-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OktSROieolwmiidlVUbgvUawp42n24/o6BQxHLvCpjsd8QqVGSYu2EAlCyjeU7O2 F2Ce0oDpqqfspURfHHwgYA== 0000899243-95-000811.txt : 19951120 0000899243-95-000811.hdr.sgml : 19951120 ACCESSION NUMBER: 0000899243-95-000811 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19951116 SROS: NASD SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: REUNION INDUSTRIES INC CENTRAL INDEX KEY: 0001003429 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 061439715 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 033-64325 FILM NUMBER: 95594265 BUSINESS ADDRESS: STREET 1: ONE STAMFORD LANDING STREET 2: 62 SOUTHFIELD AVE CITY: STAMFORD STATE: CT ZIP: 06902 BUSINESS PHONE: 2033250551 MAIL ADDRESS: STREET 1: ONE STAMFORD LANDING STREET 2: 62 SOUTHFIELD AVE CITY: STAMFORD STATE: CT ZIP: 06902 S-4 1 FORM S-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 16, 1995 REGISTRATION NO. 33- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ---------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------- REUNION INDUSTRIES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) ---------------- DELAWARE 3070 06-1439715 (STATE OR OTHER (PRIMARY STANDARD (I.R. S. EMPLOYER JURISDICTION INDUSTRIAL CLASSIFICATION IDENTIFICATION NO.) OF INCORPORATION OR CODE NUMBER) ORGANIZATION) ONE STAMFORD LANDING 62 SOUTHFIELD AVENUE STAMFORD, CONNECTICUT 06902 (203) 325-0551 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ---------------- NAME, ADDRESS INCLUDING ZIP CODE AND COPY OF COMMUNICATIONS TO: TELEPHONE NUMBER INCLUDING AREA CODE ANN F. CHAMBERLAIN, ESQ. OF AGENT FOR SERVICE: RICHARDS & O'NEIL, LLP RICHARD L. EVANS 885 THIRD AVENUE REUNION INDUSTRIES, INC. NEW YORK, NEW YORK 10022-4873 ONE STAMFORD LANDING (212) 207-1200 62 SOUTHFIELD AVENUE STAMFORD, CONNECTICUT 06902 (203) 325-0551 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE PUBLIC: As soon as practicable after the effective time of the Merger described in this Registration Statement. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [_] CALCULATION OF REGISTRATION FEE - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
PROPOSED PROPOSED MAXIMUM MAXIMUM TITLE OF EACH CLASS OF OFFERING AGGREGATE AMOUNT OF SECURITIES AMOUNT TO BE PRICE PER OFFERING REGISTRATION TO BE REGISTERED REGISTERED(1) UNIT(2) PRICE(2) FEE(2) - ----------------------------------------------------------------------------------- Common Stock, par value $.01 per share......... 3,845,085 shs $5.50 $21,147,967.50 $4,229.59
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (1) Represents the maximum number of shares to be issued in exchange for all of the issued and outstanding common stock of Reunion Resources Company (the "Existing Common Stock") pursuant to the Merger. (2) Pursuant to Rule 457 (c) and (f)(1), the registration fee is computed upon the basis of the last sale of the Common Stock at $5.50 per share on November 14, 1995 reported in the consolidated reporting system for NASDAQ Small-Cap. Issues. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- REUNION INDUSTRIES, INC. CROSS-REFERENCE SHEET This cross-reference sheet is provided pursuant to Item 501(b) of Regulation S-K showing the location in the Proxy Statement/Prospectus of information required by Part I of Form S-4:
LOCATION IN PROXY FORM S-4 ITEM NUMBER STATEMENT/PROSPECTUS -------------------- -------------------- A. INFORMATION ABOUT THE TRANSACTION 1. Forepart of Registration Statement and Outside Front Forepart of Registration Statement and Cover Page of Prospectus........ Outside Front Cover Page of Proxy Statement/Prospectus 2. Inside Front and Outside Back Cover Pages of Prospectus....... Inside Front Cover Page of Proxy Statement/Prospectus; Available Information; Table of Contents 3. Risk Factors, Ratio of Earnings to Fixed Charges and Other Outside Front Cover Page of Proxy Information..................... Statement/Prospectus; Summary; Certain Special Considerations; The Special Meeting; Proposal I: The Election of Directors; Proposal II: The Merger 4. Terms of the Transaction........ Outside Front Cover Page of Proxy Statement/Prospectus; The Special Meeting; Proposal I: The Election of Directors; Proposal II: Merger 5. Pro Forma Financial Information. Not Applicable 6. Material Contacts with the Company Being Acquired.......... Proposal II: The Merger 7. Additional Information Required for Reoffering by Persons and Not Applicable Parties Deemed to Be Underwriters.................... 8. Interests of Named Experts and Not Applicable Counsel......................... 9. Disclosure of Commission Position on Indemnification for Not Applicable Securities Act Liabilities...... B. INFORMATION ABOUT THE REGISTRANT 10. Information with Respect to S-3 Not Applicable Registrants..................... 11. Incorporation of Certain Information by Reference........ Not Applicable 12. Information with Respect to S-2 or S-3 Registrants.............. Not Applicable 13. Incorporation of Certain Information by Reference........ Not Applicable 14. Information with Respect to Registrants Other Than S-3 or S- Not Applicable 2 Registrants...................
LOCATION IN PROXY FORM S-4 ITEM NUMBER STATEMENT/PROSPECTUS -------------------- -------------------- C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED 15. Information with Respect to S-3 Not Applicable Companies......................... 16. Information with Respect to S-2 or Not Applicable S-3 Companies..................... 17. Information with Respect to Companies Other Than S-3 or S-2 Not Applicable Companies......................... D. VOTING AND MANAGEMENT INFORMATION 18. Information if Proxies, Consents or Authorizations are to be Outside Front Cover Page of Proxy Solicited......................... Statement/Prospectus; The Special Meeting; Proposal I: Election of Directors; Proposal II: The Merger; Ownership Information; Management Information; Certain Relationships and Related Transactions 19. Information if Proxies, Consents or Authorizations are not to be Not Applicable Solicited or in an Exchange Offer.
REUNION RESOURCES COMPANY NOTICE OF SPECIAL MEETING OF STOCKHOLDERS TO BE HELD JANUARY 4, 1996 To Stockholders of Reunion Resources Company: NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of REUNION RESOURCES COMPANY, a Delaware corporation (the "Company"), will be held at the offices of Richards & O'Neil, LLP, 885 Third Avenue New York, New York, at 10:00 a.m., Eastern Standard Time, on January 4, 1996 (the "Special Meeting"), for the following purposes: 1. To elect five directors to the Company's Board of Directors; 2. To consider and act upon a proposal to approve the Merger Agreement dated as of November 14, 1995 (the "Merger Agreement"), between the Company and Reunion Industries, Inc., a Delaware corporation that is a newly- formed, wholly-owned subsidiary of the Company ("New Subsidiary"), pursuant to which the Company will be merged with and into New Subsidiary, with New Subsidiary being the surviving corporation (the "Merger"). The Merger is being proposed by the Board of Directors of the Company to help assure that the Company's substantial tax benefits (in the form of net operating loss carryforwards) will continue to be available to offset future taxable income by decreasing the likelihood of an "ownership change" for federal income tax purposes, which will be accomplished by including certain transfer restrictions in New Subsidiary's Certificate of Incorporation and certain legends on the certificates representing the common stock, par value $.01 per share, of New Subsidiary (the "New Common Stock"), which New Common Stock will be issued to stockholders in exchange for the shares of the Company's common stock, par value $ .01 per share; and 3. To transact such other business as may properly come before the Special Meeting or any adjournment thereof. The Board of Directors of the Company has fixed the close of business on December 1, 1995 as the record date for the determination of stockholders of the Company entitled to notice of and to vote at the Special Meeting and at any adjournment thereof. Only holders of record on such date will be entitled to vote at the Special Meeting. A copy of the Proxy Statement/Prospectus relating to the Special Meeting and a Form of Proxy accompany this Notice. The Proxy Statement/Prospectus also relates to the shares of New Common Stock that stockholders will receive pursuant to the Merger. PLEASE COMPLETE, DATE, SIGN AND MAIL THE ENCLOSED PROXY IN THE ACCOMPANYING RETURN ADDRESSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU LATER DESIRE TO REVOKE OR CHANGE YOUR PROXY FOR ANY REASON, YOU MAY DO SO AT ANY TIME BEFORE THE VOTING BY DELIVERING TO THE COMPANY A WRITTEN NOTICE OF REVOCATION OR A DULY EXECUTED PROXY BEARING A LATER DATE OR BY ATTENDING THE SPECIAL MEETING AND VOTING IN PERSON. PLEASE DO NOT SEND ANY CERTIFICATES FOR YOUR STOCK AT THIS TIME. IF THE MERGER IS CONSUMMATED, YOU WILL RECEIVE INSTRUCTIONS REGARDING THE SURRENDER OF YOUR STOCK CERTIFICATES. By Order of the Board of Directors, [PASTE UP SIG] R. MICHAEL LOONEY, Secretary Houston, Texas November , 1995 SUBJECT TO COMPLETION, DATED NOVEMBER 16, 1995 3,845,085 SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE OF REUNION INDUSTRIES, INC. ONE STAMFORD LANDING 62 SOUTHFIELD AVENUE STAMFORD, CONNECTICUT 06902 ---------------- PROXY STATEMENT/PROSPECTUS FOR SPECIAL MEETING OF STOCKHOLDERS OF REUNION RESOURCES COMPANY TO BE HELD JANUARY 4, 1996 THE INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THE NEW COMMON STOCK HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROXY STATEMENT/ PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. ---------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ---------------- SEE "CERTAIN SPECIAL CONSIDERATIONS" FOR A DISCUSSION OF CERTAIN FACTORS THAT STOCKHOLDERS SHOULD CONSIDER PRIOR TO EXECUTING A PROXY OR CASTING A VOTE. ---------------- THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS NOVEMBER 16, 1995 PROXY STATEMENT/PROSPECTUS TABLE OF CONTENTS
DESCRIPTION PAGE NUMBER - ----------- ----------- Available Information............................................... 3 Summary............................................................. 4 Certain Special Considerations...................................... 6 The Special Meeting................................................. 8 Proposal I. The Election of Directors............................... 10 Proposal II. The Merger............................................. 12 Ownership Information............................................... 20 Management Information.............................................. 22 Certain Relationships and Related Transactions...................... 27
AVAILABLE INFORMATION The Company is (and, following the Merger, New Subsidiary will be) subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files (and New Subsidiary will file) reports, proxy statements and other information with the Commission. Reports, proxy statements and other information filed by the Company (and to be filed by New Subsidiary) may be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the Regional Offices of the Commission at 7 World Trade Center, Suite 1300, New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such information may be obtained by mail from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The Existing Common Stock is, and the New Common Stock will be, listed for quotation on the NASDAQ Small-Cap. Market and the Pacific Stock Exchange, and reports, proxy and information statements, and other information concerning the Company (and, following the Merger, New Subsidiary) may be inspected at such exchanges. The Company's Annual Report on Form 10-K as filed with the Commission for the year ended December 31, 1994, including certified financial statements and the financial schedules, excluding exhibits thereto, as well as the Company's Quarterly Reports on Form 10-Q, are available at no charge to stockholders upon written or oral request to R. Michael Looney at the address set forth in the following paragraph. The financial statements of the Company for the year ended December 31, 1994 and other information were sent to stockholders as a part of the Company's Annual Report on Form 10-K. This Proxy Statement/Prospectus does not contain all of the information in the Form S-4 and exhibits thereto. Statements in this Proxy Statement/Prospectus as to the contents of any contract, agreement or other document are summaries only and are not necessarily complete. For complete information as to these matters, stockholders should refer to the applicable exhibit to the Form S-4. The Form S-4 and the exhibits thereto filed by New Subsidiary with the Commission may be inspected at the public reference facilities of the Commission listed above. A copy of any and all of the information (not including the exhibits to such information unless such exhibits are specifically incorporated by reference) in any documents incorporated by reference in this Proxy Statement/Prospectus but not delivered herewith shall be provided without charge to each person, including any beneficial owner, to whom a Proxy Statement/Prospectus is delivered, upon written or oral request of such person to R. Michael Looney, Reunion Resources Company, 2801 Post Oak Boulevard, Suite 400, Houston, Texas 77056, telephone number (713) 627-9277. NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR NEW SUBSIDIARY. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, ANY SECURITIES, OR SOLICITATION OF A PROXY, IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR NEW SUBSIDIARY OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. 3 SUMMARY This Proxy Statement/Prospectus is being furnished in connection with the solicitation of proxies by and on behalf of the Board of Directors of Reunion Resources Company, a Delaware corporation (the "Company"), for use at the special meeting of holders of the common stock, par value $.01 per share, of the Company (the "Existing Common Stock") to be held on January 4, 1996 at 10:00 a.m., Eastern Standard Time, at the offices of Richards & O'Neil, LLP, 885 Third Avenue, New York, New York and any adjournment thereof (the "Special Meeting"). This Proxy Statement/Prospectus and accompanying Notice of Special Meeting of Stockholders and Form of Proxy are first being mailed to stockholders on or about [ ], 1995. At the Special Meeting, stockholders will be asked to consider and act upon the following proposals: (i) Proposal I: The election of five directors to the Board of Directors of the Company (See "Proposal I: The Election of Directors"); and (ii) Proposal II: Approval of the Merger Agreement, dated as of November 14, 1995 (the "Merger Agreement"), between the Company and Reunion Industries, Inc., a Delaware corporation that is a newly-formed, wholly- owned subsidiary of the Company ("New Subsidiary"), pursuant to which the Company will be merged with and into New Subsidiary, with New Subsidiary being the surviving corporation (the "Merger"). The Merger is intended to help assure that the Company's substantial net operating loss carryforwards ("NOLs") will continue to be available to offset future taxable income by decreasing the likelihood of an "ownership change" for federal income tax purposes, which will be accomplished by including certain transfer restrictions in New Subsidiary's Certificate of Incorporation and certain legends on the stock certificates representing the common stock, par value $.01 per share, of New Subsidiary (the "New Common Stock") (collectively, the "Transfer Restrictions"). (See "Proposal II. The Merger.") With the exception of the Transfer Restrictions, the New Authorized Stock (as defined below) and a new name, following the Merger New Subsidiary will be substantially identical to the Company prior to the Merger, including with respect to management, operations and financial condition. The directors and officers of the Company immediately prior to the Merger will be the directors and officers, respectively, of New Subsidiary immediately following the Merger. Immediately following the Merger, New Subsidiary will have the same consolidated assets, liabilities and stockholders' equity as the Company immediately prior to the Merger. Following the Merger, New Subsidiary's Certificate of Incorporation will contain articles identical to those in the Company's Certificate of Incorporation, with the following exceptions: (i) Article IV, relating to the New Authorized Stock; (ii) Article V, which contains the Transfer Restrictions, (iii) Article I, which provides that the corporate name of New Subsidiary is Reunion Industries, Inc.; and (iv) Section 12.8, which requires New Subsidiary to indemnify a director of the corporation in connection with any Proceeding (as defined therein) initiated by such director only if the initiation of such Proceeding was authorized in writing by the Board of Directors of the corporation. Except as revised to reflect the changes to New Subsidiary's Certificate of Incorporation described above, the Bylaws of New Subsidiary will be substantially identical to the Company's Bylaws. The Certificate of Incorporation of New Subsidiary authorizes New Subsidiary to issue (i) 20,000,000 shares of New Common Stock, par value $.01 per share, compared with 8,000,000 shares of Existing Common Stock currently authorized by the Company's Certificate of Incorporation, and (ii) 10,000,000 shares of "blank check" preferred stock, par value $.01 per share, which the Company is not currently authorized to issue (the 12,000,000 additional shares of common stock (the "Additional Common Stock") and the blank check preferred stock (the "Blank Check Preferred Stock") are hereinafter sometimes collectively referred to as the "New Authorized Stock"). See "Proposal II. The Merger--The New Authorized Stock" and "Certain Special Considerations" for certain factors to be considered with respect to the New Authorized Stock. The Board of Directors of the Company (to become the Board of Directors of New 4 Subsidiary upon effectiveness of the Merger) does not have any present plans to issue any of the New Authorized Stock. As a result of the Merger, each share of Existing Common Stock outstanding immediately prior to the Merger will be converted automatically into the right to receive an equivalent share of New Common Stock immediately following the Merger, and each warrant or other right to purchase or receive Existing Common Stock outstanding immediately prior to the Merger will be converted immediately upon consummation of the Merger, as a matter of law and pursuant to the documents governing such warrants or rights, into a similar warrant or other right, respectively, to purchase or receive an equivalent share of New Common Stock. The relative powers, designations, preferences, rights and qualifications of the New Common Stock will be substantially identical in all material respects to the relative powers, designations, preferences, rights and qualifications of the Existing Common Stock, except as described in this Proxy Statement/Prospectus. The stockholders of the Company will not have appraisal rights in connection with the Merger. New Subsidiary has filed a Registration Statement on Form S-4 under the Securities Act of 1933, as amended (the "Securities Act"), covering up to 3,845,085 shares of New Common Stock to be issued to the Company's stockholders in exchange for their Existing Common Stock pursuant to the Merger (the "Form S-4"). This Proxy Statement/Prospectus constitutes the Prospectus of New Subsidiary relating to the New Common Stock and filed as part of the Form S-4. Following the Merger, New Subsidiary, as the successor to the Company, will be a reporting company under Section 12 of the Exchange Act, and in accordance therewith will file reports and other information with the Securities and Exchange Commission (the "Commission"). The Existing Common Stock is listed for quotation on the NASDAQ Small-Cap. Market under the symbol "RUNR" and on the Pacific Stock Exchange under the symbol "RUN". Following the Merger, the New Common Stock will be listed for quotation on the NASDAQ Small-Cap. Market under the symbol "RUNR" and on the Pacific Stock Exchange under the symbol "RUN". The Company, through its wholly-owned subsidiary Oneida Molded Plastics Corporation ("Oneida"), is engaged in the manufacturing of high volume, precision plastic products and providing engineered plastics services. Oneida designs and produces injection molded parts and provides secondary services such as hot stamping, welding, printing, painting and assembly of such products. Oneida's principal products consist of specially designed and manufactured components for printer and copier machines, microwave ovens, camera parts, computer parts and consumer electronics and telecommunications equipment. In addition, Oneida designs and builds custom molds at its tool shops in order to produce component parts for specific customers. The Company is also engaged in exploring for, developing, producing and selling crude oil and natural gas in the United States, and in real estate development and wine grape agricultural operations, including vineyard development and management and the growing and marketing of wine grapes in Napa County, California. 