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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. 3)
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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. 3 (this "Amendment") amends and
supplements the Solicitation/Recommendation Statement on Schedule 14D-9 (as
amended and supplemented to date, the "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
and Amendment No. 2 on October 10, 1997, with respect to the 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, to purchase all
outstanding shares of the following classes of the Company's securities at
the indicated prices: Common Stock for $12.00 per share; Series A
Preferred Stock for $11.70 per share; and Series B Preferred Stock for
$16.00 per share, net to the seller in cash, upon the terms and subject to
the conditions set forth in the Offer to Purchase dated October 2, 1997 and
in the related Letter of Transmittal.
All capitalized terms used in this Amendment without
definition have the meanings attributed to them in the Schedule 14D-9.
The Schedule 14D-9 is hereby amended in the manner set forth
below:
Item 4. The Solicitation or Recommendation.
(a) The sixth full paragraph on page 9 of the Schedule 14D-9
under the caption "Item 4. The Solicitation or Recommendation" is hereby
amended and restated to read as follows:
On June 12, 1997, in a letter addressed to Admiral Foster, a
party made an indication of interest ranging from $18 million to
$25 million to purchase a subsidiary in the Company's government
products and services segment, Universal Propulsion Company, Inc.
In a letter dated June 24, 1997 sent to the party who had sent
the June 12 letter and in subsequent letters to other parties
that had previously expressed interest in certain of the
Company's businesses, Admiral Foster responded that the Company
would not consider any proposals until it had concluded its
strategic financial review.
The second full paragraph on page 11 of the Schedule 14D-9
under the caption "Item 4. The Solicitation or Recommendation" is hereby
amended and restated to read as follows:
On September 16, 1997, Admiral Foster received another letter
from the party that sent the August 22 letter. In this letter,
the party made separate proposals to the Company to purchase the
government products and services segment at a price ranging from
$120 million to $130 million and the industrial products segment
at a price ranging from $35 million to $40 million and also
requested permission to conduct due diligence. In a subsequent
telephone conversation, Admiral Foster asked a representative of
the party whether the proposals included the air bag business.
The representative informed Admiral Foster that the proposals did
not include air bags since insufficient public information was
available with which to value that business. When Admiral Foster
offered to provide the same limited due diligence on the air bag
business that had previously been provided to Parent, the party
stated that it wanted to perform full due diligence on the
government products and services segment and the industrial
products segment. After discussions with representatives of J.P.
Morgan and the Company's outside legal counsel, Admiral Foster
called the party to inform it that its proposals as described in
the September 16 letter were not sufficient to permit the Company
to allow it to conduct extensive due diligence.
The last paragraph starting on page 11 and continuing onto
page 12 and the first two full paragraphs on page 12 of the Schedule 14D-9
under the caption "Item 4. The Solicitation or Recommendation" are hereby
amended and restated to read as follows:
On September 25, 1997, the Board of Directors of the Company
held a meeting to consider the Offer, the Merger and the Merger
Agreement. All of the Company's directors participated in the
meeting. At the commencement of the meeting, Messrs. Rockow and
Craig distributed the following memorandum to the Board:
To: Board of Directors, Talley Industries, Inc.
From: Ralph A. Rockow
Robert T. Craig
Re: Carpenter Technology Corporation
Date: September 25, 1997
We understand that the sole purpose of this meeting is
consideration of and action upon the proposed Agreement and
Plan of Merger among Carpenter Technology Corporation,
Carpenter Acquisition Corp. and Talley Industries, Inc.
("Talley"). As members of the Talley Board of Directors, we
are concerned that approval of the proposed transaction at
this meeting would necessarily cause each of us to breach
our fiduciary duties to Talley and its shareholders.
Because of our concerns, we have retained outside
counsel to advise us of our obligations as Board members and
to assist us in determining whether we are meeting those
obligations. It is our understanding that, in considering a
significant transaction such as the proposed agreement, we
have the duty to:
1. Act in the best interests of the shareholders of
Talley;
2. Inform ourselves of all material information
reasonably available to us prior to making a
decision and prior to submitting the proposal to the
Talley stockholders;
3. Evaluate the available information in a deliberate
manner before submitting the proposal to the Talley
stockholders;
4. Consider the impact of the proposal on the
employees and other constituencies of Talley; and
5. Satisfy ourselves that the proposal is the best
available proposal and that entering into the
transaction will not unreasonably discourage other
superior proposals.
We are not able to conclude that acting upon the
pending proposal at this meeting will allow us to discharge
our duty to exercise an informed business judgment. This is
based upon a number of factors including the following:
1. We have had a very limited time to review a 49 page
single-spaced document (plus exhibits) containing a
number of significant provisions not previously
raised with the Board;
2. The entire Board will not have had an opportunity to
receive and examine the fairness opinion which we
understand will be presented at this meeting by J.P.
Morgan Securities, Inc. to satisfy ourselves that it
has taken into account all factors which may bear
upon the fairness of the cash consideration to be
received by the Talley stockholders; and
3. The entire Board has not been advised about, or had the
opportunity to evaluate, other inquiries which might
result in superior proposals for Talley and the
stockholders and we are concerned that the $6
million termination fee could create a significant
impediment to other viable proposals.
It is, therefore, our request and recommendation that a
decision on the proposed transaction be deferred for a
reasonable period of time to enable all Board members to
become fully familiar with the proposal now before us.
Messrs. Rockow and Craig then made a motion to adjourn the meeting
for two weeks to provide additional time to consider the Offer, the
Merger and the Merger Agreement. The motion was defeated by a vote
of 8 of the 10 directors.
At the September 25 meeting, the Board of Directors of the
Company reviewed the Offer, the Merger and the Merger Agreement with
the Company's executive officers, outside legal counsel and
representatives of J.P. Morgan. The Board of Directors of the
Company heard presentations by its outside legal counsel with respect
to the terms of the proposed Offer, the Merger and the Merger
Agreement and by representatives of J.P. Morgan with respect to the
financial terms of the proposed Offer and the Merger. The Board of
Directors, with the participation of the representatives of J.P.
Morgan, reviewed again the alternatives for the Company discussed
during the Board's June meeting. In this connection, representatives
of J.P. Morgan discussed with the Board of Directors an analysis of
various liquidation scenarios, including the September 16 indication
of interest. Based solely upon a discounted cash flow analysis of
the projections prepared by the management of the Company, and
assuming: (i) the $110 million proposal for the steel businesses by
Parent; (ii) the combined $155 million to $170 million proposal from
the September 16 party for the government products and services and
industrial products segments (collectively, the "Other Proposals");
and (iii) a value range of approximately $100 million to $120 million
for the remaining businesses were able to be realized; this analysis
reflected (based on these assumptions) a value range of approximately
$11 to $13 per share of Common Stock would likely be realized by the
Company's stockholders (after taking into account taxes, debt and
corporate charges that would be payable in connection with such
liquidation). In addition, based upon the valuation methodologies
employed by J.P. Morgan, including a discounted cash flow analysis
premised upon management's projections and management's projections
as adjusted by J.P. Morgan, a comparable company analysis and a
comparable acquisition analysis, and assuming: (i) the value of the
Other Proposals; and (ii) a value range of $42 million to $52 million
for the remaining businesses were able to be realized; this analysis
reflected (based on these assumptions) a value range of approximately
$9 to $10 per share of Common Stock would likely be realized by the
Company's stockholders (after taking into account taxes, debt and
corporate charges that would be payable in connection with such
liquidation). As a result of these analyses, J.P. Morgan advised
the Board that, after taking into account taxes, debt and corporate
charges that would be payable in connection with a liquidation and
the risks, uncertainties and time requirements associated with a
liquidation process, in J.P. Morgan's view, none of those scenarios
would be reasonably likely to provide the Company's stockholders with
value superior to the proposed transaction with Parent. At the
conclusion of their presentation, representatives of J.P. Morgan
delivered their oral opinion to the Board of Directors (subsequently
confirmed in writing) that, as of such date, the consideration
proposed to be received by the stockholders of the Company in the
Offer and in the Merger was fair, from a financial point of view, to
such holders.
Based upon such discussions, presentations and opinion, the
Board of Directors, by a vote of 8 of the 10 directors, (i) approved
the Offer and the Merger and the execution of the Merger Agreement
substantially in the form presented to it, and (ii) determined to
recommend that the Company's stockholders accept the Offer and tender
their Shares and approve the Merger and the Merger Agreement.
