<PAGE> 1
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Talley Industries, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
Shareholders' Committee to Remove Entrenched and Arrogant Management.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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<PAGE> 2
SHAREHOLDERS' COMMITTEE
TO REMOVE ENTRENCHED AND ARROGANT MANAGEMENT OF
TALLEY INDUSTRIES, INC.
Dear Fellow Shareholders of Talley Industries, Inc.:
SCREAM, the Shareholders' Committee to Remove Entrenched and Arrogant
Management of Talley Industries, Inc., is soliciting proxies to be used at
Talley's 1997 Annual Meeting, to be held on May 8, 1997, at 11 o'clock a.m.,
local time, at Talley Metals Technology, Inc., South Carolina Highway 172,
Hartsville, South Carolina 29550.
As set forth in more detail in the accompanying Proxy Statement, we have
nominated a slate for election to the Board of Directors and submitted a number
of shareholder proposals, all directed toward dislodging entrenched, arrogant
and ineffective management. To this end, we are proposing election of two
independent and highly knowledgeable directors (and, in the process removal of
two "lifers" from the Board). Because the Company has indicated that it might
act on a procedural technicality to invalidate the candidacy of a third SCREAM
nominee, and because SCREAM believes that removal of William Mallender from the
Board of Directors is of paramount importance to the future of the Company, we
also are seeking proxy authority to vote for one of management's
director-nominees. In addition, our proposals call upon the Board to adopt
certain corporate governance changes to ensure shareholder accountability and
prevent future management entrenchment.
We have chosen to act now because we are convinced that current management,
under Chairman and CEO William Mallender, has demonstrated that it is unable to
run the Company effectively. Consider that:
X From 1986 to 1996, the S&P 500 Index ROSE BY WELL OVER 200%.
X During that same decade the price of Talley's Common Stock FELL BY MORE
THAN 53%.
X And, not incidentally, from 1986 to 1996, the Company SUFFERED AGGREGATE
LOSSES OF ALMOST $45 MILLION.
THIS IS NOT THE RECORD OF AN EFFECTIVE MANAGEMENT !
Consider too, that Talley management, under the direction of Chairman and
CEO William Mallender, sold off Talley's airbag business in 1989, just as the
airbag industry was poised to "take off," we believe in order to raise cash to
pay debts and fund losses from its real estate investments, just as the bottom
fell out of that market.
Recently, the Company has received over $179 million in litigation damages
and from the sale of its disastrous real estate holdings and, according to the
Company's financial statements contained in filings with the Securities and
Exchange Commission, the Company had over $100 million in cash and receivables
at the end of 1996. WE DO NOT WANT THE MANAGEMENT RESPONSIBLE FOR THE COMPANY'S
PAST INVESTMENT AND DIVESTITURE DECISIONS TO INVEST THESE FUNDS ON BEHALF OF THE
SHAREHOLDERS.
We have recognized for some time that the Company is underperforming under
the burden of entrenched management, with no vision and no focus. And, we have
attempted to work with management to overcome inertia and turn things around.
Among other things we have (i) met with and engaged in less formal exchanges
with management; (ii) made specific suggestions for focusing the Company's
business on its potentially most profitable elements; (iii) suggested actions to
enhance shareholder value; (iv) submitted a nominee for election to the Board of
Directors; and (v) submitted a shareholder proposal designed to eliminate the
Company's Rights Plan -- something that we view as a virtually insurmountable
barrier against any takeover attempt. Rather than welcoming our interest and
participation, or taking its own, independent steps to improve the Company's
performance, we believe that management's actions clearly demonstrate that IT
HAS IGNORED, REBUFFED OR REJECTED OUR EFFORTS AND INTERFERED WITH OUR RIGHTS AS
SHAREHOLDERS AT VIRTUALLY EVERY OPPORTUNITY.
We have finally reached the conclusion that our efforts to engage
management in a cooperative effort for the benefit of all of the shareholders
are doomed to fail because we believe that, INSTEAD OF OPERATING THE COMPANY FOR
THE BENEFIT OF THE SHAREHOLDERS, THE TOUCHSTONE OF CURRENT MANAGEMENT IS ITS OWN
PRESERVATION AND ENRICHMENT. That management's mind is not on the shareholders
is clear from the Company's dismal financial performance. That management is
interested in staying in control is, we believe, demonstrated by the fact that,
even though the Company has in place a vast array of anti-takeover defenses
("shark repellents"), during 1996, the five members of senior management
exercised options to purchase almost 500,000 shares of
<PAGE> 3
Talley Common Stock (even though not a single option had been exercised during
the prior two years) and the Board of Directors has authorized the repurchase of
up to 950,000 shares of Common Stock, in what we believe is an attempt to
concentrate shares in the hands of "friendly" holders. And, if you are looking
for evidence of management's interest in its own financial well-being, you need
look no further than the compensation awarded to the Company's chief executive
officer, William Mallender, and the other four members of senior management, who
together have presided over the era of the Company's financial failure.
According to the Company's filings with the Securities and Exchange Commission,
in 1996 Talley's Board granted the five members of senior management an
aggregate pay increase of 313% OVER 1995, paying out OVER $10.1 MILLION,
including some $4 MILLION TO MR. MALLENDER, for calendar year 1996. In that same
year, EARNINGS APPLICABLE TO COMMON STOCK were ONLY $5.6 MILLION and THE COMMON
STOCK PRICE DECLINED NEARLY 15% FROM ITS ALREADY DEPRESSED 1995 LEVEL.
IN OTHER WORDS, TALLEY WAS A GOOD INVESTMENT FOR MR. MALLENDER AND SENIOR
MANAGEMENT IN 1996, BUT NOT FOR TALLEY'S SHAREHOLDERS.
In addition, under his "golden parachute" arrangement, for the next three
years MR. MALLENDER is entitled to receive a LUMP-SUM CASH PAYMENT OF 2.5 TIMES
HIS ANNUAL COMPENSATION, which could be as much as $9.9 MILLION (based on 1996
compensation), if two or more nominees not to the Company's liking are elected
and Mr. Mallender's employment is terminated, or he decides he does not want to
work for the new Board. Even absent such a "change in control," Mr. Mallender is
entitled to receive A CASH PAYMENT OF TWICE HIS ANNUAL COMPENSATION, which could
be as much as $7.9 MILLION (based on 1996 compensation), if his employment is
terminated for any reason short of EMBEZZLEMENT, CONVERSION OF CORPORATE
PROPERTY, OR SIMILAR WILLFUL MISCONDUCT.
Particularly since Mr. Mallender is standing for reelection at the 1997
Annual Meeting, we believe that this is the time for shareholders to reassert
their interests in the Company and its management. In particular, we are seeking
your proxy to:
(1) vote for the two SCREAM nominees committed to the goals of SCREAM and,
in order to ensure that William Mallender is not re-elected, vote for
Paul L. Foster, one of management's director-nominees -- in so doing,
removing two of the directors who have presided over the Company as its
businesses and stock price have languished; and
(2) recommend that the Board act promptly to (i) eliminate the Company's
classified Board of Directors; (ii) permit shareholders to call special
meetings; (iii) review the Company's governing instruments to identify
and eliminate provisions, such as supermajority voting requirements,
that inhibit shareholder action; and (iv) eliminate the Company's
"poison pill".
WE URGE YOU TO READ OUR ACCOMPANYING PROXY STATEMENT CAREFULLY AND TO SEND
MANAGEMENT A STRONG AND CLEAR MESSAGE THAT THE BOARD OF DIRECTORS IS EXPECTED TO
MANAGE THE COMPANY FOR THE SHAREHOLDERS, NOT THEMSELVES, THAT THE SHAREHOLDERS
DEMAND -- AND DESERVE -- AN EFFECTIVE AND ACCOUNTABLE MANAGEMENT AND THAT IF
MANAGEMENT IS UNRESPONSIVE TO SHAREHOLDER CONCERNS, THE SHAREHOLDERS WILL ACT TO
PUT IN PLACE A MANAGEMENT THAT ACCEPTS THAT THE INTERESTS OF SHAREHOLDERS MUST
COME FIRST. WE NEED YOUR SUPPORT AND URGE YOU TO JOIN US BY GIVING SCREAM YOUR
PROXY AS THE FIRST, LONG OVERDUE STEP IN CHANGING TALLEY'S DIRECTION.
All shareholders of record as of March 31, 1997, are entitled to vote at
the Annual Meeting. You may revoke any proxy previously given by executing our
BLUE PROXY CARD(S).
Call us if you have any questions or suggestions.
Sincerely,
SCREAM
April 16, 1997
<PAGE> 4
PROXY STATEMENT
OF SHAREHOLDERS' COMMITTEE TO REMOVE ENTRENCHED AND
ARROGANT MANAGEMENT IN OPPOSITION TO
MANAGEMENT AND THE CURRENT BOARD OF DIRECTORS OF
TALLEY INDUSTRIES, INC.
1997 ANNUAL MEETING OF SHAREHOLDERS
SCHEDULED FOR MAY 8, 1997
APRIL 16, 1997
Dear Fellow Shareholders of Talley Industries, Inc.:
This Proxy Statement, the accompanying letter to shareholders of Talley
Industries, Inc. and the enclosed BLUE proxy card(s), are being sent to you by a
group of your fellow shareholders, SCREAM -- Shareholders' Committee to Remove
Entrenched and Arrogant Management -- of Talley Industries, Inc. ("Talley" or
the "Company") -- in connection with our solicitation of proxies to be used at
the 1997 Annual Meeting of Stockholders to be held on May 8, 1997, at 11 o'clock
a.m., local time, at Talley Metals Technology, Inc., South Carolina Highway 172,
Hartsville, South Carolina 29550, or at any adjournments or postponements
thereof (collectively, the "Annual Meeting"). As of March 20, 1997, the members
of SCREAM beneficially owned an aggregate of 1,476,950 shares, or approximately
10.3%, of Talley's outstanding Common Stock.
Three directors are to be elected at the Annual Meeting. SCREAM is seeking
proxies for Robert T. Craig and Ralph A. Rockow (the "SCREAM NOMINEES"). In
addition, SCREAM is seeking proxies for Paul L. Foster, one of the Company's
director-nominees (the "DESIGNATED TALLEY NOMINEE"). (The SCREAM NOMINEES and
the DESIGNATED TALLEY NOMINEE sometimes are referred to collectively as the
"SCREAM SLATE.") SCREAM has elected to seek proxies for the Designated Talley
Nominee because the Company previously has indicated that it might invalidate
the nomination of SCREAM's third director-nominee on a procedural technicality.
Therefore, in order to maximize the possibility that William Mallender will not
be re-elected, SCREAM has elected to withdraw its third nominee and to seek
proxies in support of Mr. Foster.
SCREAM also proposes (the "SCREAM PROPOSALS") that the shareholders
recommend that the Board of Directors:
(1) Act to amend the Certificate of Incorporation to eliminate the
"classified" Board and to provide that, commencing with the 1998 annual
meeting, all directors be elected annually for one-year terms;
(2) Act to amend the Certificate of Incorporation to require the call of
special shareholders' meetings upon the demand of the holders of ten
percent (10%) or more of the Company's voting stock;
(3) Act either to (i) redeem the preferred stock purchase rights granted
under the Company's Rights or "Poison Pill" Plan and eliminate the Plan
or (ii) permit the shareholders to decide whether to retain or
eliminate the Rights and the Plan; and
(4) Review the Certificate of Incorporation and Bylaws to identify and
eliminate provisions that limit shareholder participation, including
certain supermajority voting requirements.
Under Delaware law, amendments to the Company's Certificate of
Incorporation must originate with action by the Board of Directors and then be
acted upon by the shareholders. Therefore, with respect to elimination of the
classified Board, adoption of a provision permitting the call of special
meetings by the shareholders, and elimination of supermajority voting provisions
and other impediments to shareholder participation, SCREAM seeks Board action
approving these matters and submitting them for a shareholder vote. No
shareholder action is required to amend the Company's Bylaws or to eliminate the
Poison Pill. Therefore, SCREAM seeks direct Board action on these matters.
<PAGE> 5
Shareholders of record as of the close of business on March 31, 1997 are
entitled to vote at the Annual Meeting. According to the Company's filings with
the Securities and Exchange Commission (the "SEC"), as of March 20, 1997,
14,280,453 shares of Common Stock, 13,793 shares of Series A Preferred Stock and
749,616 shares of Series B Preferred Stock (the Series A and Series B Preferred
Stock being referred to collectively as the "Preferred Stock") were issued and
outstanding.
The directors will be elected by the holders of Common and Preferred Stock,
voting together as a single class. The holders of Common and Preferred Stock
likewise will vote as a single class on each of the SCREAM Proposals. Therefore,
if you own more than one class of the Company's stock, you have received one
BLUE proxy card for each class held.
This Proxy Statement and the accompanying letter to shareholders and the
BLUE proxy card(s) are first being furnished on or about April 16, 1997.
IMPORTANT
WE URGE YOU TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED BLUE PROXY
CARD(S) IN THE POSTAGE-PAID ENVELOPE PROVIDED. BY SO DOING YOU WILL GRANT THE
SCREAM DESIGNEES YOUR PROXY TO VOTE YOUR SHARES FOR THE ELECTION OF THE SCREAM
SLATE AND IN FAVOR OF EACH OF THE SCREAM PROPOSALS, AND, IN THEIR DISCRETION, ON
ANY OTHER MATTERS THAT MIGHT COME BEFORE THE ANNUAL MEETING FOR A VOTE OF THE
SHAREHOLDERS.
WE URGE THAT YOU DO NOT SIGN AND RETURN ANY PROXY CARD PROVIDED BY TALLEY.
IF YOU HAVE ALREADY DONE SO, YOUR PROXY AUTOMATICALLY WILL BE REVOKED IF YOU
SIGN AND RETURN THE ENCLOSED BLUE PROXY CARD(S). YOU ALSO CAN REVOKE EARLIER
PROXIES BY WRITTEN REVOCATION FILED WITH THE SECRETARY OF THE COMPANY OR BY
ATTENDING THE ANNUAL MEETING AND VOTING IN PERSON.
IF YOU OWN YOUR SHARES IN THE NAME OF A BROKER OR OTHER NOMINEE, YOU MUST
TELL YOUR NOMINEE HOW TO VOTE YOUR SHARES. YOUR NOMINEE CANNOT VOTE YOUR SHARES
WITHOUT SPECIFIC INSTRUCTIONS FROM YOU. THESE INSTRUCTIONS CAN BE GIVEN BY
COMPLETING AND RETURNING YOUR BLUE PROXY CARD(S) TODAY.
VOTING AT THE ANNUAL MEETING
Shareholders may vote in person or by proxy at the Annual Meeting. Each
share of Common Stock and Series B Preferred Stock is entitled to one vote in
the election of directors and on each of the SCREAM PROPOSALS and each share of
Series A Preferred Stock is entitled to four-tenths of one vote in the election
of directors and on each of the SCREAM PROPOSALS.