5 CERTAIN SPECIAL CONSIDERATIONS MARKET CONSIDERATIONS Following the Merger, the New Common Stock will be subject to the Transfer Restrictions, which do not apply to the Existing Common Stock. There can be no assurance that the market price of the New Common Stock will be comparable to the market price of the Existing Common Stock, or that the Transfer Restrictions will not adversely affect the market price of the New Common Stock. The Transfer Restrictions (i) may have the effect of impeding the acquisition of a significant or controlling interest in New Subsidiary, (ii) may render it more difficult to effect a merger or similar transaction even if such transaction is favored by a majority of the independent stockholders and (iii) may serve to entrench management. (See "Proposal II. The Merger--Preservation of Tax Benefits.") The purpose of the Transfer Restrictions is to preserve tax benefits, however, not to insulate management from change. The Company and New Subsidiary believe that the tax benefits of the Transfer Restrictions outweigh any anti-takeover effect that they may have. Any anti-takeover effect of the Transfer Restrictions will end when the Transfer Restrictions terminate, which will occur on the earlier of: (i) the day after the third anniversary of the effective date of the Merger; (ii) the repeal of Section 382 of the Internal Revenue Code of 1986, as amended (the "Code") if New Subsidiary's Board of Directors determines that the Transfer Restrictions are no longer necessary; or (iii) the beginning of a taxable year of New Subsidiary as to which New Subsidiary's Board of Directors determines prior to the beginning of such taxable year that no NOLs or other tax benefits otherwise available to New Subsidiary may be carried forward. In addition, New Subsidiary's Board, under certain circumstances, may accelerate or extend the termination date of the Transfer Restrictions. (See "Proposal II. The Merger--Termination of Transfer Restrictions"). CONTINUATION OF NET OPERATING LOSS CARRYFORWARDS Notwithstanding the adoption of the Transfer Restrictions, New Subsidiary may be unable to prevent every transaction that could cause an "ownership change" for federal income tax purposes. Any such transaction may severely limit New Subsidiary's ability to utilize the NOLs. There can be no assurance that legislation will not be adopted that would limit New Subsidiary's ability to utilize the NOLs in future periods. However, the Company is not aware of any proposed legislation for changes in the tax laws that could impact the ability of New Subsidiary to utilize the NOLs as described below. ADDITIONAL COMMON STOCK Following the Merger, New Subsidiary will be authorized to issue up to 20,000,000 shares of New Common Stock. The Company is authorized to issue 8,000,000 shares of Existing Common Stock. While the Board of Directors believes that the availability of the Additional Common Stock will give New Subsidiary the ability to expand its capital base and provide flexibility in concluding acquisitions and meeting other corporate needs, the authorization of the Additional Common Stock may also have the effect of preventing or discouraging an attempt by another person or entity to acquire control of New Subsidiary through acquisition of shares or other transaction that has not been approved by the Board of Directors. It is not possible to state the actual effects of the Additional Common Stock upon the post-Merger rights of existing stockholders of the Company unless and until the Board of Directors determines to issue some or all of such Additional Common Stock. However, such effects might include (i) dilution of the per share equity interest of the stockholders, (ii) dilution of the per share voting power of the stockholders and (iii) a reduction of existing stockholders' interests in the assets of New Subsidiary in the event of liquidation. The Board of Directors does not have any present plans, understandings or agreements for the issuance or use of the Additional Common Stock. See "Proposal II. The Merger--The New Authorized Stock". 6 BLANK CHECK PREFERRED STOCK Following the Merger, New Subsidiary will be authorized to issue up to 10,000,000 shares of Blank Check Preferred Stock, which the Company is not authorized to issue. The Board of Directors believes that the authorization of Blank Check Preferred Stock is in the best interests of New Subsidiary and its stockholders because it will provide flexibility for financing New Subsidiary's activities. The authorization of Blank Check Preferred Stock, however, grants the Board of Directors broad power and discretion to establish the designations, powers, preferences and rights of one or more series of preferred stock of New Subsidiary. Although the Board of Directors has no present intention of issuing any of the Blank Check Preferred Stock in the foreseeable future, and is required to make any determination to issue any shares of Blank Check Preferred Stock based on its judgment as to the best interests of the stockholders and the corporation, the existence of authorized and unissued Blank Check Preferred Stock may enable the Board of Directors of New Subsidiary to render more difficult or to discourage an attempt to obtain control of New Subsidiary by means of a merger, tender offer, proxy contest or otherwise. For example, if in the due exercise of its fiduciary obligations, the Board of Directors were to determine that a takeover proposal is not in the best interests of the corporation and its stockholders, the Board of Directors could cause shares of the Blank Check Preferred Stock to be issued without further stockholder approval in one or more private offerings or other transactions that might dilute the voting or other rights of the proposed acquirer or insurgent stockholder or stockholder group, or create a substantial voting block in institutional or other hands that might undertake to support the position of the incumbent Board of Directors. Since no Blank Check Preferred Stock has yet been authorized or issued and the issuance of the same is not currently contemplated, it is not possible to know whether any such preferred stock, if ever issued, would have preferences over the holders of New Common Stock in the distribution of any assets in the event of liquidation. See "Proposal II. The Merger--The New Authorized Stock". 7 THE SPECIAL MEETING DATE, TIME, PLACE AND PURPOSE OF THE SPECIAL MEETING The Special Meeting will be held on January 4, 1996, at 10:00 a.m. Eastern Standard Time, at the offices of Richards & O'Neil, LLP, 885 Third Avenue, New York, New York. At the Special Meeting, the Company's stockholders will be asked to consider and act upon the following proposals: (1) Proposal I: The election of five directors to the Board of Directors of the Company (See "Proposal I: The Election of Directors); (2) Proposal II: Approval of the Merger Agreement, in the form attached hereto as ANNEX A and incorporated herein by reference, pursuant to which the Company will be merged with and into New Subsidiary, a newly-formed, wholly-owned subsidiary of the Company, with New Subsidiary being the surviving corporation (See "Proposal II. The Merger"); and (3) To transact such other business as may properly come before the Special Meeting or any adjournment thereof. For a discussion of the tax consequences of the proposed Merger, see "Proposal II. The Merger--Federal Income Tax Consequences". The Company and New Subsidiary believe that no material federal or state regulatory approvals are necessary in connection with the Merger, other than registrations in connection with securities laws. RECORD DATE; PROXY INFORMATION The Board of Directors of the Company has fixed the close of business on December 1, 1995 as the record date (the "Record Date") for the determination of stockholders of the Company entitled to notice of and to vote at the Special Meeting. Only holders of record of Existing Common Stock on the Record Date will be entitled to notice of and to vote at the Special Meeting. At the close of business on the Record Date, there were [ ] shares of Existing Common Stock issued and outstanding and entitled to vote at the Special Meeting. As of such date, there were approximately [ ] holders of record of Existing Common Stock. Stockholders are requested to complete, date, sign and promptly return the accompanying Form of Proxy in the enclosed envelope. All shares of Existing Common Stock represented by properly executed proxies returned to the Company prior to or at the Special Meeting will be voted at the Special Meeting in accordance with the instructions marked thereon, unless such proxy has been revoked. EXECUTED PROXIES WITH NO INSTRUCTIONS INDICATED THEREON WILL BE VOTED FOR ELECTION OF MANAGEMENT'S NOMINEES AS DIRECTORS AND FOR APPROVAL OF THE MERGER AGREEMENT. Any stockholder who executes and delivers a proxy may unconditionally revoke it at any time before it is voted by delivering to R. Michael Looney, Corporate Secretary of the Company, at 2801 Post Oak Boulevard, Suite 400, Houston, Texas 77056, a written notice of revocation or a duly executed proxy bearing a later date, or by attending the Special Meeting and voting in person (although attendance at the Special Meeting will not, in and of itself, constitute a revocation of a proxy). It is not anticipated that any matters other than those set forth in this Proxy Statement/Prospectus will be brought before the Special Meeting. However, if any other matters properly come before the Special Meeting, the persons named as proxies will vote upon such matters in their discretion in accordance with their best judgment. 8 This Proxy Statement/Prospectus and the accompanying Notice of Special Meeting of Stockholders and Form of Proxy are first being mailed to stockholders on or about [ ], 1995. The proxies are being solicited by action of the Company's Board of Directors. The Company will bear the costs of soliciting the proxies. In addition to the use of the mails, proxies may be solicited by personal contact, telephone or telegraph by directors, officers, employees or representatives of the Company. The Company will reimburse brokers or other persons holding stock in their names, or in the names of nominees, for their reasonable expenses in forwarding proxy soliciting materials to beneficial owners. QUORUM; VOTE REQUIRED As of the Record Date, the Company had outstanding [ ] shares of Existing Common Stock. Stockholders are entitled to one vote for each share of Existing Common Stock held as of the Record Date on each matter voted on at the Special Meeting. Stockholders do not have cumulative voting rights. The presence, in person or by proxy, of the holders of a majority of the issued and outstanding shares of Existing Common Stock entitled to vote at the Special Meeting is necessary to constitute a quorum to transact business. Abstentions and broker non-votes will be treated as present for determining whether a quorum has been reached. If a quorum is not present or represented at the Special Meeting, the stockholders that are present in person or by proxy who are entitled to vote at the Special Meeting may, by majority vote, adjourn the Special Meeting from time to time until a quorum is present or represented. Assuming that a quorum is present or represented at the Special Meeting, approval of the Merger Agreement will require the affirmative vote of the holders of a majority of the shares of Existing Common Stock entitled to vote thereon, and the election of each of the Director nominees will require the affirmative vote of a plurality of the shares of Existing Common Stock entitled to vote thereon. Stockholders will not have dissenters rights of appraisal in connection with the Merger. See "Proposal II. The Merger--Appraisal Rights". All shares of Existing Common Stock represented by properly executed proxies returned to the Company will be voted at the Special Meeting. Votes submitted as abstentions on matters to be voted on at the Special Meeting will be counted as votes against such matters. Broker non-votes will effectively be votes against the proposed election of Directors and the Merger Agreement. Management believes that all of the shares of Existing Common Stock owned or to be voted by directors, executive officers and Chatwins Group, Inc. ("Chatwins") (aggregating [ ] shares as of the Record Date, or approximately [ %] of the issued and outstanding Existing Common Stock) will be voted in favor of the election of the Director nominees and for approval of the Merger Agreement. (See "Ownership Information--Security Ownership of Certain Beneficial Owners and Management"). 9 PROPOSAL I. THE ELECTION OF DIRECTORS The Directors of the Company immediately prior to the Merger will be the Directors of New Subsidiary immediately after the Merger. At the Special Meeting, the stockholders of the Company will be asked to vote for or against the election of five Directors to the Board of Directors of the Company. The candidates proposed by management for election at the Special Meeting, listed in the table set forth in "Directors and Nominees" below, are Thomas N. Amonett, Charles E. Bradley, Sr., Thomas L. Cassidy, Franklin Myers, and John G. Poole. If elected, these candidates will comprise the entire Board of Directors of the Company, and would hold office until their successors are duly elected and qualified at the next annual meeting of stockholders of the Company (or New Subsidiary, if the Merger has become effective) or until they earlier die, resign or are removed from office in accordance with applicable law. The persons listed as "Current Director" in the table below comprise the entire Board of Directors of the Company as of the date of this Proxy Statement/Prospectus. Management believes that all of the shares of Existing Common Stock owned or to be voted by directors, executive officers and Chatwins (see "Ownership Information--Security Ownership by Certain Beneficial Owners and Management") will be voted in favor of the election of each of the candidates. The Company knows of no family relationships between any director or executive officer and any other director or executive officer of the Company. Certain biographical information with respect to the proposed Directors as well as the current Directors of the Company is set forth in "Directors and Nominees" below. THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE ELECTION OF THE PROPOSED DIRECTORS DIRECTORS AND NOMINEES
NAME STATUS AGE ---- ------ --- Thomas N. Amonett Current Director 52 Charles E. Bradley, Sr. Current Director 65 Thomas L. Cassidy Current Director 66 Franklin Myers Current Director 42 John G. Poole Proposed Director 52