Messrs. Rockow and Craig voted against the transaction stating that
they objected to the process for the reasons set forth in the
memorandum they had distributed at the commencement of the Board
meeting and that they considered the $12 price offered by Parent as
less than what they viewed as an appropriate value for the Company.
Item 8. Additional Information to be Furnished.
Item 8(d) of the Schedule 14D-9 is hereby amended and restated
by the following:
(d) On September 26, 1997, the Company and certain of its directors
were named as defendants in a purported class action filed on behalf
of the stockholders of the Company in the Chancery Court of Delaware.
These actions were entitled: Jewish Center of Hyde Park, et al. v.
Jack C. Crim, et al. (C.A. No. 15961) and Brickell Partners v.
Jack C. Crim, et al. (C.A. No. 15963) (the "Original Stockholder
Actions"). The complaints in the Original Stockholder Actions
alleged breach of fiduciary duty on the part of the Board of
Directors arising out of execution of the Merger Agreement and sought
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 complaint in Jewish Center of Hyde Park, et al. v. Jack
C. Crim, et al., was filed as Exhibit H to the Schedule 14D-9 and is
incorporated herein by reference, and the foregoing summary is
qualified in its entirety by reference thereto.
On October 8, 1997, the complaints in the Original
Stockholder Actions were amended to add Purchaser and Parent as
additional defendants (the "Amended Complaint"). This Amended
Complaint alleged 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 sought 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
moved for a preliminary injunction to enjoin the closing of the Offer
and the Merger and the court scheduled a hearing on the motion on
October 28, 1997 at 11 a.m. A copy of the Amended Complaint was
filed as Exhibit I to the Schedule 14D-9 and is incorporated herein
by reference, and the foregoing summary of the Amended Complaint is
qualified in its entirety by reference thereto.
Subsequent to the filing of the Original Shareholder
Actions, four other purported class action complaints (collectively,
the "Subsequent Actions") were filed against the Company and certain
of its directors on behalf of the stockholders of the Company in the
Chancery Court of Delaware. The Subsequent Actions were entitled as
follows: (i) Ernest Hack v. the Company, et al. (C.A. No. 15964);
(ii) Max Grill, et al. v. Paul L. Foster, et al. (C.A. No.
15965); (iii) William Steiner v. the Company, et al. (C.A. No.
15967); and (iv) Joseph Ruskay v. Jack C. Crim, et al. (C.A. No.
15975). The Subsequent Actions made substantially the same
allegations as contained in the Original Shareholder Actions and
sought similar relief. Copies of the Subsequent Actions are filed as
Exhibits J, K, L, and M, respectively, and are incorporated herein by
reference, and the foregoing summary of the Subsequent Actions is
qualified in its entirety by reference thereto.
On October 16, 1997, with respect to all the filed actions
(including the Amended Complaint and the Subsequent Actions), counsel
for the plaintiffs entered into a Memorandum of Understanding, dated
October 16, 1997 (the "MOU"), with counsel for the defendants
providing for a proposed settlement of all such actions. The MOU
provides, among other things: (i) that the Company will supplement
the disclosure contained in the Schedule 14D-9, as is set forth above
in Item 4; (ii) that Purchaser will proceed with the Offer, the
Merger and all other transactions contemplated by the Merger
Agreement without further application for injunctive relief by
plaintiffs; (iii) that plaintiffs will withdraw their motion for a
preliminary injunction promptly upon the execution of the MOU; (iv)
that the Company will bear the cost of notice to stockholders in
connection with the settlement of the stockholder actions and the
settlement hearing; (v) that the parties will attempt in good faith
to agree upon and execute an appropriate stipulation of settlement
and any other documentation required for court approval of the
settlement of the actions upon the terms set forth in the MOU; (vi)
that the stipulation will expressly provide that (a) the defendants
have denied, and continue to deny, that any of them have committed or
aided or abetted in the commission of any violation of law, and that
they are entering into a stipulation of settlement solely because the
proposed settlement would eliminate the burden and expense of further
litigation and (b) the plaintiffs will thereby release the defendants
and any of their affiliates or other representatives, whether under
state or federal law, and whether directly, representatively or in
any other capacity, excluding statutory appraisal rights, in
connection with, or that arise out of the subject matter of the
stockholder actions, the Offer, the Merger, the negotiation and
consideration of the Merger, and the fiduciary or disclosure
obligations of any of the defendants (or persons to be released) with
respect to the foregoing; (vii) that consummation of the settlement
is contingent upon an appropriate stipulation of settlement, final
court approval and dismissal of the action with prejudice, with each
party bearing its own costs; (viii) that plaintiffs will petition
(and defendants will consent solely in connection with the
settlement) the court for certification as a class, consisting of all
the stockholders of the Company from September 26, 1997 to the
effective date of the Merger; (ix) that the settlement is
conditioned upon the satisfactory completion of confirmatory
discovery and upon consummation of the Merger; and (x) that the
settlement contemplated by the MOU will not be binding upon any party
until an appropriate stipulation of settlement has been signed and
final court approval of the settlement and the dismissal of the
action with prejudice, with each party bearing its own costs (except
as provided in the MOU) has been obtained. In addition, the parties
have agreed in the MOU that plaintiffs' counsel in the Amended
Complaint and the Subsequent Actions will apply to the Delaware court
for an award of attorneys' fees and disbursements in an amount not to
exceed $330,000. Defendants have agreed not to oppose such
application and the Company will pay plaintiffs' counsel the amounts
awarded by the court. The MOU has been filed as Exhibit N to the
Schedule 14D-9 and is incorporated herein by reference, and the
foregoing summary of the MOU is qualified in its entirety by
reference thereto.
Item 9. Material to be Filed as Exhibits.
J. Complaint filed by Ernest Hack against the Company, Fred
Israel, Jack C. Crim, Paul L. Foster, Joseph A. Orlando, Alex
Stamatakis, John W. Stodder, Donald J. Ulrich, David Victor, Ralph
A. Rockow and Robert T. Craig (dated September 29, 1997, Court of
Chancery of the State of Delaware in and for New Castle County).
K. Complaint filed by Max Grill and Eugene C. Murray
against Paul L. Foster, Jack C. Crim, Robert T. Craig, Fred
Israel, J.D. MacNaughton Jr., William H. Mallender, Joseph A.
Orlando, Ralph A. Rockow, Alex Stamatakis, John W. Stodder, Donald
J. Ulrich, David Victor and the Company (dated September 29, 1997,
Court of Chancery of the State of Delaware in and for New Castle
County).
L. Complaint filed by William Steiner against the Company,
Fred Israel, Jack C. Crim, Paul L. Foster, Joseph A. Orlando, Alex
Stamatakis, John W. Stodder, Donald J. Ulrich, David Victor, Ralph
A. Rockow and Robert T. Craig (dated September 29, 1997, Court of
Chancery of the State of Delaware in and for New Castle County).
M. Complaint filed by Joseph Ruskay 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 October 6, 1997, Court
of Chancery of the State of Delaware in and for New Castle County).
N. Memorandum of Understanding, dated October 16, 1997.
O. Press Release of the Company, dated October 17, 1997.
P. Letter to the Company's stockholders, dated October 17, 1997(*)
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(*) Included in copies mailed to stockholders.
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 17, 1997
EXHIBIT J
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
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ERNEST HACK, :
:
Plaintiff, :
:
v. : Civil Action No. 15964
:
TALLEY INDUSTRIES INC., FRED :
ISRAEL, JACK C. CRIM, PAUL L. :
FOSTER, JOSEPH A. ORLANDO, ALEX :
STAMATAKIS, JOHN W. STODDER, :
DONALD J. ULRICH, DAVID VICTOR, :
RALPH A. ROCKOW and :
ROBERT T. CRAIG, :
:
Defendants. :
- --------------------------------------------------X
CLASS ACTION COMPLAINT
----------------------
Plaintiff, by his attorneys, alleges upon information and belief, except
with respect to his ownership of Talley Industries Inc. ("Talley" or the
"Company") common stock as follows:
PARTIES
-------
1. Plaintiff is the owner of common stock of Talley.
2. Talley is a Delaware corporation with executive offices at 2702 North
44th Street, Phoenix, Arizona. Talley, inter alia, designs, manufactures and
supplies specialized industrial, commercial and aerospace products and
services. As of June 30, 1997, Talley had approximately 14 million shares of
common stock outstanding held by approximately 2,500 shareholders of record.
