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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 1)
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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)
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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. 1 (this "Amendment") amends and supplements
the Solicitation/Recommendation Statement on Schedule 14D-9, as amended,
originally filed on October 2, 1997 by Talley Industries, Inc., a Delaware
corporation (the "Company"), relating to a tender offer commenced by Score
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Carpenter Technology Corporation, on October 2, 1997.
All capitalized terms used in this Amendment without definition
have the meanings attributed to them in the Schedule 14D-9.
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. The Company and certain of its
directors have been named as defendants in a purported class action filed on
September 26, 1997 on behalf of the stockholders of the Company in the
Chancery Court of Delaware. This action is entitled: Jewish Center of Hyde
Park v. Jack C. Crim, John D. McNaughton, Alex Stamatakis, Donald J. Ulrich,
Paul L. Foster, Joseph A. Orlando, Fred Israel, John W. Stodder, David Victor,
Neil W. Benson, and the Company (C.A. No. 15961) (the "Stockholder Action").
The complaint in the Stockholder Action alleges breach of fiduciary duty on
the part of the Board of Directors arising out of execution of the Merger
Agreement and seeks declaratory and injunctive relief barring defendants and
their counsel, agents, employees and all persons acting under, in concert
with, or for them, from proceeding with, consummating, or closing the Offer
and the Merger, as well as damages in an unspecified amount. A copy of the
Stockholder Action is filed as Exhibit H hereto and incorporated herein by
reference, and the foregoing summary of the Stockholder Action is qualified in
its entirety by reference thereto.
Item 9. Material to be Filed as Exhibits.
(h) Complaint filed by Jewish Center of Hyde Park against Jack C.
Crim, John D. McNaughton, Alex Stamatakis, Donald J. Ulrich, Paul L. Foster,
Joseph A. Orlando, Fred Israel, John W. Stodder, David Victor, Neil W. Benson,
and the Company (dated September 26, 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
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Name:Mark S. Dickerson
Title:Vice President and Secretary
Date:October 6, 1997
ATTACHMENT A
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
JEWISH CENTER OF HYDE PARK, CIVIL ACTION NO. 15961-NC
Plaintiff SUMMONS PURSUANT
TO 10 DEL C. Sec. 3114
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VS.
JACK S. CRIM, JOHN D. MCNAUGHTON, ALEX
STAMATAKIS, DONALD J. ULRICH, PAUL L.
FOSTER, JOSEPH A. ORLANDO, FRED ISRAEL,
JOHN W. STODDER, DAVID VICTOR, NEIL W.
BENSON, and TALLEY INDUSTRIES, INC.,
Defendants
TO THE SPECIAL PROCESS SERVER
YOU ARE COMMANDED:
To Summon the above named individual defendants by service
pursuant to 10 Del. C. Sec. 3114 upon Talley Industries, Inc., a Delaware
corporation, by serving its registered agent The Corporation Trust Company,
which is designated for service of process in Delaware, so that within the time
required by law, such defendants shall serve upon Joseph A. Rosenthal, Esq.,
plaintiff's attorney whose address is P.O. Box 1070, Wilmington, DE 19899-1070
an answer to the complaint.
To serve upon defendants a copy hereof, of the complaint, and
of a statement of plaintiff filed pursuant to Chancery Court Rule 4(dc)(1).
TO THE ABOVE NAMED DEFENDANTS:
In case of your failure, within the time permitted by 10 Del.
C. Sec. 3114(*), to serve on plaintiff's attorney named above an answer to the
complaint, judgment by default may be rendered against you for the relief
demanded in the complaint.
Dated: September 30, 1997 /s/ Dianne Kempski
Register in Chancery -----------------------------
(*)The text of 10 Del. C. Sec. 3114 is set out on the reverse of this Summons
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
JEWISH CENTER OF HYDE PARK,
Plaintiff,
v.
JACK C. CRIM, JOHN D. MCNAUGHTON, ALEX C.A. No. 1596/NC
STAMATAKIS, DONALD J. ULRICH, PAUL L.