THOMAS N. AMONETT has served as a Director of the Company since July 1, 1992 and served as the President and Chief Executive Officer of the Company from July 1, 1992 until October 26, 1995. Mr. Amonett is currently the President of Reunion Energy Company, an oil and gas operating company and a wholly-owned subsidiary of the Company. Prior to his affiliation with the Company, he had been engaged in the practice of law with Fulbright & Jaworski in Houston, Texas, where he was of counsel for more than five years. From 1982 through 1986 he served as president of Houston Oil Fields Company, a Houston-based oil and gas exploration and production company. He also served as Chairman of the Board of Directors of Weatherford International Incorporated, now Weatherford Enterra, Inc., an oil field service company, from 1986 to 1989 and where he continues to serve as a Director. Mr. Amonett also serves as a Director of PetroCorp, Incorporated, a Houston-based oil and gas company, and Team, Inc., a Houston based environmental services company. CHARLES E. BRADLEY, SR. took office as a Director of the Company on June 20, 1995 and was appointed President and Chief Executive Officer of the Company on October 26, 1995. Mr. Bradley has been a Director of Chatwins since shortly after its acquisition by Stanwich Partners, Inc. ("SPI") in 1986 and Chairman of the Board of Chatwins since 1988. Chatwins is an industrial products manufacturing company. Mr. Bradley was a co-founder of SPI in 1982 and has served as its President since that time. SPI is a private investment company. Mr. Bradley is a Director of DeVlieg-Bullard, Inc. ("DBI"), a machine tool parts and services company, General Housewares Corp., a manufacturer and distributor of housewares, Consumer Portfolio Services, Inc. ("CPS"), engaged in the business of purchasing, selling and servicing retail automobile installment sales contracts, and Audits and Surveys, Inc., an international marketing research firm. Mr. Bradley is currently the Chairman of the Board of DBI as well as President and acting Chief Financial Officer and a Director of Sanitas, Inc., a currently inactive company, and a Director, President and acting Chief Financial Officer of Texon Energy Corporation, a plastics manufacturer holding company. 10 Mr. Bradley was the Chairman of U.S. Metalsource Corp. ("Metalsource") when Metalsource filed a petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Western District of Pennsylvania, Case Number 91-2919-JLC, on August 12, 1991. Metalsource is engaged in the steel service center business. This bankruptcy proceeding is currently pending. Mr. Bradley was also a Director of DeVlieg, Inc., an affiliate of DBI ("DeVlieg"), until December 18, 1989, and served as a Vice President of DeVlieg until December 11, 1989. Mr. Bradley is also a 41% stockholder of DeVlieg. On August 5, 1991, DeVlieg filed a petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Northern District of Illinois, Case Number 91-B31744. This bankruptcy proceeding is currently pending. On March 2, 1992, a class action suit was commenced in the U.S. District Court of the District of Connecticut, Civil Action Number 92-592-CV117 (EBB), by certain stockholders of DBI against DBI and named Mr. Bradley, among others, as additional defendants. The complaint filed in this action seeks an unspecified sum of money damages and equitable relief in connection with alleged defective disclosures made in violation of Rule 10b-5 of the Exchange Act, as well as Sections 11 and 12(2) of the Securities Act, with respect to the initial public offering of Common Stock of DBI. DBI used a portion of the proceeds of such offering to purchase certain assets of DeVlieg. The complaint alleges disclosures made in connection with the offering were defective in that they failed to properly describe the prospects and resources of the acquired business and improperly estimated the value of certain of its assets. The Company has been advised that DBI and Mr. Bradley believe that the suit is without merit and that they intend to defend it vigorously. THOMAS L. CASSIDY took office as a Director of the Company on June 20, 1995. Mr. Cassidy has been a Managing Director of Trust Company of the West ("TCW"), an investment management firm, since 1984. He is also a Senior Partner in TCW Capital, an affiliate of TCW. He is a Director of DBI, Federal Paper Board Company, Inc., a an international forest products company, Spartech Corporation, a plastics manufacturing company and Chatwins. FRANKLIN MYERS served as a Director of the Company from July 1, 1992 until June 20, 1995, when he resigned contemporaneously with the sale of 1,450,000 shares of Existing Common Stock by Parkdale Holdings Corporation N.V. ("Parkdale") to Chatwins. Mr. Myers was reappointed as a Director of the Company on October 26, 1995. On April 1, 1995, Mr. Myers became Senior Vice President and General Counsel of Cooper Cameron Corporation, an oil field manufacturing company. Prior thereto he was Vice President and General Counsel of Baker Hughes Incorporated, an international oil field service and equipment company, for more than six years. He is a Director of Convest Energy Corporation, a Houston-based oil and gas producer. JOHN G. POOLE was a co-founder of SPI with Charles E. Bradley, Sr. in 1982 and has served as SPI's Vice President since that time. Mr. Poole has been a Director of Chatwins since 1988, and is also a director of DBI, CPS and Sanitas, Inc. Mr. Poole was also a Director of DeVlieg until December 18, 1989, and served as Secretary of DeVlieg until December 11, 1989. Mr. Poole again became a director of DeVlieg on June 22, 1993. Mr. Poole is also a 14% stockholder of DeVlieg. On August 5, 1991, DeVlieg filed a petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Northern District of Illinois, Case Number 91-B31744. This bankruptcy proceeding is currently pending. Mr. Poole is a defendant in the DBI class action suit described above in this section under the caption "Charles E. Bradley, Sr.". DIRECTOR COMPENSATION Directors not otherwise compensated by the Company receive annual retainers of $18,000 for service on the Board and $500 for each Board or Committee meeting attended. Compensation paid to non-employee directors during 1994 for service in all Board capacities aggregated $25,000. 11 PROPOSAL II. THE MERGER At the Special Meeting, the Company's stockholders will be asked to approve the Merger Agreement, pursuant to which the Company will be merged with and into New Subsidiary, with New Subsidiary being the surviving corporation. The Merger Agreement must be approved by the holders of a majority of the shares of Existing Common Stock entitled to vote on such a proposal. Management believes that all of the shares of Existing Common Stock owned or to be voted by directors, executive officers and Chatwins (see "--Preservation of Tax Benefits" and "Ownership Information--Security Ownership of Certain Beneficial Owners and Management") will be voted in favor of the Merger Agreement. THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE MERGER TRANSFER RESTRICTIONS The Transfer Restrictions to be implemented by the Merger are intended to help assure that an "ownership change", as defined under the Code and the Treasury Regulations promulgated thereunder (an "Ownership Change"), that could severely limit the availability of the Company's NOLs will not occur. Transfer restrictions were implemented for this same purpose in January 1989 by an amendment to the Company's Certificate of Incorporation and remained in effect until June 29, 1993, when they were eliminated in connection with the Recapitalization, as defined below. See "Ownership Information--Outstanding Warrants; Options; Other Rights". The New Common Stock to be issued by New Subsidiary in exchange for Existing Common Stock will be deemed to be issued after the adoption of the Transfer Restrictions, which are set forth in Article Fifth of the Certificate of Incorporation of New Subsidiary to be in effect upon consummation of the Merger ("New Subsidiary's Certificate of Incorporation"), a copy of which is included as ANNEX B to this Proxy Statement/Prospectus. Accordingly, the Transfer Restrictions will apply to all shares of New Common Stock, and all New Common Stock certificates will contain a legend informing holders and transferees of the Transfer Restrictions. PRESERVATION OF TAX BENEFITS NOLs offset taxable income in future years and eliminate income taxes otherwise payable on such taxable income (except for purposes of calculating alternative minimum tax liability). As of December 31, 1994, the Company's NOLs were approximately $238.4 million. The Company's NOLs expire as follows: $9.4 million in 1998, $49.4 million in 1999 and $179.6 million during the years 2000 through 2009. On June 20, 1995, Chatwins acquired 1,450,000 shares of Existing Common Stock ("the Purchased Shares") from Parkdale (the "Chatwins Acquisition"), resulting in the ownership by Chatwins of approximately 38% of the Existing Common Stock. As a result of the Chatwins Acquisition and other stock transfers, the availability of the Company's NOLs may be jeopardized (as described below) if a change in ownership of 5% of the Existing Common Stock (or if another event that would cause an Ownership Change) occurs in the future. Several steps were taken in connection with the Chatwins Acquisition to assist in the preservation of the Company's tax loss carryforwards: the 271,280 remaining shares of Existing Common Stock owned by Parkdale as well as 66,210 shares of Existing Common Stock (the "Myers Shares") and a warrant to purchase 75,000 shares of Existing Common Stock (the "Myers Warrant" and, collectively with the Myers Shares, the "Myers Securities") owned by Franklin Myers were delivered into a 3-year escrow arrangement. Each of Myers and Parkdale also entered into 3-year standstill agreements with Chatwins regarding the purchase, sale and transfer of Company securities and delivered to Chatwins 3-year 12 proxies to vote all of their respectively-owned shares of Existing Common Stock (the "Chatwins Proxies"). Also in furtherance of the preservation of the Company's tax loss carryforwards, Chatwins acquired from P. Dean Gesterkamp, simultaneously with the Chatwins Acquisition, a warrant to purchase 75,000 shares of Existing Common Stock (the "Gesterkamp Warrant"). In spite of these steps, there is a risk that, absent the Transfer Restrictions, an Ownership Change could result if other persons acquire 5% or more of the Existing Common Stock. In addition, the restrictions in the Parkdale and Myers agreements expire in June 1998. Management is proposing implementation of the Transfer Restrictions to reduce these risks. Section 382 of the Code provides that, if a corporation undergoes an Ownership Change, its ability to use its NOLs in the future may be limited. An Ownership Change occurs when the aggregate cumulative increase in the percentage ownership of a corporation's capital stock owned by persons holding 5% or more of the fair market value of such stock ("5-Percent Shareholders") is more than 50 percentage points within a three-year testing period. For purposes of determining percentage ownership, Section 382 generally defines stock to include all issued and outstanding stock, except certain preferred stock. In addition, recent Treasury Regulations provide that certain stock that may be acquired pursuant to warrants, options, rights to purchase stock, rights to convert other instruments into stock, and options or other rights to acquire any such interest may under certain circumstances be deemed to have been acquired for purposes of determining the existence of an Ownership Change under Section 382 of the Code. In determining whether the aggregate cumulative increase in the percentage ownership of capital stock by 5-Percent Shareholders is more than 50 percentage points in any three-year testing period, certain special rules apply. All stockholders who are not 5-Percent Shareholders individually are aggregated into one or more public groups, each of which is considered to be a 5-Percent Shareholder. Ownership of stock is generally attributed to the ultimate individual beneficial owner, and ownership by nominees, corporations, partnerships, trusts or other entities generally is disregarded (except to the extent used to identify different public groups or other 5-Percent Shareholders). When 5% or more of a corporation's stock is owned by another entity (such as a corporation, trust or partnership) at any time during the testing period, the owners of the other entity may be treated as one or more separate, segregated groups of stockholders that are 5-Percent Shareholders of the corporation, depending on whether such owners indirectly own as much as 5% of the corporation's stock. Similarly, the purchasers of any stock from the entity may be treated as a separate, segregated group of stockholders that is a 5-Percent Shareholder. The applicable Treasury Regulations also provide that purchasers of stock from the issuing corporation in a public offering may under certain circumstances be considered a separate stockholder group that is treated as a 5-Percent Shareholder that previously owned no stock. The Transfer Restrictions, accordingly, are generally designed to prohibit transfers to persons holding or who thereafter hold sufficient New Subsidiary stock, either directly or constructively, such that they would be treated as 5-Percent Shareholders under the applicable Treasury Regulations and are intended to prevent an Ownership Change and thereby preserve New Subsidiary's ability to maximize use of the NOLS. If an Ownership Change occurs within the meaning of Code Section 382, the amount of NOLs that a company may use to offset income in any future taxable year is limited, in general, to an amount determined by multiplying the fair market value of such company's outstanding capital stock on the change date by the "long-term tax-exempt rate" (currently 5.75%), which is published monthly by the Internal Revenue Service. For purposes of this calculation, the fair market value of a company's outstanding capital stock is adjusted to exclude any capital infusions occurring during the prior two years. The following is a summary of the Transfer Restrictions, which are set forth in Article V of New Subsidiary's Certificate of Incorporation. (See Annex B). The Transfer Restrictions apply to transfers of New Common Stock and any other instrument that would be treated as "stock," as determined under applicable Treasury Regulations (collectively, "Stock"). They are intended to prevent any person or group of persons from becoming a 5-Percent Shareholder of New Subsidiary and to prevent an increase in the percentage Stock ownership of any existing person or group of persons that constitutes a 5-Percent Shareholder. Under the 13 Transfer Restrictions, if a stockholder transfers or agrees to transfer Stock, the transfer will be prohibited and void to the extent that it would cause the transferee to hold a prohibited ownership percentage, which is defined under New Subsidiary's Certificate of Incorporation by reference to complex federal tax laws and regulations, but generally means direct and indirect ownership of 5% or more (based on value) of Stock or any other percentage that would cause a transferee to be considered a 5-Percent Shareholder under applicable Treasury Regulations (a "Prohibited Ownership Percentage"). A transfer is also prohibited and void if either it would result in the transferee's ownership percentage increasing if the transferee had held a Prohibited Ownership Percentage within the three prior years or the transferee's ownership percentage already exceeds the Prohibited Ownership Percentage, unless otherwise agreed to by New Subsidiary. The Transfer Restrictions do not prevent transfers of Stock between persons who do not hold a Prohibited Ownership Percentage. The acquisition of Stock from an individual or entity that owns directly 5% of the Stock would be deemed to result in the identification of a separate, segregated "public group" which is a new 5-Percent Shareholder. Consequently, the Transfer Restrictions will prohibit certain transfers of equity interests by, and other actions involving, persons having a Prohibited Ownership Percentage, unless the transfer or other action is approved by New Subsidiary's Board of Directors in advance or permitted by a resolution of such board. The Transfer Restrictions do not apply to any transfer that has been approved by New Subsidiary's Board of Directors if such approval is based upon a determination by the Board that such proposed transfer will not jeopardize New Subsidiary's full utilization of the NOLS. The Board may or may not grant any such transfer requests based upon existing facts and circumstances at the time. Board approval of any prohibited transfer transactions must be based upon an opinion of counsel. In addition to voiding prohibited transfers, the Transfer Restrictions provide a method of nullifying the effect of certain prohibited transfers after the transfers have purportedly occurred. If such a purported transfer is made in violation of the Transfer Restrictions, the transferee (the "Purported Acquiror") will not be recognized as the owner of the Stock. If New Subsidiary determines that such a purported transfer has violated the Transfer Restrictions, it shall require the Purported Acquiror to surrender the relevant Stock and any dividends he or she has received on them to an agent designated by New Subsidiary (the "Agent"). The Agent will sell the Stock in an arm's length transaction. If the Purported Acquiror has resold the Stock before receiving New Subsidiary's demand to surrender such Stock, the Purported Acquiror generally will be required to transfer to the Agent the proceeds of the sale and any distributions he or she has received on the Stock. After repaying its own expenses and reimbursing the Purported Acquiror for the price paid for the Stock (or the fair market value of the Stock at the time of the attempted transfer to the Purported Acquiror by gift, inheritance or similar transfer), the Agent will pay any remaining amounts to the person who sold such Stock to the Purported Acquiror. If the identity of the person who sold such Stock cannot be determined through inquiry of the Purported Acquiror, the Agent or New Subsidiary shall hold such amounts pending the determination of such identity and, if after 90 days, such identity cannot be determined, then such amounts may be paid over to a court or governmental agency or to a tax-exempt entity designated under Section 501(c)(3) of the Code. The Transfer Restrictions (i) may have the effect of impeding the attempt of a person or entity to acquire a significant or controlling interest in New Subsidiary, (ii) may render it more difficult to effect a merger or similar transaction even if such transaction is favored by a majority of the independent stockholders and (iii) may serve to entrench management. Management believes, however, that the tax benefits of the Transfer Restrictions outweigh any other effects they may have on the Company or its shareholders. See "Certain Special Considerations". TERMINATION OF TRANSFER RESTRICTIONS The Transfer Restrictions will terminate upon the earliest to occur of: (i) the day after the third anniversary of the Effective Date (as defined below); (ii) the repeal of Section 382 of the Code if New Subsidiary Board of 14 Directors determines that the Transfer Restrictions are no longer necessary; or (iii) the beginning of a taxable year of New Subsidiary as to which New Subsidiary Board of Directors determines prior to the beginning of such taxable year that no NOLs or other tax benefits otherwise available to New Subsidiary may be carried forward (the "Expiration Date"). In addition, the Board of Directors of New Subsidiary is authorized to accelerate or extend the Expiration Date if the Board determines that such acceleration or extension is reasonably necessary or desirable to preserve the NOLs or other tax benefits or that the Transfer Restrictions are no longer necessary for the preservation thereof. MERGER STRUCTURE The Merger will be accomplished under the Delaware General Corporation Law ("DGCL") pursuant to the Merger Agreement by and between the Company and New Subsidiary. Pursuant to the Merger Agreement, the Company will be merged with and into New Subsidiary, with New Subsidiary being the surviving corporation. Upon consummation of the Merger, New Subsidiary will become the successor in interest to the Company in all respects. The Merger Agreement has been approved by each of the Company's and New Subsidiary's Board of Directors and is included as ANNEX A to this Proxy Statement/Prospectus. The Merger Agreement is incorporated herein in its entirety by this reference. New Subsidiary's Board of Directors immediately after the Merger will consist of the persons serving on the Company's Board of Directors immediately prior to the Merger, and New Subsidiary's executive officers immediately after the merger will consist of persons serving as the Company's executive officers immediately prior to the Merger in their same respective positions. (See "Proposal I. The Election of Directors--Directors" and "Management Information--Executive Officers.") There are no material contracts between the Company and New Subsidiary other than the Merger Agreement. CONDITIONS TO CONSUMMATION OF THE MERGER Consummation of the Merger is subject to stockholder approval and receipt of all orders, consents or approvals, governmental or otherwise, that may be required or advisable. The Company and New Subsidiary believe that no material federal or state regulatory approvals are necessary other than registrations in connection with securities laws. Management believes that all of the conditions precedent to the Merger will be satisfied prior to the anticipated Effective Date. EFFECTIVENESS OF THE MERGER The Merger will become effective immediately upon the filing of a Certificate of Merger in accordance with the DGCL and upon the satisfaction or waiver of the conditions to the Merger (the "Effective Date"). It is presently contemplated that, assuming approval at the Special Meeting, the Certificate of Merger will be filed, and the Effective Date will occur, as soon as practicable following the Special Meeting. The Merger Agreement provides that the Company and New Subsidiary, by mutual consent of their respective Boards of Directors, may amend, modify or supplement the Merger Agreement, and either of the respective Boards of Directors may terminate the Merger Agreement or abandon the Merger at any time prior to the Effective Date, even following stockholder approval. ABOUT NEW SUBSIDIARY New Subsidiary is a Delaware corporation recently formed for the sole purpose of facilitating the Merger. Prior to the Merger, New Subsidiary will not have carried on any business dealings, owned any material property, been subject to any legal proceedings, nor paid out any dividends. The Company is currently the holder of all of the issued and outstanding New Common Stock which is the only class of stock of New Subsidiary to have been issued. 