3. Defendant Paul L. Foster is acting Chairman of the Board, Chief
Executive Officer and a Director of Talley.
4. Defendant Jack C. Crim is President, Chief Operating Officer and a
Director of Talley.
5. Defendants Fred Israel, Joseph A. Orlando, Alex Stamatakis, John W.
Stodder, Donald J. Ulrich, David Victor, Ralph A. Rockow and Robert T. Craig
are Directors of Talley.
6. The foregoing individuals (collectively the "Director Defendants"),
as officers and/or directors of Talley, owe fiduciary duties to Talley and its
shareholders.
CLASS ACTION ALLEGATIONS
------------------------
7. Plaintiff brings this action on his own behalf and as a class action
on behalf of all shareholders of defendant Talley (except defendants herein and
any person, firm, trust, corporation or other entity related to or affiliated
with any of the defendants) or their successors in interest, who have been or
will be adversely affected by the conduct of defendants alleged herein.
8. This action is properly maintainable as a class action for the
following reasons:
(a) The class of shareholders for whose benefit this action is brought
is so numerous that joinder of all class members is impracticable. As of June
30, 1997, there were over 14 million shares of defendant Talley's common stock
outstanding owned by over 2,500 shareholders of record scattered throughout
the United States.
(b) there are questions of law and fact which are common to members of
the Class and which predominate over any questions affecting any individual
members. The common questions include, inter alia, the following:
i. Whether the Director Defendants have breached fiduciary
duties owed by them to plaintiff and members of the Class;
ii. Whether the Director Defendants have wrongfully failed
to act in the best interests of Talley and its shareholders; and
iii. Whether plaintiff and the other members of the Class
will be irreparably damaged by the wrongful conduct complained of herein.
9. Plaintiff is committed to prosecuting this action and has retained
competent counsel experienced in litigation of this nature. The claims of
plaintiff are typical of the claims of the other members of the Class and
plaintiff has the same interests as the other members of the Class.
Accordingly, plaintiff is an adequate representative of the Class and will
fairly and adequately protect the interests of the Class.
10. Defendants have acted or refused to act on grounds generally
applicable to the Class, thereby making appropriate injunctive relief with
respect to the Class as a whole.
11. 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 the other members not parties to the
adjudications.
12. Plaintiff anticipates that there will not be any difficulty in the
management of this litigation.
13. For the reasons stated herein, a class action is superior to other
available methods of the fair and efficient adjudication of this action.
SUBSTANTIVE ALLEGATIONS
14. On September 26, 1997, it was announced that Talley had entered into
a definitive agreement to be acquired by Carpenter Technology Corp.
("Carpenter") in a transaction pursuant to which Carpenter will pay $12 a share
for each of Talley's common shares (the "Transaction"). Carpenter is scheduled
to commence its tender offer for Talley's shares on October 2, 1997.
15. On September 25, 1997, the day prior to the announcement of the
Transaction, Talley stock closed at $11-7/16 per share. Accordingly, the
Transaction offers less than a 5% premium over the pre-announcement closing
price of Talley's stock.
16. Talley's stock rose $1-1/8 to close at $12-9/16 on September 26,
1997. A group of Talley shareholders holding approximately 9% of Talley stock
announced their opposition to the Transaction which they have stated is
inadequate. Indeed, they have stated that Talley stock may be worth as much as
$18 per share.
17. The Director Defendants have violated fiduciary duties owed to the
public shareholders of Talley. The Director Defendants were and are obligated
to act in the best interests of Talley and its shareholders, including the
maximization of shareholder value in the sale of the Company.
18. By agreeing to the Transaction, the Director Defendants failed to
take adequate steps to enhance Talley's value and/or attractiveness as a
merger/acquisition candidate or effectively expose Talley to the marketplace
in an effort to create active and open bidding for Talley. While the Director
Defendants should continue to seek out other possible purchasers of the assets
of Talley or its stock in a manner designed to obtain the best transaction
reasonably available for Talley's shareholders and seek to enhance the value
of Talley for all its current shareholders, they have instead wrongfully
agreed to allow Carpenter to obtain the valuable assets of Talley at an
inadequate price.
19. The conduct of the Director Defendants is, and unless corrected,
will continue to be wrongful, unfair and harmful to Talley's public
shareholders.
20. In contemplating, planning and/or effecting the foregoing actions,
the Director Defendants are not acting in good faith toward plaintiff and the
Class, and have breached, and are breaching, fiduciary duties to plaintiff and
the Class.
21. As a result of the wrongful actions and inactions of the Director
Defendants, plaintiff and the Class have been and will be damaged.
22. Unless enjoined by this Court, the Director Defendants will continue
to breach fiduciary duties owed to plaintiff and the Class, all to the
irreparable harm of the Class.
23. Plaintiff has no adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
(a) Declaring that this action may be maintained as a class action;
(b) Enjoining consummation of the Transaction or if it is consummated,
rescinding it or awarding rescissory damages;
(c) Enjoining preliminarily and permanently the Director Defendants
duly to consider all alternatives to maximize shareholder value;
(d) Requiring defendants to compensate plaintiff and the members of the
Class for all losses and damages suffered and to be suffered by them as a
result of the wrongful conduct complained of herein, together with prejudgment
and post-judgment interest;
(e) Awarding plaintiff the costs and disbursements of this action,
including reasonable attorneys', accountants', and experts' fees; and
(f) Granting such other and further relief as may be just and proper.
Dated: September 29, 1997 CHIMICLES, JACOBSEN & TIKELLIS
/s/ James C. Strum
---------------------
Pamela S. Tikellis
James C. Strum
Robert J. Kriner, Jr.
One Rodney Square
P.O. Box 1035
Wilmington, DE 19899
(302) 656-2500
Attorneys for Plaintiff
OF COUNSEL:
WOLF, HALDENSTEIN, ADLER,
FREEMAN & HERZ, LLP
Jeffrey G. Smith, Esquire
270 Madison Avenue
New York, NY 10016
LAW OFFICES OF CHARLES J. PIVEN, P.A.
Suite 2700
The Legg Mason Tower
111 South Calvert Street
Baltimore, MD 21202
EXHIBIT K
IN THE COURT OF THE CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- - - - - - - - - - - - - - - - - - - - - - - - - - X
MAX GRILL and EUGENE C. MURRAY, :
on behalf of themselves and all others :
similarly situated, :
:
Plaintiffs, : C.A. No. 15965NC
:
- against - : CLASS ACTION
: COMPLAINT
PAUL L. FOSTER, JACK C. CRIM, ROBERT : ---------
T. CRAIG, FRED ISRAEL, J.D. :
MACNAUGHTON JR., WILLIAM H. :
MALLENDER, JOSEPH A. ORLANDO, :
RALPH A. ROCKOW, ALEX STAMATAKIS, :
JOHN W. STODDER, DONALD J. ULRICH, :
DAVID VICTOR and TALLEY INDUSTRIES, :
INC. :
:
Defendants. :
- - - - - - - - - - - - - - - - - - - - - - - - - - X
Plaintiffs, by their attorneys, allege upon information and belief,
except for paragraphs 2 and 3 which are alleged upon personal knowledge, as
follows:
JURISDICTION
------------
1. This Court has jurisdiction by virtue of the fact that Talley
Industries Inc. ("TI" or the "Company") is incorporated in the State of
Delaware.
THE PARTIES
-----------
2. Plaintiff Max Grill is, and at all relevant times was, the owner of
shares of common stock of TI.
3. Plaintiff Eugene C. Murray is, and at all relevant times was, the
owner of shares of common stock of TI.
4. Defendant TI is a Delaware corporation with its principal offices at
2702 North 44th Street, Phoenix, Arizona 85008. TI is a diversified maker of
aerospace, industrial and commercial applications.
