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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 2)
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Talley Industries, Inc.
(Name of Subject Company)
Talley Industries, Inc.
(Name of Person(s) Filing Statement)
Common Stock, par value $1.00 per share
(Including the associated Preferred Stock Purchase Rights)
(Title of Class of Securities)
87468710
(CUSIP Number of Class of Securities)
Series A Convertible Preferred Stock, par value $1.00 per share
(Title and Class of Securities)
87468720
(CUSIP Number of Class of Securities)
Series B $1.00 Cumulative Convertible Preferred Stock, par value $1.00 per
share
(Title of Class of Securities)
87468730
(CUSIP Number of Class of Securities)
Mark S. Dickerson
Vice President,
General Counsel and Secretary
Talley Industries, Inc.
2702 North 44th Street
Suite 100A
Phoenix, Arizona 85008
(602) 957-7711
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of
the Person(s) Filing Statement)
---------------
Copies to:
William L. Rosoff
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
(212) 450-4000
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This Amendment No. 2 (this "Amendment") amends and supplements
the Solicitation/Recommendation Statement on Schedule 14D-9, originally filed
on October 2, 1997 by Talley Industries, Inc., a Delaware corporation (the
"Company") and subsequently amended by Amendment No. 1 on October 6, 1997,
relating to a tender offer commenced by Score Acquisition Corp., a Delaware
corporation ("Purchaser"), and a wholly owned subsidiary of Carpenter
Technology Corporation, a Delaware corporation ("Parent") on October 2, 1997.
All capitalized terms used in this Amendment without definition
have the meanings attributed to them in the Schedule 14D-9, as amended.
The items of the Schedule 14D-9 set forth below are hereby
amended by adding the following:
Item 8. Additional Information to be Furnished.
(d) Stockholder Litigation. On October 8, 1997, the complaint
relating to the Stockholder Action was amended to add Brickell Partners as a
newly named plaintiff and Purchaser and Parent as additional defendants in
this purported class action. This amended action is entitled: Jewish Center
of Hyde Park and Laz Schneider against Jack C. Crim, Alex Stamatakis, Donald
J. Ulrich, Paul L. Foster, Joseph A. Orlando, Fred Israel, John W. Stodder,
David Victor, the Company, Purchaser and Parent (C.A. No. 15961) and by
Brickell Partners against Jack C. Crim, John D. McNaughton, Alex Stamatakis,
Donald J. Ulrich, Paul L. Foster, Joseph A. Orlando, Fred Israel, John W.
Stodder, David Victor, Neil W. Benson, the Company, Purchaser and Parent (C.A.
No. 15963) (the "Amended Stockholder Action"). The complaint in the Amended
Stockholder Action alleges breach of fiduciary duty on the part of the Board
of Directors arising out of execution of the Merger Agreement and failure to
disclose material information in the Schedule 14D-1, as filed with the SEC by
Purchaser and Parent, and Schedule 14D-9, as filed with the SEC by the
Company, and seeks declaratory and injunctive relief barring defendants and
their counsel, agents, employees and all persons acting under, in concert
with, or for them, from proceeding with, consummating, or closing the Offer
and the Merger, as well as damages in an unspecified amount.
The plaintiffs have moved for a preliminary injunction to enjoin the
closing of the Offer and the Merger and have scheduled a hearing on the
motion on October 28, 1997 at 11 a.m. A copy of the Amended Stockholder
Action is filed as Exhibit I hereto and incorporated herein by reference,
and the foregoing summary of the Amended Stockholder Action is qualified in
its entirety by reference thereto.
Item 9. Material to be Filed as Exhibits.
I. Amended Class Action Complaint filed by Jewish Center of Hyde
Park and Laz Schneider against Jack C. Crim, Alex Stamatakis, Donald J.
Ulrich, Paul L. Foster, Joseph A. Orlando, Fred Israel, John W. Stodder, David
Victor, the Company, Purchaser and Parent and by Brickell Partners against
Jack C. Crim, John D. McNaughton, Alex Stamatakis, Donald J. Ulrich, Paul L.
Foster, Joseph A. Orlando, Fred Israel, John W. Stodder, David Victor, Neil W.
Benson, the Company, Purchaser and Parent (dated October 8, 1997, Court of
Chancery of the State of Delaware in and for New Castle County).
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this Statement is true,
complete and correct.
Talley Industries, Inc.
By: /s/ Mark S. Dickerson
--------------------------------------
Name:Mark S. Dickerson
Title:Vice President and Secretary
Date:October 10, 1997
EXHIBIT I
[LETTERHEAD OF ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.]
October 9, 1997
The Honorable Stephen P. Lamb
Vice Chancellor
Court of Chancery
Daniel L. Herrmann Courthouse
Wilmington, DE 19801
RE: Jewish Center of Hyde Park v. Jack C. Crim et al.,
Del. Ch., C.A. No. 15961
and Brickell Partners v. Jack C. Crim et al.,
Del. Ch., C.A. No. 15963
Dear Vice Chancellor Lamb:
I understand these actions are assigned to Your Honor. I am
enclosing a copy of plaintiffs' Amended Class Action Complaint, Motion for
Preliminary Injunction and Motion for Expedited Proceedings, all of which were
served on defendants via Federal Express for delivery today. I should be
grateful if the Court could schedule a conference on the motion for expedition
at Your Honor's earliest convenience.
Respectfully,
Norman M. Monhait
NMM/mmb
Enclosures
cc: Talley Industries, Inc. (via Federal Express)
All Individual Defendants c/o Talley Industries, Inc.