By letter dated February 5, 1997, Saad A. Alissa, one of the founding
members of SCREAM, submitted to the Company a Notice of Stockholder Nominations
and Intent to Bring Business Before the 1997 Annual Meeting, as required by the
Company's Bylaws. As of the date of this Proxy Statement, management had not
responded to SCREAM's request for confirmation that it will permit the SCREAM
NOMINEES and the SCREAM PROPOSALS to come before the Annual Meeting for
shareholder action. Instead, the Company's preliminary proxy materials, as filed
with the SEC, specifically reserved the right to invalidate the nomination of
one of the SCREAM NOMINEES. The Company has changed its final proxy materials,
as filed with the SEC, to remove reference to the possible invalidity of the
candidacy of the SCREAM NOMINEE. However, as of the date of this Proxy
Statement, the Company has failed to respond to SCREAM's request that management
state its position as to the SCREAM NOMINEE and has failed to inform
shareholders in general of its position on this matter. In addition, the Company
has reserved the right to prevent the SCREAM PROPOSALS from coming to a
shareholder vote at the Annual Meeting, upon a finding of the presiding officer
that the SCREAM PROPOSALS are not "properly presented" or "in order." The
Company refused to permit the shareholders to vote on a nominee put forth by Mr.
Alissa at the 1996 annual meeting.
Because the Company has indicated that it might invalidate the nomination
of SCREAM's third director-nominee, in light of the Company's refusal to permit
election of a shareholder nominee to come to a vote of the shareholders at the
1996 annual meeting, and in order to maximize the possibility that William
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Mallender, one of the three director-nominees designated by management, will not
be re-elected at the Annual Meeting, SCREAM has elected to withdraw its third
nominee and to seek proxies in support of Paul L. Foster, the DESIGNATED TALLEY
NOMINEE.
All shares will be voted as specified on each properly executed BLUE proxy
card. You may vote FOR the election of each of the SCREAM NOMINEES and FOR the
DESIGNATED TALLEY NOMINEE as directors of the Company or withhold authority to
vote for the SCREAM NOMINEES and the DESIGNATED TALLEY NOMINEE by appropriately
marking the BLUE proxy card(s). You may also withhold your vote for either one
of the SCREAM NOMINEES and/or for the DESIGNATED TALLEY NOMINEE by writing the
name of each such candidate in the space provided on the BLUE proxy card. As
required by rules and regulations promulgated under the Securities Exchange Act
of 1934, as amended, SCREAM hereby states that there is no assurance that the
DESIGNATED TALLEY NOMINEE will serve if elected with any of the SCREAM NOMINEES.
However, SCREAM has no reason to believe that he will not serve. If no choice is
specified, the shares will be voted FOR the SCREAM NOMINEES and the DESIGNATED
TALLEY NOMINEE and IN FAVOR OF each of the SCREAM PROPOSALS. Proxies, once
given, may be revoked at any time by filing with the Secretary of the Company
either a written revocation or a duly executed proxy card bearing a later date
or by appearing in person at the Annual Meeting and voting in person.
ELECTION OF SCREAM NOMINEES TO THE BOARD OF DIRECTORS
According to the Company's filings with the SEC, the terms of three
directors will expire at the Annual Meeting and the terms of seven additional
directors will continue for up to an additional two years thereafter. The term
of an eleventh director also expires at the Annual Meeting, but the Company's
proxy materials give no indication of why this director is not standing for
reelection.
The terms of Paul L. Foster, Townsend Hoopes and William H. Mallender will
expire at the Annual Meeting. We propose that shareholders elect the two SCREAM
NOMINEES to two of the three positions to be filled at the Annual Meeting. In
addition, SCREAM proposes that the shareholders elect Paul L. Foster, who is one
of the three director-nominees designated by Talley management (the "DESIGNATED
TALLEY NOMINEE") to fill the third position on the Board of Directors to be
filled at the Annual Meeting. In addition to Mr. Foster, the Company has
designated William H. Mallender and Townsend Hoopes as director nominees. If
elected, the members of the SCREAM SLATE would hold office for three years
(until the annual meeting in 2000), unless the SCREAM PROPOSAL to amend the
Company's Certificate of Incorporation to eliminate the classified Board is
adopted at the Annual Meeting and implemented prior to the 1998 annual meeting.
If the classified Board is eliminated prior to the 1998 annual meeting, the
terms of all of the directors will expire in 1998. Although we have no reason to
believe that any of the SCREAM NOMINEES or the DESIGNATED TALLEY NOMINEE will
not be available to stand for election at the Annual Meeting or to serve if
elected, in the event of an unexpected vacancy in the SCREAM SLATE, the persons
named on the BLUE proxy card have agreed to vote for the election of such
substitute nominee(s) as may be proposed by SCREAM.
There is no assurance that the DESIGNATED TALLEY NOMINEE will serve if
elected with any of the SCREAM NOMINEES. However, SCREAM has no reason to
believe that he will not serve.
Pursuant to the Company's Bylaws, as filed with the SEC, the holders of a
majority of the aggregate number of votes to which all outstanding shares of
capital stock are entitled will constitute a quorum at the Annual Meeting and
directors will be elected by a plurality of the votes cast by the holders of
Common and Preferred Stock, voting together as a single class. Pursuant to
Delaware law, however, the presence of a shareholder, in person or by proxy, for
the sole purpose of protesting the legality of a meeting of shareholders may not
be counted in establishing the presence of a quorum. There is no provision for
abstentions in the election of directors, as to which votes either may be cast
or withheld. According to the Company's Proxy Statement, as filed with the SEC,
proxies which are marked "Withhold Authority" or as to which a broker or other
nominee has indicated a lack of discretionary authority ("broker non-votes")
will have no effect on the
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election of directors, but will be counted as present for purposes of
determining the presence of absence of a quorum.
The persons named on the BLUE proxy card do not intend to vote any shares
for the election of William H. Mallender or Townsend Hoopes, two of the nominees
proposed by Talley. Instead, they will vote FOR the SCREAM NOMINEES and for Paul
L. Foster, the DESIGNATED TALLEY NOMINEE, who was proposed by Talley management.
The accompanying BLUE proxy card, if properly completed, executed and
delivered, will be voted in accordance with your instructions, as reflected on
such card. You may vote FOR the election of each of the SCREAM NOMINEES and FOR
the DESIGNATED TALLEY NOMINEE as directors of the Company or withhold authority
to vote for the SCREAM NOMINEES and the DESIGNATED TALLEY NOMINEE by
appropriately marking the BLUE proxy card(s). You may also withhold your vote
for either one of the SCREAM NOMINEES and/or for the DESIGNATED TALLEY NOMINEE
by writing the name of each such candidate in the space provided on the BLUE
proxy card. As required by Section 240.14a-4(d)(iv) promulgated under the
Securities Exchange Act of 1934, as amended, SCREAM hereby states that there is
no assurance that the DESIGNATED TALLEY NOMINEE will serve if elected with any
of the SCREAM NOMINEES. However, SCREAM has no reason to believe that he will
not serve.
IF YOU PROPERLY SIGN, DATE AND RETURN THE BLUE PROXY CARD, BUT DO NOT
INDICATE YOUR INSTRUCTIONS THEREON, YOUR SHARES WILL BE VOTED FOR EACH MEMBER OF
THE SCREAM SLATE.
Below are the name, business address, principal occupation and age of each
of the SCREAM NOMINEES.
Robert T. Craig
14 Spotted Sandpiper
Hilton Head Island, SC
29928 Mr. Craig served for 15 years in various senior
executive positions with TRW, Inc., a diversified
company involved in the automotive and space and
defense industries whose shares are traded on the
New York Stock Exchange, retiring in 1987. TRW
manufactures airbag and steering systems, engine
valves, pistons, satellites, electronic components,
and other products. From 1975 to 1987, Mr. Craig
served as Vice President and Division General
Manager of TRW's Power Accessories Division, a
business unit of TRW which generated approximately
$150 million in revenues in 1986 and had
approximately 1,200 employees. During the same
period, he held a number of other operating
management positions within high technology
business units of TRW involved in the development
and production of products including aircraft fuel
systems, nuclear products and torpedo propulsion
systems. Mr. Craig holds a Bachelor of Science
degree in Electrical Engineering from the
Massachusetts Institute of Technology and a Master
of Science degree in Electrical Engineering from
Case Western Reserve University. Mr. Craig is 69.
Ralph A. Rockow
Exodyne, Inc.
Exodyne Business Park
8433 North Black Canyon
Highway, Suite 200
Phoenix, AR 85021 Mr. Rockow currently serves as the Chairman of the
Board and President of Exodyne Inc., a private
company which he founded in 1982, and as either
Chairman or Chairman and President of each of its
four wholly owned operating subsidiaries. Through
these subsidiaries and their approximately 850
employees, Exodyne specializes in research,
engineering and technical support services,
manufacturing, educational services and real estate
investment. Exodyne has over 100 offices
nationwide, conducts business domestically and
internationally in commercial, industrial and
government markets and generated revenues of
approximately $40 million in its most recent fiscal
year. From 1976 to 1982, Mr. Rockow was employed by
Talley, holding a number of senior operating
positions, finally as Group President of the
Government and Technical Products Group, the
business unit engaged in the design and production
of electronics, electromechanical and reinforced
plastic parts,
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<PAGE> 8
aircraft ejection seats and radar weather mapping
systems. Mr. Rockow holds Bachelor of Science and
Master of Science degrees in Mechanical Engineering
from The Ohio State University and has written and
presented on numerous technical topics. He is 63.
The Talley Proxy Statement sets forth certain biographical information
(incorporated herein by reference without independent verification) concerning
Paul L. Foster, the DESIGNATED TALLEY NOMINEE.
THE SCREAM PROPOSALS
SCREAM PROPOSAL NO. 1: ELIMINATE THE CLASSIFIED BOARD AND PROVIDE ONE YEAR TERMS
FOR ALL DIRECTORS
The Company's Certificate of Incorporation mandates a "classified" Board of
Directors, consisting of three classes of directors of as nearly equal size as
possible, with the members of one class elected each year. Consequently, the
shareholders cannot vote on all of the directors at each annual meeting. As a
practical matter, this means that at least two annual meetings must come and go
before the shareholders can replace a majority of the Board.
SCREAM believes that the classified Board serves to entrench existing
management and inhibit change, all to the detriment of shareholders. Elimination
of the classified Board would give shareholders the opportunity to voice their
approval or disapproval of the performance of all of their directors annually
and, we believe, remove a significant impediment to takeover attempts. We
believe that annual election of directors would ensure that all of the directors
remain accountable to the shareholders and that management decisions reflect the
interests of Talley's shareholders, rather than those of management itself. And,
since the change would not take effect until the 1998 annual meeting, the seven
carryover directors, working with the three SCREAM directors, would have a
transition period in which to prepare the Board for a return to annual
accountability.
SCREAM believes that the Company's attempted justification of its
classified Board demonstrates its complete disregard for the intelligence and
judgment of Talley's shareholders. Talley's shareholders have the power to
ensure continuity and experience without a classified Board, simply by
exercising their judgment in voting annually to return incumbent directors to
office. Absent the assumption that the shareholders do not know "what is good
for them" we believe that there is no justification for the contrived mechanism
of a classified Board, particularly since it serves to extend the time required
to replace a majority of the directors. Finally, we note that the Company has
been subject to the "stability and continuity" of its classified Board for a
number of years, and that we see no evidence that such characteristics have
prevented Talley its less-than-spectacular performance during that time.
SCREAM also believes that the "everyone does it" argument put forth by the
Company in defense of the classified Board is without merit and that in any
event there is no basis for comparing Talley to "large and well-run" companies.
Under Delaware law, amendments to the Company's Certificate of
Incorporation must be initiated by the Board of Directors. Therefore, SCREAM
PROPOSAL No. 1 (the text of which is included in ANNEX A to this Proxy
Statement) recommends that the Board of Directors act to amend the Certificate
of Incorporation to eliminate the classified Board of Directors, commencing with
the election of directors in 1998, by adopting a resolution to that effect and
submitting it to a vote of the shareholders at a special meeting called for that
purpose as promptly as practicable following the Annual Meeting.
Pursuant to the Company's Bylaws, as filed with the SEC, the holders of a
majority of the aggregate number of votes to which all outstanding shares of
capital stock are entitled will constitute a quorum at the Annual Meeting.
Pursuant to Delaware law, however, the presence of a shareholder, in person or
by proxy, for the sole purpose of protesting the legality of a meeting of
shareholders may not be counted in establishing the presence of a quorum. The
Company's Bylaws provide that adoption of SCREAM PROPOSAL No. 1 requires the
affirmative vote of a majority of the voting power of the Common and Preferred
Stock present in
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<PAGE> 9
person or represented by proxy at the Annual Meeting and entitled to vote on
that Proposal. According to the Company's proxy materials, as filed with the
SEC, abstentions will be counted as present and entitled to vote and will have
the same effect as vote against SCREAM PROPOSAL No. 1. Broker non-votes will be
counted as present for purposes of determining the presence of absence of a
quorum, but will not be counted as entitled to vote on SCREAM PROPOSAL No. 1 and
will have no effect on the outcome of the vote on that Proposal.
IF YOU PROPERLY SIGN, DATE AND RETURN THE BLUE PROXY CARD(S), BUT YOU DO
NOT INDICATE YOUR INSTRUCTIONS THEREON, YOUR SHARES WILL BE VOTED IN FAVOR OF
SCREAM PROPOSAL NO. 1.
SCREAM PROPOSAL NO. 2: REQUIRE THE CALL OF SPECIAL STOCKHOLDERS' MEETINGS UPON
THE DEMAND OF HOLDERS OF 10% OR MORE OF THE VOTING STOCK
The Company's Certificate of Incorporation and Bylaws provide that only the
Board of Directors, Chairman of the Board and President have the authority to
call special meetings of shareholders. The shareholders, on the other hand, do
not have the authority to call meetings or require that they be called by the
Company. So, no matter what management may do or not do, or why the shareholders
may want to meet, they have no right to meet and no power to act independently
of management.
SCREAM believes that it is imperative that Talley's shareholders have the
power to act independently at special meetings. However, we believe that such
meetings should not be called lightly and recognize that frequently called
meetings could impede management and result in substantial additional expense to
the Company. Therefore, we are proposing that special meetings should only be
called upon the written demand of the holders of ten percent (10%) or more of
Talley's outstanding voting stock. We believe that such a provision would work
to restore a substantial degree of shareholder democracy and enhance the
accountability of management to the shareholders, while preventing the call of
unnecessary or unwarranted shareholder meetings.
In our view, the Company's justification for denying shareholders the right
to call special meetings demonstrates once again the low regard in which
management holds the shareholders. It assumes that shareholders will exercise
their rights inappropriately and act in a manner harmful to the Company by
"wasting" its time and "disrupting" its operations, and that only management has
the wisdom and judgment to determine when circumstances "warrant" a meeting of
shareholders. Unlike current management, we believe that the shareholders can
and will recognize their own best interests, as well as those of the Company
and, consequently, will exercise the right to call special meetings in a prudent
and appropriate manner.