5. The Company's Board of Directors consists of the following persons:
(a) Paul L. Foster is, and at all relevant times has been,
Chairman of the Board of Directors, Chief Executive Officer, and a Director
of the Company;
(b) Jack C. Crim is, and at all relevant times has been,
President, Chief Operating Officer, and a Director of the Company;
(c) Robert T. Craig is, and at all relevant times has been, a
member of the Board of Directors of the Company;
(d) Fred Israel is, and at all relevant times has been, a
Director of the Company;
(e) J.D. MacNaughton, Jr. is, and at all relevant times has
been, a Director of the Company;
(f) William H. Mallender is, and at all relevant times has
been, a Director of the Company;
(g) Joseph A. Orlando is, and at all relevant times has been,
a Director of the Company;
(h) Ralph A. Rockow is, and at all relevant times has been, a
Director of the Company;
(i) Alex Stamatakis is, and at all relevant times has been, a
Director of the Company;
(j) John W. Stodder is, and at all relevant times has been, a
Director of the Company;
(k) Donald J. Ulrich is, and at all relevant times has been, a
Director of the Company; and
(l) David Victor, is, and at all relevant times has been, a
Director of the Company.
6. The persons named in paragraph 5 above shall be collectively
referred to herein as the "Individual Defendants."
7. The Individual Defendants, by reason of their corporate
directorships stand in a fiduciary position relative to the Company's
shareholders, which fiduciary relationship, at all times relevant herein,
required the Individual Defendants to exercise their best judgment, and to act
in a prudent manner, and in the best interests of the Company's shareholders.
They were and are required to use their ability to control and manage the
Company in a fair, just and equitable manner; to act in furtherance of the
best interests of the Company's shareholders; to refrain from abusing their
positions of control; and not to favor their own interests at the expense of
the Company's shareholders.
8. Each Individual Defendant herein is sued individually as an aider
and abettor, as well as in his or her capacity as an officer and/or director of
the Company, and the liability of each arises from the fact that he has
engaged in all or part of the unlawful acts, plans, schemes, or transactions
complained of herein.
CLASS ACTION ALLEGATIONS
------------------------
9. Plaintiffs bring this action on their own behalf and, pursuant to
Rule 23 of the Rules of the Court of Chancery of the State of Delaware, on
behalf of all 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.
10. Plaintiffs seek injunctive relief and to recover damages for
themselves and the other members of the Class caused by the breach of fiduciary
duties owed by the Individual Defendants, in that plaintiffs and the other
members of the Class will not receive their fair proportion of the value of
TI's assets and businesses, which is not fully reflected in the price to be
paid by Carpenter Technology Corp. ("CT") and which can only truly be
determined if the Individual Defendants create a level playing field for other
bidders to come in and bid for TI. Plaintiffs and the other members of the
Class are being prevented from obtaining a fair price for their shares of the
Company's common stock.
11. The Individual Defendants' decision to agree to the transaction was
given in breach of their fiduciary duties owed to TI's stockholders to take
all necessary steps to ensure that the stockholders will receive the maximum
value realizable for their shares in any merger or acquisition of the Company.
In the context of this action, the Board of Directors of TI must take all
reasonable steps to assure the maximization of stockholders value, including
the implementation of a bidding mechanism to foster a fair auction of the
Company to the highest bidder or the exploration of strategic alternatives
which will return greater or equivalent value to the plaintiffs and the Class.
12. This action is properly maintainable as a Class Action.
13. The Class is so numerous that joinder of all members is
impracticable. There were 14,113,453 shares of TI common stock issued and
outstanding as of June 30, 1997, which shares are traded on the New York Stock
Exchange. While the exact number of Class members are unknown to plaintiffs at
this time and can only be ascertained through appropriate discovery, plaintiffs
believe that there are thousands of members of the Class.
14. A Class Action is superior to other methods for the fair and
efficient adjudication of the claims herein asserted and no unusual
difficulties are likely to be encountered in the management of this Class
Action. The likelihood of individual Class members prosecuting separate
claims is remote.
15. There are questions of law and fact which are common to the Class
and which predominate over questions affecting any individual Class member.
The common questions include, inter alia, the following:
(a) whether defendants are unlawfully impeding other possible
merger or takeover attempts at the expense of TI's public stockholders;
(b) whether defendants have failed to disclose all material
facts relating to the takeover including the potential and expected
positive future financial benefits which they expect to derive;
(c) whether defendants have failed and will fail to negotiate in
good faith with other prospective purchasers of the Company; and
(d) whether the plaintiffs and other members of the Class would
be irreparably damaged were the defendants not enjoined from the conduct
described herein below.
16. The prosecution of separate claims would create a risk of
either inconsistent or varying adjudications concerning individual members
of the Class, which would establish incompatible standards of conduct for
the party opposing the Class, and adjudications concerning individual
members of the Class would, as a practical matter, be dispositive of the
interests of other members of the Class who are not parties to the
adjudications or substantially impair or impede the ability of other
members of the Class who are not parties to the adjudications, to protect
their interests. The defendants have acted on grounds generally applicable
to all members of the Class, making relief concerning the Class as whole
appropriate.
17. 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 the plaintiffs have the same interests as the other members of
the Class. Plaintiffs are adequate representatives of the Class. A Class
Action poses no management problems and this case is ideally suited for
Class Action certification.
SUBSTANTIVE ALLEGATIONS
-----------------------
18. On September 26, 1997, TI announced that it has entered into a
definitive agreement and plan of merger with CT to be acquired for cash.
Under the terms of the agreement, CT will commence an all-cash tender offer
for all outstanding shares of Talley common stock at a price of $12 per
share of TI common stock, $16 per share of TI Series B Preferred Stock and
$11.70 per share of TI Series A preferred stock.
19. The per-share value of $12 represented a narrow premium to the
September 25, 1997 closing price of $11.438 for TI shares.
20. Immediately after the agreement was announced, two founders of
a TI minority shareholder group criticized the offer as inadequate. The
dissident holder group, calling itself the Shareholders Committee To Remove
Entrenched and Arrogant Management ("SCREAM") said it wouldn't support the
offer because the breakup value of the company is much higher. The group
said TI should allow other companies to bid on TI's divisions individually,
because its airbag, stainless steel, defense and industrial products are
worth more individually than as a whole. "It is difficult to put a number
on it because the company is not allowing other parties to come in and look
at the books," said William Danzell of Danzell Investment Management Ltd.
"But if you look at the different segments of the business and add the
values, I think we are looking at about $18 per share."
21. Earlier this year, SCREAM, which controls 10.3% of the TI's
stock, forced the ouster of TI's Chief Executive Officer and another
Director.
22. The Individual Defendants agreed to an offer that is unfair to
TI's shareholders and does not reflect the intrinsic value of TI's assets.
This agreement is terribly unfair as the consideration to be paid to TI's
shareholders and does not recognize the underlying value of the Company's
stock.
23. In announcing the merger, defendants have failed to disclose,
inter alia, the full extent of the future earnings potential of TI and its
expected increase in profitability.
24. The defendants' knowledge and economic power and that
of the investing public is unequal because the Individual Defendants are in
possession of material non-public information concerning the Company's
assets, businesses, and future prospects and control the business and
corporate affairs of TI. This disparity makes it inherently unfair for the
merger of TI at such an unfair and grossly inadequate price.
25. The Individual Defendants have at all times been fiduciaries to
TI shareholders. As set forth herein, they have breached and are
continuing to breach their fiduciary duties to TI's shareholders.
26. The Individual Defendants have breached their fiduciary duties
by reason of the acts and transactions complained of herein, including
their failure to negotiate the possible acquisition of TI and to provide
confidential information to potential suitors on the same playing field
that it created for CT.
27. Unless enjoined by the Court, the Individual Defendants will
continue to breach their fiduciary duties owed to plaintiffs and the other
members of the Class.
28. The Individual Defendants' authorization to pursue the
transaction was given in breach of their fiduciary duties owed to TI's
stockholders to take all necessary steps to ensure that the stockholders
will receive the maximum value realizable for their shares in any merger of
the Company. In the context of this action, the Board of Directors of TI
must take all reasonable steps to assure the maximization of stockholder
value, including the implementation of a bidding mechanism to foster a fair
auction of the Company to the highest bidder or the exploration of
strategic alternatives which will return greater or equivalent value to the
plaintiffs and the Class.
29. Plaintiffs and the 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 TI's assets and businesses, which is not fully
reflected in the price to be paid by CT and which can only truly be
determined if the Individual Defendants create a level playing field for
other bidders to come in and bid for TI. Plaintiffs and the other members
of the Class have been and will be prevented from obtaining a fair price
for their shares of the Company's common stock.