(via Federal Express)
Carpenter Technology Corporation (via Federal Express)
Score Acquisition Corp. c/o Carpenter Technology Corporation
(via Federal Express)
Stanley Bernstein, Esquire
Jeffrey Haber, Esquire
William Rosoff, Esquire
Register in Chancery
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ------------------------------ x
JEWISH CENTER OF HYDE PARK and :
LAZ SCHNEIDER, :
Plaintiffs, :
v. : C.A. No. 15961 NC
JACK C. CRIM, et al., :
Defendants. :
x
BRICKELL PARTNERS, :
Plaintiff, :
v. : C.A. No. 15963 NC
JACK C. CRIM, et al., :
Defendants. :
- ------------------------------ x
NOTICE OF FILING AMENDED CLASS ACTION COMPLAINT
TO: Talley Industries, Inc. Carpenter Technology Corporation
All Individual Defendants Score Acquisition Corp.
c/o Talley Industries, Inc. 101 West Bern Street
2702 N. 44th Street Reading, PA 19601
Phoenix, AZ 85008
PLEASE TAKE NOTICE that plaintiffs herewith file the attached
Amended Class Action Complaint as of right pursuant to Rule 15(a).
In compliance with Rule 15(aa), plaintiffs aver that the
Amended Complaint is in full substitution for the Complaints heretofore filed
on September 26, 1997.
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.
By: /s/ Norman M. Monhait
-----------------------------------
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiffs
IN THE COURT OF CHANCERY IN THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- -------------------------------------- x
JEWISH CENTER OF HYDE PARK and :
LAZ SCHNEIDER, :
Plaintiffs, :
v. :
JACK C. CRIM, ALEX STAMATAKIS, : C.A. No. 15961--NC
DONALD J. ULRICH, PAUL L. FOSTER, :
JOSEPH A. ORLANDO, FRED ISRAEL, :
JOHN W. STODDER, DAVID VICTOR, :
TALLEY INDUSTRIES, INC., SCORE :
ACQUISITION CORP., and CARPENTER :
TECHNOLOGY CORPORATION, :
:
Defendants. :
- ------------------------------ x
BRICKELL PARTNERS, :
a Florida Partnership, :
Individually And On Behalf :
of All Others, :
:
Plaintiff, :
v. :
JACK C. CRIM, JOHN D. MCNAUGHTON, : C.A. No. 15963 NC
ALEX STAMATAKIS, DONALD J. ULRICH, :
PAUL L. FOSTER, JOSEPH A. ORLANDO, :
FRED ISRAEL, JOHN W. STODDER, DAVID :
VICTOR, NEIL W. BENSON and TALLEY :
INDUSTRIES, INC., SCORE ACQUISITION :
CORP., and CARPENTER TECHNOLOGY :
CORPORATION, :
Defendants. :
- ------------------------------------ x
AMENDED CLASS ACTION COMPLAINT
Plaintiffs, as and for their amended class action complaint,
allege upon information and belief, except as to themselves, which they allege
upon knowledge as follows:
NATURE OF THE ACTION
1. This is a stockholders' class action on behalf of the
holders of the common and preferred stock of Talley Industries, Inc. ("Talley"
or the "Company"), to enjoin certain actions of defendants related to the
proposed acquisition ("Acquisition") of all of the outstanding shares of
Talley stock by Carpenter Technology Corporation, ("Carpenter"). The
defendant directors of Talley have breached their fiduciary duties of loyalty,
candor and care in connection with the proposed acquisition of Talley.
Plaintiffs allege they and the other public stockholders of Talley are
entitled to enjoin the proposed transaction or, alternatively, to rescind the
transaction and/or recover damages in the event that the transaction is
consummated.
2. On or around October 2, 1997 Carpenter and Talley mailed an
Offer to Purchase on Schedule 14D-1 (the "14D-1") and a
Solicitation/Recommendation Statement on Schedule 14D-9 (the "14D-9") to
Talley shareholders seeking to implement the Acquisition, to which Carpenter
and Talley had previously agreed on September 25, 1997, and announced to the
public on September 26, 1997. Pursuant to the terms of the Acquisition,
Talley shareholders are to receive $12.00 in cash for each share of their
Talley common stock, $11.00 for each share of Talley's Series A Preferred
Shares, and $16.00 per share for Talley's Series B Preferred Shares. This
consideration is grossly inadequate and unfair compensation given the
intrinsic value of Talley's various business segments.
3. As set forth in detail below, in an effort to obtain
shareholder approval of the Acquisition unfairly and/or to absolve themselves
of their breaches of fiduciary duty, defendants have sought to portray the
merger as "fair" to Talley shareholders and have withheld vital information
needed by shareholders to assess and consider properly the Acquisition and
related financial data in the 14D-1 and 14D-9, as more specifically alleged
below. Any purported shareholder "ratification" obtained under these
circumstances would be invalid.
4. In breach of their fiduciary duties when undertaking such a
momentous transaction, Talley's directors and financial advisor have failed to
consider adequately the Company's strategic alternatives under the
circumstances. In this regard, the Individual Defendants failed to maintain a
level playing field among potential acquirors of the Company by failing to
afford third parties access to confidential information on the same terms as
Carpenter.
PARTIES
5. Plaintiffs have been the owners of the common stock of
Talley since prior to the transaction herein complained of and continuously to
date.
6. Defendant Talley is a Delaware corporation. The Company
manufactures and markets solid propellant-actuated devices and high
reliability electronic components under government controls and provides naval
architectural and marine engineering designs.