So far as SCREAM is aware, the Company has never called a special meeting
of its shareholders. Therefore, we believe that Company's position that the
current procedures are adequate because management will call such meetings in an
appropriate case is completely groundless. In addition, notwithstanding
management's statements to the contrary, MR. ALISSA HAS NEVER SUCCESSFULLY
AVAILED HIMSELF OF THE COMPANY'S PROCEDURES, although he once has tried to do
so. Instead, on one occasion, he submitted a shareholder proposal UNDER
PROCEDURES CONTAINED IN THE RULES OF THE SEC, independent of the Company's
governing documents. On another occasion, while Mr. Alissa believes that he
fully complied with the requirements of the Company's Bylaws and the Company
never informed him that he had failed to comply, WILLIAM MALLENDER REFUSED TO
PERMIT THE SHAREHOLDERS TO VOTE ON MR. ALISSA'S DIRECTOR-NOMINEE AT THE 1996
ANNUAL MEETING. Mr. Alissa did not, however, seek a judicial determination of
his compliance with the Bylaw requirements or judicial relief with respect to
Mr. Mallender's action in refusing to permit the nomination to come to a
shareholder vote.
Existing procedures may be adequate in the hands of a management intent on
serving the interests of shareholders. However, we believe that Mr. Mallender's
action in preventing the shareholders from voting on Mr. Alissa's Board nominee
last year clearly demonstrates that, in the hands of a management intent on its
own self-preservation, such procedures are woefully inadequate and, in fact, act
as a bar to shareholder action. Therefore, we believe that these provisions must
be expanded to permit direct shareholder action, without reliance on the motives
of management.
6
<PAGE> 10
Under Delaware law, amendments to the Company's Certificate of
Incorporation must be initiated by the Board of Directors, while amendments to
its Bylaws may be effected by action of the Board of Directors alone. Therefore,
SCREAM PROPOSAL No. 2 (the text of which is included in ANNEX A to this Proxy
Statement) recommends that the Board of Directors act to amend the Certificate
of Incorporation to permit holders of ten percent (10%) or more of the Company's
voting stock to require the call of special meetings upon written demand
delivered to the Board of Directors, the President or Secretary, by adopting a
resolution to that effect and submitting it to a vote of the shareholders at a
special meeting called for that purpose as promptly as practicable following the
Annual Meeting and that, assuming shareholder action in favor of such an
amendment to the Certificate of Incorporation, the Board of Directors act
promptly to amend the Bylaws accordingly.
Pursuant to the Company's Bylaws, as filed with the SEC, the holders of a
majority of the aggregate number of votes to which all outstanding shares of
capital stock are entitled will constitute a quorum at the Annual Meeting.
Pursuant to Delaware law, however, the presence of a shareholder, in person or
by proxy, for the sole purpose of protesting the legality of a meeting of
shareholders may not be counted in establishing the presence of a quorum. The
Company's Bylaws provide that adoption of SCREAM PROPOSAL No. 2 (the text of
which is included in ANNEX A to this Proxy Statement) requires the affirmative
vote of a majority of the voting power of the shares of Common and Preferred
Stock present in person or represented by proxy at the Annual Meeting and
entitled to vote on that Proposal. According to the Company's Proxy Statement,
as filed with the SEC, abstentions will be counted as present and entitled to
vote and will have the same effect as vote against SCREAM PROPOSAL No. 2. Broker
non-votes will be counted as present for purposes of determining the presence or
absence of a quorum, but will not be counted as entitled to vote on SCREAM
PROPOSAL No. 2 and will have no effect on the outcome of the vote on that
Proposal.
IF YOU PROPERLY SIGN, DATE AND RETURN THE BLUE PROXY CARD(S), BUT YOU DO
NOT INDICATE YOUR INSTRUCTIONS THEREON, YOUR SHARES WILL BE VOTED IN FAVOR OF
SCREAM PROPOSAL NO. 2.
SCREAM PROPOSAL NO. 3: ELIMINATE CERTAIN SUPERMAJORITY VOTING REQUIREMENTS
The Company's Certificate of Incorporation provides that the affirmative
vote of eighty percent (80%) of all classes of the Company's stock entitled to
vote is required for amendment of a number of its provisions including, without
limitation, the provisions (1) requiring a classified Board of Directors; (2)
limiting authority to call special meetings to the Board of Directors, Chairman
of the Board and President; and (3) requiring an eighty percent (80%) vote to
modify the foregoing supermajority voting provisions. Supermajority votes also
are required to amended a number of other anti-takeover or "shark repellent"
provisions of the Certificate of Incorporation.
We believe that supermajority voting provisions, as well as the other shark
repellent provisions of the Company's Certificate of Incorporation and Bylaws,
impede shareholder democracy and entrench existing management generally, without
regard to takeover offers or any other specific actions. Therefore, SCREAM
believes that the Company's governing documents should be reviewed and revised
to eliminate those provisions that discourage shareholder action and encourage
management entrenchment.
We believe that management's statement that supermajority voting
requirements "are not intended as, and cannot properly be used as, a shield
against a fair and fully funded takeover offer that benefits the shareholders
equally" is no defense at all. Instead we believe that it is nothing more than
an attempt to "distract" the shareholders. As such, we view management's
response as yet another indication of its lack of respect for the intelligence
and judgment of Talley shareholders.
In 1978, the SEC itself identified supermajority voting requirements as
among a class of devices the primary purpose of which is to deter unfriendly
takeovers, which act "to insulate management from removal," and the overall
effect of which is to "make difficult the removal of management." WE BELIEVE
THAT THE SEC IS CORRECT AND THAT, NOTWITHSTANDING THE STATED PURPOSE OF THE
COMPANY'S SUPERMAJORITY VOTING REQUIREMENTS, THEY IN FACT ACT TO INSULATE
CURRENT MANAGEMENT FROM REMOVAL AND RENDER SUCH REMOVAL DIFFICULT. WE LEAVE IT
TO OUR FELLOW SHAREHOLDERS TO REACH THEIR OWN CONCLUSIONS AS TO THE REAL
MOTIVATION BEHIND MANAGEMENT'S
7
<PAGE> 11
SUPPORT OF THESE REQUIREMENTS AND AS TO WHETHER THE POSSIBLE BENEFICIAL EFFECTS
OF THESE REQUIREMENTS OUTWEIGHS THEIR IMPACT ON MANAGEMENT.
Under Delaware law, amendments to the Company's Certificate of
Incorporation must be initiated by the Board of Directors. Therefore, SCREAM
PROPOSAL No. 3 (the text of which is included in ANNEX A to this Proxy
Statement) recommends that the Board of Directors undertake a thorough review of
the Company's Certificate of Incorporation and Bylaws for the purpose of
identifying and removing those provisions that limit shareholder participation
and that, at a minimum, the Board of Directors act to amend the Certificate of
Incorporation to eliminate the supermajority vote require to amend those
provisions dealing with the structure of the Board of Directors and the call of
special shareholder meetings, by adopting a resolution to that effect and
submitting it to a vote of the shareholders at a special meeting called for that
purpose as promptly as practicable following the Annual Meeting. Under Delaware
law, the affirmative vote of more than fifty percent (50%) of the outstanding
shares of voting stock is required to amend a certificate of incorporation.
Therefore, to the extent that the Board and the shareholders act to eliminate
the existing eighty percent (80%) supermajority provisions, the fifty percent
(50%) statutory voting requirement will apply.
SCREAM PROPOSAL No. 3 does not mandate the removal of all provisions that
might serve to impede shareholder participation and, therefore, entrench
management. However, we anticipate that, if the Board of Directors undertakes a
good faith review of the Certificate of Incorporation and Bylaws, removal of
most, if not all, of such provisions will follow.
Pursuant to the Company's Bylaws, as filed with the SEC, the holders of a
majority of the aggregate number of votes to which all outstanding shares of
capital stock are entitled will constitute a quorum at the Annual Meeting.
Pursuant to Delaware law, however, the presence of a shareholder, in person or
by proxy, for the sole purpose of protesting the legality of a meeting of
shareholders may not be counted in establishing the presence of a quorum. The
Company's Bylaws provide that adoption of SCREAM PROPOSAL No. 3 (the text of
which is included in ANNEX A to this Proxy Statement) requires the affirmative
vote of a majority of the voting power of the shares of Common and Preferred
Stock present in person or represented by proxy at the Annual Meeting and
entitled to vote on that Proposal. According to the Company's Proxy Statement,
as filed with the SEC, abstentions will be counted as present and entitled to
vote and will have the same effect as vote against SCREAM PROPOSAL No. 3. Broker
non-votes will be counted as present for purposes of determining the presence or
absence of a quorum, but will not be counted as entitled to vote on SCREAM
PROPOSAL No. 3 and will have no effect on the outcome of the vote on that
Proposal.
IF YOU PROPERLY SIGN, DATE AND RETURN THE BLUE PROXY CARD(S), BUT YOU DO
NOT INDICATE YOUR INSTRUCTIONS THEREON, YOUR SHARES WILL BE VOTED IN FAVOR OF
SCREAM PROPOSAL NO. 3.
SCREAM PROPOSAL NO. 4: ELIMINATE THE COMPANY'S RIGHTS ("POISON PILL") PLAN OR
SUBMIT THE QUESTION OF ITS ELIMINATION OR RETENTION TO A
BINDING VOTE OF THE STOCKHOLDERS
On April 29, 1986, the Board of Directors adopted a shareholder rights plan
(commonly known as a "poison pill") (the "Rights Plan"). The Board acted on its
own initiative, with neither prior shareholder approval nor subsequent
ratification, at a time when, to our knowledge, there was no indication of a
hostile takeover attempt. In February 1996, the Board again acted unilaterally,
this time to extend the term of the Rights Plan. Again, there was apparently no
impending threat of an unfriendly takeover bid. And, this time the Board acted
in the face of a shareholder proposal challenging the continued existence of the
Rights Plan.
Pursuant to the Rights Plan, each share of the Company's Common Stock
currently has attached one Right entitling its holder to purchase one
one-hundredth (1/100) of a share of the Company's Series C Junior Participating
Preferred Stock ("Series C Preferred") at a price of $32. In addition, the
Rights separate from the Common Stock ten days after (i) any person acquires
fifteen percent (15%) of the Company's Common Stock or (ii) the date of
commencement, or the first public announcement, of a tender or exchange offer
which would result in the ownership by an person of fifteen percent (15%) or
more of the Company's Common Stock (each, an "Acquiring Person Transaction").
Once such separation has occurred, if the Company is a party to a merger or
other business combination, or engages in certain other transactions,
8
<PAGE> 12
specified in the Rights Plan, each Right is exercisable for that number of
shares of Common Stock which, at the time of the triggering transaction, would
have a market value equal to twice the exercise price of the Right. The Rights
are redeemable by action of the Company, on ten days notice, at a redemption
price of $0.05 per Right, at any time prior to an Acquiring Person Transaction.
SCREAM believes that the Rights Plan serves the interest of management, to
the detriment of the shareholders, by permitting the Board of Directors to
reject tender offers and other takeover attempts without presentation to the
shareholders. That is, the Board has the ability to act for its own motives,
even when an offer could be attractive to some or all of the shareholders.
Therefore, we believe that the Board should either redeem the Rights and,
thereby, eliminate the Rights Plan, or permit the shareholders to decide whether
the Rights and the Plan should be eliminated or retained, and SCREAM PROPOSAL
No. 4 calls upon the Board of Directors to take one of these two actions.
We believe that the fact that other companies have adopted Poison Pills is
entirely irrelevant to the appropriateness of such a Plan for the Company. We do
note, however, that in the last several years a substantial number of larger and
more successful companies, including Bell Atlantic, Philip Morris, Time Warner,
United Technologies, La Quinta Inns and Lockheed, have acted voluntarily to
eliminate their Poison Pills and that proposals to redeem or allow shareholders
to vote on Poison Pills have received majority support at some 24 publicly
traded companies, including Advanced Micro Devices, Intel and Ryder. In no case,
have we found evidence of adverse effects stemming from such action.
THE COMPANY HAS IN PLACE TEN OF THE 16 PROVISIONS IDENTIFIED BY THE SEC AS
ANTI-TAKEOVER MEASURES, IN ADDITION TO THE POISON PILL. Therefore, we believe
that the Company's reliance on a study of the allegedly beneficial effects of a
"moderate" number of shark repellents is unwarranted and misleading. We also
believe that Company's demonstrably poor performance, even with its veritable
arsenal of anti-takeover defenses, provides clear evidence that such measures
have not worked to the benefit of Talley's shareholders.
In response to a shareholder proposal submitted for action at the Company's
1996 annual meeting, management stated its belief that the Rights Plan protects
shareholders against potential abuses during the takeover process and permits
the Board to negotiate on behalf of all of the shareholders to maximize and
enhance shareholder value. In light of management's apparent lack of concern for
shareholder value, as evidenced by the Company's historical performance (see
"WHY SCREAM??? -- Historical Performance of the Company"), and given the
presence, in the Company's governing documents, of a veritable arsenal of shark
repellent provisions, we believe that management's rationale for adoption and
renewal of the Rights Plan is disingenuous at best and self-serving at worst.
AT THE 1996 ANNUAL MEETING, NEARLY 39% OF THE COMPANY'S SHARES VOTED WERE
CAST IN FAVOR OF A SHAREHOLDER PROPOSAL TO ELIMINATE THE RIGHTS PLAN OR TO
SUBMIT THE MATTER TO A BINDING SHAREHOLDER VOTE. THIS 39% APPROVAL REPRESENTS,
IN OUR EXPERIENCE, AN EXCEPTIONALLY HIGH PERCENTAGE FOR A SHAREHOLDER PROPOSAL.
WE BELIEVE THAT THE SHAREHOLDER RESPONSE WAS PARTICULARLY SIGNIFICANT IN THE
FACE OF A SELF-CONGRATULATORY LETTER TO SHAREHOLDERS ANNOUNCING THE EXTENSION OF
THE POISON PILL, CIRCULATED BY MANAGEMENT ON TALLEY LETTERHEAD AND, WE PRESUME,
AT THE COMPANY'S EXPENSE, IN ADVANCE OF THE 1996 ANNUAL MEETING. MANAGEMENT'S
ACTION IN EXTENDING THE POISON PILL IN THE FACE OF MR. ALISSA'S PENDING PROPOSAL
WE BELIEVE, DEMONSTRATES YET AGAIN MANAGEMENT'S DISDAIN FOR THE SHAREHOLDERS AND
ITS UNWILLINGNESS TO PERMIT THE SHAREHOLDERS TO DECIDE MATTERS CENTRAL TO THEIR
OWN INTERESTS. IMPLEMENTATION AND CONTINUATION OF THE RIGHTS PLAN IN THE FACE OF
SUCH SIGNIFICANT SHAREHOLDER OPPOSITION, IN OUR VIEW, DEMONSTRATES THAT CURRENT
MANAGEMENT IS RUNNING THE COMPANY, AND MAKING MANAGEMENT DECISIONS, FOR ITS OWN
BENEFIT AND PROTECTION AND NOT FOR THE BENEFIT OF THE COMPANY'S SHAREHOLDERS.
We believe that the ultimate issue is not whether management believes the
Poison Pill is a good thing, but rather whether it is management or the
shareholders who should make that determination and act on takeover proposals.
An SEC study has concluded that "POISON PILL PLANS CAN EFFECTIVELY PREVENT
SHAREHOLDERS FROM EVEN CONSIDERING THE MERITS OF A TAKEOVER THAT IS OPPOSED BY
THE BOARD." We have no confidence that Talley's current management will "disarm"
the Poison Pill, even when such action is in the best interests of a majority,
or even all, of the shareholders. Therefore, quite apart from the potential
effects of Poison Pills, we
9
<PAGE> 13
believe that it is in the best interests of Talley's shareholders that they act
directly on retention of the Poison Pill and on any future takeover proposals,
rather than leaving such matters to current management.