30. Plaintiffs and the Class have no adequate remedy at law.
WHEREFORE, plaintiffs demand judgment, as follows:
A. Declaring this to be a proper Class Action;
B. Ordering the Individual Defendants to carry out their fiduciary
duties to plaintiffs and the other members of the Class by announcing their
intention to:
1. cooperate fully with any person or entity, having a bona fide
interest in proposing any transaction which would maximize shareholder
value, including, but not limited to, a buyout or takeover of the Company;
2. invalidating any breakup fee agreed to by defendants if there
is one;
3. undertake an appropriate evaluation of TI's worth as a
merger/acquisition candidate;
4. take all appropriate steps to enhance TI's value and
attractiveness as a merger/acquisition candidate;
5. take all appropriate steps to effectively expose TI to the
marketplace in an effort to create an active auction for TI;
6. take proper action to maximize the price that TI shareholders
will receive for their shares.
7. act independently so that the interests of TI's public
stockholders will be protected; and
8. adequately ensure that no conflicts of interest exist between
Individual Defendants' own interests and their fiduciary obligations to
maximize stockholder value or, if such conflicts exist, to ensure that all
conflicts are resolved in the best interests of TI's public stockholders;
C. Ordering the Individual Defendants to carry out their fiduciary
duties to plaintiffs and the Class and requiring them to respond in good
faith to any bona fide potential acquirors of TI;
D. Temporarily and permanently enjoining the merger agreement
entered into with CT;
E. Awarding plaintiffs the costs and disbursements of the action,
including a reasonable allowance for plaintiffs' attorneys' and experts'
fees; and
F. Granting such other and further relief as may be just and proper.
DATED: September 29, 1997
MORRIS and MORRIS
By: /s/ Patrick F. Morris
---------------------------
Karen L. Morris
Patrick F. Morris
Suite 1600
1105 North Market Street
Wilmington, DE 19801
(302) 426-0400
Attorneys for Plaintiffs
Of Counsel:
STULL, STULL & BRODY
6 East 45th Street
New York, NY 10017
(212) 687-7230
WEISS & YOURMAN
551 Fifth Avenue
Sutie 1600
New York, NY 10176
EXHIBIT L
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- - - - - - - - - - - - - - - - - - - - - - x
WILLIAM STEINER, :
:
Plaintiff, :
:
v. : Civil Action No. 15967
:
TALLEY INDUSTRIES INC., FRED :
ISRAEL, JACK C. CRIM, PAUL L. :
FOSTER, JOSEPH A. ORLANDO, ALEX :
STAMATAKIS, JOHN W. STODDER, :
DONALD J. ULRICH, DAVID VICTOR, :
RALPH A. ROCKOW and :
ROBERT T. CRAIG, :
:
Defendants. :
- - - - - - - - - - - - - - - - - - - - - - -x
CLASS ACTION COMPLAINT
----------------------
Plaintiff, by his attorneys, alleges upon information and
belief, except with respect to his ownership of Talley Industries Inc.
("Talley" or the "Company") common stock as follows:
PARTIES
-------
1. Plaintiff is the owner of common stock of Talley.
2. Talley is a Delaware corporation with executive offices at
2702 North 44th Street, Phoenix, Arizona. Talley, inter alia, designs,
manufactures and supplies specialized industrial, commercial and aerospace
products and services. As of June 30, 1997, Talley had approximately 14
million shares of common stock outstanding held by approximately 2,500
shareholders of record.
3. Defendant Paul L. Foster is acting Chairman of the Board, Chief
Executive Officer and a Director of Talley.
4. Defendant Jack C. Crim is President, Chief Operating Officer
and a Director of Talley.
5. Defendants Fred Israel, Joseph A. Orlando, Alex Stamatakis,
John W. Stodder, Donald J. Ulrich, David Victor, Ralph A. Rockow and Robert T.
Craig are Directors of Talley.
6. The foregoing individuals (collectively the "Director
Defendants"), as officers and/or directors of Talley, owe fiduciary duties to
Talley and its shareholders.
CLASS ACTION ALLEGATIONS
------------------------
7. Plaintiff brings this action on his own behalf and as a class
action on behalf of all shareholders of defendant Talley (except defendants
herein and any person, firm, trust, corporation or other entity related to or
affiliated with any of the defendants) or their successors in interest, who
have been or will be adversely affected by the conduct of defendants alleged
herein.
8. This action is properly maintainable as a class action for the
following reasons:
(a) The class of shareholders for whose benefit this action
is brought is so numerous that joinder of all class members is impracticable.
As of June 30, 1997, there were over 14 million shares of defendant Talley's
common stock outstanding owned by over 2,500 shareholders of record scattered
throughout the United States.
(b) there are questions of law and fact which are common to
members of the Class and which predominate over any questions affecting any
individual members. The common questions include, inter alia, the following:
i. Whether the Director Defendants have breached
fiduciary duties owed by them to plaintiff and members of the Class;
ii. Whether the Director Defendants have wrongfully
failed to act in the best interests of Talley and its shareholders; and
iii. Whether plaintiff and the other members of the
Class will be irreparably damaged by the wrongful conduct complained of herein.
9. Plaintiff is committed to prosecuting this action and has
retained competent counsel experienced in litigation of this nature. The
claims of plaintiff are typical of the claims of the other members of the
Class and plaintiff has the same interests as the other members of the Class.
Accordingly, plaintiff is an adequate representative of the Class and will
fairly and adequately protect the interests of the Class.
10. Defendants have acted or refused to act on grounds generally
applicable to the Class, thereby making appropriate injunctive relief with
respect to the Class as a whole.
11. 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 the other members not parties to the adjudications.
12. Plaintiff anticipates that there will not be any difficulty in
the management of this litigation.
13. For the reasons stated herein, a class action is superior to
other available methods of the fair and efficient adjudication of this action.
SUBSTANTIVE ALLEGATIONS
-----------------------
14. On September 26, 1997, it was announced that Talley had entered
into a definitive agreement to be acquired by Carpenter Technology Corp.
("Carpenter") in a transaction pursuant to which Carpenter will pay $12 a
share for each of Talley's common shares (the "Transaction"). Carpenter is
scheduled to commence its tender offer for Talley's shares on October 2, 1997.
15. On September 25, 1997, the day prior to the announcement of the
Transaction, Talley stock closed at $11-7/16 per share. Accordingly, the
Transaction offers less than a 5% premium over the pre-announcement closing
price of Talley's stock.
16. Talley's stock rose $1-1/8 to close at $12-9/16 on September
26, 1997. A group of Talley shareholders holding approximately 9% of Talley
stock announced their opposition to the Transaction which they have stated is
inadequate. Indeed, they have stated that Talley stock may be worth as much
as $18 per share.
17. The Director Defendants have violated fiduciary duties owed to
the public shareholders of Talley. The Director Defendants were and are
obligated to act in the best interests of Talley and its shareholders,
including the maximization of shareholder value in the sale of the Company.
18. By agreeing to the Transaction, the Director Defendants failed
to take adequate steps to enhance Talley's value and/or attractiveness as a
merger/acquisition candidate or effectively expose Talley to the marketplace in
an effort to create active and open bidding for Talley. While the Director
Defendants should continue to seek out other possible purchasers of the assets
of Talley or its stock in a manner designed to obtain the best transaction
reasonably available for Talley's shareholders and seek to enhance the value of
Talley for all its current shareholders, they have instead wrongfully agreed to
allow Carpenter to obtain the valuable assets of Talley at an inadequate price.
19. The conduct of the Director Defendants is, and unless
corrected, will continue to be wrongful, unfair and harmful to Talley's public
shareholders.
20. In contemplating, planning and/or effecting the foregoing
actions, the Director Defendants are not acting in good faith toward plaintiff
and the Class, and have breached, and are breaching, fiduciary duties to
plaintiff and the Class.
21. As a result of the wrongful actions and inactions of the
Director Defendants, plaintiff and the Class have been and will be damaged.
22. Unless enjoined by this Court, the Director Defendants will
continue to breach fiduciary duties owed to plaintiff and the Class, all to the
irreparable harm of the Class.