7. Defendant Carpenter Technology Corp. ("Carpenter") is a
Delaware corporation based in Reading, Pennsylvania and is engaged in the
manufacture, fabrication and distribution of speciality metals. Carpenter
also manufacturers engineered products, including structural ceramics and
ultra hard-wear parts.
8. Defendant Score Acquisition Corp. ("Score") is a Delaware
corporation and a wholly-owned subsidiary of Carpenter.
9. Defendants Jack C. Crim, Alex Stamatakis, Donald J. Ulrich,
Paul L. Foster, Joseph A. Orlando, Fred Israel, John W. Stodder and David
Victor, are Directors of Talley and voted to approve the Merger.
10. The Individual Defendants are in a fiduciary relationship
with Plaintiff and the other public stockholders of Talley and owe them the
highest obligations of good faith and fair dealing.
CLASS ACTION ALLEGATIONS
11. Plaintiffs bring this action on their own behalf and as a
class action, pursuant to Rule 23 of the Rules of the Court of Chancery, on
behalf of all stock holders of the Company (except the defendants herein and
any person, firm, trust, corporation, or other entity related to or affiliated
with any of the defendants) and their successors in interest, who are or will
be threatened with injury arising from defendants' actions as more fully
described herein.
12. This action is properly maintainable as a class action
because:
(a) The class is so numerous that joinder of all members is
impracticable. As of June 30, 1997, there were approximately 14,113,453
shares of Talley common stock outstanding owned by hundreds, if not thousands,
of record and beneficial holders;
(b) There are questions of law and fact which are common to the class
including, inter alia, the following: (i) whether defendants have breached
their fiduciary and other common law duties owed by them to plaintiff and the
members of the class; and (ii) whether the class is entitled to injunctive
relief or damages as a result of the wrongful conduct committed by defendants.
(c) Plaintiffs are committed to prosecuting this action and have
retained competent counsel experienced in litigation of this nature. The
claims of the plaintiffs are typical of the claims of other members of the
class and plaintiffs have the same interests as the other members of the
class. Plaintiff will fairly and adequately represent the class.
(d) Defendants have acted in a manner which affects plaintiff and all
members of the class alike, thereby making appropriate injunctive relief
and/or corresponding declaratory relief with respect to the class as a whole.
(e) The prosecution of separate actions by individual members of the
Class would create a risk of inconsistent or varying adjudications with
respect to individual members of the Class, which would establish incompatible
standards of conduct for defendants, or adjudications with respect to
individual members of the Class which would, as a practical matter, be
dispositive of the interests of other members or substantially impair or
impede their ability to protect their interests.
SUBSTANTIVE ALLEGATIONS
13. On May 8, 1997, Talley announced that a dissident group of
shareholders, known as the Shareholder Committee to Remove Entrenched and
Arrogant Management, or SCREAM, in its proxy fight with management of the
Company, had succeeded in placing two of its three nominees on the Company's
Board of Directors. SCREAM's nominees, Ralph A. Rockow and Robert T. Craig,
replaced Chairman and Chief Executive William Mallender and Board member
Townsend Hoopes. SCREAM initiated the proxy contest as a result of its
dissatisfaction with the Company's performance and what it perceived to be the
current management's and Board's attempts to entrench and enrich themselves
despite the Company's lackluster performance.
14. On June 19, 1997 representatives of J.P. Morgan
Securities, Inc. ("J.P. Morgan"), which had been retained by Talley's Board of
Directors (the "Board") to provide a strategic review to the Company,
presented their initial findings to the Board. J.P. Morgan described various
alternatives including a "stay the course" strategy, a sale or spin off of
certain of the Company's businesses, or the sale or liquidation of the entire
Company.
15. Just one week prior to the Company's retention of J.P.
Morgan, an unidentified party made an indication of interest at a specified
value range to purchase Universal Propulsion Inc., one of Talley's
subsidiaries. Defendant Foster responded that Talley would not consider any
proposals until it completed its strategic review. Other third parties made
inquiries about the Company's businesses. The 14D-9 is, however, silent about
the value range offered for the subsidiary, the identity of the party making
the offer, the identities of the other parties who made inquiries, and the
business segments for which they expressed interest. Shareholders are also not
told that once the Company retained J.P. Morgan and held a board meeting on
July 18, 1997, the Individual Defendants refused to pursue the earlier
indications of interest solely because the inquiries did not include the
purchase of the entire Company. Yet, defendants were advised that the value
of Talley's two primary businesses were worth more if sold separately than as
a whole. In fact, a third party would later offer up to $175 million for
these businesses.
16. On July 18, 1997, Carpenter contacted defendant Foster and
indicated its interest in purchasing Talley's steel businesses for
$110,000,000. On July 22 and July 23, 1997, the Board met to consider
Carpenter's offer an well as others strategic alternatives. Representatives
of J.P. Morgan participated in this meeting. Primarily because of tax
reasons, it was determined that the divestiture of the Company's steel
businesses would be dilutive to Talley's earnings and that Carpenter's offer
therefore would be rejected. The Board did, however, decide to encourage
Carpenter to submit an offer for the entire Company, after voting to put the
Company "in play."
17. By so acting, the Board set out on a course that could
lead to a sale of the Company. Inexplicably, the Board ignored the
possibility of seeking competing bids and did not authorize J.P. Morgan to
solicit other potential bids for Talley, despite its ability to do so and
despite earlier indication of interest from other third parties. Thus, the
Board deprived itself of critical information necessary to be adequately
informed, which it could have obtained at relatively little additional cost
and with no disruption to its business since it already was engaged in
discussions with Carpenter, and customary confidentiality arrangements (of the
type ultimately extended to Carpenter) could easily have been utilized to
facilitate expressions of interest by other potential purchasers.