It is SCREAM's view that continuation of the Rights Plan serves the
interest of management in perpetuating itself, reduces management's
accountability to the shareholders and damages shareholder value. In light of
these adverse effects of the Rights Plan, and the fact that it was both adopted
and extended, without shareholder approval or ratification, we are again
proposing that the Board of Directors either (i) redeem all of the Rights and,
thereby, terminate the Rights Plan or (ii) submit to a binding vote of the
shareholders the question of whether to eliminate or retain the Rights and the
Rights Plan, by adopting a resolution to that effect and submitting it to a vote
of the shareholders at a special meeting called for that purpose as promptly as
practicable following the Annual Meeting.
Pursuant to the Company's Bylaws, as filed with the SEC, the holders of a
majority of the aggregate number of votes to which all outstanding shares of
capital stock are entitled will constitute a quorum at the Annual Meeting.
Pursuant to Delaware law, however, the presence of a shareholder, in person or
by proxy, for the sole purpose of protesting the legality of a meeting of
shareholders may not be counted in establishing the presence of a quorum. The
Company's Bylaws provide that adoption of SCREAM PROPOSAL No. 4 (the text of
which is included in ANNEX A to this Proxy Statement) requires the affirmative
vote of a majority of the voting power of the shares of Common and Preferred
Stock present in person or represented by proxy at the Annual Meeting and
entitled to vote on that Proposal. According to the Company's Proxy Statement,
as filed with the SEC, abstentions will be counted as present and entitled to
vote and will have the same effect as vote against SCREAM PROPOSAL No. 4. Broker
non-votes will be counted as present for purposes of determining the presence or
absence of a quorum, but will not be counted as entitled to vote on SCREAM
PROPOSAL No. 4 and will have no effect on the outcome of the vote on that
Proposal.
IF YOU PROPERLY SIGN, DATE AND RETURN THE BLUE PROXY CARD(S), BUT YOU DO
NOT INDICATE YOUR INSTRUCTIONS THEREON, YOUR SHARES WILL BE VOTED IN FAVOR OF
SCREAM PROPOSAL NO. 4.
10
<PAGE> 14
WHY SCREAM???
We believe that management has no interest in enhancing shareholder value
and has no intention (or perhaps lacks the capacity) to manage the Company for
the benefit of its shareholders. We also believe, however, that management is
acutely interested in running the Company for its own benefit, even when its
actions may be to the detriment of shareholders. In general, we believe that
current management is so entrenched and so focused on sustaining and enriching
itself that the only viable option for Talley's shareholders is to begin the
process of replacing management entirely.
HISTORICAL PERFORMANCE OF THE COMPANY
SCREAM has prepared an array of statistical and graphical data to assist
you in deciding whether SCREAM's charges against current management have merit
and whether you should vote your shares in favor of the SCREAM NOMINEES and the
SCREAM PROPOSALS. Although SCREAM has made certain calculations, the data were
drawn primarily from Talley's required filings with the SEC. This data forms the
basis for the tables and charts which follow, although the tables and charts
themselves were prepared by SCREAM. In our view this data demonstrates that, by
almost any objective measure, Talley's management has failed to operate the
Company effectively and profitably and has failed to preserve and enhance
shareholder value.
<TABLE>
<CAPTION>
TABLE 1: STANDARD MEASUREMENTS OF PERFORMANCE
AND OTHER DATA UNDER TALLEY'S CURRENT MANAGEMENT
YEAR
(FISCAL YEAR ENDS DEC. 31) 1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Standard Measurement of
Performance:
Revenues* ('000) $336,893 $320,718 $324,200 $327,760 $385,286 $502,698
Total Assets* ('000) $466,891 $363,822 $382,438 $369,903 $372,599 $280,385
Stockholders' Equity* ('000) $ 53,697 $ 40,781 $ 36,542 $ 40,166 $ 58,334 $ 74,486
Earnings per Share* $ (5.15) $ (1.82) $ (0.90) $ 0.13 $ 1.28 $ 0.40
Shares Outstanding ('000) 8,795 9,189 9,676 10,412 14,001 13,913
Other Data:
Revenues per Share** $ 38.31 $ 34.90 $ 33.51 $ 31.48 $ 27.52 $ 36.13
Total Assets per Share**
('000) $ 53.09 $ 39.59 $ 39.52 $ 35.53 $ 26.61 $ 20.15
Equity per Share** $ 6.11 $ 4.44 $ 3.78 $ 3.86 $ 4.17 $ 5.35
</TABLE>
* Data are taken from the Company's filings with the SEC.
** These data do not represent measures recognized pursuant to generally
accepted accounting principles. Total revenues and assets are aggregate
measures which bear no necessary relationship to per share measures and do
not directly affect shareholders on a per share basis. These measures may not
be comparable to similarly titled measures reported by the Company or other
companies. Per share Revenues, Total Assets and Equity for each year are
computed by dividing the aggregate data as of December 31 of each year
reflected in Table 1 above by the number of shares outstanding as of December
31 of that year, as reflected in Table 1.
WE BELIEVE THE NUMBERS ABOVE SPEAK FOR THEMSELVES -- WHETHER MEASURED BY
REVENUES PER SHARE, TOTAL ASSETS PER SHARE OR EQUITY PER SHARE, TALLEY IS BEHIND
WHERE IT WAS IN 1991 AND IS A COMPANY THAT HAS BEEN GOING NOWHERE.
And, if you otherwise would conclude, based on earnings per share, that the
Company has performed well during the last half-decade, please keep in mind that
THE COMPANY'S EARNINGS PER SHARE IN 1984 (THE FIRST FULL YEAR DURING WHICH
WILLIAM MALLENDER SERVED AS CHAIRMAN OF THE COMPANY), WERE $1.04 AND THAT DURING
MR. MALLENDER'S TENURE EARNINGS FELL TO AS LOW AS A LOSS OF $5.95 PER SHARE IN
1990, BEFORE "RECOVERING" TO $0.40 PER SHARE IN 1996. Over the "long haul," we
do not believe that management should be too quick to congratulate itself on its
performance.
11
<PAGE> 15
To make it clear how Talley has performed, we have charted certain
performance measures for Talley over the past several years.
TALLEY INDUSTRIES - PERFORMANCE
<TABLE>
<S> <C> <C> <C>
REVENUES PER TOTAL ASSETS BOOK VALUE PER
YEAR SHARE PER SHARE SHARE
1990 37.89 59.83 11.08
1991 38.31 53.09 6.11
1992 34.9 39.59 4.44
1993 33.51 39.52 3.78
1994 31.48 35.53 3.86
1995 27.52 26.61 4.17
</TABLE>
* These data do not represent measures recognized pursuant to generally accepted
accounting principles. Total revenues and assets are aggregate measures which
bear no necessary relationship to per share measures and do not directly
affect shareholders on a per share basis. These measures may not be comparable
to similarly titled measures reported by the Company or other companies. Per
share Revenues, Total Assets and Equity for each year are computed by dividing
the aggregate data as of December 31 of each year reflected in Table 1 above
by the number of shares outstanding as of December 31 of that year, as
reflected in Table 1.
We also have graphed the Company's total assets, total revenues and
earnings per share over the last several years.
TALLEY INDUSTRIES - PERFORMANCE
<TABLE>
<CAPTION>
REVENUES TOTAL ASSETS EARNINGS
YEAR (in thousands) (in thousands) PER SHARE
<S> <C> <C> <C>
1991 336,893 466,891 -5.15
1992 320,718 363,822 -1.82
1993 324,200 382,438 -0.90
1994 327,760 369,903 0.13
1995 385,286 372,599 1.28
1996 502,698 280,385 0.40
</TABLE>
12
<PAGE> 16
The Company's Common Stock has underperformed the stock market by a wide
margin. The graph below depicts the price movement of Talley's Common Stock
compared to the S&P 500 Index, a widely used gauge for the performance of the
stock market, for every year since 1987. Notice the dramatic percentage rise in
the S&P 500 Index, and the equally dramatic underperformance of the Company's
stock. THIS IS NOT A PERFORMANCE THAT TALLEY'S BOARD AND MANAGEMENT SHOULD BE
PROUD OF -- AND, IN OUR VIEW, IT IS NOT A RECORD THAT YOU, AS A VOTING
SHAREHOLDER OF TALLEY, SHOULD PERMIT TO CONTINUE.
<TABLE>
<S> <C> <C>
TALLEY - % S&P 500 - %
YEAR CHANGE CHANGE
1986 0 0
1987 -6.29 2.02
1988 -23.89 14.67
1989 -43.71 45.91
1990 -70.42 36.66
1991 -79.58 72.21
1992 -83.95 78.1
1993 -63.53 92.59
1994 -57.85 89.62
1995 -57.55 154.31
1996 -63.53 205.84
</TABLE>
Notwithstanding Talley's financial and stock market performance over the
last several years, the Board, under William Mallender's leadership, has not
been hampered from compensating management handsomely. Consider the following
table, which shows how much Mr. Mallender and the five highest paid executives
have received each year since 1990, a period during which Talley's stock
substantially underperformed the S&P 500. The chart on the following page shows
that William Mallender has received handsome compensation packages every year,
and particularly in 1996, and that his compensation appears to bear no
reasonable or rational relationship to the Company's performance.
13
<PAGE> 17
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Mallender's Total
Compensation (1)... $ 520,218 $ 660,524 $2,386,630 $1,370,323 $1,022,500 $ 3,960,135
Five Highest Paid
Executives' Total
Compensation (1)... $1,403,773 $1,637,859 $6,351,917 $2,762,089 $2,462,649 $10,163,187
</TABLE>
(1) Includes salary, bonus, restricted stock awards, payments made under the
Company's long-term incentive program, and "Other Annual Compensation" and
"All Other Compensation" as defined in the Company's proxy statements on
Schedule 14A filed with the SEC.
<TABLE>
<S> <C> <C>
MALLENDER'S
YEAR PAY OPERATING EPS
1990 605606 (6.25)
1991 520218 (5.24)
1992 660524 (2.11)
1993 2386630 (0.85)
1994 1370323 0.13
1995 1022554 0.25
</TABLE>
LENGTH OF SERVICE OF SENIOR MANAGEMENT AND THE BOARD OF DIRECTORS
We believe even a brief review of the backgrounds of Talley's executive
officers and directors indicates clearly that current management has been in
place so long that it has lost sight of the fact that its job is to run the
Company for the benefit and enrichment of the shareholders and not for itself.
Therefore, we believe, the Company literally is starving for "new blood" and the
shareholders are suffering as a result of its absence.
Consider, for example, the following, based on the Company's filings with
the SEC:
- WILLIAM MALLENDER has been employed by the Company for 26 YEARS -- NEARLY
2/3 OF HIS ADULT LIFE.
- On average, the Company's 5 EXECUTIVE OFFICERS have worked for the Company
for almost 19 YEARS -- MORE THAN HALF OF THEIR ADULT LIVES.
- On average, the Company's 8 CONTINUING NON-MANAGEMENT DIRECTORS have served
for more than 11 YEARS -- 1 OF THESE DIRECTORS has been on the Board for 27
YEARS and another for 14 YEARS.
- On average, the 2 DIRECTORS UP FOR REELECTION other than the DESIGNATED
TALLEY NOMINEE have served for 23 YEARS -- 1 OF THESE DIRECTORS (WILLIAM
MALLENDER) has been on the Board SINCE 1975.
SCREAM values the wisdom of experience and, of course, does not believe in
youth for its own sake. In fact, we readily acknowledge that the average age of
the SCREAM NOMINEES is 66. However, we also believe that managers and directors,
left undisturbed and unchallenged for an extended period of time, may lose sight
of the fact that their mission is to maximize value for the shareholders and not
to perpetuate their own existence. And, in the case of Talley's senior executive
personnel, we believe that this has been occurring for some time, to the
detriment of the Company and its shareholders.
14
<PAGE> 18
DIRECTOR COMPENSATION
We also believe that it is easy to see why the members of the Board are so
interested in maintaining their positions. The following is a list of some of
the forms of compensation and "perqs" available to non-employee directors EACH
YEAR, as reported in the Company's 1997 Proxy Statement, as filed with the SEC:
- $27,000 retainer;
- $1,000 per Board meeting (this amounted to $13,000 PER DIRECTOR in 1996);
- $650 per Committee meeting (this amounted to $1,300 PER MEMBER of the
Audit and Executive Compensation Committees in 1996);
- REIMBURSEMENT OF EXPENSES for attendance at Board and Committee meetings;
- BENEFITS under the Company's medical plan and travel and accident
insurance policy;
- 1,000 SHARES OF COMMON STOCK; AND
- 1,000 STOCK OPTIONS.
Each non-employee director who has served on the Board for at least five
years (which, at present, includes all but one of the Company's outside
directors) also is entitled to enjoy the following benefits:
- Upon termination or retirement, deferred compensation/retirement benefits
equal to his highest eligible compensation during the preceding three
years;
- $50,000 IN A LUMP-SUM PAYMENT upon resignation from the Board on or after
age 70 (which currently applies to two directors); AND
- Coverage under Talley's group life insurance policy.
WE BELIEVE THAT IT IS EASY TO SEE WHY THE COMPANY'S DIRECTORS CLING SO
TENACIOUSLY TO THEIR POSITIONS -- THEY PROVIDE A QUITE LAVISH COMPENSATION
PACKAGE. AND, SINCE A SUBSTANTIAL PORTION OF THE COMPENSATION IS TIED TO
LONGEVITY OF SERVICE, IT SEEMS TO US THAT THE DIRECTORS HAVE EVERY INCENTIVE TO
SETTLE IN FOR THE LONG TERM.
Lavish director compensation is not, it appears, limited to amounts
received for services as directors. During 1996, the Company paid Talley
director Alex Stamatakis $189,000 in consulting fees and related expenses for
"SERVICES RELATING TO INTERNATIONAL BUSINESS MATTERS," even though the Company's
SEC filings indicate that "SUBSTANTIALLY ALL OF THE COMPANY'S FACILITIES ARE
LOCATED IN AND PROVIDE SALES AND SERVICES TO THE UNITED STATES AND CANADA" and
Mr. Mallender has indicated that the Company's recently sold Canadian steel
subsidiary was the Company's "ONLY NON-U.S. BASED OPERATING SUBSIDIARY." One may
only wonder why Mr. Stamatakis is entitled to compensation for assistance in
international business matters when the Company apparently has none. In
addition, David Victor, another Talley director has been handsomely compensated
by the Company outside of his "normal" director's compensation. In particular,
during the last three years, Mr. Victor's law firm billed the Company OVER $1.3
MILLION. SCREAM believes that the role of directors is to serve the interests of
the Company's shareholders and that, to the extent that any one or more of them
stands to benefit from business relationships with the Company, such interests
cannot adequately be served.
