockholders unequally. The Board, consistent with its
fiduciary duties, would be required to evaluate such a fair takeover offer to
determine if it is in the best interests of the Company and its stockholders.
A number of studies have shown that poison pills do not reduce stockholder
returns. In fact, a 1993 academic study showed that stockholder activism, in the
form of poison pill rescission proposals is associated with below-market
returns. Another 1993 study, reported in Pensions & Investments found that
companies with a moderate number of anti-takeover provisions perform better than
companies with very small numbers of such provisions. Moreover, an earlier study
by Georgeson & Co. showed that companies with poison pills receive takeover
premiums some 70% greater than those without poison pills.
The Board of Directors believes that the Company's existing Certificate of
Incorporation and Bylaws, some of provisions of which may be construed as
anti-takeover in nature, are in the best interests of the Company and its
stockholders, for the reasons outlined above. The Board of Directors believes
that Mr. Alissa's attempt to remove these important, protective provisions is
unnecessary and unwarranted, and strongly recommends that you vote AGAINST items
2, 3, 4, 5 and 6 on the Company's enclosed proxy card.
18
<PAGE> 22
XI. FIVE YEAR STOCKHOLDER RETURN COMPARISON
The following graph compares the cumulative five-year total stockholder
returns on the Company's Common Stock, on an indexed basis, with the Standard &
Poor's 500 Stock Index and the Investor's Business Daily Diversified Operations
Index. The Investor's Business Daily Diversified Operations Index is an index
that consists of over 100 diversified industrial companies, which includes the
Company. The table assumes an initial $100 investment and the cumulative total
returns are calculated assuming the reinvestment of dividends.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD DIVERSIFIED
(FISCAL YEAR COVERED) COMPANY S&P 500 INDEX OPERATIONS INDEX
<S> <C> <C> <C>
1990 100 100 100
1991 89 108 108
1992 168 118 115
1993 221 120 113
1994 246 165 144
1995 211 203 181
</TABLE>
XII. THE COMPANY'S CERTIFYING ACCOUNTANT
Price Waterhouse LLP has served as the Company's independent public
accountants since July 1991 and has been selected to serve in that capacity
during fiscal year 1997. Representatives of Price Waterhouse LLP are expected to
be present at the annual meeting and will have an opportunity to make a
statement if they so desire, and to respond to appropriate questions.
XIII. SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership with the SEC and the New York Stock Exchange. Officers, directors and
greater than ten-percent stockholders are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during fiscal year 1996,
all filings required by its officers, directors and greater than ten-percent
stockholders under Section 16(a) of the Exchange Act were timely filed.
Phoenix, Arizona
Dated: April 11, 1997
19
<PAGE> 23
EXHIBIT A
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name and the present principal
occupation or employment (except with respect to the directors (other than Mr.
Benson) whose principal occupation is set forth in the Proxy Statement), and the
name, principal business and address of any corporation or other organization in
which such employment is carried on, of the directors and executive officers of
the Company who may assist in soliciting proxies from the Company's
stockholders. Unless otherwise indicated below, the principal business address
of each such person is 2702 North 44th Street, Suite 100A, Phoenix, Arizona
85008 and such person is an employee of the Company. Directors are indicated
with an asterisk.
<TABLE>
<CAPTION>
PRESENT OFFICE OR OTHER PRINCIPAL
NAME AND PRINCIPAL BUSINESS ADDRESS OCCUPATION OR EMPLOYMENT
- -------------------------------------------- --------------------------------------------
<S> <C>
Neil W. Benson*............................. Senior Partner, Lewis Golden & Co.,
Lewis Golden & Co. Chartered Accountants
40, Queen Anne Street
London, England W1M OEL
Jack C. Crim*...............................
Paul L. Foster*.............................
St. Joseph's University
5600 City Avenue
Philadelphia, PA 19131
Townsend Hoopes*............................
5117 Scarsdale Road
Bethesda, MD 20816
Fred Israel*................................
2801 New Mexico Avenue, N.W.
Penthouse 7
Washington, DC 20007
William H. Mallender*.......................
Joseph A. Orlando*..........................
18-1 Stonewood Drive
Old Lyme, CT 06371
Alex Stamatakis*............................