18. On July 23, 1997, the Company announced its financial
results for the first six months and second quarter of 1997. In particular,
for the six months ended June 30. 1997, Talley earned $4.6 million, or 29
cents per share on revenue of $176.2 million. Talley reported a net loss of
$1.6 million, or 18 cents per share, on revenue of $189.1 million for the
first six months of 1996. The per share loss for the 1996 six-month period
was $1.16 after a charge of 98 cents per share on account of the value of
additional shares of common stock issued during the six-month period to induce
conversion of preferred stock. The 1996 first half loss reflected various
charges and costs associated with the Company's litigation with TRW and the
repurchase of senior debentures. Commenting on the foregoing, Foster stated:
We are pleased at the strong operating performance at our business
units for the first half of 1997. We look forward to the sale of
the final real estate parcel and completing, within the next few
weeks, our planned exit from the business. We remain committed to
building an automotive air bag business and are continuing our
research and development efforts and capital spending programs to
create an opportunity for Talley in this critical safety product
area.
19. On August 1, 1997, Talley received from Carpenter a
nonbinding indication of interest to purchase all of Talley's outstanding
common stock for $10 per share. Carpenter indicated that it would consider
increasing the proposed price if it received additional information concerning
Talley's air bag business since a proper valuation of that business was
assertedly not possible based on publicly available information. Defendant
Foster rejected the offer, without Board consultation, that same day. On
August 4, 1997, Carpenter and the Company executed a confidentiality agreement
whereby Carpenter was permitted to conduct limited due diligence of Talley's
air bag business. Talley had previously rejected Carpenter's request for a
period of exclusive due diligence on the grounds that the $10 per share offer
was insufficient to grant such a request.
20. On August 7, 1997, after conducting its due diligence of
Talley's air bag business, Carpenter increased its offer to $12 per share,
subject to further due diligence. Talley granted Carpenter's request for a 45
day period of due diligence, but agreed to only a limited exclusivity
provision. The confidentiality agreement provided that Talley would not
initiate, solicit, or encourage other offers for the Company during this
period, but that it could participate in discussions or negotiations with, and
provide confidential information to a third party if defendant Foster
determined in good faith, after receiving advice from the Company's financial
advisor, that such third party had submitted a bona fide proposal or
indication of interest that was, or could reasonably be expected to lead to,
an acquisition proposal that was financially superior to Carpenter's $12 per
share proposal.
21. By proposing such an agreement, defendants tilted the
playing field by locking-up a transaction with Carpenter. William Danzell,
one of two shareholders who organized SCREAM, aptly observed that the
Individual Defendants:
decided to sell the company and only let Carpenter in the door.
Without having market forces, you have a very low valuation placed
on the company.
Further, according to Danzell, who is knowledgeable of the
matters complained of herein as a consequence of SCREAM's two member
representation on the Talley Board, "reputable investment banks and other
companies" asked to be part of the sale process and were rebuffed by the
Individual Defendants and J.P. Morgan.
22. During the next several weeks Carpenter and Talley
representatives met several times and exchanged, on an exclusive and
preferential basis, non-public information about the two companies' strategic
plans and products. The individual defendants performed no market
solicitation or meaningful exploration of strategic alternatives.
23. From August 11, 1997 until the execution of the definitive
merger agreement on September 25, 1997, Talley and J.P. Morgan received a
number of inquiries from third parties concerning the Company as a whole and
certain of the Company's businesses. The Company also received requests for
confidential information from certain of these third parties. In response to
these requests, as disclosed in the 14D-9, defendants erected unreasonable
barriers by telling the third parties that "if they were interested in
receiving such non-public information they would need to be as specific as
possible as to the nature of their interest, in particular with respect to
their valuation assumptions." Since the Company did not impose any of these
conditions on Carpenter as a prerequisite to its receiving confidential
information, these conditions can only be viewed as a further attempt to grant
Carpenter favorable and preferential treatment vis-a-vis other potential
acquirors and a breach of the Individual Defendants' duty to maximize
shareholder value.
24. According to the 14D-9, on August 22, 1997, Talley
received from a third party it has not identified an offer to purchase a
majority of the Company's outstanding common stock for $12 in cash per share.
The letter also stated that the offer would be conditioned on the third
party's obtaining financing and inclusion in any merger agreement of
acceptable termination provisions. On August 27, 1997, representatives of
J.P. Morgan, acting on behalf of the individual defendants, rejected this
offer.
25. On September 16, 1997, defendants received another letter
from this unidentified third party offering to purchase at specified value
ranges the government products and services segment and the industrial
products and services segment of Talley. This letter also requested
permission to conduct due diligence. In a subsequent telephone conversation
with defendant Foster, the representative of the undisclosed third party
indicated that it had not made an offer for Talley's air bag business because
sufficient public information was not available to value that portion of the
Company properly. Defendant Foster offered to permit limited due diligence on
the air bag business of the Company but refused to permit this unidentified
suitor to conduct due diligence of the other business segments because it
deemed the proposal of September 16, 1997, insufficient. Defendants' failure
to permit this third party to conduct due diligence is inexcusable in light of
the fact that Carpenter, after it conducted its own due diligence, increased
its initial offer for the Company by 20 percent. In breach of their fiduciary
duties to maximize shareholder value, the Individual Defendants failed to
permit this third party to conduct some form of due diligence of the entire
Company.