15 NEW SUBSIDIARY'S CERTIFICATE OF INCORPORATION AND BYLAWS New Subsidiary's Certificate of Incorporation contains articles identical to those in the Company's Certificate of Incorporation, with the following exceptions: (i) Article IV, relating to the New Authorized Stock; (ii) Article V, which contains the Transfer Restrictions, (iii) Article I, which provides that the corporate name of New Subsidiary is Reunion Industries, Inc.; and (iv) Section 12.8, which requires New Subsidiary to indemnify a director of the corporation in connection with any Proceeding (as defined therein) initiated by such director only if the initiation of such Proceeding was authorized in writing by the Board of Directors of the corporation. A copy of New Subsidiary's Certificate of Incorporation is included as ANNEX B to this Proxy Statement/Prospectus. Except as revised to reflect the changes to New Subsidiary's Certificate of Incorporation described above, the Bylaws of New Subsidiary will be substantially identical to the Company's Bylaws. CONVERSION OF SECURITIES IN THE MERGER Each share of Existing Common Stock outstanding immediately prior to the Merger will be converted, by reason of the Merger, pursuant to the Merger Agreement and without any action by the holder thereof, into the right to receive one share of New Common Stock. The New Common Stock shall be deemed issued by New Subsidiary after the adoption of the Transfer Restrictions set forth in the Certificate of Incorporation of New Subsidiary. The relative powers, designations, preferences, rights and qualifications of the New Common Stock, as in effect immediately prior to the Merger, will be substantially equivalent in all material respects to the Existing Common Stock so converted, except that the New Common Stock will be subject to the Transfer Restrictions. See "--Description of Existing Common Stock; Dividends; Transfer Agent". Upon consummation of the Merger, Rights (see "Ownership Information--Outstanding Warrants; Options; Other Rights") to shares of Existing Common Stock will become Rights to shares of New Common Stock, pursuant to applicable law and the documents governing such Rights. DESCRIPTION OF EXISTING COMMON STOCK; DIVIDENDS; TRANSFER AGENT The Company is authorized to issue 8,000,000 shares of Existing Common Stock, $.01 par value, of which [ ] were issued and outstanding as of the Record Date. Each share of Existing Common Stock has one vote on all matters presented to the stockholders. Since the Existing Common Stock does not have cumulative voting rights, the holders of more than 50% of the shares may, if they choose to do so, elect all of the directors and, in that event, the holders of the remaining shares will not be able to elect any directors. Subject to the rights and preferences of any preferred stock which may be designated and issued, the holders of Existing Common Stock are entitled to dividends when and as declared by the board of directors and are entitled on liquidation to all assets remaining after payment of liabilities. The Existing Common Stock has no preemptive or other subscription rights. There are no conversion rights or sinking fund provisions with respect to the Existing Common Stock. For many years, the Company has reinvested any earnings in its business and, accordingly, has not paid any dividends on the Existing Common Stock. Although the Company (or New Subsidiary, if the Merger has been consummated) intends to continue to invest any future earnings in its business, it may determine at such future date that the payment of cash dividends would be desirable. The payment of any such dividends would depend, among other things, upon the earnings and financial condition of the Company (or New Subsidiary, if the Merger has been consummated). Registrar and Transfer Company, New York, New York, is the transfer agent and registrar for the Existing Common Stock. THE NEW AUTHORIZED STOCK New Subsidiary's Certificate of Incorporation, which will survive the Merger, authorizes New Subsidiary to issue (i) 20,000,000 shares of New Common Stock, par value $.01 per share, and (ii) 10,000,000 shares of 16 Blank Check Preferred Stock, par value $.01 per share. See "Certain Special Considerations" for certain factors stockholders should consider with respect to the New Authorized Stock. The Board of Directors views the authorization of the Additional Common Stock as necessary to provide financial flexibility to New Subsidiary, following the effectiveness of the Merger, through the availability of additional shares of common stock for possible issuance in connection with acquisitions of properties or businesses, financings, employee and director stock incentives and general corporate purposes. Neither the Company nor New Subsidiary has entered into any agreement, arrangement, undertaking or understanding, written or oral, for the issuance of any of the Additional Common Stock, nor do they have any plans to issue any of the Additional Common Stock in the foreseeable future. As with all of the New Common Stock, the Additional Common Stock will have the same relative powers, designations, preferences, rights and qualifications as the Existing Common Stock, except that the Additional Common Stock, like all of the New Common Stock, will be subject to the Transfer Restrictions. See "--Description of Existing Common Stock; Dividends; Transfer Agent". Stockholders have no pre-emptive rights to purchase any Additional Common Stock. Although it is not possible to state the actual effects of the Additional Common Stock upon the post-Merger rights of the existing stockholders of the Company unless and until the Board of Directors of New Subsidiary determines to issue some or all of such Additional Common Stock, such effects might include (i) dilution of the per share equity interest of the stockholders, (ii) dilution of the per share voting power of the stockholders, (iii) a reduction of existing stockholders' interests in the assets of New Subsidiary in the event of liquidation and (iv) the prevention or discouraging of an attempt by another person or entity to acquire control of New Subsidiary following effectiveness of the Merger without the approval of its Board of Directors, and a possible resulting loss of liquidity to stockholders and/or the entrenchment of management. The authorization of the Additional Common Stock is not being included in New Subsidiary's Certificate of Incorporation in response to any specific effort to accumulate the Company's securities or to obtain control of the Company by means of a merger, tender offer, solicitation and opposition to management or otherwise. The authorization of 10,000,000 shares of Blank Check Preferred Stock will also provide flexibility for financing New Subsidiary's activities in the future. The term Blank Check Preferred Stock refers to stock for which the designations, preferences, conversion rights, cumulative, relative, participating, optional or other rights, including voting rights, qualifications, limitations or restrictions thereof are determined by a corporation's board of directors. Accordingly, the Board of Directors of New Subsidiary will be able to authorize the creation and issuance of up to 10,000,000 shares of preferred stock in one or more series, with such rights, qualifications, limitations and restrictions as may be determined in the Board's sole discretion, with no further authorization required of the stockholders. Although the Board of Directors of New Subsidiary has no present intention of issuing any of the Blank Check Preferred Stock immediately following the Merger, the existence of authorized and unissued Blank Check Preferred Stock may enable the Board of Directors of New Subsidiary to render more difficult or to discourage an attempt to obtain control of New Subsidiary by means of a merger, tender offer, proxy contest or otherwise. For example, if in the due exercise of its fiduciary obligations the Board of Directors of New Subsidiary could cause shares of the Blank Check Preferred Stock to be issued without further stockholder approval in one or more private offerings or other transactions that might dilute the voting or other rights of the proposed acquirer or insurgent stockholder or stockholder group, or create a substantial voting block in institutional or other hands that might undertake to support the position of the incumbent Board of Directors. Since no Blank Check Preferred Stock has yet been authorized or issued and the issuance of such stock is not currently contemplated, it is not possible to know whether any such preferred stock, if ever issued, would have preferences over the holders of New Common Stock in the distribution of any assets in the event of a liquidation. MARKET FOR EXISTING COMMON STOCK AND NEW COMMON STOCK The Existing Common Stock is listed for quotation on the NASDAQ Small-Cap. Market under the symbol "RUNR" and on the Pacific Stock Exchange under the symbol "RUN". On November 10, 1995 the 17 last sale price of the Existing Common Stock as reported by the NASDAQ Small- Cap. Market was $5.625 per share. Following the Merger, the New Common Stock will be listed for quotation on the NASDAQ Small-Cap. Market under the symbol "RUNR" and on the Pacific Stock Exchange under the symbol "RUN". (See "Certain Special Considerations--Market Considerations.") PRO FORMA AND COMPARATIVE FINANCIAL STATEMENTS; ACCOUNTING Pro forma and comparative financial information regarding New Subsidiary and its consolidated subsidiaries giving effect to the Merger have not been included herein because immediately following the consummation of the Merger, the consolidated financial statements of New Subsidiary will be the same as the consolidated financial statements of the Company immediately prior to the Merger. Similarly, no selected historical pro forma and other financial data have been included because the Merger will have no effect on the Company's historical financial statements. The Merger will be accounted for in a manner similar to a pooling of interests. APPRAISAL RIGHTS Pursuant to Section 262 of the DGCL, no holder of the Company's securities will have appraisal rights in connection with the Merger because the Existing Common Stock is listed on a national securities exchange, and the Company's stockholders will be required under the terms of the Merger Agreement to accept shares of the surviving entity, New Subsidiary, for their Existing Common Stock. EXCHANGE OF CERTIFICATES As soon as practicable after the Effective Date, New Subsidiary will furnish a letter of transmittal to stockholders for use in exchanging their stock certificates (each a "Letter of Transmittal"), which will contain instructions with respect to the surrender of Existing Common Stock certificates and the distribution of New Common Stock certificates. The Company's stockholders should not send in certificates until they receive the Letter of Transmittal. The Company's stockholders who fail to exchange their Existing Common Stock certificates on or after the Effective Date by surrendering such certificates, together with a properly completed Letter of Transmittal, to the agent designated by the Company and New Subsidiary (the "Exchange Agent") will not receive their New Common Stock until such time as their Existing Common Stock certificates are later surrendered to the Exchange Agent for transfer, accompanied by such instruments of transfer and supporting evidence as New Subsidiary may reasonably require. Any dividends declared or distributions made on shares of New Common Stock which such holders have a right to receive will be retained by New Subsidiary until such holders surrender their Existing Common Stock certificates in exchange for New Common Stock certificates or until paid to a public official pursuant to applicable abandoned property, escheat or similar laws. No interest will accrue or be payable with respect to any dividends or distributions retained on unissued New Common Stock certificates. On the Effective Date, holders of certificates representing Existing Common Stock will cease to have any rights with respect to such shares and each such certificate will be deemed for all corporate purposes to evidence only the right to receive shares of New Common Stock for which such shares may be exchanged. The stock transfer books of the Company will be closed at the close of business on the business day immediately preceding the Effective Date, and the holders of record of Existing Common Stock as of the Effective Date will be the stockholders entitled to exchange their shares of Existing Common Stock for shares of New Common Stock as provided in the Merger Agreement. No transfer or assignment of any shares of Existing Common Stock will take place after the Effective Date until the certificates for such shares are exchanged pursuant to the Merger Agreement. In the event of a transfer of ownership of any such shares which is not registered in the stock transfer records of the Company, no shares of New Common Stock exchangeable for such shares will be issued to the transferee until the certificate or certificates representing 18 such transferred shares are delivered to the Exchange Agent together with all documents required to evidence and effect such transfer. In addition, it will be a condition to the issuance of any certificate for any shares of New Common Stock in a name other than the name in which the surrendered Existing Common Stock is registered that the person requesting the issuance of such certificate either pay to the Exchange Agent any transfer or other taxes required by reason of the issuance of a certificate of New Common Stock in a name other than the registered holder of the certificate surrendered, or establish to the satisfaction of the Exchange Agent that such tax has been paid or is not applicable. In no event will the Exchange Agent, the Company or New Subsidiary be liable to any holder of Existing Common Stock for shares of New Common Stock, or dividends or distributions thereon, delivered in good faith to a public official pursuant to any applicable abandoned property, escheat or similar law. All shares of New Common Stock issued upon the surrender of shares of Existing Common Stock shall be deemed to have been issued in full satisfaction of all rights pertaining to such shares of Existing Common Stock, subject, however, to New Subsidiary's obligation to pay any dividends or make any other distributions with a record date prior to the Effective Date which may have been declared or made by the Company on such shares of Existing Common Stock prior to the Effective Date and that remain unpaid as of the Effective Date. FEDERAL INCOME TAX CONSEQUENCES THE FOLLOWING DISCUSSION DOES NOT INCLUDE ANY STATE, LOCAL AND FOREIGN TAX CONSEQUENCES, AND DOES NOT SPECIFICALLY ADDRESS THE CONSEQUENCES TO STOCKHOLDERS OTHER THAN INDIVIDUAL UNITED STATES CITIZENS WHO HOLD THEIR COMPANY SECURITIES AS A CAPITAL ASSET. THIS DISCUSSION IS FOR GENERAL INFORMATION ONLY AND EACH STOCKHOLDER IS URGED TO CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE CONSEQUENCES OF THE MERGER. For federal income tax purposes, the Merger should qualify as a tax-free reorganization under Section 368(a) of the Code. If the Merger so qualifies, the Company's stockholders would not recognize gain or loss upon the exchange of their Existing Common Stock for New Common Stock. The New Common Stock should have the same basis and holding period in the stockholders' hands as the Existing Common Stock. No gain or loss should be recognized by the Company on the transfer of its assets to New Subsidiary pursuant to the Merger, and no gain or loss should be recognized by New Subsidiary on receipt of the Company's assets and New Subsidiary's assumption of the Company's liabilities. The basis of the Company's assets acquired by New Subsidiary in the Merger should be the same as the basis of those assets in the Company's hands immediately prior to the Merger, and New Subsidiary's holding period should include the Company's holding period with respect to the assets. The Company's tax attributes generally will carry over to New Subsidiary. For example, for purposes of the federal income tax treatment of the NOLs, subject to certain limitations, New Subsidiary should be permitted to utilize such NOLs to the same extent as the Company would have been so permitted. New Subsidiary also should succeed to the Company's earnings and profits. New Subsidiary should be treated as a continuation of the Company for purposes of computing depreciation and for other specified purposes. INTERESTS OF CERTAIN PERSONS The Company believes that the interest of the Company's management and principal stockholders in the consummation of the Merger arises solely from their respective positions as fiduciaries of the Company and/or their ownership of securities of the Company, and that such parties are to receive no extra or special benefit from the Merger that is not shared on a pro rata basis by all other stockholders. LEGAL MATTERS The validity of the shares of New Common Stock and the federal income tax consequences of the Merger to the Company's shareholders will be passed upon for New Subsidiary by Richards & O'Neil, LLP, New York, New York. 19 OWNERSHIP INFORMATION SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT As of September 30, 1995, the Company had outstanding 3,845,085 shares of Existing Common Stock. Each share of Existing Common Stock is entitled to one vote. The following table sets forth information regarding the beneficial ownership of the Existing Common Stock at September 30, 1995, by (i) each stockholder known to the Company to own 5% or more of the Existing Common Stock, (ii) each Director of the Company or nominee therefor, (iii) each of the chief executive officers and the other executive officers who were compensated at an annualized rate of more than $100,000 in 1994 (collectively, the "Named Executives") and (iv) all current Directors and executive officers as a group. Except as set forth in the footnotes to the following table, each stockholder has sole dispositive and voting power with respect to the shares of Existing Common Stock shown as owned by him.