The SCREAM PROPOSALS do not directly address the issue of director
compensation. However, SCREAM anticipates that, following the election of the
SCREAM NOMINEES, the Board will take action to review director compensation and
bring it more into line with current norms for comparable public companies in
general and similarly situated enterprises in particular. In this regard, SCREAM
believes that director compensation can and should be reduced by the elimination
of director coverage under the Company's various insurance policies and both
lump-sum and ongoing pension payments to retiring directors. While the SCREAM
NOMINEES, as a minority of the Board, cannot ensure that such actions will be
taken, if elected, the SCREAM NOMINEES will forego all director compensation
other than the standard retainer (currently $27,000 annually), expense
reimbursements and stock option awards (currently 1,000 annually), pending
revision of the Company's director compensation policy.
15
<PAGE> 19
EXECUTIVE COMPENSATION
According to the Company's proxy materials, the Board granted senior
management A 313% PAY INCREASE, paying out OVER $10.1 MILLION, including some $4
MILLION TO WILLIAM MALLENDER, for calendar year 1996. In that same year,
EARNINGS APPLICABLE TO COMMON STOCK were ONLY $5.6 MILLION and THE COMMON STOCK
PRICE DECLINED NEARLY 15% FROM ITS ALREADY DEPRESSED LEVEL. In addition, the
Board of Directors has provided Mr. Mallender with a "golden parachute" under
which, for the next three years, he is entitled to receive a lump-sum CASH
PAYMENT OF 2.5 TIMES HIS ANNUAL COMPENSATION, which could be as much as $9.9
MILLION (based on 1996 annual compensation), if the SCREAM NOMINEES or any other
two or more nominees opposed by the Company are elected and Mr. Mallender's
employment is terminated, or he decides he does not want to work for the new
Board. Even absent such a "change in control," Mr. Mallender is entitled to
receive A CASH PAYMENT OF TWICE HIS ANNUAL COMPENSATION, which could be as much
as $7.9 MILLION (based on 1996 compensation), if his employment is terminated
for any reason short of EMBEZZLEMENT, CONVERSION OF CORPORATE PROPERTY, OR
SIMILAR WILLFUL MISCONDUCT.
THAT IS, MR. MALLENDER CURRENTLY IS ENTITLED TO RECEIVE $9.9 MILLION IF THE
SCREAM NOMINEES ARE ELECTED AND HE DECIDES TO QUIT. AND, IF THE SCREAM NOMINEES
ARE NOT ELECTED OR HE DOES NOT DECIDE TO QUIT, MR. MALLENDER IS ENTITLED TO
RECEIVE $7.9 MILLION IN CASH, EVEN IF THE BOARD TERMINATES HIS EMPLOYMENT FOR
NEGLIGENCE, BAD JUDGMENT OR OTHER GOOD AND SUFFICIENT REASON (SHORT OF WILLFUL
MISCONDUCT) AT ANY TIME DURING THE NEXT THREE YEARS.
OBVIOUSLY, TALLEY WAS A GOOD INVESTMENT FOR MR. MALLENDER AND SENIOR
MANAGEMENT IN 1996 -- BUT NOT FOR TALLEY SHAREHOLDERS.
SCREAM believes that effective executives should be well compensated and
that such compensation should be tied directly to reasonable performance
expectations. However, we also believe that it is entirely inappropriate to
reward managers while the Company's business is suffering. And, in our view,
there is absolutely no justification for granting significant severance benefits
when termination is based on a failure to perform or other "good cause." The
SCREAM PROPOSALS do not directly address the issue of executive compensation.
However, we anticipate that a newly constituted Board of Directors, not under
Mr. Mallender's influence and control, will revisit Talley's executive
compensation arrangements and will bring them into line with the realities of a
less-than-successful publicly held company.
WE SCREAM!!!
SCREAM is composed of four Talley shareholders. We beneficially own, in the
aggregate 1,476,950 shares of Talley Common Stock, acquired between 1994 and
1997. Additional information concerning our interest in Talley's securities
appears in Annex B to this Proxy Statement.
The driving force behind the creation of SCREAM (apart from Talley's poor
operating results and dismal stock market performance) was Saad A. Alissa. Mr.
Alissa, a citizen of the Kingdom of Saudi Arabia, first began to acquire shares
of the Company's Common Stock in July 1994, both directly and through Abdullatif
Ali Alissa Establishment, a sole proprietorship organized under the laws of the
Kingdom of Saudi Arabia (the "Establishment") of which he serves as President.
Mr. Alissa has continued to purchase Talley shares directly and through the
Establishment and its subsidiaries. At the same time, Mr. Alissa has undertaken
a number of steps designed to overcome management inertia and enhance Talley's
value for the benefit of its shareholders. As the following summary
demonstrates, Mr. Alissa's proposals consistently have been ignored or thwarted
by management, while the Company has continued to languish. SCREAM was born out
of Mr. Alissa's belief that there is, in fact, no realistic possibility of
effecting change through current management and that, therefore, any improvement
in Talley's prospects must commence with the replacement of that management.
Mr. Alissa first met with William Mallender, Chairman and Chief Executive
Officer, and Alex Stamatakis, a member of the Board of Directors, at Mr.
Alissa's request, on August 31, 1995. At this meeting, Mr. Alissa explored the
possibility of (1) eliminating the Rights Plan (or submitting the matter to a
vote of the shareholders); (2) disposing of non-core businesses; and (3) using
resulting sale proceeds to retire a
16
<PAGE> 20
portion of the Company's debt. While management promised to consider his
proposals, no action resulted from this meeting.
Given management's unresponsiveness, by letter dated October 29, 1995, Mr.
Alissa submitted to the Company a shareholder proposal (the "Initial Proposal")
for inclusion in its proxy materials for the 1996 annual meeting. Like SCREAM
PROPOSAL No. 4, the Initial Proposal called for redemption of the Rights or
submission of the matter to a binding vote of the shareholders. While the
Initial Proposal was included in the Company's proxy materials, as required by
SEC rules, management, not only opposed its adoption but, in February 1996,
extended the term of the Rights Plan. This action was taken after receipt of the
Initial Proposal and with full knowledge that it challenged the continued
existence of the Rights Plan and sought shareholder input on the matter.
On January 6, 1996, Mr. Alissa exercised his rights as a shareholder of the
Company, pursuant to Article II, Section 8 of the Company's Bylaws, to put forth
a nominee for election to the Company's Board of Directors at the Company's 1996
annual meeting. In preparation for that meeting, by letter dated February 25,
1996, Mr. Alissa demanded access to the Company's shareholder list, as permitted
under Delaware law. The Company rejected Mr. Alissa's demand, and in turn
demanded assurances from Mr. Alissa that the shareholder communications for
which the list was sought would be effected in compliance with applicable law
and SEC rules. It was, and remains, Mr. Alissa's position that both the
Company's denial of unqualified access to the shareholder list and its implied
concern as to the propriety of his purposes were both groundless and
inappropriate. However, in the interest of time, Mr. Alissa promptly provided
the assurances demanded and finally received access to the shareholder list.
Thereafter Mr. Alissa did, in fact, communicate with certain other
shareholders regarding, among other things, the election of his nominee to the
Board of Directors. However, management refused to permit that nomination to
come before the 1996 annual meeting. The plain language of both the Company's
Bylaws and the Company's proxy materials states that shareholders "may nominate
persons for election as director" by complying with certain stated procedures.
However, without challenging the adequacy of compliance with such procedures,
management took the position that it was not required, to put forward
shareholder nominations, but that its sole obligation was to consider for
nomination nominees put forward by shareholders. Mr. Alissa did not, however,
seek a judicial determination of his compliance with the Bylaw requirements or
judicial relief with respect to management's refusal to permit the nomination to
come to a shareholder vote.
On December 17, 1996, at his request, Mr. Alissa again met with William
Mallender and other members of senior management. In the course of that meeting,
it was Mr. Alissa's understanding that management (1) agreed to his proposal to
dispose of the Company's non-core businesses and to focus on such high growth,
core businesses as specialty steel and the airbags business that the Company
recently had reentered; (2) agreed to develop new, independent investment
banking relationships to improve stock sponsorship and to assist in building and
expanding the core businesses; and (3) extended an invitation to Mr. Alissa to
serve on the Board of Directors. At that meeting, Mr. Alissa requested certain
additional information to aid him in reaching a decision as to possible Board
service. Mr. Alissa has never received the information requested.
In fact, to our knowledge no action whatsoever was taken by the Company as
to any of the matters discussed at the December 17 meeting. Therefore, in an
effort to reestablish constructive dialogue, on January 4, 1997, Mr. Alissa
proposed to Mr. Mallender, among other things, that the Company conduct an
issuer tender offer, thereby enhancing shareholder value by permitting all
shareholders to participate pro rata in such offer.
Mr. Mallender rejected this proposal almost immediately, labeling it
"impractical" and "impossible." However, he did suggest a telephone conversation
to discuss Mr. Alissa's proposals. Later, when Mr. Alissa proposed a
face-to-face meeting as a more appropriate forum for the discussion, Mr.
Mallender declined; indicating that he did not believe that Mr. Alissa's
position was sufficiently complex to require a face-to-face meeting.
By letter dated January 23, 1997, Mr. Alissa again demanded access to the
Company's shareholder list. On February 21, 1997, having received no response
from the Company to his demand in spite of the statutory requirement that such a
response be given within five calendar days, Mr. Alissa filed suit in the
Delaware
17
<PAGE> 21
Chancery Court seeking access to the Company's stock ledger and stockholder
list. Upon being informed that Mr. Alissa stood ready to travel to the United
States from Saudi Arabia within days for depositions, the Company proposed
settling the action and releasing the stock ledger and stockholder list, as
required by Delaware law. The parties executed a stipulation and order as of
February 28, 1997, the Chancery Court entered an order to this effect on March
5, 1997, and the Company thereafter provided the required documents.
By letter dated February 5, 1997, Mr. Alissa submitted to the Company a
Notice of Stockholder Nominations and Intent to Bring Business Before the 1997
Annual Meeting (the "Stockholder Notice"), as required by the Company's Bylaws.
This Notice set forth three SCREAM nominees and the four SCREAM PROPOSALS,
together with a fifth proposal, urging the Board to retain an independent
investment banker to assist the Board in adopting a program to boost the growth
and profitability of the Company's operating businesses, invest its funds and
enhance shareholder value. Because the Company since has indicated that it has
retained J.P. Morgan Securities, Inc. for the purposes contemplated by this
proposal, SCREAM believes, so long as the Company continues to retain J.P.
Morgan Securities for the purposes stated, that management has finally responded
to its concerns. Therefore, SCREAM does not expect to introduce this proposal at
the Annual Meeting. SCREAM and its members may, however, elect to resubmit this
proposal or to submit other proposals in connection with future annual meetings
as permitted by the Company's Bylaws and the rules of the SEC.
Subsequent to submission of the Stockholder Notice (which, pursuant to the
Company's Bylaws, was required to be submitted during a narrow, 30-day period),
Dr. Albert Cox, one of the three director-nominees originally named by SCREAM,
withdrew in favor of George W. Sawyer. SCREAM had commenced discussions with Mr.
Sawyer concerning his potential candidacy prior to the deadline imposed by the
Bylaws. Mr. Sawyer has extensive experience in mergers, acquisitions and
restructurings in the aerospace, marine and defense industries and as an
independent consultant to these industries on technical, program and
manufacturing issues. In addition, Mr. Sawyer served as Chief Executive Officer
of Sperry Marine, Inc., a leading international supplier of marine navigation
and control systems to naval and commercial maritime markets for two years. From
1988 to 1991, and from 1976 to 1981, Mr. Sawyer served as the President of John
J. McMullen Associates, Inc., a major international ship design and engineering
firm with assets in excess of $50 million that was acquired by Talley in 1988.
Mr. Sawyer also served as Assistant Secretary of the Navy and as a senior
executive of a number of major corporations involved in infrastructure design
and construction, environmental technology and nuclear application development.
Based on Mr. Sawyer's extensive experience as an operating manager and
executive, and for the "good cause" of furthering the interests of Talley's
shareholders, Dr. Cox stepped aside in favor of Mr. Sawyer. SCREAM notified the
Company of the substitution of Mr. Sawyer for Dr. Cox by letter dated February
25, 1997 and amended its filings with the SEC accordingly. By letter dated March
25, 1997, delivered contemporaneously with the Company's initial filing of
preliminary proxy materials with the SEC, the Company indicated that the
substitution letter did "not satisfy the Talley Bylaw provision for
nominations." The Company's letter also indicated that it is important, absent a
"compelling reason" to ensure that Bylaw and other requirements "designed to
protect the integrity of our Board elections" be followed and requested
additional information regarding the substitution of nominees. The Company has
indicated that the Bylaw nomination procedures serve to "ensure that the Company
and all stockholders have sufficient information regarding a nominee well in
advance of the meeting" and that "in the absence of any explanation by Mr.
Alissa of the relevant facts and circumstances surrounding the claimed
substitution" the Company would reserve the right to treat Mr. Sawyer's
nomination as invalid.
SCREAM provided the requested explanation by letter dated March 31,
indicating, among other things, that (1) Mr. Alissa took only exploratory steps
toward the possible future solicitation of proxies for use at the Annual Meeting
prior to Mr. Mallender's letter of January 14, effectively dismissing Mr.
Alissa's various proposals to enhance shareholder value; (2) Mr. Sawyer's name
came to SCREAM's attention relatively late in the search process and close to
the end of the 30-day period provided by the Bylaws for shareholder nominations;
and (3) that Dr. Cox stepped aside in the interests of Talley's shareholders
once Mr. Sawyer had indicated his willingness to serve as a SCREAM nominee,
following consultation with his business associates
18
<PAGE> 22
and legal advisers, and Mr. Alissa and other members of SCREAM had concluded
that Mr. Sawyer was an outstanding candidate who, by virtue of his experience
and management philosophy, would serve the interests of Talley's shareholders
capably and effectively. The SCREAM letter also noted that the Annual Meeting
was delayed by the Board, so that information concerning Mr. Sawyer will have
been in front of the Company for a longer period than if Mr. Sawyer had been
included in the initial notice of nominations and the meeting had been held as
originally scheduled. Because Talley received notice of the substitution a full
month before filing its preliminary proxy materials, SCREAM believes, and has so
informed the Company, that the substitution will not reduce the time during
which information concerning Mr. Sawyer will be available to the shareholders.
As of the date of this Proxy Statement, SCREAM has received no notice from
the Company as to its final decision on this matter and the Company's proxy
materials are entirely silent on this point. Therefore, it appears that the
Company may prohibit the shareholder nomination of a highly skilled and
competent designee on the basis of a procedural technicality, NOTWITHSTANDING
THE COMPLETE ABSENCE OF DETRIMENT TO THE INTEGRITY OF THE ELECTION PROCESS AND
NOTWITHSTANDING THE FACT THAT THE SUBSTITUTION IN NO WAY REDUCED THE PERIOD
DURING WHICH INFORMATION ABOUT THE SCREAM NOMINEES WAS AVAILABLE TO THE
SHAREHOLDERS.
In addition, the Company's proxy materials leave open the possibility that
the SCREAM PROPOSALS may not be "properly presented" or "in order" at the Annual
Meeting. Therefore, management has reserved the right to prevent the SCREAM
PROPOSALS from coming to a shareholder vote at the Annual Meeting, upon the
finding of the presiding officer (whom we believe will be William Mallender)
that the SCREAM PROPOSALS are not "properly presented" or "in order" in
accordance with the Bylaws and applicable law.