26. Defendants' conduct is even more egregious in light of the
amount that was offered for the two segments. Undisclosed to shareholders,
but known to defendants, the third party had offered up to $130 million for
Talley's government products business and up to $45 million for its industrial
products segment. Since these values were based on limited due diligence and
did not include the air bag business, defendants' failure to permit the offer
or to pursue its proposal deprived Talley shareholders of the opportunity to
receive the maximum value for their shares.
27. On September 25, 1997, the Board met to consider the terms
of the proposed Carpenter transaction. At this meeting, Mr. Rockow and Mr.
Craig, SCREAM's nominees on the Board, made a motion to adjourn the meeting
for two weeks to provide additional time to consider the proposed transaction.
The motion was defeated by a vote of 8 to 2. Thereafter, J.P. Morgan
delivered its oral opinion to the Board that the proposed Carpenter
transaction at the indicated values was fair to the stockholder of Talley from
a financial point of view. The Individual Defendants decided -- with nothing
more than the opinion of J.P. Morgan and without permitting other potential
acquirors to bid for the Company, despite expressions of interest to do so --
to approve the proposed transaction and to recommend that the Company's
shareholders accept Carpenter's offer. Directors Rockow and Craig voted
against the proposed transaction.
28. On September 26, 1997, Talley and Carpenter announced that
they had entered into a definitive merger agreement whereby Carpenter will
acquire Talley in a transaction in which the common and preferred shareholders
will receive approximately $184 million in cash. Under the terms of the
Acquisition as presently proposed, Carpenter will commence a cash tender offer
for all of Talley's outstanding common and preferred shares. Carpenter will
pay $12 per share for Talley's 14,113,623 common shares and 260,550
exercisable common stock options outstanding. Carpenter will also pay $11.70
for Talley's 13,793 Series A Preferred shares, and $16 per share for Talley's
749,486 Series B preferred shares outstanding. The tender offer will be
followed by a merger in which remaining Talley shares will be converted into
the right to receive the foregoing amounts of cash.
29. In response, the two founders of SCREAM, Saad Alissa and
William B. Danzell, issued a press release criticizing the proposed
transaction as inadequate. The press release stated that the founders of
SCREAM "consider this offer unsatisfactory and simply will not support it at
such a low price because the breakup value of the Company, we believe, is
significantly higher." The press release also noted that the Individual
Defendants had failed to seek out competing bids and stated "Talley has thus
far prevented other companies from extending bids or evaluating the individual
segments. Carpenter is the only one that has been allowed access."
30. On or about October 2, 1997, Talley and Carpenter
disseminated the 14D-1 and 14D-9 to shareholders purporting to describe, inter
alia, the Acquisition, the history of negotiations between the companies, the
opinion of Talley's financial advisor and certain other purportedly relevant
information.
31. The Merger agreement creates disabling conflicts of
interest by conferring extraordinary benefits on certain of the Individual
Defendants and executive officers of Talley. The 14D-9 discloses that "each
stock option, whether vested or not, outstanding immediately prior to the
Effective Time [of the Merger will] be canceled in exchange for a cash payment
by the Company." Furthermore, the 14D-9 also discloses that Carpenter will
honor all existing employment, severance, consulting or other compensation
agreements, plans or contracts between the Company and any of its officers,
directors and employees.
Talley Fails To Disclose The Subsequent Negotiations
And/Or Any Counter-Offers To The Merger Price
32. The 14D-9 fails to disclose relevant information regarding
how the price was determined. The 14D-9 fails to disclose the substance of
the negotiations between Carpenter and Talley, particularly what prices and
counter-offers were proposed by Talley. This information is particularly
relevant given the fact that Talley's shareholders had recently expressed
their dissatisfaction with the Company's stock price performance by
electing SCREAM's nominees to the Board. Talley shareholders would
reasonably want to know what the Company's management believed the Company
was worth. Furthermore, defendants failed to disclose the substance of the
other expressions of interest by third parties and any valuations of the
Company they might have offered, such as that offered for two of Talley's
businesses. Given the lack of information provided concerning the price
and negotiations, investors are unable to consider the Acquisition properly
because they have no way of knowing where the ultimate merger price stands
in relation to Talley's initial demands or what SCREAM's nominees believe
the Company is worth. Publicly, Danzell has stated that, "if you look at
the different segments of the business and add the values, I think we are
looking at about $18 per share."
33. The 14D-9 also fails to disclose the reasons given by Mr.
Rockow and Mr. Craig for voting against the Acquisition as presently proposed.
Indeed, no explanation or rationale for their decision is offered. Since Mr.
Rockow and Mr. Craig were elected directors in the recent proxy fight
initiated by the dissident shareholders of Talley, the public stockholders
would need to know the reasons these directors opposed the proposed
transaction in order for them to make an informed decision about the Merger.
Messrs. Rockow and Craig asserted that competing offers had been frustrated
and higher values could be obtained if the Company were sold in parts.
34. Furthermore, the 14D-9 fails to disclose the substance of
the proposals Talley received from other potential acquirors, particularly how
the terms of the September 16, 1997 offer for Talley's government products and
services segment and industrial products and services segment in its offer of
September 16, 1997. Accordingly, Talley shareholders cannot determine what
the intrinsic value of Talley common shares is and whether the Carpenter
Acquisition is preferable to other alternatives or is fair.