23. Plaintiff has no adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
(a) Declaring that this action may be maintained as a class
action;
(b) Enjoining consummation of the Transaction or if it is
consummated, rescinding it or awarding rescissory damages;
(c) Enjoining preliminarily and permanently the Director
Defendants duly to consider all alternatives to maximize shareholder value;
(d) Requiring defendants to compensate plaintiff and the
members of the Class for all losses and damages suffered and to be suffered
by them as a result of the wrongful conduct complained of herein, together
with prejudgment and post-judgment interest;
(e) Awarding plaintiff the costs and disbursements of this
action, including reasonable attorneys', accountants', and experts' fees; and
(f) Granting such other and further relief as may be just
and proper.
Dated: September 29, 1997
CHIMICLES, JACOBSEN & TIKELLIS
/s/ James C. Strum
--------------------------
Pamela S. Tikellis
James C. Strum
Robert J. Kriner, Jr.
One Rodney Square
P.O. Box 1035
Wilmington, DE 19899
(302) 656-2500
Attorneys for Plaintiff
OF COUNSEL:
GOODKIND LABATON RUDOFF & SUCHAROW, LLP
100 Park Avenue, 12th Floor
New York, New York 10017
(212) 907-0700
EXHIBIT M
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- -----------------------------------------------------x
JOSEPH RUSKAY, :
: C. A. No. 15975 NC
Plaintiff, :
:
- against - : CLASS ACTION COMPLAINT
:
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 :
TALLEY INDUSTRIES, INC. :
:
Defendants. :
- -----------------------------------------------------x
Plaintiff, by his attorneys, alleges upon personal knowledge as
to his own acts and upon information and belief as to all other matters, as
follows:
NATURE OF THE ACTION
--------------------
1. Plaintiff brings this action individually and as a class
action on behalf of all persons, other than defendants, who own the securities
of Talley Industries, Inc. ("Talley" or the "Company"), and who are similarly
situated (the "Class"), for injunctive and other relief. Plaintiff seeks the
injunctive relief herein, inter alia, to enjoin the closing of a proposed
transaction whereby Carpenter Technology Corporation ("Carpenter") will
acquire the Company in a two-step tender offer valued at approximately $312
million. Alternatively, in the event that the proposed transaction is
implemented, plaintiff seeks to recover damages caused by the breach of
fiduciary duties owed by the defendants.
PARTIES
-------
2. Plaintiff has been, at all times relevant hereto, and
continues to be, an owner of the Company's $1 Convertible Preferred Series B
Stock.
3. Defendant Talley is a corporation duly organized and
existing under the laws of the State of Delaware, with its principal executive
offices located at 2702 N. 44th Street, Phoenix, Arizona 85008. The Company
produces steel products, ceramic insulators, and welding equipment; makes
aerosol insecticides, air fresheners and sanitizers; provides naval
architecture and engineering services; and designs and makes solid propellant
actuated devices and electronic components for the United States Government.
Talley currently supplies Carpenter with stainless bar products to augment the
manufacturing capacity of the Carpenter Specialty Alloys Operations main plant
in Reading, Pa.
4. Defendants Jack C. Crim, John D. McNaughton, Alex
Stamatakis, Donald J. Ulrich, Paul L. Foster ("Foster"), Joseph A. Orlando,
Fred Israel, John W. Stodder, David Victor, and Neil W. Benson are directors of
Talley.
5. The defendants named in paragraph 4 are hereinafter referred
to as the "Individual Defendants."
6. Because of their positions as officers/directors of Talley,
the Individual Defendants owe fiduciary duties of loyalty and due care to
plaintiff and the other members of the Class.
7. Each defendant herein is sued individually as a conspirator,
as well as in his capacity as an officer and/or director of Talley, and the
liability of each arises from the fact that each defendant has engaged in all
or part of the unlawful acts, plans, schemes, or transactions complained of
herein.
CLASS ACTION ALLEGATIONS
------------------------
8. Plaintiff brings this case in his own behalf and as a class
action, pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf
of all holders of the Company's securities, except defendants herein and any
person, firm, trust, corporation, or other entity related to or affiliated
with any of the defendants, or any of the Company's principal shareholders,
who will be threatened with injury arising from defendants' actions as
described more fully below.
9. This action is properly maintainable as a class action.
10. The Class is so numerous that joinder of all members is
impracticable. As of June, 1997, the Company had 14,113,453 shares
outstanding. There are hundreds, if not thousands, of record and beneficial
shareholders.
11. There are questions of law and fact common to the Class
including, inter alia, whether:
a. defendants have breached and will continue to breach
their fiduciary and other common law duties owed by them to plaintiff and
the members of the Class; and
b. plaintiff and the other members of the Class would
be irreparably damaged by the wrongs complained of herein.
12. Plaintiff is committed to prosecuting the action and has
retained competent counsel experienced in litigation of this nature.
Plaintiff's claims are typical of the claims of the other members of the Class
and plaintiff has the same interests as the other members of the Class.
Plaintiff is an adequate representative of the Class.
13. The prosecution of separate actions by individual members
of the Class would create the 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 the other members not parties to the
adjudications or substantially impair or impede their ability to protect their
interests.
14. The defendants have acted, or refused to act, on grounds
generally applicable to, and causing injury to, the Class and, therefore,
preliminary and final injunctive relief on behalf of the Class as a whole is
appropriate.
SUBSTANTIVE ALLEGATIONS
-----------------------
15. By the acts, transactions, and courses of conduct alleged
herein, defendants, individually and as part of a common plan and scheme and/or
aiding and abetting one another in total disregard of their fiduciary duties,
are attempting to deprive plaintiff and the Class unfairly of the opportunity
to maximize the value of their investment in Talley.
16. Talley has recently reported renewed growth and earnings.
a. For example, 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.
b. 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
airbag 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.
17. Notwithstanding Talley's recent, strong operating
performance, Talley's recent stock price has been trading at levels less than
its intrinsic value. In light of Talley's strong portfolio of products and
financial performance, its prospects for future growth and expansion are
substantial, and the intrinsic value of the Company is far greater than that
reflected in the market price of Talley's stock.
18. On September 26, 1997, both Talley and Carpenter announced
that the latter agreed to buy Talley for $312 million. Under the terms of the
agreement, Carpenter will commence an all-cash tender offer for all the
outstanding shares of Talley stock at a price of $12 per share of Talley common
stock, $16 per share of Talley Series B Preferred Stock, and $11.70 per share
of Talley Series A Preferred Stock.
19. Assuming a majority of Talley's stock is duly tendered
under the tender offer and not withdrawn before the expiration date of the
offer (Oct. 30, 1997, unless extended), Carpenter will be obligated to
complete, in the second step of the tender offer, an all-cash merger whereby
all Talley shares remaining outstanding will be acquired at the same per-share
prices as under the tender offer.
20. Commenting on the consideration offered in the transaction,
defendant Foster stated: "The $12 price represents an attractive premium above
the trading range for our Common Stock the last several years." However,
since May 1997, Talley's stock has been trading in the range of $8 to $11 7/16
per share. In fact, the consideration offered -- $12 per share -- represents
a small premium, less than 10%, over the price of the Company's stock on the
day before the transaction was announced, $11 7/16.
21. Despite the obvious long-term value of the Talley
acquisition for Carpenter, Talley shareholders will be receiving a small
takeover premium over Talley's stock price immediately prior to the
announcement of the transaction and inadequate value in relation to Talley's
contribution to the pro forma combined value of the two firms. The
substantial synergies that Carpenter will enjoy by virtue of the transaction
are not being adequately compensated in the transaction price. These
synergies are not insubstantial. According to Carpenter, although it expects
the acquisition to be "slightly" dilutive to earnings per share for fiscal
1998, it anticipates the acquisition to be accretive to earnings per share
thereafter. Commenting on the benefits of the transaction, Carpenter Chairman
Robert Cardy said, "Our five-year outlook required us to seek out more
manufacturing capacity, and this acquisition will give us a modern facility
known for its high-quality products and competitive costs."