4227 Upper Ridge Way
Scottsdale, AZ 85253
John W. Stodder*............................
2516 Via Tejon, Suite 301
P.O. Box 5
Palos Verdes Estates, CA 90274
Donald J. Ulrich, Jr.*......................
Ventura Coastal Corporation
2325 Vista Del Mar, Box 69
Ventura, CA 93002
David Victor*...............................
Osborn Maledon
2929 North Central Avenue, 21st Floor
Phoenix, AZ 85012-2798
Mark S. Dickerson........................... Vice President, Secretary and General
Counsel
Kenneth May................................. Vice President and Controller
Daniel R. Mullen............................ Vice President and Treasurer
</TABLE>
1
<PAGE> 24
EXHIBIT B
TRANSACTIONS IN THE SECURITIES OF THE COMPANY WITHIN
THE PAST TWO YEARS AND CERTAIN OTHER TRANSACTIONS
The following table sets forth information with respect to all purchases
and sales of shares of Common Stock and Preferred Stock of the Company by the
Company and the directors and executive officers of the Company during the past
two years.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NUMBER OF SHARES OF SERIES B
OF COMMON STOCK PREFERRED STOCK
NAME PURCHASED (SOLD) PURCHASED (SOLD) DATE
- ------------------------------------------ ---------------- ---------------- --------
<S> <C> <C> <C>
Neil W. Benson............................ 1,000(1) 5/1/96
1,000(2) 5/1/96
Jack C. Crim.............................. (116) (3)
112,500(4) 8/6/96
(5,000)(5) 4/22/96
12,500(6) 4/22/96
(4,718) (7)
13,348 (8)
233 379 (9)
Paul L. Foster............................ 1,000(1) 5/1/96
1,000(2) 5/1/96
Townsend Hoopes........................... (1,950)(10) 12/17/96
1,000(1) 5/1/96
1,000(2) 5/1/96
(1,500)(5) 4/22/96
3,750(6) 4/22/96
Fred Israel............................... 1,000(1) 5/1/96
1,000(2) 5/1/96
William H. Mallender...................... 1,000(11) 11/1/96
(370) (3)
150,000(4) 8/6/96
(3,000)(5) 4/22/96
7,500(6) 4/22/96
(5,096) (7)
14,604 (8)
219 392 (9)
(10,000)(10) 4/11/95
Joseph A. Orlando......................... 1,000(1) 5/1/96
1,000(2) 5/1/96
(500)(5) 4/22/96
1,250(6) 4/22/96
Alex Stamatakis........................... 1,000(1) 5/1/96
1,000(2) 5/1/96
John W. Stodder........................... 1,325(11) 11/5/96
1,000(1) 5/1/96
1,000(2) 5/1/96
(800)(5) 4/22/96
2,000(6) 4/22/96
</TABLE>
1
<PAGE> 25
<TABLE>
<CAPTION>
NUMBER OF SHARES
NUMBER OF SHARES OF SERIES B
OF COMMON STOCK PREFERRED STOCK
NAME PURCHASED (SOLD) PURCHASED (SOLD) DATE
- ------------------------------------------ ---------------- ---------------- --------
<S> <C> <C> <C>
Donald J. Ulrich, Jr. .................... 1,000(1) 5/1/96
1,000(2) 5/1/96
David Victor.............................. 1,000(1) 5/1/96
1,000(2) 5/1/96
Mark S. Dickerson......................... (1,500)(12) 12/24/96
(11,900)(12) 12/19/96
788 (13)
75,000(4) 8/6/96
(2,367) (7)
6,679 (8)
208 234 (9)
(2,800)(12) 3/7/95
(5,000)(12) 3/3/95
Kenneth May............................... 631 (13)
75,000(4) 8/6/96
(200)(5) 4/22/96
500(6) 4/22/96
(4,173) (7)
11,195 (8)
290 376 (9)
(4,500)(10) 11/20/95
(4,500)(10) 11/17/95
(9,000)(10) 11/16/95
(10,057)(10) 11/15/95
Daniel R. Mullen.......................... 639 (13)
75,000(4) 8/6/96
(3,883) (7)
10,452 (8)
307 368 (9)
Talley Industries, Inc. .................. 3,400(11) 1/23/97
800(11) 1/22/97
1,500(11) 1/21/97
3,000(11) 1/20/97
1,000(11) 1/17/97
323,232(14) 1/16/97