FOSTER, JOSEPH A. ORLANDO, FRED ISRAEL,
JOHN W. STODDER, DAVID VICTOR, NEIL W.
BENSON and TALLEY INDUSTRIES, INC.
Defendants.
CLASS ACTION COMPLAINT
Plaintiff alleges upon information and belief, except for
paragraph 1 hereof, which is alleged upon knowledge, as follows:
1. Plaintiff has been the owner of the common stock of Talley
Industries, Inc. ("Talley" or the "Company") since prior to the transaction
herein complained of and continuously to date.
2. Talley is a corporation duly organized and existing under
the laws of the State of Delaware. 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.
3. Carpenter Technology Corp. ("Carpenter") is 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.
4. Defendants Jack C. Crim, John D. McNaughton, Alex
Stamatakis, Donald J. Ulrich, Paul L. Foster, Joseph A. Orlando, Fred Israel,
John W. Stodder, David Victor and Neil W. Benson are Directors of Talley.
5. 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
6. Plaintiff brings this action on its own behalf and as a
class action, pursuant to Rule 23 of the Rules of the Court of Chancery, on
behalf of all common stockholders 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.
7. 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: whether defendants have breached their
fiduciary and other common law duties owed by them to plaintiff and the
members of the class; and whether the class is entitled to injunctive relief
or damages as a result of the wrongful conduct committed by defendants.
(c) Plaintiff is committed to prosecuting this action and has retained
competent counsel experienced in litigation of this nature. The claims of the
plaintiff are typical of the claims of other members of the class and
plaintiff has 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
8. On May 8, 1997, it was 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 Mallinder 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 and Board's attempts to entrench and enrich themselves
despite the Company's lackluster performance.
9. 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 valued at $312 million. Under the terms of
the transaction 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 common shares, $11.70 for Talley's Series
A Preferred shares, and $16 per share for Talley's Series B preferred shares.
10. In response, the two founders of SCREAM 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."
11. By entering into the agreement with Carpenter, the Talley
Board has initiated a process to sell the Company which imposes heightened
fiduciary responsibilities and requires enhanced scrutiny by the Court.
However, the terms of the proposed transaction 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.
12. 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.
13. The Individual Defendants have violated the fiduciary
duties owed to the public shareholders of Talley. The Individual Defendants'
agreement to the terms of the transaction, its timing, and the failure to
auction the Company and invite other bidders, 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.
14. 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) Engage in a meaningful auction with third parties in an attempt to
obtain the best value for Talley's public shareholders.
15. 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.
16. Plaintiff and other members of the Class have been and will
be damaged in that they have not and will not receive their fair proportion of
the value of Talley's assets and business, and will be prevented from
obtaining fair and adequate consideration for their shares of Talley common
stock.
17. 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;
(b) The merger price is not the result of an appropriate consideration
of the value of Talley because the Talley Board approved the proposed merger
without undertaking steps to accurately ascertain Talley's value through open
bidding or at least a "market check mechanism"; and
(c) By entering into the agreement with Carpenter, the Individual
Defendants have allowed the price of Talley stock to be capped, thereby
depriving plaintiff and the Class of the opportunity to realize any increase
in the value of Talley stock.
18. By reason of the foregoing, each member of the Class will
suffer irreparable injury and damages absent injunctive relief by this Court.
19. Plaintiff and other members of the Class have no adequate
remedy at law.
WHEREFORE, plaintiff and the Class demand judgment against
defendants as follows:
a. Declaring that this action is properly maintainable as a
class action and certifying plaintiff as the representative 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 plaintiff its costs and disbursements and
reasonable allowances for fees of plaintiff's counsel and experts;
and
f. Granting plaintiff and the Class such other and further
relief as the Court may deem just and proper.
ROSENTHAL, MONHAIT, GROSS & GODDESS, B.A.
By: /s/ Joseph A. Rosenthal, Esq.
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Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
BERNSTEIN LIEBHARD & LIFSHITZ
274 Madison Avenue
New York, NY 10016
(212) 779-1414