AMOUNT AND PERCENT NATURE OF OF NAME (AND ADDRESS OF 5% BENEFICIAL OWNERS) OWNERSHIP CLASS - ------------------------------------------ --------- ------- Chatwins Group, Inc. 300 Weyman Plaza, Suite 340 Pittsburgh, PA 15236...................................... 1,862,490(1) 47.5% Parkdale Holdings Corporation N.V. Nieuwestraat 4-6, P.O. Box 210 Curacao, Netherlands Antilles............................. 271,280(2) 7.1% Thomas N. Amonett.......................................... 66,000(3) 1.7% Charles E. Bradley, Sr..................................... 1,862,490(4) 47.5% Thomas L. Cassidy.......................................... 0 0.0% John G. Poole.............................................. 0 0.0% Franklin Myers............................................. 141,210(5) 3.6% W. Kyle Willis............................................. 47,000(6) 1.2% Richard L. Evans........................................... 0 0.0% All Current Directors and Executive Officers as a group.... 2,013,490(7) 49.9%
- -------- (1) Includes 75,000 shares that may be purchased pursuant to currently exercisable warrants, with respect to which Chatwins has dispositive power only, and 337,490 shares (66,210 owned by Myers and 271,280 owned by Parkdale) with respect to which Chatwins has sole voting power and no dispositive power. (2) Parkdale has granted a proxy to Chatwins to vote these shares. (3) Includes 32,000 shares that may be purchased pursuant to currently exercisable options. (4) Includes all shares of Existing Common Stock shown as beneficially owned by Chatwins. Mr. Bradley is Chairman of the Board of Chatwins as well as the beneficial owner of more than 50% of the issued and outstanding shares of Chatwins and may, pursuant to Rule 13d-3 be deemed the beneficial owner of all shares of Existing Common Stock beneficially owned by Chatwins. Mr. Bradley disclaims beneficial ownership of all such shares of Common Stock. (5) Includes a currently exercisable warrant to purchase 75,000 shares of Existing Common Stock. Mr. Myers has granted Chatwins a three year proxy to vote 66,210 shares. (6) Includes 22,000 shares that may be purchased pursuant to currently exercisable stock options. (7) Includes currently exercisable warrants and options to purchase an aggregate of 117,000 shares of Existing Common Stock. 20 OUTSTANDING WARRANTS; OPTIONS; OTHER RIGHTS All outstanding rights to acquire Existing Common Stock by reason of warrants, options, rights to purchase stock, rights to convert other instruments into stock, and options or other rights to acquire any such interest (collectively, "Rights") will be converted immediately upon consummation of the Merger, as a matter of law and pursuant to the documents governing such Rights, into Rights with respect to the same number of shares of New Common Stock and on the same terms and conditions as previously were applicable to such Rights. As of September 30, 1995, the following categories of Rights exist with respect to the Existing Common Stock: (i) warrants to purchase up to 150,000 shares of authorized Existing Common Stock issued under the Warrant Agreements dated as of July 1, 1992, as amended June 28,1995, by and among the Company and the other parties named therein; (ii) options to purchase up to 115,750 shares of Existing Common Stock under the 1993 Incentive Stock Plan (all of which became presently exercisable upon the Chatwins Acquisition); and (iii) the rights of holders of shares of the common stock of the Company or the securities of the predecessors of the Company that were outstanding prior to the implementation of the Recapitalization (as defined below) and that have not been exchanged for shares of Existing Common Stock pursuant to the terms of the Recapitalization Plan to receive 44,220 shares of Existing Common Stock. The shares covered by the Rights equal 309,970 shares in the aggregate. Effective June 29, 1993 the Articles of Incorporation of the Company (then Buttes Gas & Oil Co.) were amended to effect a plan of recapitalization (the "Recapitalization") pursuant to which, among other things, (i) each then outstanding share of common stock of the Company was converted automatically into 1/300th share of new common stock, and (ii) all fractional interests in shares were settled in cash. The resulting shareholders of the newly-issued common stock then received 14 additional shares for each whole share resulting from this automatic conversion of the old shares. There remain approximately 1,036,709 unconverted pre-Recapitalization shares, representing the right to receive approximately 44,220 shares of Existing Common Stock (or cash, in the case of fractional shares). 21 MANAGEMENT INFORMATION EXECUTIVE OFFICERS The officers of the Company immediately prior to the Merger will be the officers of New Subsidiary immediately following the Merger. The following individuals currently serve as executive officers of the Company (or its principal subsidiary) at the pleasure of the Board of Directors and are subject to annual appointment by the board at its first meeting following the annual meeting of stockholders:
NAME POSITION AGE ---- -------- --- Charles E. Bradley, Sr.(1).. Current Director, President and Chief 65 Executive Officer of the Company Richard L. Evans(2)......... Executive Vice President and Chief 43 Financial Officer of the Company R. Michael Looney(3)........ Secretary of the Company 50 David N. Harrington(4)...... President and Chief Operating Officer, 54 Oneida
- -------- (1) See "Proposal I. The Election of Directors--Directors" for certain biographical information. (2) Mr. Evans joined the Company as Executive Vice President and Chief Financial Officer in October 1995. From May 1993 to September 1995, he was Controller of Terex Corporation, a capital goods manufacturer. From October 1989 to May 1993 Mr. Evans was Controller of SPI. Mr. Evans was a Director, from August 1990, and Vice President, from September 1990, of DeVlieg until May 1993. On August 5, 1991, DeVlieg filed a petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Northern District of Illinois, Case Number 91-B31744. This bankruptcy proceeding is currently pending. (3) Mr. Looney joined the Company in 1981 as director of taxes of a subsidiary of the Company. He has served as Secretary of the Company since February 1, 1995. (4) Mr. Harrington has served as Chief Operating Officer of Oneida since December 1989 and as President of Oneida since October 1990. From March 1986 through December 1989, Mr. Harrington served as Vice President and General Manager of Oneida. SUMMARY COMPENSATION TABLE The following table reflects all forms of compensation for services to the Company for the years ended December 31, 1994, 1993 and 1992, of those individuals who were at December 31, 1994 (i) the Chief Executive Officer and (ii) each of the other executive officers who were compensated at an annualized rate of more than $100,000 in 1994 (the "Named Executives"):
ANNUAL COMPENSATION LONG-TERM COMPENSATION --------------------------------- ------------------------ STOCK NAME AND PRINCIPAL OTHER ANNUAL OPTIONS ALL OTHER POSITION YEAR SALARY BONUS COMPENSATION(1) (SHARES) COMPENSATION(2) ------------------ ---- -------- -------- --------------- ------- --------------- Thomas N. Amonett....... 1994 $168,000 $100,800 $6,000 -- $3,002 President and CEO until 1993 167,250 20,000 6,000 20,000 1,906 October 26, 1995 1992 75,000 -- 2,500 68,000 1,415 W. Kyle Willis.......... 1994 $130,000 $ 65,000 $6,000 -- $2,862 Executive Vice President, Treasurer 1993 128,750 15,000 6,000 14,000 552 and CFO until October 26, 1995 1992 50,000 -- 2,500 51,000 249
(footnotes on next page) 22 - -------- (1) Includes automobile allowance. (2) Company contributions under nondiscriminatory defined contribution plan and certain health insurance plans for which all employees are eligible. OPTION GRANTS/EXERCISES AND YEAR-END VALUES The Company did not grant any stock options to the Chief Executive Officer or the other Named Executive in 1994. The following table sets forth information with respect to the unexercised options to purchase shares of Existing Common Stock granted under all stock option plans to the Named Executives and held by them at December 31, 1994. AGGREGATED OPTION EXERCISES DURING 1994 AND OPTION VALUE AT DECEMBER 31, 1994
VALUE OF UNEXERCISED NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT NUMBER OF OPTIONS AT DECEMBER 31, 1994 DECEMBER 31, 1994(1) SHARES ACQUIRED VALUE ----------------------------- ---------------------------- ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE(2) EXERCISABLE UNEXERCISABLE(2) --------------- -------- ----------- ---------------- ----------- ---------------- Thomas N. Amonett....... -- -- 10,000(3) 10,000 -- -- W. Kyle Willis.......... 4,500 $15,335(3) 53,500 7,000 $159,867 --
- -------- (1) Amounts were calculated by multiplying the number of unexercised in-the- money options exercisable or unexercisable, as the case may be, by the closing sales price of the Common Stock on December 31, 1994 ($5.00) and subtracting the total exercise prices. (2) These options, granted in December 1993, were originally exercisable as follows: 50% after one year and 50% after the second year. However, as a result of changes to the Board of Directors of the Company in 1995, these options are now immediately exercisable. (3) Amounts were calculated by multiplying the number of options exercised by the market value of the Common Stock at the time of exercise and subtracting the exercise price. EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS There are no employment contracts with the Named Executives. In November 1994, the Company executed agreements with Thomas N. Amonett and W. Kyle Willis providing for compensation upon a change-in-control of the Company. If, prior to December 31, 1996, more than 25 percent of the outstanding Existing Common Stock is acquired by any person other than Parkdale ("Change-in-Control") and his employment is terminated for any reason within one year following a Change- in-Control, the agreements provide that Mr. Amonett or Mr. Willis shall receive two years compensation and benefits. The June 20, 1995 purchase by Chatwins of approximately 38% of the Existing Common Stock from Parkdale would trigger these agreements in the event that the employment of Mr. Amonett or Mr. Willis as officers of the Company is terminated prior to June 20, 1996. The Company and each of Mr. Amonett and Mr. Willis have agreed that such a termination is likely to occur before such time. COMMITTEES New Subsidiary's Board of Directors will establish committees similar to those currently provided for by the Company's Board of Directors, and the members of various committees of the Company's Board of Directors immediately prior to the Merger will be the members of the corresponding committees of New Subsidiary's Board of Directors immediately following the Merger. As of October 26, 1995 the Board of Directors of the Company maintained a Compensation Committee and an Audit Committee, each comprised of Charles E. Bradley, Sr. and Thomas L. Cassidy. 23 COMPENSATION COMMITTEE REPORT The Compensation Committee of the Board of Directors of the Company furnished the following report as of May 10, 1995 on executive compensation for 1994. Effective June 20, 1995 both members of the Compensation Committee who prepared this report, Emil Nakfoor and Mr. Myers, resigned from the Compensation Committee and have since been replaced on the Compensation Committee by Charles E. Bradley, Sr. and Thomas L. Cassidy. The Board of Directors pursues a philosophy of seeking to improve the Company's performance and to maximize shareholder value by, among other things, relating executive compensation and stock-based benefits to the Company's performance. In general, executive financial rewards may be segregated into the following significant components: base compensation, bonus, and stock option and other benefit plans. Base compensation for senior executive (including the chief executive officer and other executive officers) is intended to be competitive with or inferior to that paid in comparably situated companies, but with a reasonable degree of financial security and flexibility afforded to those individuals who are regarded by the Board of Directors as acceptably discharging the levels and types of responsibility implicit in the various senior executive positions. While the Committee's principal concern is with establishing compensation programs and setting executive compensation at levels which are somewhat reflective of those prevailing in the oil and gas industry for similar executive positions, no comparability studies were conducted for executive salaries to be paid in 1994. However, no raises were awarded to the chief executive officer or the other officers during 1994. Under the supervision of the Compensation Committee, annual bonuses reflect a policy of requiring a specified level of Company performance for the year before any bonuses are earned by senior executives, with bonuses for achieving higher levels of performance directly related to the level achieved. In setting performance criteria, the Committee will consider the total compensation payable or potentially available to the chief executive and other executive officers. While the development of any business necessarily involves numerous factors, the Board's primary emphasis will be on encouraging management to increase the Company's net assets and cash flow, and in certain instances, rationalization of certain Company businesses or assets. While no objective standards were set for the payment of bonuses during 1994, bonuses of $100,800 and $65,000, respectively, were awarded in January 1994 to the chief executive officer and the chief financial officer in recognition of their progress in improving the Company's balance sheet and operations during 1993. The Board of Directors is of the view that properly designed and administered long-term, stock-based incentives for senior executives closely align the executives' economic interests with those of stockholders and provide a direct and continuing focus upon the goal of constantly striving to maximize stockholder value, however, no options were granted to executive officers during 1994. The Compensation Committee intends, with any necessary concurrence of the Board of Directors, to continue to consider alternate forms of stock- based incentives with a view to achieving the maximum possible performance- based benefit to all senior executives at the least possible cost and the greatest attainable economic efficiency to the Company, with such benefits designed as nearly as practicable to directly align the economic interests of professional managers with those of the Company's stockholders. However, no stock-based incentives were granted during 1994. Pursuant to applicable rules of the Securities and Exchange Commission, (i) the members of the Compensation Committee during 1994 were deemed to own beneficially an aggregate of 1,807,476 shares, or 47.4%, of the Existing Common Stock, and (ii) the current members of the Compensation Committee are deemed to own beneficially an aggregate of 1,862,490 shares, or 47.5%, of the Existing Common Stock. See "Ownership Information--Security Ownership of Certain Beneficial Owners and Management". COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Franklin Myers, a member of the Compensation Committee until his resignation from the Board of Directors of the Company on June 20, 1995 (he has since been reelected to the Board of Directors, but is not 24 currently a member of the Compensation Committee), provided consulting services to the Company at an annual compensation rate of $150,000 during 1994 under contractual arrangements entered in 1992 (See "Certain Relationships and Related Transactions--Parkdale Holdings Corporation N.V.") The Company also maintains a voluntary employee retirement plan under which employees may contribute up to 18% of their pre-tax earnings, with the Company making matching contributions of 25% of each employee's contribution, not to exceed 6% of each participants pre-tax earnings. THE COMPENSATION COMMITTEE 25 EXISTING COMMON STOCK PERFORMANCE GRAPH The following graph illustrates the yearly percentage change in the cumulative total shareholder return on the Existing Common Stock, compared with the cumulative total return on (i) the Standard & Poor's 500 Stock Index and (ii) the Dow Jones Secondary Oils Index for the five years ended December 31, 1994:
YEAR ENDED DECEMBER 31, ----------------------------- 1989 1990 1991 1992 1993 1994 ---- ---- ---- ---- ---- ---- Reunion Resources Company(2)...................... 100 100 95 175 480 400 Dow Jones Secondary Oils Index(3)................. 100 83 82 82 91 88 S&P 500 (Dividends Reinvested)(4)................. 100 97 126 136 150 152