IN OUR VIEW, MANAGEMENT'S ACTIONS WITH RESPECT TO THE SCREAM NOMINEES AND
THE SCREAM PROPOSALS, PARTICULARLY IN LIGHT OF MR. MALLENDER'S REFUSAL TO PERMIT
A SHAREHOLDER VOTE ON MR. ALISSA'S SHAREHOLDER NOMINEE IN 1996 NOTWITHSTANDING
MR. ALISSA'S BELIEF THAT HE HAD FULLY COMPLIED WITH THE REQUIREMENTS OF THE
COMPANY'S BYLAWS AND THE COMPANY'S FAILURE TO INFORM HIM OF ANY NONCOMPLIANCE,
DEMONSTRATE AGAIN BOTH MANAGEMENT'S COMPLETE AND TOTAL DISREGARD FOR THE
INTERESTS OF TALLEY'S SHAREHOLDERS AND ITS DISRESPECT FOR THEIR GOOD JUDGMENT.
CERTAIN ADDITIONAL INFORMATION
The Talley Proxy Statement contains certain additional information,
including information with respect to management's nominees for election as
directors, including Paul L. Foster, the DESIGNATED TALLEY NOMINEE, the
beneficial owners of more than five percent (5%) of the Company's voting
securities, stock ownership of directors and officers and the date by which
shareholder proposals must be received in order to be included in the Company's
proxy materials for its 1998 annual meeting. Such information, which we have not
independently verified, is incorporated herein by reference.
SOLICITATION OF PROXIES
SCREAM may solicit proxies by mail, advertisement or other printed means;
telephone, facsimile, telegram or other electronic means; or in person.
Solicitations are expected to be made by members of SCREAM, as well as by
persons whom we hire, and who will be compensated for their efforts. We have
requested that banks, brokerage firms and other custodians, nominees and
fiduciaries forward solicitation materials to the beneficial owners of the
shares they hold of record. We will reimburse these record holders for customary
clerical and mailing expenses incurred by them in forwarding these materials to
their customers.
We have engaged Beacon Hill Partners, Inc. as our proxy solicitors, and
anticipate that their fees and expenses for this service will be approximately
$100,000. Through March 31, 1997, we have expended approximately $251,500 in
preparing for this solicitation and anticipate that we will spend approximately
$439,500, including the proxy solicitors' fee, during the entire process.
We will bear the costs of our proxy solicitation. Because we believe that
this solicitation is in the interests of the Company and its shareholders, we
expect to seek reimbursement of our expenses for this solicitation from the
Company's Board of Directors, without submission of the matter to a vote of the
shareholders. In this regard we note that management has been expending
corporate funds in an effort to defeat SCREAM and that it can be expected to do
so through the date of the Annual Meeting.
19
<PAGE> 23
ANNEX A
TEXT OF SCREAM PROPOSALS
SCREAM PROPOSAL NO. 1: ELIMINATE THE CLASSIFIED BOARD AND PROVIDE ONE YEAR TERMS
FOR ALL DIRECTORS
RESOLVED, that the shareholders of Talley Industries, Inc. (the "Company")
recommend that the Board of Directors of the Company act to amend Section 1 of
Article FIFTH of the Certificate of Incorporation to eliminate the classified
Board of Directors, commencing with the election of directors in 1998, by
adopting a resolution to that effect and submitting it to a vote of the
shareholders at a special meeting called for that purpose as promptly as
practicable following the 1997 Annual Meeting.
SCREAM PROPOSAL NO. 2: REQUIRE THE CALL OF SPECIAL STOCKHOLDERS' MEETINGS UPON
THE DEMAND OF HOLDERS OF 10% OF THE VOTING STOCK
RESOLVED, that the shareholders of the Company recommend that the Board of
Directors act to amend Section 6 of Article FIFTH of the Certificate of
Incorporation to provide that special meetings of the shareholders of the
Company shall be called by the Board of Directors, President or Secretary upon
delivery thereto of a written demand for the call of such meeting from the
holders of ten percent (10%) or more of the Company's then-outstanding voting
securities, by adopting a resolution to that effect and submitting it to a vote
of the shareholders at a special meeting called for that purpose as promptly as
practicable following the 1997 Annual Meeting.
FURTHER RESOLVED that, in the event that the Certificate of Incorporation
shall be amended in the manner contemplated by the foregoing resolution, the
shareholders of the Company recommend that the Board of Directors act to amend
Section 2 of Article II of the Bylaws of the Company likewise to provide that
special meetings of the shareholders of the Company shall be called by the Board
of Directors, President or Secretary of the Company upon delivery thereto of a
written demand for the call of such meeting from the holders of ten percent
(10%) of the Company's then-outstanding voting securities.
SCREAM PROPOSAL NO. 3: ELIMINATE CERTAIN SUPERMAJORITY VOTING REQUIREMENTS
RESOLVED, that the shareholders of the Company recommend that the Board of
Directors undertake a thorough review of the Company's Certificate of
Incorporation and Bylaws for the purpose of identifying and removing those
provisions that limit shareholder participation and that, at a minimum, the
Board of Directors act to amend Section 8 of Article FIFTH of the Certificate of
Incorporation to eliminate the requirements of an eighty percent (80%)
affirmative vote to amend (i) Section 1 of Article FIFTH (structure of the Board
of Directors) and (ii) Section 6 of Article FIFTH (call of special meetings upon
demand of shareholders), by adopting a resolution to that effect and submitting
it to a vote of the shareholders at a special meeting called for that purpose as
promptly as practicable following the 1997 Annual Meeting.
SCREAM PROPOSAL NO. 4: ELIMINATE THE COMPANY'S RIGHTS ("POISON PILL") PLAN OR
SUBMIT THE QUESTION OF ITS ELIMINATION OR RETENTION TO A
BINDING VOTE OF THE STOCKHOLDERS
RESOLVED, that the shareholders of the Company recommend that the Board of
Directors of the Company either (i) redeem all of the preferred stock purchase
rights ("Rights") granted by dividend declared on April 29, 1986 to shareholders
of record on May 16, 1986 or issued thereafter pursuant to the Rights Agreement
dated as of April 30, 1986 between the Company and Manufacturers Hanover Trust
Company of California, as amended, and, thereby, eliminate the Rights and the
Rights Agreement or (ii) submit to a binding vote of the shareholders the
question or whether to retain or eliminate such Rights and Rights Agreement, by
adopting a resolution to that effect and submitting it to a vote of the
shareholders at a special meeting called for that purpose as promptly as
practicable following the 1997 Annual Meeting.
<PAGE> 24
ANNEX B
CERTAIN INFORMATION REGARDING THE MEMBERS OF SCREAM
SHARE OWNERSHIP INFORMATION
The following table sets forth the name, business address and number of
shares of voting securities owned beneficially by each of the participants in
this proxy solicitation or their associates as of March 31, 1997. No such
participant or associate owns any securities other than shares of Common Stock
and no such participant or associate owns any such shares of record but not
beneficially.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND BUSINESS ADDRESS BENEFICIAL OWNERSHIP
------------------------------------------------------- -----------------------
<S> <C>
Saad A. Alissa......................................... 1,121,000 Common Shares(1)
Abdullatif Ali Alissa Est. P.O. Box 192 Alkhobar 31952,
Saudi Arabia
Robert T. Craig........................................ 1,000 Common Shares
14 Spotted Sandpiper Hilton Head Island, SC 29928
William B. Danzell..................................... 4,950 Common Shares
Danzell Investment Management, Ltd. 18 Pope Avenue
Executive Park Road Hilton Head Island, SC 29938
Ralph A. Rockow........................................ 350,000 Common Shares
Exodyne, Inc. Exodyne Business Park 8433 North Black
Canyon Highway, Suite 200 Phoenix, AR 85021
</TABLE>
- ---------------
(1) Consists of (i) 34,000 shares held directly by Mr. Alissa; (ii) 721,100
shares held by Financial Investors Limited, a Cayman Islands corporation
that is a wholly owned subsidiary of Abdullatif Ali Alissa Est., a sole
proprietorship organized under the laws of the Kingdom of Saudi Arabia, of
which Mr. Alissa is the President; and (iii) 365,900 shares held by General
Investors Limited, a Cayman Islands corporation of which Mr. Alissa is the
sole shareholder. Mr. Alissa serves as the sole director and Secretary of
Financial Investors Limited and General Investors Limited.
SHARE TRANSACTION INFORMATION
The following tables set forth information with respect to all purchases
and sales of the Company's voting securities (in all cases, Common Stock) by
members of SCREAM and their associates during the past two years (since April 1,
1995).
<PAGE> 25
SHARES PURCHASED DIRECTLY OR INDIRECTLY BY SAAD A. ALISSA
<TABLE>
<CAPTION>
NUMBER
DATE OF SHARES PRICE
- ------------------------- --------- -----
<S> <C> <C>
08/24/95................. 5,000 8.000
08/29/95................. 5,000 7.875
09/05/95................. 500 7.875
09/05/95................. 5,000 8.000
09/06/95................. 5,000 8.000
09/07/95................. 4,000 8.375
09/07/95................. 5,000 8.375
09/14/95................. 2,600 9.000
09/14/95................. 10,000 9.250
09/25/95................. 5,000 9.125
09/26/95................. 5,000 8.875
09/26/95................. 5,000 8.875
09/27/95................. 5,000 8.875
09/28/95................. 5,000 8.875
09/29/95................. 5,000 8.875
10/02/95................. 2,100 8.875
10/02/95................. 1,100 8.875
10/03/95................. 1,600 8.875
10/10/95................. 5,000 8.750
10/12/95................. 4,300 8.750
10/13/95................. 5,000 8.875
07/10/96................. 3,200 8.250
07/11/96................. 10,000 8.500
07/11/96................. 10,000 8.250
07/12/96................. 3,200 8.125
07/12/96................. 3,200 8.125
07/15/96................. 1,800 8.125
07/15/96................. 1,800 8.125
07/16/96................. 10,000 7.625
07/16/96................. 10,000 7.750
07/18/96................. 5,000 8.000
07/22/96................. 3,000 8.000
07/23/96................. 3,500 7.750
07/23/96................. 1,500 7.625
07/25/96................. 5,000 7.500
07/26/96................. 4,000 7.500
07/26/96................. 4,000 7.500
08/14/96................. 12,000 7.875
08/16/96................. 3,000 7.750
08/30/96................. 10,000 7.750
08/30/96................. 10,000 7.625
09/02/96................. 10,000 7.750
09/16/96................. 4,000 7.500
</TABLE>
B-2
<PAGE> 26
SHARES PURCHASED BY ROBERT T. CRAIG
<TABLE>
<CAPTION>
NUMBER
DATE OF SHARES PRICE
- ------------------------- --------- -----
<S> <C> <C>
9/14/95.................. 1,000 9.125
</TABLE>
SHARES PURCHASED BY WILLIAM B. DANZELL
<TABLE>
<CAPTION>
NUMBER
DATE OF SHARES PRICE
- ------------------------- --------- -----
<S> <C> <C>
7/8/96................... 2,000 8.375
</TABLE>
SHARES PURCHASED BY RALPH A. ROCKOW
<TABLE>
<CAPTION>
NUMBER
DATE OF SHARES PRICE
- ------------------------- --------- -----
<S> <C> <C>
3/25/96.................. 1,000 7.00
3/26/96.................. 8,900 7.00
3/27/96.................. 10,200 7.00
3/28/96.................. 5,900 7.00
3/28/96.................. 24,000 7.00
</TABLE>
No part of the purchase price of any of the shares purchased by the
participants as reflected above was represented by borrowed funds.
CERTAIN ADDITIONAL BACKGROUND REGARDING SCREAM MEMBERS
Saad A. Alissa is the President of Abdullatif Ali Alissa Est. (the
"Establishment"), a sole proprietorship organized under the laws of the Kingdom
of Saudi Arabia. The Establishment's principal business is importing and
operating a dealership for General Motors and Isuzu Motors automobiles, spare
parts and accessories. Its principal business address is Post Office Box 192,
Alkhobar 81962, Saudi Arabia.
William B. Danzell is the President and principal shareholder of Danzell
Investment Management Ltd., a South Carolina corporation engaged in the business
of providing investment advisory services. The principal business address of
Danzell Investment Management Ltd. is 18 Pope Avenue, Executive Park Road,
Hilton Head Island, SC 29938.
The current occupations and principal business addresses of each of the
other participants in this proxy solicitation appear under the heading "Election
of the Scream Nominees to the Board of Directors" of this Proxy Statement.
None or the members of SCREAM and no other person who may be deemed to be a
"participant" in this proxy solicitation currently is, or during the last year
has been, a party to any contract, arrangement or understanding with any other
person with respect to any of the Company's securities, except as set forth in
this Proxy Statement.
There has been no transaction since the beginning of Talley's last fiscal
year, and there is not currently any proposed transaction to which Talley is a
party, in which SCREAM or any of its members or an "associate" or any immediate
family member of any of the foregoing persons or any other person who may be
deemed to be a "participant" in this proxy solicitation had or will have a
direct material interest including, without limitation, any understanding with
respect to any future employment or any future transaction in which Talley or
any of its affiliates is a party.
B-3
<PAGE> 27
YOUR VOTE IS EXTREMELY IMPORTANT
No matter how many or how few Talley shares you own, please vote FOR the
SCREAM NOMINEES, the SCREAM SLATE (the SCREAM NOMINEES and the DESIGNATED TALLEY
NOMINEE) and IN FAVOR OF the SCREAM PROPOSALS by SIGNING, MARKING, DATING and
MAILING your BLUE proxy card(s) in the enclosed postage-paid envelope. If you
wish to vote FOR OUR SLATE OF NOMINEES and IN FAVOR OF OUR PROPOSALS, you must
submit the enclosed BLUE proxy card(s) and MUST NOT later submit Talley's proxy
card.
If you have already voted and returned Talley's proxy card, you have every
legal right to change you mind and vote FOR OUR SLATE and IN FAVOR OF OUR
PROPOSALS on the BLUE proxy card(s). Only your latest dated proxy card will be
counted at the Annual Meeting.
If your shares are held for you by a bank or brokerage firm, only your bank
or brokerage firm can vote your shares, and only after receiving your voting
instructions. Please call your bank or broker and instruct your representative
to vote your shares FOR OUR SLATE OF NOMINEES and FOR OUR PROPOSALS on the BLUE
proxy card(s).
TIME IS OF THE ESSENCE. PLEASE VOTE AND RETURN YOUR COMPLETED AND SIGNED
BLUE PROXY CARD(S) TODAY.