10,000(11) 1/15/97
1,500(11) 1/8/97
25,000(11) 1/7/97
85,700(11) 1/3/97
1,000(11) 1/2/97
35,000(11) 12/31/96
59,000(11) 12/30/96
7,700(11) 12/27/96
10,500(11) 12/26/96
15,500(11) 12/24/96
5,000(11) 12/23/96
9,000(11) 12/20/96
8,000(11) 12/19/96
</TABLE>
2
<PAGE> 26
<TABLE>
<CAPTION>
NUMBER OF SHARES
NUMBER OF SHARES OF SERIES B
OF COMMON STOCK PREFERRED STOCK
NAME PURCHASED (SOLD) PURCHASED (SOLD) DATE
- ------------------------------------------ ---------------- ---------------- --------
<S> <C> <C> <C>
Talley Industries, Inc. (continued)
8,500(11) 12/18/96
32,100(11) 12/17/96
7,100(11) 12/16/96
10,100(11) 12/13/96
1,500(11) 12/10/96
10,100(11) 12/9/96
11,200(11) 12/6/96
11,200(11) 12/4/96
10,600(11) 11/27/96
10,600(11) 11/26/96
9,900(11) 11/22/96
4,700(11) 11/6/96
(42,500)(15) 11/1/96
(7,500)(16) 9/30/96
(570,000)(15) 8/6/96
1,000(17) 7/2/96
1,000(18) 7/2/96
(10,000)(1) 5/1/96
(10,000)(2) 5/1/96
(1,003,172)(5) 4/22/96
750(19) 4/12/96
10,000(19) 4/8/96
(702,919)(20) 2/7/96
(134,550)(21) 5/25/95
</TABLE>
- ---------------
(1) Grant of restricted stock pursuant to the Company's 1996 Non-Employee
Director Stock Plan.
(2) Grant of stock options pursuant to the Company's 1996 Non-Employee Director
Stock Plan.
(3) These shares were deemed sold under the Talley Savings Plus plan from May
1, 1996 through December 31, 1996.
(4) Acquisition of shares upon exercise of stock options.
(5) Disposition of shares in a transaction described in the Company's Offering
Circular, dated March 21, 1996, and its Schedule 13E-4, dated March 22,
1996, filed with the Securities and Exchange Commission.
(6) Acquisition of shares in a transaction described in the Company's Offering
Circular, dated March 21, 1996, and its Schedule 13E-4, dated March 22,
1996, filed with the Securities and Exchange Commission.
(7) These shares were deemed sold under the Talley Savings Plus plan from
January 1, 1996 through April 30, 1996.
(8) These shares were deemed acquired under the Talley Savings Plus plan from
January 1, 1996 through April 30, 1996.
(9) These shares were deemed acquired under the Talley Savings Plus plan from
January 1, 1995 through December 31, 1995.
(10) Disposition of shares in the public market.
(11) Purchase of shares in the public market.
(12) Disposition of shares by gift.
(13) These shares were deemed acquired under the Talley Savings Plus plan from
May 1, 1996 through December 31, 1996.
3
<PAGE> 27
(14) Purchase of shares in a privately negotiated transaction. These shares
include 118,765 shares that were not outstanding but reserved for issuance
pursuant to a contractual commitment given in connection with a 1994
acquisition.
(15) Disposition of shares upon exercise of stock options pursuant to the
Company's 1978 and 1990 Stock Option Plans.
(16) Grant of stock pursuant to the Company's 1996 Comprehensive Stock Plan.
(17) Cancellation of stock options for no value pursuant to the Company's 1996
Non-Employee Director Stock Plan.
(18) Forfeiture of restricted stock for no value pursuant to the Company's 1996
Non-Employee Director Stock Plan.
(19) Cancellation of stock options for no value pursuant to the Company's 1978
Stock Option Plan.
(20) Disposition of shares in a privately negotiated transaction.
(21) Grant of stock options pursuant to the Company's 1978 Stock Option Plan.