- -------- (1) Tabular data assumes that the value of the investment in the Company's common stock and each index was $100 at December 31, 1989 and that all dividends, if any, were reinvested. (2) The Company's common stock was suspended from trading on the Pacific Stock Exchange on August 1987 until November 1990 when trading resumed. For purposes of this presentation, the stock price at December 31, 1989 is assumed to be equal to the closing stock price of the Company's common stock on December 31, 1990. (3) Dow Jones Total Return Index for Secondary Oils prepared by Dow Jones & Company, Inc. (4) Standard & Poor's 500 Total Return Index provided by Media General Financial Services, Inc. In prior years, the Company selected a line-of-business index published by John S. Herold, Inc. covering small domestic exploration and production companies. The JSH Small Domestic E&P Index is no longer published to the public and is not readily accessible to the Company's shareholders. Accordingly, the Company has selected an index published by Dow Jones & Company, Inc. covering small domestic oil companies whose activities include production and exploration. 26 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS CHATWINS GROUP, INC. Charles E. Bradley, Sr., a Director of the Company since June 20, 1995 and the President and Chief Executive officer of the Company since October 26, 1995, is the Chairman and a Director of Chatwins and the beneficial owner of approximately 68% of the outstanding common stock of Chatwins. Thomas L. Cassidy, a Director of the Company since June 20, 1995, and John G. Poole, a nominee for election as a Director of the Company at the Special Meeting, are both Directors of Chatwins. As a result of the Chatwins Acquisition and related transactions (see "Proposal II. The Merger--Preservation of Tax Benefits") Chatwins has voting control over approximately 45% of the Existing Common Stock. On June 28, 1995, Chatwins proposed to the Board of Directors of the Company and the Board of Directors subsequently resolved that the Company extend the exercisability of the Myers Warrant and the Gesterkamp Warrant. The Gesterkamp Warrant and the Myers Warrant had been scheduled to terminate by their terms on July 1, 1995. These warrants now expire on June 30, 1999. Contemporaneously with the Chatwins Acquisition (see "Proposal II. The Merger--Preservation of Tax Benefits"), and in order to assist Chatwins in preserving for the Company and the Company's stockholders the benefits of the Company's tax loss carryforwards, Myers agreed not to exercise the Myers Warrant or transfer the Myers Securities until June 21, 1998. The preservation of tax loss carryforwards was also the principal goal underlying Chatwins' purchase of the Gesterkamp Warrant. Under Section 382 of the Internal Revenue Code, the availability of tax loss carryforwards is restricted if there is a change in ownership of more than 50% in any 3-year period. After giving effect to the Chatwins Acquisition, the exercise or sale of the Myers Securities and the Gesterkamp Warrant would result in a 5.7% ownership change which, if added to other possible ownership changes, could jeopardize the availability of substantial amounts of the Company's tax loss carryforwards. Thus, the Company believes that extending the Myers Warrant is fair consideration for Mr. Myers's standstill agreement with respect to his Existing Common Stock. Because the Gesterkamp Warrant is security for the note Chatwins issued to Mr. Gesterkamp when it purchased the warrant, extension of the Gesterkamp Warrant was necessary to Mr. Gesterkamp's agreement to sell, rather than exercise, the Gesterkamp Warrant. Thus, the Company believes that extending the Gesterkamp Warrant is fair consideration for Chatwins' agreement to purchase such warrant from Mr. Gesterkamp. On September 14, 1995 the Company purchased from Chatwins Holdings, Inc., a Delaware corporation and wholly-owned subsidiary of Chatwins ("CHI"), all of the issued and outstanding common stock and preferred stock of Oneida. The aggregate purchase price for the shares totaled $3,107,000, which was funded entirely from internal cash reserves of the Company. Oneida's liabilities at the time of acquisition included $4,268,000 payable to Congress Financial Corporation and $4,933,000 payable to Chatwins. The stock purchase agreement between the Company and Chatwins requires the Company to cause Oneida to repay the indebtedness to Chatwins (the "Oneida Debt") plus interest thereon at 10% per annum from September 1, 1995 on or before the second anniversary of the closing date of the Oneida purchase, or earlier from the net proceeds, if any, of the sale of the Company's other material assets. The financial terms of the Oneida transaction were determined based on Oneida's financial position and results of operations at and for the six months ended June 30, 1995. The terms of the transaction were approved by the unanimous vote of the directors of the Company at the time with Messrs. Bradley and Cassidy abstaining. Prudential Securities Incorporated acted as financial advisor to the Company in connection with the Oneida transaction and rendered its opinion to the Board of Directors of the Company that the consideration paid by the Company was fair to the Company from a financial point of view. On November 1, 1995 and November 2, 1995, respectively, Mr. Bradley made loans of $800,000 and $500,000 to the Company, which the Company then advanced to Oneida and Oneida used these funds to repay a portion of the Oneida Debt to Chatwins. It is intended that the Company will enter into an agreement with Mr. Bradley whereby the Company will agree to cause Oneida to repay this $1,300,000 to Mr. Bradley on the same terms that the Company had previously agreed to cause Oneida to pay the Oneida Debt to Chatwins. 27 Chatwins has recently proposed to the Company a merger of Rostone Corporation, a manufacturer of thermoset plastic products and an indirect subsidiary of Chatwins and SPI, with and into Oneida. Chatwins and the Company are currently negotiating the possible terms of such a merger. Chatwins has informed the Company that it intends to propose a series of further transactions to the Board of Directors of the Company, including sales by the Company of certain of the Company's real estate and oil and gas assets and the acquisition of additional assets or businesses by the Company. Following the third anniversary of the Chatwins Acquisition, Chatwins may consider proposing the merger of itself with and into the Company. Each of the transactions that Chatwins may propose in which it has an interest separate from that of the Company will be subject to approvals by the Boards of Directors of the Company and Chatwins and compliance by Chatwins with the covenants in its financing agreements. There can be no assurance that any transaction will be proposed or that any proposed transaction will be consummated. PARKDALE HOLDINGS CORPORATION N.V. Parkdale became the Company's largest stockholder in 1988 in connection with reorganization financing provided by it to facilitate the Company's discharge from bankruptcy. During the next several years the Company experienced progressively larger losses, and cash balances had become critically depleted by mid-1992. Representatives of Parkdale approached Franklin Myers, who had served as outside counsel to the Company for a number of years before its 1985 bankruptcy filing, about the possibility of Mr. Myers becoming its agent and attorney-in-fact to represent its stockholdings in the Company. When Mr. Myers agreed in June 1992 to undertake the proposed assignment, he agreed to do so based upon the stated premises that he would do so only if he were to be given exclusive voting and investment control over Parkdale's stockholdings and if he were to take affirmative actions on Parkdale's behalf in an effort to increase the value of the Company for the benefit of stockholders generally, he would expect to be retained by the Company as a financial consultant and compensated through both cash and equity inducements of substantial magnitude. Consistent with these understandings, Mr. Myers was so retained immediately following the ouster of the incumbent board of directors at the 1992 annual meeting of stockholders. Under the terms of his consulting arrangement (which was cancelled effective January 1, 1995), the Company paid Mr. Myers an annual fixed consulting fee of $150,000 and awarded him options and warrants in 1992 covering the right to purchase up to 112,500 shares of the Existing Common Stock at a purchase price of $1.56 per share, the average market price for the Existing Common Stock in June 1992. Notwithstanding the apparent (or actual) conflict of interest which may have existed with respect to the financial arrangements between the Company and Mr. Myers, the Board of Directors is of the opinion that these arrangements were as favorable to the Company as any which could have been negotiated at arm's length with similarly situated third parties under the same circumstances. In connection with the Chatwins Acquisition, Mr. Myers gave Chatwins a three-year proxy to vote all of his Existing Common Stock, and entered into a standstill agreement with respect to his Company securities. Contemporaneously with the Chatwins Acquisition, Mr. Myers resigned as a Director of the Company. On October 26, 1995, he was appointed to the Board of Directors to fill the vacancy created by the resignation of W. Kyle Willis from the Board of Directors. 28 DEADLINE FOR STOCKHOLDER PROPOSALS Proposals of stockholders of the Company intended to be presented at the 1996 annual meeting of stockholders must be received by R. Michael Looney, Secretary of the Company, by February 4, 1996 for inclusion in the proxy statement and form of proxy relating to the 1996 annual meeting to be held by the Company or, if the Merger has been consummated, New Subsidiary. By Order of the Board of Directors, [Paste Up Sig] R. Michael Looney CORPORATE SECRETARY Houston, Texas November 16, 1995 29 ANNEX A TO PROXY STATEMENT/PROSPECTUS MERGER AGREEMENT THIS MERGER AGREEMENT, dated as of November 14, 1995 (the "Agreement"), is by and between REUNION RESOURCES COMPANY, a Delaware corporation ("Reunion") and REUNION INDUSTRIES, INC., a Delaware corporation ("New Reunion"). W I T N E S S E T H : WHEREAS, the respective Boards of Directors of Reunion and New Reunion deem it advisable that Reunion merge with and into New Reunion (the "Merger"), upon the terms and conditions herein and in accordance with the laws of the State of Delaware, and that the shares of stock of each of Reunion and New Reunion shall be converted upon the Merger as set forth herein. NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS: SECTION 1. TERMS 1.1. At the Effective Time (as hereinafter defined) of the Merger, Reunion shall be merged with and into New Reunion, with New Reunion as the surviving corporation (hereinafter also referred to as the "Surviving Corporation"). 1.2. The Surviving Corporation shall be named "Reunion Industries, Inc.". 1.3. At the Effective Time, each share of Common Stock of Reunion issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger, be converted into one share of Common Stock of the Surviving Corporation. Each share of Common Stock of New Reunion issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action by the holder thereof, be cancelled. 1.4. If any certificate representing stock of the Surviving Corporation is to be issued in a name other than that in which a surrendered certificate theretofore representing stock of Reunion is registered, it shall be a condition of such issuance that the surrendered certificate shall be properly endorsed or otherwise in proper form for transfer and that the person requesting such issuance shall either pay to the Surviving Corporation or its transfer agent any transfer or other taxes required by reason of the issuance of a certificate or certificates representing the Surviving Corporation stock in a name other than that of the registered holder of the certificate surrendered, or establish to the satisfaction of the Surviving Corporation or its transfer agent that such tax has been paid or is not applicable. 1.5. Upon and after the Effective Time, the Surviving Corporation shall possess all the rights, privileges, powers and franchises, and be subject to all the restrictions, disabilities and duties, of the Constituent Corporations (as hereinafter defined); and all rights, privileges, powers and franchises of the Constituent Corporations shall be vested in and be the property of the Surviving Corporation; and all debts, liabilities and duties of the Constituent Corporations shall thenceforth attach to the Surviving Corporation and may be enforced against it to the same extent as if said debts, liabilities and duties have been incurred or contracted by it. SECTION 2. EFFECTIVE TIME 2.1. Subsequent to the execution of this Agreement, Reunion and New Reunion (collectively, the "Constituent Corporations") shall each submit this Agreement to their respective stockholders for their approval pursuant to the applicable provisions of the General Corporation Law of the State of Delaware. 2.2. Following approval of this Agreement in accordance with Section 2.1 above, and provided that: (a) the conditions specified in Section 5.1 hereof have been fulfilled or waived; and (b) this Agreement has not been terminated and abandoned pursuant to Section 5.3 hereof; the Surviving Corporation will cause a Certificate of Merger to be executed, acknowledged and filed with the Secretary of the State of Delaware as provided in Section 251 of the General Corporation Law of the State of Delaware and a copy of the Certificate of Merger, certified by the Secretary of State of the State of Delaware, to be recorded in the Office of the Recorder of Deeds of New Castle County, all in accordance with the provisions of Section 103 of the General Corporation Law of the State of Delaware. 2.3. The Merger shall become effective immediately upon the filing of the Certificate of Merger with the Secretary of State of the State of Delaware (the date and time of such filing being herein referred to as the "Effective Time"). 2 SECTION 3. COVENANTS AND AGREEMENTS 3.1. Reunion covenants and agrees that it will, as sole stockholder of New Reunion, vote the Common Stock of New Reunion owned by it to approve this Agreement as provided by law. 3.2. New Reunion covenants and agrees that as the Surviving Corporation it shall be liable for all the obligations of the Constituent Corporations outstanding as of the Effective Time and hereby expressly assumes all such obligations as of the Effective Time. SECTION 4. CERTIFICATE OF INCORPORATION AND BYLAWS; BOARD OF DIRECTORS 4.1. The Certificate of Incorporation of New Reunion as constituted at the Effective Time shall thereafter be the Certificate of Incorporation of the Surviving Corporation until such time as it shall be amended as provided by law. 4.2. The Bylaws of New Reunion shall be the bylaws of the Surviving Corporation, subject to alteration, amendment or repeal from time to time by the Board of Directors or the stockholders of the Surviving Corporation. 4.3. From and after the Effective Time the members of the Board of Directors of the Surviving Corporation shall consist of the members of the Board of Directors of Reunion immediately prior to the Effective Time, to hold office until the expiration of their then current terms and until their respective successors shall be elected. 4.4. From and after the Effective Time, the officers of New Reunion shall consist of the officers of Reunion immediately prior to the Effective Time, to hold office until the next annual meeting of the stockholders of New Reunion and until their respective successors are elected and appointed. SECTION 5. CONDITIONS, AMENDMENT AND TERMINATION 5.1. The respective obligations of the Constituent Corporations to consummate the Merger under this Agreement are subject to the following conditions, any and all of which (other than paragraph (d)) may be waived by the party for whose benefit they are included: 3 (a) All third party consents which are required in order to consummate the Merger and to effectuate the contemplated transactions incidental or related thereto shall have been obtained; (b) The Common Stock of the Surviving Corporation shall have been approved for quotation on the NASDAQ Small-Cap. Market and the Pacific Stock Exchange; (c) Reunion shall have received a ruling of the Internal Revenue Service or an opinion of counsel in form and substance satisfactory to Reunion as to the tax treatment of the Merger; and (d) Each of the Constituent Corporations shall have received the approval of its stockholders as required under Delaware law. 5.2. To the fullest extent permitted by applicable law, the Constituent Corporations, by mutual consent of their respective Boards of Directors, may amend, modify or supplement this Agreement in such a manner as may be agreed upon by them in writing at any time prior to the Effective Time, even though the Agreement shall have been approved by the stockholders of the Constituent Corporations or of either thereof. 5.3. This Agreement may be terminated and the Merger abandoned for any reason by resolution adopted by either of the respective Boards of Directors of the Constituent Corporations at any time prior to the Effective Time, even though this Agreement shall have been approved by the stockholders of the Constituent Corporations or of either thereof. IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by their respective officers thereunto duly authorized and their respective corporate seals affixed, all as of the day and year first above written. REUNION RESOURCES COMPANY By: -------------------------------- Its: REUNION INDUSTRIES, INC. By: -------------------------------- Its: 4 ANNEX B TO PROXY STATEMENT/PROSPECTUS CERTIFICATE OF INCORPORATION OF REUNION INDUSTRIES, INC. ARTICLE I NAME The name of the Corporation is Reunion Industries, Inc. ARTICLE II REGISTERED OFFICE/AGENT The registered office of the Corporation in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company. ARTICLE III PURPOSES The purposes of the Corporation are to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. ARTICLE IV CAPITAL STOCK Section 4.1 Authorized Stock. The total number of shares of all classes of stock which the Corporation shall have authority to issue is Thirty Million (30,000,000), of which 20,000,000 shares shall be of a class designated "common stock", having a par value of $.01 per share (the "Common Stock"), and Ten Million (10,000,000) shares shall be of a class designated "preferred stock", par value $.01 per share (the "Preferred Stock"). Any and all stock issued by the Corporation shall be deemed issued after the adoption of the transfer restrictions set forth in Article Fifth hereof. Section 4.2 Common Stock. Except as otherwise provided in this Certificate of Incorporation or by law, each holder of Common Stock shall be entitled to one vote for each share held. The holders of the Common Stock shall be entitled to receive, when and as declared by the Board of Directors, out of funds legally available therefor, dividends payable in cash, stock or otherwise. On any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the remaining net assets of the Corporation shall be distributed pro rata to the holders of the Common Stock in accordance with their respective rights and interest. Section 4.3 Preferred Stock. Preferred Stock may be issued in one or more series as may be determined from time to time by the Board of Directors. All shares of any one series of Preferred Stock will be identical except as to the date of issue and the dates from which dividends on shares of the series issued on different dates will cumulate, if cumulative. Authority is hereby expressly granted to the Board of Directors to authorize the issuance of one or more series of Preferred Stock, and to fix by