If you have any questions or need assistance in voting your shares or in
changing your vote, please contact Beacon Hill Partners, Inc. at the toll-free
number listed below:
BEACON HILL PARTNERS
90 BROAD STREET
NEW YORK, NEW YORK, 10004
(212) 843-8500 (CALL "COLLECT")
OR
CALL TOLL FREE -- (800) 854-9486
<PAGE> 28
TALLEY INDUSTRIES, INC. SHAREHOLDERS' COMMITTEE
TO REMOVE ENTRENCHED AND ARROGANT MANAGEMENT
Dear Fellow Shareholders of Talley Industries, Inc.:
We are a shareholder group, representing approximately 10.3% of Talley's
outstanding shares of Common Stock, called the Shareholders' Committee to Remove
Entrenched and Arrogant Management or SCREAM. We are no longer willing or able
to stand by while current management takes action after action which, we
believe, run Talley into the ground and its shareholders around in
circles -- all the while collecting enormous paychecks and retirement benefits
for themselves. Over the years we watched helplessly as management sold off
Talley's airbag business in 1989, just as the airbag industry was poised to
"take off," we believe in an effort to raise funds to meet debt obligations and
fund losses incurred in its real estate investments, just as the bottom fell out
of that market. We have been victimized by the collapse of the stock's price and
its failure to recover, even in the midst of one of the longest and strongest
bull markets in the nation's history. And, through it all, we have endured
management's practice of paying itself generously, even in the worst of times,
and even more generously upon even the hint of improved performance.
Why is this the case??? WE THINK IT IS BECAUSE CURRENT MANAGEMENT HAS BUILT
A CORPORATE GOVERNANCE STRUCTURE THAT SHUTS SHAREHOLDERS OUT OF THE PROCESS AND
ENSURES THAT IT WILL STAY IN CONTROL OF TALLEY AND ITS PURSE STRINGS FOR THE
INDEFINITE FUTURE.
WHAT HAS MANAGEMENT DONE FOR YOU LATELY???????
The performance of Talley's stock price has been abysmal over the last
decade, showing a decline of more than 53%, compared to an increase of more than
200% in the S&P 500 Index during the same period. Still, Talley's management,
led by CEO William Mallender, has been more than generously compensated all the
same. In case there is any doubt, consider the following charts, based upon
information in Talley's annual and periodic reports and proxy statements, which
compare Talley's operating earnings with Mr. Mallender's compensation, and
Talley's stock price performance with the S&P 500 Index:
<TABLE>
<S> <C> <C> <C> <C>
TALLEY - % S&P 500 - %
YEAR CHANGE CHANGE
1986 0 0
1987 -6.29 2.02
1988 -23.89 14.67
1989 -43.71 45.91
1990 -70.42 36.66
1991 -79.58 72.21
1992 -83.95 78.1
1993 -63.53 92.59
1994 -57.85 89.62
1995 -57.55 154.31
1996 -63.53 205.84
MALLENDER'S
YEAR PAY OPERATING EPS
1990 605606 (6.25)
1991 520218 (5.24)
1992 660524 (2.11)
1993 2386630 (0.85)
1994 1370323 0.13
1995 1022554 0.25
</TABLE>
OBVIOUSLY, TALLEY HAS BEEN A GOOD INVESTMENT FOR MR. MALLENDER AND OTHER
MEMBERS OF SENIOR MANAGEMENT -- BUT NOT FOR THE COMMON SHAREHOLDERS -- WHO
RECEIVED NO DIVIDENDS AND THE VALUE OF WHOSE HOLDINGS DECLINED NEARLY 15% IN
1996 ALONE.
<PAGE> 29
THE SOLUTION
It seems to us that Talley's problems are abundantly clear. It also seems
that at least the initial steps to resolving those problems are equally clear.
Therefore, the accompanying Proxy Statement sets forth our "package" -- (1) a
fresh, independent slate of nominees for two of the three director positions on
Talley's Board to be filled at the Annual Meeting on May 8, 1997; (2) our
proposals recommending that the Board act to amend Talley's Certificate of
Incorporation and Bylaws to restore meaningful shareholder participation; and
(3) our proposal, first submitted to the shareholders last year over the
objections of Talley's management, to eliminate the Company's Rights or "Poison
Pill" Plan and return decisions regarding Talley's future to its shareholders.
We believe that election of our director nominees and adoption and
implementation of our proposals are long overdue steps necessary to change
Talley's direction. We believe that these actions will permit Talley to focus on
rebuilding shareholder value in general and its operating businesses in
particular. We also believe that these steps will permit Talley to rid itself of
the scourge of the entrenched senior executives who have demonstrated their
inability to increase stock prices meaningfully, or to improve operating results
or other measures of shareholder value, but who unfailingly compensate
themselves without regard to such measures.
STEP ONE -- REVITALIZE THE BOARD OF DIRECTORS
As you can see from the biographical materials included in our Proxy
Statement, both of our director nominees have long, distinguished records of
service in business. Both have significant experience in managing large,
diversified operating companies -- experience that relates directly to one or
more of Talley's businesses. In addition, these nominees share other less
obvious traits -- ALL ARE COMMITTED TO RUNNING TALLEY FOR THE BENEFIT OF ITS
SHAREHOLDERS AND BELIEVE THAT MANAGEMENT COMPENSATION SHOULD REFLECT THE SUCCESS
OF MANAGEMENT IN MEETING SHAREHOLDER GOALS AND MAXIMIZING SHAREHOLDER VALUE.
In stark contrast to the experience of our nominees is the track record of
the directors whom they would replace and the array of compensation due to these
incumbents. Mr. Hoopes has been a member of the Board of Directors since 1979.
THAT IS, HE WAS A MEMBER OF THE BOARD THAT ELECTED TO SELL TALLEY'S AIRBAG
BUSINESS IN THE AFTERMATH OF ITS DECISION TO INVEST IN REAL ESTATE -- WHILE
TALLEY'S STOCK PRICE FELL FROM $24.37 IN 1987 TO $2.25 IN 1992. All non-employee
members of the Board currently are entitled to receive: (1) a $27,000 annual
fee; (2) per meeting fees of $1,000 for Board meetings and $650 for committee
meetings (and both are members of the Audit Committee); (3) reimbursement of
expenses for attendance at meetings; (4) 1,000 shares of stock annually AT NO
COST TO THE DIRECTORS; and (5) 1,000 stock options annually, again AT NO COST TO
THE DIRECTORS. In addition, since each has served as a director for in excess
(one may say well in excess) of five years, each also is entitled to receive, at
shareholders' expense: (1) deferred compensation/retirement benefits equal to
his highest eligible compensation during the three years preceding retirement or
termination; (2) benefits under a medical plan, and business travel and accident
insurance policy provided AT NO COST TO THE DIRECTOR; (3) coverage under
Talley's group life insurance policy AT NO COST TO THE DIRECTOR; and (4) upon
resignation from the Board on or after his 70th birthday (which, in the case of
Mr. Hoopes is now, since he is 74) a lump sum payment of $50,000.
The last incumbent director up for reelection, Mr. Mallender, is another
story. He has been Chairman and Chief Executive Officer since 1983 and in that
role has presided over Talley's dismal operating and stock market performance,
while receiving generous cash payments, stock and option grants and fringe
benefits. As Chairman and Chief Executive Officer, in 1996 Mr. Mallender
received (1) annual compensation of almost $1.9 million and (2) other
compensation of more than $2 million -- an overall increase of more than 300%
over 1995. The other compensation includes benefits paid by Talley Manufacturing
to the extent that such benefits exceed Internal Revenue limits on amounts
payable by Talley itself, insurance premiums and matching 401(k) plan
contributions. Of course Mr. Mallender, like nonemployee directors, enjoys the
benefits of Talley's pension, retirement, group life, health and accident plans.
Unfortunately, even if the shareholders succeed in ousting Mr. Mallender as
a director at the upcoming Annual Meeting and a new Board seeks to terminate his
employment with Talley, he will continue to siphon
2
<PAGE> 30
funds from Talley's treasury. The Board of Directors (at a time when Mr. Hoopes
was a member) provided Mr. Mallender with a "golden parachute" through May 21,
2000, under which Talley must pay him a lump sum equal to two and one-half times
his annual compensation (including salary, bonus and incentive awards), which
could be as much as $9.9 million (based on 1996 compensation), if the SCREAM
Nominees or any other two or more nominees opposed by the Company are elected to
the Board and Mr. Mallender elects to quit or if the Company terminates his
employment within two years following such a so-called "change in control." Even
absent such a change, Mr. Mallender is entitled to a lump-sum payment equal to
twice his annual compensation, which could be as much as $7.9 million (based on
1996 compensation), upon termination of his employment for any reason other than
embezzlement, conversion of corporate property or similar willful misconduct.
THAT IS, MR. MALLENDER, THANKS TO HIS BOARD OF DIRECTORS, IS ENTITLED TO
RECEIVE OVER $9.9 MILLION IF THE SCREAM NOMINEES ARE ELECTED AND HE DECIDES HE
DOES NOT WANT TO WORK FOR THE NEW BOARD. AND, EVEN IF THE SCREAM NOMINEES ARE
NOT ELECTED OR HE DOES NOT DECIDE TO QUIT, MR. MALLENDER IS ENTITLED TO RECEIVE
OVER $7.9 MILLION IN CASH, EVEN IF THE BOARD FIRES HIM FOR NEGLIGENCE, BAD
JUDGMENT OR OTHER GOOD AND SUFFICIENT REASON (SHORT OF WILLFUL MISCONDUCT) AT
ANY TIME DURING THE NEXT THREE YEARS!
Despite the costs involved in removing Mr. Mallender, however, we believe
that the price is worth paying in order to open up Talley to new, energetic and
imaginative management. We also anticipate that a newly constituted Board of
Directors, not under Mr. Mallender's influence and control, will revisit
Talley's compensation arrangements for both directors and executive officers and
will bring them into line with the realities of a less-than-successful publicly
held company. And, while the SCREAM NOMINEES, as a minority of the Board, cannot
ensure that such actions will be taken, if elected, the SCREAM NOMINEES will
forego all director compensation other than standard directors' fees, expense
reimbursements and stock option awards, pending revision of the Company's
director compensation policy.
In addition to the SCREAM Nominees, SCREAM is seeking proxies for Paul L.
Foster, one of the Company's director-nominees. SCREAM is taking this action
because the Company has indicated that it might invalidate the nomination of
SCREAM's third director-nominee on a procedural technicality. Therefore, in
order to maximize the possibility that William Mallender will not be re-elected,
SCREAM has elected to withdraw its third nominee and to seek proxies in support
of Mr. Foster.
STEP TWO -- RESTORE SHAREHOLDER PARTICIPATION
Talley's Certificate of Incorporation and Bylaws bristle with so-called
"shark repellent" provisions designed to defend existing management against
shareholder "interference." First and foremost, the staggered Board of Directors
ensures that at least two annual meetings must elapse before existing
shareholders or a potential acquiror can replace a majority of the directors. In
addition, a supermajority vote (equal to at least 80% of the outstanding shares
entitled to vote) is required to remove a director, and even then removal is
only permitted "for cause." Similar supermajority votes are required to
authorize virtually any transaction that has the potential for resulting in a
change in control and, therefore, a change in management. Finally, although
permitted under state law, shareholders are prohibited from acting by written
consent and have no authority to require the call of shareholders' meetings. The
overall effect of these provisions is, we believe, to make it virtually
impossible for shareholders to take any meaningful role in Talley's management
or in determining its future direction, apart from, or in opposition to, the
desires of management. AND, THE CERTIFICATE AND BYLAWS REQUIRE AN 80%
SHAREHOLDER VOTE TO CHANGE ANY OF THESE PROVISIONS PROTECTING CURRENT
MANAGEMENT.
As if these shark repellents were not enough, the Board instituted and,
last year, extended, Talley's Rights or "Poison Pill" Plan. Because this Plan
strips shareholders of the ability to act directly on offers for their shares by
permitting the Board of Directors to reject tender offers without presentation
to the shareholders, we believe that the ultimate effect of the Poison Pill Plan
is to inhibit offers for Talley's stock which the Board considers "unfriendly."
The Board neither provided for nor sought shareholder input when it first
adopted and then extended the Poison Pill Plan. THE BOARD INSISTS ON KEEPING
THIS PLAN IN PLACE, DESPITE THE FACT THAT LAST YEAR HOLDERS OF NEARLY 39% OF THE
SHARES VOTED WERE CAST IN SUPPORT OF A SHAREHOLDER RESOLUTION URGING THAT THE
RIGHTS PLAN BE TERMINATED OR ITS CONTINUATION SUBMITTED TO A SHAREHOLDER VOTE.
3
<PAGE> 31
We expect that adoption and implementation of our proposals to amend the
Certificate and Bylaws and eliminate the Poison Pill will serve a starting point
for dismantling management's defenses and returning control of Talley's destiny
to the shareholders. Our specific proposals are as follows.
- - FIRST, we are seeking to ELIMINATE THE STAGGERED BOARD OF DIRECTORS,
effective with the 1998 annual meeting. This will give shareholders the right
to voice their approval or disapproval of the performance of their directors
on an annual basis and will remove a significant impediment to takeover
attempts. And, since the change will not take effect until the 1998 annual
meeting, the seven carryover directors, working with our three directors,
will have a transition period in which to prepare the Board for a return to
the "real world" of Board accountability.
- - SECOND, we are seeking changes to the Certificate of Incorporation and Bylaws
that will PERMIT HOLDERS OF 10% OR MORE OF THE TALLEY'S VOTING STOCK TO CALL
SHAREHOLDERS' MEETINGS. We believe that this action will restore a
substantial degree of shareholder democracy to Talley's management.
- - THIRD, we are seeking TERMINATION OF THE POISON PILL PLAN. We believe that
the existence of the Poison Pill depresses stock prices, inhibits potential
takeovers, serves the interest of management in keeping their jobs and
reduces management's accountability. We believe that there is no place in
Talley's future for a device which permits members of current management to
retain their positions and to avoid shareholder accountability.
Under Delaware law, amendments to Talley's Certificate of Incorporation
must be initiated by the Board of Directors. Therefore, by voting in favor of
our corporate governance proposals, you are requesting that the Board of
Directors act to submit appropriate amendments to a shareholder vote, which then
must be approved by an 80% vote. Elimination of the Poison Pill Plan likewise
requires Board action, although no shareholder vote is required. Therefore,
adoption of our proposals will begin the longer process of actually amending the
Certificate of Incorporation.
EVEN IF OUR CORPORATE GOVERNANCE PROPOSALS AND OUR PROPOSAL TO ELIMINATE
THE POISON PILL PLAN ARE ADOPTED, THE BOARD IS NOT REQUIRED TO ACT ON THEM.
HOWEVER, WE EXPECT THAT THE LARGER IS THE VOTE IN FAVOR OF OUR PROPOSALS, THE
MORE DIFFICULT IT WILL BE FOR THE BOARD TO CONTINUE TO DISREGARD THE EXPRESSED
DESIRE OF TALLEY'S SHAREHOLDERS THAT THEIR RIGHT TO PARTICIPATE IN CORPORATE
GOVERNANCE PROMPTLY BE RESTORED.
THEREFORE, EVERY SHAREHOLDER VOTE IN FAVOR OF OUR PROPOSALS IS CRITICAL.
THE TIME TO ACT IS NOW
Saad Alissa, one of the principal members of SCREAM, has spent much of the
last two years trying to convince management to enhance shareholder value,
remove impediments to potential takeovers and improve operating performance.
Virtually every suggestion for improvement has been ignored or rejected by
management, primarily in the person of Mr. Mallender.
We believe that the replacement of two current Board members, including,
most particularly, Mr. Mallender, by our nominees, and the adoption and
implementation of our other proposals, will provide Talley's shareholders with
much needed leadership and with an opportunity to enjoy increased value from
their investment.
Please sign and return the enclosed BLUE proxy card(s) today. If you have
any questions, please feel free to call us.