22. By entering into the merger agreement with Carpenter, the
Individual Defendants have initiated a process to sell the Company that imposes
heightened fiduciary responsibilities and requires enhanced scrutiny by the
Court. The terms of the proposed transaction were not the result of an
auction process or active market check; they are intrinsically unfair and
inadequate from the standpoint of Talley's shareholders. Indeed, according to
the dissident group, which controls 10.3 percent of Talley's common stock, and
which earlier this year ousted the company's chairman and another director,
"It is difficult to put a number on it because the company is not allowing
other parties to come in and look at the books. But if you look at the
different segments of the business and add the values, I think we are looking
at about $18 per share." William Danzell, one of two shareholders who
organized the dissident group in a bid to force the directors to take steps to
shore up the share price, went on to say 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, "reputable investment banks and other companies"
asked to be part of the sale process and were rebuffed by Talley and its
investment bank J.P. Morgan.
23. Indeed, the dissident group stated that the offer is
inadequate. "Carpenter is bottom fishing," said Danzell.
24. The dissident group was organized last January. In May
1997, it successfully waged a proxy fight to oust Talley's chairman and chief
executive, William Mallender, and another director, Townsend W. Hoopes.
25. After the transaction closes, Carpenter said it plans to
invest in Talley's metal operations to increase capacity and reduce costs, and
expects to sell eight units in Talley's government products and services
group. The government products group accounted for $148 million of revenue in
1996, and the industrial products group, reported revenues of $74 million in
1996. Recognizing the value of Talley's various businesses, the dissident
group said that Talley could garner a higher price for shareholders if the
Company was sold piecemeal.
26. The consideration to be paid to Class members in the
proposed transaction is unfair and inadequate because, among other reasons:
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 price is not the result of an appropriate
consideration of the value of Talley because the Individual Defendants
approved the proposed transaction without undertaking steps to accurately
ascertain Talley's true value through open bidding or at least a "market
check mechanism."
27. The terms of the proposed transaction are grossly unfair to
the Class, and the unfairness is compounded by the gross disparity between the
knowledge and information possessed by the Individual Defendants by virtue of
their positions of control of Talley and that possessed by Talley's public
shareholders.
28. As a result of defendants' action, plaintiff and the Class
have been and will be damaged by the breaches of fiduciary duty and, therefore,
plaintiff and the Class will not receive the fair value of Talley's assets and
businesses.
29. Unless enjoined by this Court, defendants will continue to
breach their fiduciary duties owed to plaintiff and the Class, and will
succeed in their plan to exclude plaintiff and the Class from the fair
proportionate share of Talley's valuable assets and businesses, all to the
irreparable harm of the Class.
30. Plaintiff and the Class have no adequate remedy of law.
WHEREFORE, plaintiff prays for judgment and relief as follows:
a. declaring that this lawsuit is properly maintainable
as a class action and certifying plaintiff as representative of the Class;
b. declaring that the defendants and each of them have
committed a gross abuse of trust and have breached their fiduciary duties
to plaintiff and the other members of the Class;
c. preliminarily and permanently enjoining defendants
and their counsel, agents, employees, and all persons acting under, in
concert with, or for them, from proceeding with or implementing the
transaction;
d. in the event the transaction is consummated,
rescinding it and setting it aside, or awarding rescissory damages to the
Class;
e. awarding compensatory damages against defendants,
jointly and severally, in an amount to be determined at trial, together
with prejudgment interest at the maximum rate allowable by law;
f. awarding plaintiff and the Class their costs and
disbursements and reasonable allowances for plaintiff's counsel and
experts' fees and expenses; and
g. granting such other and further relief as may be
just and proper.
ROSENTHAL MONHAIT GROSS
& GODDESS, P.A.
By: /s/ J.A. Rosenthal
-----------------------------
Suite 1401 Mellon Bank Center
Wilmington, Delaware 19899
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
POMERANTZ HAUDEK BLOCK & GROSSMAN
100 Park Avenue, 26th Floor
New York, NY 10017-5516
(212) 661-1100
EXHIBIT N
MEMORANDUM OF UNDERSTANDING
---------------------------
The undersigned parties to the actions captioned Jewish Center
of Hyde Park, et al. v. Jack C. Crim, et al., Civil Action No. 15961-NC;
Brickell Partners v. Jack C. Crim, et al., Civil Action No. 15963-NC; Ernest
Hack v. Talley Industries, Inc., et al., Civil Action No. 15964-NC; Max Grill
and Eugene C. Murray v. Paul L. Foster, et al., Civil Action No. 15965-NC;
William Steiner v. Talley Industries, Inc., et al., Civil Action No. 15967-NC;
Joseph Ruskay v. Jack C. Crim, et al., Civil Action No. 15975-NC; now pending
in the Court of Chancery of the State of Delaware (the "Actions"), by their
respective attorneys, have reached an agreement in principle providing for the
settlement of the Actions on the terms and subject to the conditions set forth
below.
Whereas, as of September 25, 1997, an Agreement and Plan of
Merger was entered into by and among Talley Industries, Inc. ("Talley"),
Carpenter Technology Corporation ("Carpenter") and a merger subsidiary of
Carpenter ("Acquisition Sub") providing for, inter alia, a merger;
Whereas, on September 26, 1997, it was publicly announced that
an agreement had been reached to merge Talley with Acquisition Sub, pursuant
to a tender offer by Acquisition Sub for all shares of Talley (the "Tender
Offer") at a price of $12.00 in cash per common share, $11.70 in cash for each
share of Talley's Series A Preferred, and $16.00 per share in cash for each
share of Talley's Series B Preferred, followed by a merger (the "Merger") at
the same per share price;
Whereas thereafter, the Actions were filed in the Delaware
Court of Chancery, New Castle County, challenging the transaction, and have
now been consolidated for all purposes;
Whereas, the complaints in the Actions were brought as class
actions on behalf of all holders of the stock of Talley (except defendants in
the Actions and any person, firm, trust, corporation or other entity related
to or affiliated with any of the defendants in the Actions) and named as
defendants Talley and the members of its Board of Directors, as well as
Carpenter;
Whereas, the Actions challenged the Merger alleging, inter
alia, that the Talley directors, as aided and abetted by the other defendants,
were breaching their fiduciary duty by agreeing to the Merger and employing
unfair and deceptive procedures which resulted in an unfair price, and whereas
it was further alleged that all defendants failed to disclose material
non-public information regarding the value of Talley's assets, the full extent
of the future earning potential of Talley, Talley's expected growth and
profitability, the substance of the expressions of interest received by Talley
from other potential acquirors, and the reasons Mr. Rockow and Mr. Craig
opposed the transaction;
Whereas, plaintiffs' counsel have negotiated at arm's-length
with counsel for defendants to settle the Actions on the terms set forth below;
Whereas, plaintiffs' counsel have determined that a settlement
of the Actions in principle on the terms reflected in this Memorandum of
Understanding is fair, reasonable and adequate and in the best interests of
the Talley public stockholders;
Whereas, defendants maintain there is no substance to the
claims against them in the Actions and continue to deny all allegations of
wrongdoing; and
Whereas, defendants, recognizing the many sharply contested
legal and factual issues and the risks attendant to the further prosecution of
the defense of the Actions, have concluded that it is desirable that the
claims against them be compromised and settled;
NOW, THEREFORE, IT IS STIPULATED AND AGREED, subject to the
approval of the Court, by and among the parties hereto:
1. Based upon a review of the Schedule 14D-1 and Schedule
14D-9 that has been sent to the stockholders of Talley in connection with
Acquisition Sub's Offer to Purchase (the "Tender Offer Materials") and the
review of documents and other information on an expedited basis, plaintiffs'
counsel proposed that certain changes and further disclosures be included and
made in the Tender Offer Materials. In settlement of the Actions, Talley has
agreed to include certain of these proposed disclosures (the "Disclosures") in
the Tender Offer Materials. The Disclosures consist of (a) the reasons that
Talley Board members Ralph Rockow and Robert Craig opposed the Merger,
including the text of a memorandum that they distributed to the Talley Board
of Directors on September 25, 1997; (b) the dollar amounts of the third-party
indications of interest received by Talley referred to in the Schedule 14D-9;
and (c) the implications of the September 16 proposal referred to in the
Schedule 14D-9 for the analysis of the liquidation value of Talley.
2. Subject to the inclusion of the Disclosures in the Tender
Offer Materials, as set forth in paragraph 1 above, defendant Acquisition Sub
will proceed with the Offer to Purchase and all other transactions
contemplated by the Agreement and Plan of Merger, subject only to the
conditions specified by the Agreement and Plan of Merger and without further
application for injunctive relief by plaintiffs in this or any other Court.