resolution or resolutions providing for the issue of each such series the powers, including the voting powers (but no greater than one vote per share), designations, preferences, and relative, participating, optional, redemption, conversion, exchange or other special rights, and qualifications, limitations or restrictions of such series, and the number of shares in each series, to the full extent now or hereafter permitted by law. ARTICLE V RESTRICTIONS ON TRANSFERS OF STOCK Section 5.1 Prohibited Transfers. In order to preserve the net operating loss carryovers (including any "net unrealized built-in loss," as defined under applicable law), capital loss carryovers, general business credit carryovers, alternative minimum tax credit carryovers and foreign tax credit carryovers (the "Tax Benefits") to which the Corporation is entitled pursuant to the Internal Revenue Code of 1986, as amended, or any successor statute (collectively, the "Code") and the Treasury Regulations promulgated thereunder (the "Treasury Regulations"), the following restrictions shall apply until the date which is the earlier of (x) the day after the third (3rd) anniversary of the effectiveness of the merger of Reunion Resources Company, a Delaware corporation, with and into the Corporation (the "Merger"), (y) the repeal of Section 382 of the Code if the Board of Directors determines that the restrictions are no longer necessary, and (z) the beginning of a taxable year of the Corporation as to which the Board of Directors determined prior to the beginning of such taxable year that no Tax Benefits may be carried forward, unless the Board of Directors shall fix an earlier or later date in accordance with Section 5.7 of this Article Fifth (such date is sometimes referred to herein as the "Expiration Date"): 2 (1) For purposes of this Article Fifth, (a) a "Prohibited Ownership Percentage" shall mean any ownership of the Corporation's stock that would cause a Person or Public Group to be a "5-percent shareholder" of the Corporation within the meaning of Treasury Regulation Section 1.382-2T(g)(1); (b) a "Public Group" shall have the meaning contained in Treasury Regulation Section 1.383- 2T(f)(13); (c) a "Person" shall mean any individual, corporation, estate, trust, association, company, partnership, limited liability company, joint venture, or similar organization (including the Corporation); (d) "Transfer" refers to any means of conveying legal or beneficial ownership of shares of stock of the Corporation, whether such means are direct or indirect, voluntary or involuntary, including, without limitation, the issuance by the Corporation of shares of stock of the Corporation (without regard to whether such shares are treasury shares or new shares) and the transfer of ownership of any entity that owns shares of stock of the Corporation; and "Transferee" means any Person to whom stock of the Corporation is Transferred. (2) From and after the effectiveness of the Merger, no Person shall Transfer any shares of stock of the Corporation (other than stock described in Section 1504(a)(4) of the Code, or stock that is not so described solely because it is entitled to vote as a result of dividend arrearages) to any other Person to the extent that such Transfer, if effective, (i) would cause the Transferee or any Person or Public Group to have a Prohibited Ownership Percentage; (ii) would increase the ownership percentage of any Transferee or any Person or Public Group having a Prohibited Ownership Percentage; or (iii) would create a new Public Group under Treasury Regulation Section 1.382-2T(j)(3)(i). (3) Any Transfer of shares of stock of the Corporation that would otherwise be prohibited pursuant to the preceding subsection, including but not limited to the issuance of stock by the Corporation pursuant to the exercise of any warrants, options or other rights to acquire stock in the Corporation, shall nonetheless be permitted if information relating to a specific proposed transaction is presented to the Board of Directors and the Board determines that, based on the facts in existence at the time of such determination, such transaction will not jeopardize the Corporation's full utilization of the Tax Benefits, based upon an opinion of legal counsel selected by the Board to that effect. Nothing in this subsection will be construed to limit or restrict the Board of Directors in the exercise of its fiduciary duties under applicable law. (4) Within 10 days after the Expiration Date, the Board of Directors shall cause a written notice to be mailed to the Stockholders of the Corporation informing said Stockholders of the expiration of the restrictions contained in this Article Fifth. Section 5.2 Attempted Transfer in Violation of Transfer Restrictions. Unless approval of the Board of Directors is obtained as provided in subsection (3) of Section 5.1 of this Article Fifth, any attempted Transfer of shares of stock of the Corporation in excess of the shares that could be Transferred to the Transferee without restriction under subsection (2) 3 of Section 5.1 of this Article Fifth is not effective to Transfer ownership of such excess shares (the "Prohibited Shares") to the purported acquiror thereof (the "Purported Acquiror"), who shall not be entitled to any rights as a Stockholder of the Corporation with respect to the Prohibited Shares (including, without limitation, the right to vote or to receive dividends with respect thereto). All rights with respect to the Prohibited Shares shall remain the property of the Person who initially purported to Transfer the Prohibited Shares to the Purported Acquiror (the "Initial Transferor") until such time as the Prohibited Shares are resold as set forth below in subsection (1) or subsection (2) of this Section 5.2. The Purported Acquiror, by acquiring ownership of shares of stock of the Corporation that are not Prohibited Shares, shall be deemed to have consented to all the provisions of this Article Fifth and to have agreed to act as provided in the following subsection (1). The Corporation and the Board of Directors shall be fully protected in relying in good faith upon the information, opinions, reports or statements of the chief executive officer, the chief financial officer, or the chief accounting officer of the Corporation or of the Corporation's legal counsel, independent auditors, transfer agent, investment bankers, and other employees and agents in making the determinations and findings contemplated by this Section 5.2, and neither the Corporation nor the Board of Directors shall be responsible for any good faith errors made in connection therewith. (1) Upon demand by the Corporation, the Purported Acquiror shall transfer any certificate or other evidence of the Purported Acquiror's possession or control of the Prohibited Shares, along with any dividends and other distributions paid by the Corporation with respect to the Prohibited Shares that were received by the Purported Acquiror (the "Prohibited Distributions"), to an agent designated by the Corporation (the "Agent"). If the Purported Acquiror has sold the Prohibited Shares to an unrelated party in an arms-length transaction after purportedly acquiring them, the Purported Acquiror shall be deemed to have sold the Prohibited Shares as agent for the Initial Transferor, and in lieu of transferring the Prohibited Shares and Prohibited Distributions to the Agent shall transfer to the Agent the Prohibited Distributions and the proceeds of such sale (the "Resale Proceeds"), except to the extent that the Agent grants written permission to the Purported Acquiror to retain a portion of the Resale Proceeds not exceeding the amount that would have been payable by the Agent to the Purported Acquiror pursuant to the following subsection (2) if the Prohibited Shares had been sold by the Agent rather than by the Purported Acquiror. Any purported transfer of the Prohibited Shares by the Purported Acquiror other than a transfer described in one of the two preceding sentences shall not be effective to transfer any ownership of the Prohibited Shares. (2) The Agent shall sell in an arms-length transaction (through the NASDAQ Small Cap. Market or the Pacific Stock Exchange, if possible) any Prohibited Shares transferred to the Agent by the Purported Acquiror, and the proceeds of such sale (the "Sale Proceeds"), or the Resale Proceeds, if applicable, shall be allocated, after reimbursement to the Agent of its expenses, to the Purported Acquiror up to the following amount: (i) where 4 applicable, the purported purchase price paid or value of consideration surrendered by the Purported Acquiror for the Prohibited Shares, or (ii) where the purported Transfer of the Prohibited Shares to the Purported Acquiror was by gift, inheritance, or any similar purported Transfer, the fair market value of the Prohibited Shares at the time of such purported Transfer. Subject to the succeeding provisions of this subsection, any Resale Proceeds or Sales Proceeds in excess of the Agent's expenses and the amount allocable to the Purported Acquiror pursuant to the preceding sentence, together with any Prohibited Distributions, shall be the property of the Initial Transferor. If the identity of the Initial Transferor cannot be determined by the Agent through inquiry made to the Purported Acquiror, the Agent or the Corporation shall hold such amounts pending the determination of the identity of the Initial Transferor. The Agent may also take, but is not required to take, any reasonable actions to attempt to identify the Initial Transferor. If after ninety (90) days following the date the Prohibited Shares were transferred to the Agent the Initial Transferor has not been identified, any amounts due to the Initial Transferor pursuant to this subsection may be paid over to a court or governmental agency, if applicable law permits, or otherwise shall be transferred to an entity designated by the Corporation that is described in Section 501(c)(3) of the Code. In no event shall any such amounts due to the Initial Transferor inure to the benefit of the Corporation or the Agent, but such amounts may be used to cover expenses incurred by the Agent in attempting to identify the Initial Transferor. Section 5.3 Prompt Enforcement Against Purported Acquiror. Within thirty (30) business days of learning of the purported Transfer of Prohibited Shares to a Purported Acquiror, the Corporation through its Secretary shall demand that the Purported Acquiror surrender to the Agent the certificates representing the Prohibited Shares, or any Resale Proceeds, and any Prohibited Distributions, and if such surrender is not made by the Purported Acquiror within thirty (30) business days from the date of such demand, the Corporation shall institute legal proceedings to compel such transfer; provided, however, that nothing in this Section 5.3 shall preclude the Corporation in its discretion from immediately bringing legal proceedings without a prior demand, and provided further that failure of the Corporation to act within the time periods set out in this Section 5.3 shall not constitute a waiver of any right of the Corporation to compel any transfer required by subsection (1) of Section 5.2. Section 5.4 Additional Actions to Prevent Violation or Attempted Violation. Upon a determination by the Board of Directors that there has been or is threatened a purported Transfer of Prohibited Shares to a Purported Acquiror, the Board of Directors may take such action in addition to any action required by the preceding paragraph as it deems advisable to give effect to the provisions of this Article Fifth, including, without limitation, refusing to give effect on the books of this Corporation to such purported Transfer or instituting proceedings to enjoin such purported Transfer. Notwithstanding the foregoing sentence, the Board of Directors shall take no action which would prohibit the settlement of 5 transactions entered into through the NASDAQ Small Cap. Market, the Pacific Stock Exchange, or other market or exchange on which the Corporation has listed its securities. Section 5.5 Obligation to Provide Information. The Corporation may require as a condition to the registration of the Transfer of any shares of its stock that the proposed Transferee furnish to the Corporation all information reasonably requested by the Corporation with respect to all the proposed Transferee's direct or indirect ownership interest in, or options to acquire, stock of the Corporation. Section 5.6 Legends. All certificates evidencing ownership of shares of stock of this Corporation that are subject to the restrictions on Transfer contained in this Article Fifth shall bear a conspicuous legend referencing the restrictions set forth in this Article Fifth. Section 5.7 Further Actions. Nothing contained in this Article Fifth shall limit the authority of the Board of Directors to take such other action to the extent permitted by law as it deems necessary or advisable to protect the Corporation and the interests of the holders of its securities in preserving the Tax Benefits. Without limiting the generality of the foregoing, in the event of a change in law making one or more of the following actions necessary or desirable or in the event that the Board of Directors believes that such actions are in the best interest of the Corporation and its Stockholders, the Board of Directors may accelerate or extend the Expiration Date; provided that the Board of Directors shall determine in writing that any such acceleration or extension is reasonably necessary or desirable to preserve the Tax Benefits under the Code and the regulations thereunder or that the continuation of these restrictions is no longer reasonably necessary for the preservation of the Tax Benefits, which determination shall be based upon an opinion of legal counsel to the Corporation and which determination shall be filed with the Secretary of the Corporation and mailed by the Secretary to the Stockholders of this Corporation within ten days after the date of any such determination. In addition, the Board of Directors may, to the extent permitted by law, from time to time establish, modify, amend or rescind Bylaws, regulations and procedures of the Corporation not inconsistent with the express provisions of this Article Fifth for purposes of determining whether any acquisition of stock of the Corporation would jeopardize the Corporation's ability to preserve and use the Tax Benefits, and for the orderly application, administration and implementation of the provisions of this Article Fifth. Such procedures and regulations shall be kept on file with the Secretary of the Corporation and with its transfer agent and shall be made available for inspection by the public and, upon request, shall be mailed to any holder of stock of the Corporation. 6 ARTICLE VI BOARD OF DIRECTORS Except as otherwise provided by law, the business and affairs of the Corporation shall be managed by, or under the direction of, its Board of Directors. The number of directors of the Corporation shall be fixed by, and in the manner provided in, the Corporation's Bylaws, but shall not be fewer than three nor more than 12. None of the directors need be a stockholder of the Corporation or a resident of the State of Delaware. Elections of directors need not be by written ballot unless the Corporation's Bylaws provide otherwise. Without limiting the rights, powers, privileges and discretionary authority conferred by the Delaware General Corporation Law (the "DGCL") or other applicable law, the Board of Directors is expressly authorized to adopt, amend or repeal the Bylaws of the Corporation. ARTICLE VII STOCKHOLDERS Stockholder action that must or may be taken at an annual or special meeting of the stockholders, with prior notice and a vote, may instead be taken without a meeting, without prior notice and without a vote if a written consent or consents, setting forth the action taken, shall be signed by the holders of no less than the number of shares of capital stock required to authorize or take such action at an annual or special meeting of the stockholders. Meetings of stockholders may be held within or without the State of Delaware as the Bylaws may provide. In addition to such special meetings as are provided by law or this Certificate of Incorporation, special meetings of the stockholders may be called only by (a) the Board of Directors pursuant to a resolution adopted by a majority of the Board of Directors then in office, (b) the Chairman of the Board, (c) the President of the Corporation or (d) the holders of not less than 30% of the total voting power of all shares of stock of the Corporation entitled to vote in the election of directors. The books of the Corporation may be kept (subject to any provision contained in the DGCL) outside the State of Delaware at such place(s) as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation. ARTICLE VIII NO PREEMPTIVE RIGHTS No stockholder shall be entitled, as a matter of right, to subscribe for or acquire additional, unissued or treasury shares of any class of capital stock of the Corporation whether now or hereafter authorized, or any bonds, debentures or other 7 securities convertible into, or carrying a right to subscribe to or acquire such shares, but any shares or other securities convertible into, or carrying a right to subscribe to or acquire such shares may be issued or disposed of by the Board of Directors to such persons and on such terms as in its discretion it shall deem advisable. ARTICLE IX NO CUMULATIVE VOTING At each election of directors, every stockholder entitled to vote at such election shall have the right to vote, in person or by proxy, the number of shares owned by him for as many persons as there are directors to be elected and for whose election he is entitled to cast a vote. No stockholder shall have the right to cumulate his votes in any election of directors. ARTICLE X BUSINESS COMBINATIONS WITH AFFILIATES The Corporation hereby elects not to be governed by Section 203 of the DGCL which restricts business combination transactions with Interested Stockholders (as defined therein). ARTICLE XI LIMITED DIRECTOR LIABILITY A director of the corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involved intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL for unlawful payment of dividends or improper redemption of stock, or (iv) for any transaction from which the director derived an improper