Sincerely,
SCREAM
April 16, 1997
4
<PAGE> 32
YOUR VOTE IS EXTREMELY IMPORTANT
(1) Please SIGN, MARK, DATE and MAIL your BLUE proxy card(s) in the
enclosed postage-paid envelope. If you wish to vote FOR OUR SLATE OF
NOMINEES (consisting of the SCREAM NOMINEES and the DESIGNATED TALLEY
NOMINEE), and IN FAVOR OF OUR PROPOSALS you must submit the enclosed
BLUE proxy card(s) and MUST NOT submit Talley's proxy card.
(2) If you have already voted Talley's proxy card, you have every legal
right to change you mind and vote FOR OUR SLATE and IN FAVOR OF OUR
PROPOSALS on the BLUE proxy card(s). Only your latest dated proxy card
will be counted.
(3) If your shares are held for you by a bank or brokerage firm, only your
bank or brokerage firm can vote your shares, and only after receiving
your instructions as to how to vote. Please call your bank or broker
and instruct your representative to vote your shares FOR OUR SLATE OF
NOMINEES and IN FAVOR OF OUR PROPOSALS on the BLUE proxy card.
(4) TIME IS OF THE ESSENCE. PLEASE VOTE TODAY.
If you have any questions or need assistance in voting your shares or in
changing your vote, please contact Beacon Hill Partners, Inc. at the toll-free
number listed below:
BEACON HILL PARTNERS
90 BROAD STREET
NEW YORK, NEW YORK, 10004
(212) 843-8500 (CALL "COLLECT")
OR
CALL TOLL FREE -- (800) 854-9486
<PAGE> 33
================================================================================
================================================================================
THIS PROXY IS SOLICITED ON BEHALF OF THE SHAREHOLDERS' COMMITTEE
TO REMOVE ENTRENCHED AND ARROGANT MANAGEMENT OF TALLEY INDUSTRIES,
INC.
IN CONNECTION WITH THE 1997 ANNUAL MEETING OF SHAREHOLDERS
The undersigned shareholder of Talley Industries, Inc. ("Talley")
hereby appoints Robert T. Craig and Ralph A. Rockow, and each of them,
as lawful attorneys and proxies, with several power of substitution,
for and in the name of the undersigned to represent, and vote, as
designated below, all shares of the Common Stock of Talley which the
undersigned is entitled to vote at the 1997 Annual Meeting of the
Shareholders of Talley to be held on May 8, 1997, 11 o'clock a.m.
local time, or at any adjournment, postponement or rescheduling
thereof (collectively, the "Annual Meeting"). The undersigned hereby
revokes any and all previous proxies with respect to the matters
covered by this proxy and the voting of such shares at the Annual
Meeting.
A. ELECTION OF DIRECTORS
1. SCREAM Nominees.
[ ] FOR all nominees listed below (except as marked to the contrary
below)
[ ] WITHHOLD AUTHORITY for all nominees listed below
Nominees: Robert T. Craig; Ralph A. Rockow
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR EITHER INDIVIDUAL
NOMINEE PRINT THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
-------------------------------------------------------------
2. Designated Talley Nominee
[ ] FOR Paul L. Foster
[ ] WITHHOLD AUTHORITY for Paul L. Foster
SCREAM IS NOT SEEKING AUTHORITY TO VOTE FOR AND WILL NOT EXERCISE ANY
SUCH AUTHORITY with respect to: William H. Mallender or Townsend
Hoopes
B. ADOPTION OF SCREAM PROPOSALS
1. SCREAM Proposal No. 1, recommending that the Board of Directors act
to amend the Certificate of Incorporation to eliminate the staggered
Board of Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. SCREAM Proposal No. 2, recommending that the Board of Directors act
to amend the Certificate of Incorporation and Bylaws to permit
holders of ten percent (10%) or more of the Company's voting stock
to call special meetings.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(continued, and to be signed, on other side)
(continued from other side)
3. SCREAM Proposal No. 3, recommending that the Board of Directors
undertake a thorough review of the Company's Certificate of
Incorporation and Bylaws for the purpose of identifying and
removing those provisions that limit stockholder participation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. SCREAM Proposal No. 4, recommending that the Board of Directors
either (i) eliminate both the Rights and the Rights Plan or (ii)
submit to a binding vote of the stockholders the question of
whether to retain or eliminate such Rights and Rights Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
C. DISCRETIONARY AUTHORITY
In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the Annual Meeting or any
adjournment, postponement or rescheduling thereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE
ENCLOSED ENVELOPE.
THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED HEREIN.
IF NO INSTRUCTIONS ARE GIVEN, THE SHARES REPRESENTED BY THIS PROXY
WILL BE VOTED "FOR" ALL OF THE NOMINEES LISTED ABOVE, "IN FAVOR" OF
SCREAM PROPOSALS NO. 1, NO. 2, NO. 3 AND NO. 4 AND IN THE DISCRETION
OF THE PROXY HOLDERS AS TO OTHER MATTERS. Rules and regulations
promulgated under the Securities Exchange Act of 1934, as amended,
require that the following statement be included on this card: There
is no assurance that the DESIGNATED TALLEY NOMINEE (Paul L. Foster)
will serve if elected with any of the SCREAM NOMINEES.
PLEASE DATE AND SIGN THIS PROXY EXACTLY AS YOUR NAME APPEARS HEREON.
Dated: , 1997
-------------------------------
SIGNATURE OF OWNER
-------------------------------
ADDITIONAL SIGNATURE OF JOINT
OWNER (IF ANY)
IF STOCK IS JOINTLY HELD, EACH
JOINT OWNER SHOULD SIGN. WHEN
SIGNING AS ATTORNEY-IN-FACT,
EXECUTOR, ADMINISTRATOR,
TRUSTEE, GUARDIAN, CORPORATE
OFFICER OR PARTNER, PLEASE GIVE
FULL TITLE.
TO VOTE IN ACCORDANCE WITH THE RECOMMENDATIONS OF SCREAM, JUST SIGN,
DATE AND RETURN THIS PROXY--NO BOXES NEED BE CHECKED.
<PAGE> 34
COMMON
COMMON STOCK
STOCK
<PAGE> 35
================================================================================
================================================================================
THIS PROXY IS SOLICITED ON BEHALF OF THE SHAREHOLDERS' COMMITTEE
TO REMOVE ENTRENCHED AND ARROGANT MANAGEMENT OF TALLEY INDUSTRIES,
INC.
IN CONNECTION WITH THE 1997 ANNUAL MEETING OF SHAREHOLDERS
The undersigned shareholder of Talley Industries, Inc. ("Talley")
hereby appoints Robert T. Craig and Ralph A. Rockow, and each of them,
as lawful attorneys and proxies, with several power of substitution,
for and in the name of the undersigned to represent, and vote, as
designated below, all shares of the Series A Preferred Stock of Talley
which the undersigned is entitled to vote at the 1997 Annual Meeting
of the Shareholders of Talley to be held on May 8, 1997, 11 a.m. local
time, or at any adjournment, postponement or rescheduling thereof
(collectively, the "Annual Meeting"). The undersigned hereby revokes
any and all previous proxies with respect to the matters covered by
this proxy and the voting of such shares at the Annual Meeting.
A. ELECTION OF DIRECTORS
1. SCREAM Nominees.
[ ] FOR all nominees listed below (except as marked to the contrary
below)
[ ] WITHHOLD AUTHORITY for all nominees listed below
Nominees: Robert T. Craig; Ralph A. Rockow
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR EITHER INDIVIDUAL
NOMINEE PRINT THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
-------------------------------------------------------------
2. Designated Talley Nominee
[ ] FOR Paul L. Foster
[ ] WITHHOLD AUTHORITY for Paul L. Foster
SCREAM IS NOT SEEKING AUTHORITY TO VOTE FOR AND WILL NOT EXERCISE ANY
SUCH AUTHORITY with respect to: William H. Mallender or Townsend
Hoopes
B. ADOPTION OF SCREAM PROPOSALS
1. SCREAM Proposal No. 1, recommending that the Board of Directors act
to amend the Certificate of Incorporation to eliminate the staggered
Board of Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. SCREAM Proposal No. 2, recommending that the Board of Directors act
to amend the Certificate of Incorporation and Bylaws to permit
holders of ten percent (10%) or more of the Company's voting stock
to call special meetings.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(continued, and to be signed, on other side)
(continued from other side)
3. SCREAM Proposal No. 3, recommending that the Board of Directors
undertake a thorough review of the Company's Certificate of
Incorporation and Bylaws for the purpose of identifying and
removing those provisions that limit stockholder participation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. SCREAM Proposal No. 4, recommending that the Board of Directors
either (i) eliminate both the Rights and the Rights Plan or (ii)
submit to a binding vote of the stockholders the question of
whether to retain or eliminate such Rights and Rights Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
C. DISCRETIONARY AUTHORITY
In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the Annual Meeting or any
adjournment, postponement or rescheduling thereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE
ENCLOSED ENVELOPE.
THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED HEREIN.
IF NO INSTRUCTIONS ARE GIVEN, THE SHARES REPRESENTED BY THIS PROXY
WILL BE VOTED "FOR" ALL OF THE NOMINEES LISTED ABOVE, "IN FAVOR" OF
SCREAM PROPOSALS NO. 1, NO. 2, NO. 3 AND NO. 4 AND IN THE DISCRETION
OF THE PROXY HOLDERS AS TO OTHER MATTERS. RULES AND REGULATIONS
PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
REQUIRE THAT THE FOLLOWING STATEMENT BE INCLUDED ON THIS CARD: THERE
IS NO ASSURANCE THAT THE DESIGNATED TALLEY NOMINEE (PAUL L. FOSTER)
WILL SERVE IF ELECTED WITH ANY OF THE SCREAM NOMINEES.
PLEASE DATE AND SIGN THIS PROXY EXACTLY AS YOUR NAME APPEARS HEREON.
Date: , 1997
-------------------------------
SIGNATURE OF OWNER
-------------------------------
ADDITIONAL SIGNATURE OF JOINT
OWNER (IF ANY)
IF STOCK IS JOINTLY HELD, EACH
JOINT OWNER SHOULD SIGN. WHEN
SIGNING AS ATTORNEY-IN-FACT,
EXECUTOR, ADMINISTRATOR,
TRUSTEE, GUARDIAN, CORPORATE
OFFICER OR PARTNER, PLEASE GIVE
FULL TITLE.
TO ACT IN ACCORDANCE WITH THE RECOMMENDATIONS OF SCREAM, JUST SIGN,
DATE AND RETURN THIS PROXY--NO BOXES NEED BE CHECKED.
<PAGE> 36
SERIES A
SERIES A PREFERRED
PREFERRED
<PAGE> 37
================================================================================
================================================================================
THIS PROXY IS SOLICITED ON BEHALF OF THE SHAREHOLDERS' COMMITTEE
TO REMOVE ENTRENCHED AND ARROGANT MANAGEMENT OF TALLEY INDUSTRIES,
INC.
IN CONNECTION WITH THE 1997 ANNUAL MEETING OF SHAREHOLDERS
The undersigned shareholder of Talley Industries, Inc. ("Talley")
hereby appoints Robert T. Craig and Ralph A. Rockow, and each of them,
as lawful attorneys and proxies, with several power of substitution,
for and in the name of the undersigned to represent, and vote, as
designated below, all shares of the Series B Preferred Stock of Talley
which the undersigned is entitled to vote at the 1997 Annual Meeting
of the Shareholders of Talley to be held on May 8, 1997, 11 a.m. local
time, or at any adjournment, postponement or rescheduling thereof
(collectively, the "Annual Meeting"). The undersigned hereby revokes
any and all previous proxies with respect to the matters covered by
this proxy and the voting of such shares at the Annual Meeting.
A. ELECTION OF DIRECTORS
1. SCREAM Nominees.
[ ] FOR all nominees listed below (except as marked to the contrary
below)
[ ] WITHHOLD AUTHORITY for all nominees listed below
Nominees: Robert T. Craig; Ralph A. Rockow
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR EITHER INDIVIDUAL
NOMINEE PRINT THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
-------------------------------------------------------------
2. Designated Talley Nominee
[ ] FOR Paul L. Foster
[ ] WITHHOLD AUTHORITY for Paul L. Foster
SCREAM IS NOT SEEKING AUTHORITY TO VOTE FOR AND WILL NOT EXERCISE ANY
SUCH AUTHORITY with respect to: William H. Mallender or Townsend
Hoopes
B. ADOPTION OF SCREAM PROPOSALS
1. SCREAM Proposal No. 1, recommending that the Board of Directors act
to amend the Certificate of Incorporation to eliminate the staggered
Board of Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. SCREAM Proposal No. 2, recommending that the Board of Directors act
to amend the Certificate of Incorporation and Bylaws to permit
holders of ten percent (10%) or more of the Company's voting stock
to call special meetings.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(continued, and to be signed, on other side)
(continued from other side)
3. SCREAM Proposal No. 3, recommending that the Board of Directors
undertake a thorough review of the Company's Certificate of
Incorporation and Bylaws for the purpose of identifying and
removing those provisions that limit stockholder participation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. SCREAM Proposal No. 4, recommending that the Board of Directors
either (i) eliminate both the Rights and the Rights Plan or (ii)
submit to a binding vote of the stockholders the question of
whether to retain or eliminate such Rights and Rights Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
C. DISCRETIONARY AUTHORITY
In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the Annual Meeting or any
adjournment, postponement or rescheduling thereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE
ENCLOSED ENVELOPE.
THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED HEREIN.
IF NO INSTRUCTIONS ARE GIVEN, THE SHARES REPRESENTED BY THIS PROXY
WILL BE VOTED "FOR" ALL OF THE NOMINEES LISTED ABOVE, "IN FAVOR" OF
SCREAM PROPOSALS NO. 1, NO. 2, NO. 3 AND NO. 4 AND IN THE DISCRETION
OF THE PROXY HOLDERS AS TO OTHER MATTERS. RULES AND REGULATIONS
PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
REQUIRE THAT THE FOLLOWING STATEMENT BE INCLUDED ON THIS CARD: THERE
IS NO ASSURANCE THAT THE DESIGNATED TALLEY NOMINEE (PAUL L. FOSTER)
WILL SERVE IF ELECTED WITH ANY OF THE SCREAM NOMINEES.
PLEASE DATE AND SIGN THIS PROXY EXACTLY AS YOUR NAME APPEARS HEREON.
Date: , 1997
-------------------------------
SIGNATURE OF OWNER
-------------------------------
ADDITIONAL SIGNATURE OF JOINT
OWNER (IF ANY)
IF STOCK IS JOINTLY HELD, EACH
JOINT OWNER SHOULD SIGN. WHEN
SIGNING AS ATTORNEY-IN-FACT,
EXECUTOR, ADMINISTRATOR,
TRUSTEE, GUARDIAN, CORPORATE
OFFICER OR PARTNER, PLEASE GIVE
FULL TITLE.
TO VOTE IN ACCORDANCE WITH THE RECOMMENDATIONS OF SCREAM, JUST SIGN,
DATE AND RETURN THIS PROXY -- NO BOXES NEED BE CHECKED.
<PAGE> 38
SERIES B
PREFERRED
SERIES B
PREFERRED