Other than as disclosed in the Proxy Statement, to the knowledge of the
Company, none of the Company, its directors or executive officers has any
substantial interest, direct or indirect, by security holdings or otherwise, in
any matter to be voted upon at the 1997 Annual Meeting of Stockholders.
Other than as disclosed in the Proxy Statement, to the knowledge of the
Company, none of the Company, its directors or executive officers is, or has
been within the past year, a party to any contract, arrangement or understanding
with any person with respect to any class of securities of the Company,
including, but not limited to, joint ventures, loan or option arrangements, puts
or calls, guarantees against loss or guarantees of profit, division of losses or
profits, or the giving or withholding of proxies.
Other than as disclosed in the Proxy Statement, to the knowledge of the
Company, none of the Company, its directors or executive officers, or any of
their associates, has any arrangements or understandings with any person or
persons with respect to any future employment by the Company or its affiliates
or with respect to any future transactions to which the Company or any of its
affiliates will or may be a party.
4
<PAGE> 28
TALLEY SAVINGS PLUS
VOTING INSTRUCTIONS TO TRUSTEE FOR ANNUAL MEETING OF STOCKHOLDERS, MAY 8, 1997
As a participant in the Talley Savings Plus plan, you have the right to
give written instructions to the Plan Trustee as to the voting of certain
shares of the Company's stock allocated to your account at the Company's Annual
Meeting of Stockholders to be held on May 8, 1997 and at any and all
adjournments thereof. In this connection, please indicate your voting choices
on the reverse side of this card, sign and date it, and return this card
promptly in the postage paid envelope provided.
(Continued and to be signed and dated on the reverse side)
- --------------------------------------------------------------------------------
-FOLD AND DETACH HERE-
[TALLEY LOGO]
YOUR VOTE IS IMPORTANT TO THE COMPANY.
PLEASE COMPLETE, SIGN AND DATE THIS INSTRUCTION CARD ON THE REVERSE SIDE AND
RETURN THE CARD BY TEARING OFF THE TOP PORTION OF THIS SHEET AND RETURNING IT
IN THE ENCLOSED ENVELOPE.
<PAGE> 29
ALL SHARES OF STOCK ALLOCATED TO MY ACCOUNT Please mark
your choice /X/
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" like this
ITEM 1 AND "AGAINST" ITEMS 2, 3, 4, 5 AND 6.
ITEM 1. ELECTION OF THREE DIRECTORS to serve until the annual meeting in 2000
and until their successors are duly elected and qualified.
NOMINEES: Paul L. Foster, Townsend Hoopes and William H. Mallender
INSTRUCTION: To withhold authority to vote for any individual nominee(s), write
the name of the nominees(s) on the space below.
FOR all nominees listed at WITHHOLD AUTHORITY
the left (except as marked to vote for all nominees
to the contrary hereon) listed at the left
/ / / /
- -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" ITEMS 2, 3, 4, 5 AND 6.
ITEM 2. Eliminate FOR AGAINST ABSTAIN
Classified / / / / / /
Board
ITEM 3. Create Right for FOR AGAINST ABSTAIN
10% of / / / / / /
Stockholders To
Call Special Meeting
ITEM 4. Eliminate Certain FOR AGAINST ABSTAIN
Supermajority Requirements / / / / / /
ITEM 5. Retain Independent FOR AGAINST ABSTAIN
Investment Advisor For / / / / / /
Certain Purposes
ITEM 6. Eliminate Stockholders' FOR AGAINST ABSTAIN
Rights Plan or Create / / / / / /
Ability of Stockholders
to so Eliminate
ITEM 7. The Trustee appointed herein is authorized to vote, in his discretion,
upon any other business as may properly come before the meeting or any
adjournments thereof.
The shares represented by this instruction card will be voted in the manner
directed by the participant(s). To the extent no direction is given when the
duly executed instruction card is returned, such shares will be voted "FOR" the
election of the three nominees named in Item 1 and "AGAINST" Items 2, 3, 4, 5
and 6 if such proposals are properly brought before the meeting or any
adjournment thereof.