The 14D-1 and 14D-9 Fails To Disclose Material
Information Necessary For Talley Shareholders
To Make An Informed Decision
35. The 14D-1 and 14D-9 were mailed to Talley shareholders on
or about October 2, 1997, two days after the end of the Company's third fiscal
quarter. However, the 14D-1 and 14D-9 do not provide any detailed or
meaningful information on Talley's most recent financial and operating results
although such information is clearly relevant in assessing the value of
Talley. Furthermore, such information was likely provided to J.P. Morgan and
Carpenter in connection with each's due diligence investigation of the
Company. Accordingly, the shareholders of Talley will be forced to decide
whether to irrevocably divest themselves of their valuable investment in
Talley on the basis of incomplete information that is material to an informed
evaluation of the Company.
The Individual Defendants Failed To Act
In A Properly Informed Manner In The
Best Interests Of The Shareholders
36. The Talley Board initiated a process to sell the Company
which imposed heightened fiduciary responsibilities and requires enhanced
scrutiny by the Court. However, the terms of the proposed Acquisition were
not the result of an auction process or active market check; they were arrived
at without a full and thorough investigation by the Individual Defendants; and
they are intrinsically unfair and inadequate from the standpoint of the Talley
shareholders.
37. The Individual Defendants failed to make an informed
decision, as no market check of the Company's value was obtained. In agreeing
to the merger, the Individual Defendants failed to properly inform themselves
of Talley's highest transactional value.
38. The Individual Defendants have violated their fiduciary
duties owed to the public shareholders of Talley. The Individual Defendants'
agreement to the terms of the Acquisition, its timing, and the failure to
auction the Company and permit other bidders a fair opportunity to submit and
pursue offers, and defendants' failure to provide a market check demonstrate a
clear absence of the exercise of due care and of loyalty to Talley's public
shareholders.
39. The Individual Defendants' fiduciary obligations under
these circumstances require them to:
(a) Undertake an appropriate evaluation of Talley's net worth as a
merger/acquisition candidate; and
(b) Actively evaluate the proposed transaction and engage in a
meaningful auction with third parties in an attempt to obtain the best value
for Talley's public shareholders.
40. The Individual Defendants have breached their fiduciary
duties by reason of the acts and transactions complained of herein, including
their decision to merge with Carpenter without making the requisite effort to
obtain the best offer possible and not making all material information
available to Talley shareholders in connection with the transaction.
41. The consideration to be paid to class members in the
proposed merger is unfair and inadequate because, among other things:
(a) The intrinsic value of Talley's common stock is materially in
excess of the amount offered for those securities in the merger giving due
consideration to the anticipated operating results, net asset value, cash
flow, and profitability of the Company; and
(b) The merger price is not the result of an appropriate consideration
of the value of Talley because the Talley Board approved the Acquisition
without undertaking steps to accurately ascertain Talley s value through open
bidding or at least a "market check mechanism".
42. By reason of the foregoing, each member of the Class will
suffer irreparable injury and damages absent injunctive relief by this Court.
43. Carpenter is named as a defendant in this action so that
the Court may afford complete relief.
44. Plaintiff and other members of the Class have no adequate
remedy at law.
WHEREFORE, plaintiffs and members of the Class demand judgment
against defendants as follows:
a. Declaring that this action is properly maintainable as a
class action and certifying plaintiffs as the representatives of
the Class;
b. Preliminarily and permanently enjoining defendants and their
counsel, agents, employees and all persons acting under, in
concert with, or for them, from proceeding with, consummating, or
closing the proposed transaction;
c. In the event that the proposed transaction is consummated,
rescinding it and setting it aside, or awarding rescissory damages
to the Class;
d. Awarding compensatory damages against defendants,
individually and severally, in an amount to be determined at
trial, together with pre-judgment and post-judgment interest at
the maximum rate allowable by law, arising from the proposed
transaction;
e. Awarding plaintiffs their costs and disbursements and
reasonable allowances for fees of plaintiffs' counsel and experts
and reimbursement of expenses; and
f. Granting plaintiffs and the Class such other and further
relief as the Court may deem just and proper.
Dated: October 8, 1997
ROSENTHAL, MONHAIT, GROSS &
GODDESS, P.A.
By: /s/ Norman M. Monhait
---------------------------------------
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiffs
OF COUNSEL:
BERNSTEIN LIEBHARD & LIFSHITZ
274 Madison Avenue
New York, NY 10016
(212) 779-1414
WECHSLER HARWOOD HALEBIAN
& FEFFER LLP
805 Third Avenue
New York, NY 10022
(212) 935-7400
LOWEY DANNENBERG BEMPORAD
& SELINGER, P.C.
The Gateway
One North Lexington Avenue
White Plains, NY 10602
(914) 997-0500
WEISS & YOURMAN
10940 Wilshire Blvd.
24th Floor
Los Angeles, CA 90024
STULL, STULL & BRODY
6 East 45th Street
New York, NY 10017
CERTIFICATE Of SERVICE
I, Norman M. Monhait, do hereby certify on this 8th day of
October, 1997 that I caused copies of the foregoing Notice of Filing and
Amended Class Action Complaint to be served via Federal Express upon:
Talley Industries, Inc. Carpenter Technology Corporation
All Individual Defendants Score Acquisition Corp.
c/o Talley Industries, Inc. 101 West Bern Street
2702 N. 44th Street Reading, PA 19601
Phoenix, AZ 85008
/s/ Norman M. Monhait
----------------------------------
Norman M. Monhait
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
x
JEWISH CENTER OF HYDE PARK and :
LAZ SCHNEIDER, :
Plaintiffs, :
v. : C.A. No. 15961 NC
:
JACK C. CRIM, et al., :
Defendants. :
x
BRICKELL PARTNERS, :
Plaintiff, :
v. : C.A. No. 15963 NC
:
JACK C. CRIM, et al., :
Defendants. :
x
NOTICE OF MOTION
TO: Talley Industries, Inc. Carpenter Technology Corporation
All Individual Defendants Score Acquisition Corp.
c/o Talley Industries, Inc. 101 West Bern Street
2702 N. 44th Street Reading, PA 19601
Phoenix, AZ 85008
PLEASE TAKE NOTICE that plaintiffs will present the attached Motion For
Preliminary Injunction to the Court at the earliest convenience of the Court
and counsel.