3. Promptly upon execution of this Memorandum of
Understanding, plaintiffs will withdraw their Motion for a Preliminary
Injunction pending in the Actions and notify the Court that their Motion is
withdrawn.
4. Plaintiffs' counsel agree to apply to the Court for an
award of attorneys' fees and disbursements in an amount not to exceed
$330,000, as the Court may allow. Defendants agree that they will not oppose
such application, and Talley will pay to plaintiffs' counsel the amounts
awarded by the Court.
5. Talley will bear the cost of notice to the class members
in connection with the settlement of the Actions and the settlement hearing.
6. The undersigned parties will attempt in good faith to
agree upon and to execute an appropriate stipulation of settlement and such
other documentation as may be required in order to obtain court approval of
the settlement of the Actions upon the terms set forth in this Memorandum of
Understanding. The stipulation of settlement will expressly provide, inter
alia, that all defendants have denied, and continue to deny, that they have
committed or aided and abetted in the commission of any violations of law, and
that they are entering into the stipulation solely because the proposed
settlement would eliminate the burden and expense of further litigation. The
stipulation of settlement will provide for a release of all claims of the
stockholders of Talley against defendants or any of their present or former
officers, directors, agents, attorneys, financial advisors, commercial bank
lenders, investment bankers, representatives, affiliates, associates, parents,
subsidiaries, general and limited partners and partnerships, heirs, executors,
administrators, successors and assigns, whether under state or federal law, and
whether directly, representatively or in any other capacity (excluding
statutory appraisal rights), in connection with, or that arise out of the
subject matter of the Actions, the Tender Offer, the Merger, the negotiation
and consideration of the Merger, and the fiduciary or disclosure obligations
of any of the defendants (or persons to be released) with respect to any of
the foregoing.
7. Consummation of the settlement is subject to the drafting
and execution of an appropriate stipulation of settlement and such other
documentation as may be required, final court approval of the settlement (as
to be defined in the stipulation of settlement), and dismissal of the action
with prejudice and each party to bear its own costs (except for the costs set
forth in paragraphs 4 and 5 above).
8. For purposes of settlement of the Actions consistent with
the terms of this Memorandum of Understanding, plaintiffs will petition the
Court in connection with the stipulation of settlement for certification of a
class pursuant to Chancery Court Rules 23(b)(1) and (b)(2), consisting of all
Talley shareholders (exclusive of defendants and their affiliates) who owned
Talley shares on any day during the period from September 26, 1997 (the date
that the proposed Merger of Talley with Carpenter was publicly announced) to
and including the effective date of the Merger, including the legal
representatives, heirs, successors in interest, transferees and assigns of all
such foregoing holders and/or owners, immediate and remote (the "Class").
Defendants will consent to such petition solely in connection with the
settlement.
9. The undersigned parties will present the settlement
agreement to the Court for approval as soon as practicable and will use their
best efforts to obtain final court approval of the settlement and the
dismissal of the action with prejudice and without cost to any party, except
as provided in paragraphs 4 and 5 above.
10. The settlement contemplated herein shall be conditioned
upon the satisfactory completion of confirmatory discovery and upon
consummation of the Merger.
11. The settlement contemplated by this Memorandum of
Understanding will not be binding upon any party until an appropriate
stipulation of settlement has been signed and final court approval of the
settlement and the dismissal of the action with prejudice and each party to
bear its own costs (except for the costs set forth in paragraphs 4 and 5
above) has been obtained. This Memorandum of Understanding shall be null and
void and of no force and effect should any of these conditions not be met and,
in that event, this agreement shall not be deemed to prejudice in any way the
positions of the parties with respect to the Actions.
ROSENTHAL, MONHAIT, GROSS &
GODDESS, P.A.
/s/ Norman M. Monhait
------------------------------
Norman M. Monhait
Mellon Bank Center, Suite 1401
919 N. Market Street
P.O. Box 1070
Wilmington, DE 19801
(302) 656-4433
On Behalf of All Plaintiffs
PRICKETT, JONES, ELLIOTT,
KRISTOL & SCHNEE
/s/ Samuel D. Brickley, II
-----------------------------
Samuel D. Brickley, II
Wayne N. Elliott
Samuel D. Brickley, II
1310 King Street
P.O. Box 1328
Wilmington, DE 19899
(302) 888-6500
Attorneys for Defendants Carpenter
Technology Corporation and Score
Acquisition Corp.
MORRIS, NICHOLS, ARSHT &
TUNNELL
/s/ Martin P. Tully
-----------------------------
Martin P. Tully
Alan J. Stone
David J. Teklits
1201 N. Market Street
P.O. Box 1347
Wilmington, DE 19899
(302) 658-9200
Attorneys for Defendants Jack Crim,
Alex Stamatakis, Donald J. Ulrich,
Paul L. Foster, Joseph A. Orlando,
Fred Israel, John W. Stodder, David Victor,
John D. McNaughton, Neil W. Benson, and
Talley Industries, Inc.
DATED: October 16, 1997
EXHIBIT O
Talley Industries Announces Agreement in Principle to Settle Stockholder
Litigation
Business Wire via Dow Jones
PHOENIX--(BUSINESS WIRE)--Oct. 17, 1997--Talley Industries Inc.
(NYSE:TAL) Friday announced today that Talley and Carpenter Technology Corp.
(NYSE:CRS) had reached an agreement in principle to settle stockholder class
litigation brought in the Delaware Court of Chancery, challenging the
previously announced merger agreement with Carpenter.
The terms of the settlement agreement, which must still be
presented to and approved by the Delaware Court of Chancery at a settlement
hearing, call for Talley to amend and supplement the disclosure contained in
its Schedule 14D-9. In exchange, the plaintiffs have agreed to dismiss the
actions.
The defendants continue to deny plaintiffs' allegations and
have agreed to the settlement terms in order to avoid the burden and expense
of further litigation.
The amendment is being mailed to Talley stockholders today.
Talley Industries Inc. designs, manufactures and supplies
specialized industrial, commercial and aerospace products and services,
including stainless steel bar and wire rod, and high reliability electronic
components. The company was a pioneer in the automotive airbag industry and
is currently developing new airbag technologies.
Contact: Talley Industries Inc., Phoenix
Daniel R. Mullen, 602/957-7711
14:38 EDT October 17, 1997
EXHIBIT P
[Talley logo]
Talley Industries, Inc.
2702 North 44th Street
Phoenix, Arizona 85008
Paul L. Foster
Chairman of the Board and
Chief Executive Officer
October 17, 1997
Dear Stockholders:
We are pleased to report that a memorandum of understanding
has been reached to settle pending shareholder litigation seeking to
prevent consummation of the pending tender offer and the proposed merger
with a subsidiary of Carpenter Technology Corporation. The litigation was
initiated after the Schedule 14D-9 was mailed on October 2, 1997 and we
have enclosed an amendment to Talley's Schedule 14D-9, as filed today with
the Securities and Exchange Commission, supplementing the materials you
have already received.
The tender offer is scheduled to expire at midnight on
October 30, 1997. Pursuant to the tender offer, a subsidiary of Carpenter
is offering to purchase all outstanding shares of the following classes of
Talley securities at the indicated prices: Common Stock for $12.00 per
share; Series A Preferred Stock for $11.70 per share; and Series B
Preferred Stock for $16.00 per share, net to the seller in cash. Following
completion of the tender offer, shares of Talley not acquired in the tender
offer are to be acquired in a second step merger at the same per share
price for each class of securities.
A majority of your Board of Directors has determined that
the terms of the tender offer and the proposed merger are fair to and in
the best interests of Talley and its stockholders and has approved the
Merger Agreement, the tender offer and the merger. A majority of your
Board of Directors recommends that Talley stockholders accept the tender
offer and tender their shares of Common Stock and Preferred Stock pursuant
to the tender offer.
If you need further information, assistance in tendering
your shares, or additional copies of the tender offer documents, please
call the Information Agent for the Offer, D.F. King & Co., Inc, toll free
at (800) 347-4750.
On behalf of the management and the Board of Directors of
Talley Industries, Inc., we thank you for your continued support.
Sincerely,
/s/ PAUL L. FOSTER
--------------------------------
PAUL L. FOSTER
Chairman of the Board and
Chief Executive Officer