I WILL ATTEND THE MEETING / /
Signature(s)_______________________________________________Date___________,1997
(Please sign as your name appears on this proxy. If signing for an estate,
trust or corporation, title or capacity should be stated. If shares are held
jointly, each holder should sign. Attorneys should submit powers of attorney.)
- -------------------------------------------------------------------------------
-FOLD AND DETACH HERE-
<PAGE> 30
TALLEY INDUSTRIES, INC.
PROXY - ANNUAL MEETING OF STOCKHOLDERS - MAY 8, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The stockholder(s) signing this proxy hereby appoint(s) Messrs. William
H. Mallender and Mark S. Dickerson, or any of them, as attorneys and proxies of
such stockholder(s), with full power of substitution to each of them, for and in
the name and stead of the undersigned to appear and vote, as designated on the
reverse side of this proxy, all of the shares of stock of Talley Industries,
Inc., which such stockholder(s) would be entitled to vote if personally present
at the Annual Meeting of Stockholders of Talley Industries, Inc., to be held on
May 8, 1997 at 11:00 a.m. South Carolina Time, at Talley Metals Technology,
Inc., South Carolina Hwy. 172, Hartsville, SC 29550, and at any and all
adjournments thereof.
Please complete, sign and date this proxy and return it promptly in the
enclosed envelope whether you plan to attend the meeting or not. This proxy
will not be used if you attend the meeting in person and so request.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES FOR
DIRECTOR IN ITEM 1 AND "AGAINST" ITEMS 2, 3, 4, 5 AND 6 LISTED ON
THE REVERSE SIDE.
(Continued and to be signed and dated on the reverse side)
- --------------------------------------------------------------------------------
-FOLD AND DETACH HERE-
[TALLEY INDUSTRIES, INC. LOGO]
YOUR VOTE IS IMPORTANT TO THE COMPANY.
PLEASE COMPLETE, SIGN AND DATE THIS PROXY CARD ON THE REVERSE SIDE AND RETURN
THE CARD BY TEARING OFF THE TOP PORTION OF THIS SHEET AND RETURNING IT IN THE
ENCLOSED ENVELOPE.
<PAGE> 31
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" Please mark
ITEM 1 AND "AGAINST" ITEMS 2, 3, 4, 5 AND 6. your choice /X/
like this
ITEM 1. ELECTION OF THREE DIRECTORS to serve until the annual meeting in 2000
and until their successors are duly elected and qualified.
NOMINEES: Paul L. Foster, Townsend Hoopes and William H. Mallender
INSTRUCTION: To withhold authority to vote for any individual nominee(s), write
the name of the nominee(s) on the space below.
FOR all nominees listed at WITHHOLD AUTHORITY
the left (except as marked to vote for all nominees
to the contrary hereon) listed at the left
/ / / /
- -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" ITEMS 2, 3, 4, 5 AND 6.
ITEM 2. Eliminate FOR AGAINST ABSTAIN
Classified / / / / / /
Board
ITEM 3. Create Right for FOR AGAINST ABSTAIN
10% of / / / / / /
Stockholders To
Call Special Meeting
ITEM 4. Eliminate Certain FOR AGAINST ABSTAIN
Supermajority Requirements / / / / / /
ITEM 5. Retain Independent FOR AGAINST ABSTAIN
Investment Advisor For / / / / / /
Certain Purposes
ITEM 6. Eliminate Stockholders' FOR AGAINST ABSTAIN
Rights Plan or Create / / / / / /
Ability of Stockholders
to so Eliminate
ITEM 7. The proxies appointed herein are authorized to vote, in their
discretion, upon any other business as may properly come before the meeting or
any adjournments thereof.
The shares represented by this proxy will be voted in the manner
directed by the stockholders(s). To the extent no direction is given when the
duly executed proxy is returned, such shares will be voted "FOR" the
election of the three nominees named in Item 1 and "AGAINST" Items 2, 3, 4, 5
and 6 if such proposals are properly brought before the meeting or any
adjournment thereof.
I WILL ATTEND THE MEETING / /
Signature(s)_______________________________________________Date___________,1997
(Please sign as your name appears on this proxy. If signing for an estate,
trust or corporation, title or capacity should be stated. If shares are held
jointly, each holder should sign. Attorneys should submit powers of attorney.)
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