ROSENTHAL, MONHAIT, GROSS
& GODDESS, P.A.
By: /s/ Norman M. Monhait
----------------------------------
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiffs
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
x
JEWISH CENTER OF HYDE PARK and :
LAZ SCHNEIDER, :
Plaintiffs, :
v. : C.A. No. 15961 NC
:
JACK C. CRIM, et al., :
Defendants. :
x
BRICKELL PARTNERS, :
Plaintiff, :
v. : C.A. No. 15963 NC
:
JACK C. CRIM, et al., :
Defendants. :
x
MOTION FOR PRELIMINARY INJUNCTION
Plaintiffs hereby move, pursuant to Court of Chancery Rule 65,
for an Order:
1. Preliminarily enjoining defendants and all persons acting
in concert with them from proceeding with, consummating or otherwise closing
the tender offer by Score Acquisition Corp. ("Score") for all issued and
outstanding shares of Talley Industries, Inc. ("Talley") and the proposed
subsequent merger (the "Merger") between Score and Talley; and
2. Requiring Score, its parent Carpenter Technology
Corporation, and Talley to supplement their publicly disseminated information
issued in connection with the tender offer by disclosing all material facts
and correcting the omissions and misrepresentations described in plaintiffs'
Amended Class Action Complaint in this action.
The grounds for this Motion are set forth in plaintiffs'
Amended Class Action Complaint and will be more fully set forth in plaintiffs'
opening brief in support of this motion.
ROSENTHAL, MONHAIT, GROSS
& GODDESS, P.A.
By: /s/ Norman M. Monhait
--------------------------------
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiffs
OF COUNSEL:
BERNSTEIN LIEBHARD & LIFSHITZ
274 Madison Avenue
New York, NY 10016
WECHSLER HARWOOD HALEBIAN & FEFFER LLP
805 Third Avenue, 7th Floor
New York, NY 10022
LOWEY DANNENBERG BEMPORAD
& SELINGER, P.C.
The Gateway
One North Lexington Avenue
White Plains, NY 10602
(914) 997-0500
WEISS & YOURMAN
10940 Wilshire Blvd.
24th Floor
Los Angeles, CA 90024
STULL, STULL & BRODY
6 East 45th Street
New York, NY 10017
CERTIFICATE OF SERVICE
I, Norman M. Monhait, do hereby certify on this 8th day of
October, 1997 that I caused copies of the foregoing Notice of Motion and
Motion for Preliminary Injunction to be served via Federal Express upon:
Talley Industries, Inc. Carpenter Technology Corporation
All Individual Defendants Score Acquisition Corp.
c/o Talley Industries, Inc. 101 West Bern Street
2702 N. 44th Street Reading, PA 19601
Phoenix, AZ 85008
/s/ Norman M. Monhait
--------------------------------
Norman M. Monhait
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
x
JEWISH CENTER OF HYDE PARK and :
LAZ SCHNEIDER, :
Plaintiffs, :
v. : C.A. No. 15961 NC
:
JACK C. CRIM, et al., :
Defendants. :
x
BRICKELL PARTNERS, :
Plaintiff, :
v. : C.A. No. 15963 NC
:
JACK C. CRIM, et al., :
Defendants. :
x
NOTICE OF MOTION
TO: Talley Industries, Inc. Carpenter Technology Corporation
All Individual Defendants Score Acquisition Corp.
c/o Talley Industries, Inc. 101 West Bern Street
2702 N. 44th Street Reading, PA 19601
Phoenix, AZ 85008
PLEASE TAKE NOTICE that plaintiffs will present the attached
Motion For Expedited Proceedings to the Court at the earliest convenience of
the Court and counsel.
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.
By: /s/ Norman M. Monhait
----------------------------------
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiffs
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
x
JEWISH CENTER OF HYDE PARK and :
LAZ SCHNEIDER, :
Plaintiffs, :
v. : C.A. No. 15961 NC
:
JACK C. CRIM, et al., :
Defendants. :
x
BRICKELL PARTNERS, :
Plaintiff, :
v. : C.A. No. 15963 NC
:
JACK C. CRIM, et al., :
Defendants. :
x
MOTION FOR EXPEDITED PROCEEDINGS
Plaintiffs, by their attorneys, respectfully move the Court to
schedule their Motion for Preliminary Injunction, served and filed herewith,
for a hearing prior to October 30, 1997, the presently-scheduled date for the
closing of a tender offer by Score Acquisition Corp. ("Score"), a wholly-owned
subsidiary of Carpenter Technology Corporation ("Carpenter"), for all the
issued and outstanding shares of Talley Industries, Inc. ("Talley") and the
proposed subsequent merger ("Merger") between Score and Talley. As grounds
for this Motion, plaintiffs represent as follows:
1. Plaintiffs allege that they are stockholders of Talley.
They bring this action on behalf of all Talley stockholders, contending that
the defendant directors of Talley, aided and abetted by Carpenter, have
breached their fiduciary duties to plaintiffs and the proposed class by failing
to obtain the best available transaction in a sale of Talley and by failing to
include in documents disseminated by Talley and Score, in connection with the
tender offer which is the first step in a two-step acquisition by Carpenter of
Talley, information material to the tendering decision of Talley shareholders.
These allegations are particularized in plaintiffs' Amended Class Action
Complaint filed on October 9, 1997 ("Complaint").
2. Among other things, the Complaint alleges that in approving
Carpenter's proposed acquisition of Talley over the opposing votes of two
Talley directors, the individual defendants failed in their responsibility to
obtain the best available transaction for Talley stockholders in that: they
granted Carpenter access to due diligence information in an amount and manner
not granted to competing bidders; they refused to pursue competing offers to
acquire Talley or a substantial portion of its assets in a manner designed to
obtain the best available transaction; and they refused to pursue adequately a
sale of Talley's assets notwithstanding firm offers for the acquisition of
certain Talley divisions. In particular: the cash Carpenter will pay for all of
Talley's shares under the proposed transaction is approximately $184 million;
the director defendants refused to pursue an offer to acquire two Talley
divisions at a price of $175 million, which was made without due diligence
solely based on public information.
3. The Complaint further alleges that Score's tender offer
offering circular ("Offering Circular") and Talley's 14D-9 SEC filing, both of
which have been disseminated to Talley stockholders in connection with the
tender offer, omit material information in a number of respects:
(a) although these documents disclose that two Talley directors voted
against the Carpenter transaction, they fail to disclose that the reasons
these directors articulated for their opposition were that greater value could
be obtained by selling Talley in parts and that Talley had frustrated other
potential bidders' efforts to acquire all or substantial parts of Talley;
(b) although these documents disclose that Talley received an offer
for two divisions which the individual defendants declined to pursue, they do
not state that this offeror offered $175 million for the two divisions alone,
which compares favorably to the approximately $184 million Carpenter is paying
for all of Talley's stock in the proposed transaction; and
(c) although these documents were mailed to Talley shareholders on or
about October 2, 1997, two days after the end of Talley's third fiscal
quarter, they do not provide any meaningful information on Talley's financial
and operating results for the quarter, even though this information was known
or knowable;
4. In short, the Complaint alleges that Talley's directors
failed to obtain the best transaction available in a change of control/sale of
the company context (which allegations are supported by the views of two
Talley directors), and that Talley shareholders are being denied information
material to their decision of whether or not to accept the consideration
offered in the Carpenter transaction.
5. Absent injunctive relief, plaintiffs and Talley
shareholders are at risk of irreparable injury. See QVC Network, Inc. v.
Paramount Communications, Inc., Del. Ch., 635 A.2d 1245, 1273 n. 50 (1993)
(loss of opportunity to obtain best available transaction constitutes
irreparable injury); Robert M. Bass Group, Inc. v. Evans, Del. Ch., 552 A.2d
1227, 1246 (1988) (same); Arnold v. Society for Savings Bancorp, Inc., Del.
Supr., 678 A.2d 533 (1996) (corporate charter provisions pursuant to 8 Del. C.
Section 102(b)(7) precludes damage remedy for disclosure violations not
amounting to bad faith or disloyal conduct).
6. Since the tender offer is scheduled to close on October 30,
1997, plantiffs request that the Court hear their preliminary injunction
motion sufficiently prior to that date to permit a decision and Order if the
Court is persuaded the transaction should be enjoined.
7. Plaintiffs have not previously applied for this relief.
WHEREFORE, plaintiffs respectfully request the Court to enter
an Order in the form attached hereto.
ROSENTHAL, MONHAIT, GROSS
& GODDESS, P.A.
By: /s/ Norman M. Monhait
-------------------------------
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiffs
OF COUNSEL:
BERNSTEIN LIEBHARD & LIFSHITZ
274 Madison Avenue
New York, NY 10016
WECHSLER HARWOOD HALEBIAN & FEFFER LLP
805 Third Avenue, 7th Floor
New York, NY 10022
LOWEY DANNENBERG BEMPORAD
& SELINGER, P.C.
The Gateway
One North Lexington Avenue
White Plains, NY 10602
(914) 997-0500
WEISS & YOURMAN
10940 Wilshire Blvd.
24th Floor
Los Angeles, CA 90024
STULL, STULL & BRODY
6 East 45th Street
New York, NY 10017
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
x
JEWISH CENTER OF HYDE PARK, :
Plaintiff, :
v. : C.A. No. 15961 NC
:
JACK C. CRIM, et al., :
Defendants. :
x
BRICKELL PARTNERS, :
Plaintiff, :
v. : C.A. No. 15963 NC
:
JACK C. CRIM, et al., :
Defendants. :
x
O R D E R
Upon plaintiffs' Motion for Expedited Proceedings and for good
cause shown, subject to further Order of the Court upon timely application, IT
IS this ____ day of October, 1997 ORDERED:
1. Plaintiffs' application for preliminary injunction shall be
heard on October __, 1997 at _______ _.m.
2. Counsel for the parties shall confer promptly concerning a
discovery and briefing schedule for the preliminary injunction motion and
present it to the Court for approval.
Vice Chancellor
CERTIFICATE OF SERVICE
I, Norman M. Monhait, do hereby certify on this 8th day of
October, 1997 that I caused copies of the foregoing Notice of Motion and
Motion for Expedited Proceedings to be served via Federal Express upon:
Talley Industries, Inc. Carpenter Technology Corporation
All Individual Defendants Score Acquisition Corp.
c/o Talley Industries, Inc. 101 West Bern Street
27021 N. 44th Street Reading, PA 19601
Phoenix, AZ 85008
/s/ Norman M. Monhait
--------------------------------
Norman M. Monhait