personal benefit. If the DGCL is hereafter amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the Corporation, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the DGCL, as amended. Any repeal or modification of this paragraph by the stockholders of the Corporation shall be 8 prospective only, and shall not adversely affect any limitation on the personal liability of a director of the Corporation existing at the time of such repeal or modification. ARTICLE XII INDEMNIFICATION Section 12.1 Mandatory Indemnification. Each person who at any time is or was a director of the Corporation, and is threatened to be or is made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, arbitrative or investigative (a "Proceeding"), by reason of the fact that such person is or was a director of the Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, venturer, proprietor, member, employee, trustee, agent or similar functionary of another domestic or foreign corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other for-profit or non-profit enterprise, whether the basis of a Proceeding is alleged action in such person's official capacity or in another capacity while holding such office, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the DGCL, or any other applicable law as may from time to time be in effect (but, in the case of any such amendment or enactment, only to the extent that such amendment or law permits the Corporation to provide broader indemnification rights than such law prior to such amendment or enactment permitted the Corporation to provide), against all expense, liability and loss (including, without limitation, court costs and attorneys' fees, judgments, fines, excise taxes or penalties, and amounts paid or to be paid in settlement) actually and reasonably incurred or suffered by such person in connection with a Proceeding, and such indemnification shall continue as to a person who has ceased to be a director of the Corporation or a director, officer, partner, venturer, proprietor, member, employee, trustee, agent or similar functionary of another domestic or foreign corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other for- profit or non-profit enterprise, and shall inure to the benefit of such person's heirs, executors and administrators. The Corporation's obligations under this Section 12.1 include, but are not limited to, the convening of any meeting, and the consideration of any matter thereby, required by statute in order to determine the eligibility of any person for indemnification. Section 12.2 Prepayment of Expenses. Expenses incurred by a director of the Corporation in defending a Proceeding shall be paid by the Corporation in advance of the final disposition of such Proceeding to the fullest extent permitted by, and only in compliance with, the DGCL or any other applicable laws as may from time to time be in effect, including, without limitation, any provision of the DGCL which requires, as a condition precedent to such expense advancement, the delivery to the Corporation of an undertaking, by or on behalf of such director, to repay all amounts so advanced if it shall ultimately be determined that such director is not entitled to be indemnified under Section 12.1 or 9 otherwise. Repayments of all amounts so advanced shall be upon such terms and conditions, if any, as the Corporation's Board of Directors deems appropriate. Section 12.3 Vesting. The Corporation's obligation to indemnify and to prepay expenses under Sections 12.1 and 12.2 shall arise, and all rights granted to the Corporation's directors hereunder shall vest at the time of the occurrence of the transaction or event to which a Proceeding relates, or at the time that the action or conduct to which such Proceeding relates was first taken or engaged in (or omitted to be taken or engaged in), regardless of when such Proceeding is first threatened, commenced or completed. Notwithstanding any other provision of this Certificate of Incorporation or the Bylaws of the Corporation, no action taken by the Corporation, either by amendment of this Certificate of Incorporation or the Bylaws of the Corporation or otherwise, shall diminish or adversely affect any rights to indemnification or prepayment of expenses granted under Sections 12.1 and 12.2 which shall have become vested as aforesaid prior to the date that such amendment or other corporate action is effective or taken, whichever is later. Section 12.4 Enforcement. If a claim under Section 12.1 or Section 12.2 or both Sections 12.1 and 12.2 is not paid in full by the Corporation within 30 days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit in a court of competent jurisdiction against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall also be entitled to be paid the expense of prosecuting such claim. It shall be a defense to any such suit (other than a suit brought to enforce a claim for expenses incurred in defending any Proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct that make it permissible under the DGCL or other applicable law to indemnity the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. The failure of the Corporation (including its Board of Directors, independent legal counsel or stockholders) to have made a determination prior to the commencement of such suit as to whether indemnification is proper in the circumstances based on the applicable standard of conduct set forth in the DGCL or other applicable law shall neither be a defense to the action nor create a presumption that the claimant has not met the applicable standard of conduct. The termination of any Proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal Proceeding, had reasonable cause to believe that his conduct was unlawful. 10 Section 12.5 Nonexclusive. The indemnification provided by this Article XII shall not be deemed exclusive of any other rights to which a person seeking indemnification may be entitled under any statute, bylaw, other provisions of this Certificate of Incorporation, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office. Section 12.6 Permissive Indemnification. The rights to indemnification and prepayment of expenses which are conferred on the Corporation's directors by Sections 12.1 and 12.2 may also be conferred on any officer, employee or agent of the Corporation if, and to the extent, authorized by the Board of Directors. Section 12.7 Insurance. The Corporation shall have power to purchase and maintain insurance, at its expense, on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, venturer, proprietor, member, employee, trustee, agent or similar functionary of another domestic or foreign corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other for-profit or non-profit enterprise against any expense, liability or loss asserted against such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the Corporation would have the power to indemnity such person against such expense, liability or loss under the Corporation's Bylaws, the provisions of this Article XII, the DGCL or other applicable law. Section 12.8 Condition to Mandatory Indemnification. Subject to the first sentence of Section 12.4 hereof, the Corporation shall be required to indemnify a director of the Corporation pursuant to Section 12.1 hereof in connection with a Proceeding (or part thereof) initiated by such director only if the initiation of such Proceeding (or part thereof) by the director was authorized in writing by the Board of Directors of the Corporation. ARTICLE XIII COMPROMISE Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of section 279 of Title 8 of the Delaware Code order a meeting of the 11 creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three- fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation. ARTICLE XIV INCORPORATOR The name and mailing address of the incorporator is: Charles R. Umpleby Richards & O'Neil, LLP 885 Third Avenue New York, New York 10022-4873 I, the undersigned, being the incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this certificate, hereby declaring under the penalties of perjury that this is my act and deed and that the facts stated herein are true, and accordingly have hereunto set my hand this ____ day of November 1995. -------------------------------------- Charles R. Umpleby 12 PART II. INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. New Subsidiary's Certificate of Incorporation and Bylaws provide that present and former directors of New Subsidiary, or persons serving at the request of the corporation, shall be indemnified and held harmless by the corporation to the fullest extent authorized by the Delaware General Corporation Law against all losses, liabilities, and expenses incurred in connection with any threatened, pending, or completed action suit or proceeding instituted against such person by virtue of his or her position as a director of the corporation or person serving at the request of the corporation. Generally, Delaware General Corporation Law Section 145 permits such indemnification where the party seeking indemnification acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, or, in the case of any criminal action or proceeding, where such person had no reasonable cause to believe his conduct was unlawful. A similar standard of care is applicable in the case of derivative actions except that indemnification only extends to expenses (including attorneys' fees) incurred in connection with defense or settlement of such an action and then, where the person is adjudged to be liable to the corporation, only if and to the extent that the Court of Chancery of the State of Delaware or the court in which such action was brought determines that such person is fairly and reasonably entitled to such indemnity and then only for such expenses as the court shall deem proper. Section 145 further provides that where a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding he shall be indemnified against expenses, including attorneys' fees, incurred in connection therewith. The indemnification provisions of the Certificate of Incorporation and Bylaws of New Subsidiary differ from those of the Company only insofar as one new section has been added (See Section 12.8 of New Subsidiary's Certificate of Incorporation, attached as ANNEX B hereto) which provides that the corporation shall be required to indemnify a director in connection with a Proceeding (as defined therein) initiated by such director only if the initiation of such Proceeding by the director was authorized in writing by the Board of Directors. The Company maintains insurance policies under which directors and officers are insured, within the limits and subject to the limitations of the policies, against expenses in connection with the defense of actions, suits or proceedings, and certain liabilities that might be imposed as a result of such actions, suits or proceedings, to which they are parties by reason of being or having been directors or officers of the Company. These policies will be maintained by New Subsidiary. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits
EXHIBIT NO. DESCRIPTION OF EXHIBIT ----------- ---------------------- 2.1 --Merger Agreement by and between Reunion Resources Company and Reunion Industries, Inc. (incorporated by reference to Annex A to the Proxy Statement/Prospectus) 3.1 --Form of Certificate of Incorporation of Reunion Industries, Inc. (incorporated by reference to Annex B to the Proxy Statement/Prospectus) 3.2 --Form of Bylaws of Reunion Industries, Inc. *4.1 --Form of Specimen Stock Certificate evidencing the Common Stock, par value $.01 per share, of Reunion Industries, Inc. *5.1 --Opinion of Richards & O'Neil, LLP *8.1 --Opinion of Richards & O'Neil, LLP *24.1 --Consents of Richards & O'Neil, LLP (included in Exhibits 5.1 and 8.1) 25.1 --Power of Attorney (included on signature pages hereto)
- -------- * Exhibit to be filed by amendment. II-1 ITEM 22. UNDERTAKINGS. The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement; (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high and of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offer. The undersigned Registrant hereby undertakes as follows: that prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other Items of the applicable form. The Registrant undertakes that every prospectus (i) that is filed pursuant to the paragraph immediately preceding, or (ii) that purports to meet the requirements of section 10(a)(3) of the Securities Act of 1933 and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. II-2 The undersigned Registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. The undersigned Registrant hereby undertakes to supply by means of a post- effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas on the 16th day of November, 1995. REUNION INDUSTRIES, INC. By /s/ Charles E. Bradley, Sr. ___________________________________ Charles E. Bradley, Sr. President and Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Charles E. Bradley, Sr. his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this Registration Statement, and to file the same, with all Exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated as of this 16th day of November, 1995.
SIGNATURE TITLE DATE --------- ----- ---- /s/ Charles E. Bradley, Sr. President, Chief Executive November 16, 1995 ____________________________________ Officer, Director Charles E. Bradley, Sr. /s/ Thomas N. Amonett Director November 16, 1995 ____________________________________ Thomas N. Amonett /s/ Thomas L. Cassidy Director November 16, 1995 ____________________________________ Thomas L. Cassidy /s/ Franklin Myers Director November 16, 1995 ____________________________________ Franklin Myers /s/ Richard L. Evans Executive Vice President and November 16, 1995 ____________________________________ Chief Financial Officer Richard L. Evans
II-4 INDEX TO EXHIBITS
EXHIBITS DESCRIPTION OF EXHIBIT PAGE -------- ---------------------- ---- 2.1 --Merger Agreement by and between Reunion Resources Company and Reunion Industries, Inc. (incorporated by reference to Annex A to the Proxy Statement/Prospectus) 3.1 --Form of Certificate of Incorporation of Reunion Industries Incorporated (incorporated by reference to Annex B to the Proxy Statement/Prospectus) 3.2 --Form of Bylaws of Reunion Industries, Inc. *4.1 --Form of Specimen Stock Certificate evidencing the Common Stock, par value $.01 per share, of Reunion Industries, Inc. *5.1 --Opinion of Richards & O'Neil, LLP *8.1 --Opinion of Richards & O'Neil, LLP *24.1 --Consents of Richards & O'Neil, LLP (included in Exhibits 5.1 and 8.1) 25.1 --Power of Attorney (included on signature pages hereto)
- -------- * Exhibit to be filed by amendment. EX-3.2 2 EXHIBIT 3.2 EXHIBIT 3.2 BYLAWS OF REUNION INDUSTRIES, INC. TABLE OF CONTENTS
1.1 Registered Office.............................. 1 1.2 Other Offices.................................. 1 ARTICLE II STOCKHOLDERS MEETINGS 2.1 Place of Meetings.............................. 1 2.2 Annual Meetings................................ 1 2.3 Special Meetings............................... 1 2.4 Notice of Meetings............................. 2 2.5 Waiver of Notice............................... 2 2.6 Notice of Adjournments......................... 2 2.7 Quorum 2 2.8 Stockholders Entitled to Vote.................. 3 2.9 Stockholders May Vote in Person or by Proxy.... 3 2.10 Elections of Directors; No Cumulative Voting... 3 2.11 Voting......................................... 4 2.12 Voting List.................................... 4 2.13 Inspectors of Election......................... 4 2.14 Informal Action by Stockholders................ 4 ARTICLE III DIRECTORS 3.1 Number and Term of Office...................... 5 3.2 Vacancies...................................... 5 3.3 Place of Meetings.............................. 5 3.4 First Meeting.................................. 5 3.5 Regular Meetings............................... 6 3.6 Special Meetings............................... 6 3.7 Notice of Meetings............................. 6 3.8 Waiver of Notice............................... 6 3.9 Quorum......................................... 6 3.10 Adjournment.................................... 7 3.11 Informal Action................................ 7 3.12 General Powers................................. 7
(i) 3.13 Committees..................................... 7 3.14 Compensation of Directors...................... 8 3.15 Removal of Directors........................... 8 3.16 Directors' Liability........................... 8 ARTICLE IV OFFICERS 4.1 Executive Officers............................. 8 4.2 Agents or Employees............................ 9 4.3 Salaries....................................... 9 4.4 Removal of Officers, Agents or Employees....... 9 4.5 Chairman of the Board and President; Powers and Duties........................................ 9 4.6 Vice President: Powers and Duties.............. 10 4.7 Secretary: Powers and Duties................... 10 4.8 Treasurer; Powers and Duties................... 10 4.9 Delegation of Officer's Duties................. 10 ARTICLE V SHARES OF CAPITAL STOCK 5.1 Certificates of Shares......................... 11 5.2 Registered Stockholders........................ 11 5.3 Transfer of Shares............................. 11 5.4 Restriction on Transfer........................ 11 5.5 Replacement of Certificates.................... 12 ARTICLE VI RECORD DATE 6.1 Directors May Fix Record Date.................. 12 ARTICLE VII DIVIDENDS AND WORKING CAPITAL 7.1 Dividends...................................... 12 7.2 Reserve Fund................................... 12
(ii)
ARTICLE VIII MISCELLANEOUS PROVISIONS 8.1 Corporate Records.............................. 13 8.2 Execution of Written Instruments............... 13 8.3 Telecommunications............................. 13 8.4 Corporate Seal................................. 13 ARTICLE IX INDEMNIFICATION 9.1 Indemnification: Actions by Third Parties...... 14 9.2 Indemnification: Actions by or in the Right of the Corporation............................... 14 9.3 Advances....................................... 14 9.4 Non-exclusivity................................ 14 9.5 Insurance...................................... 15 ARTICLE X AMENDMENTS OF BY-LAWS 10.1 Amendments.................................... 15
(iii) BYLAWS OF REUNION INDUSTRIES, INC., A DELAWARE CORPORATION ARTICLE I OFFICES SECTION 1.1 Registered Office. The registered office of Reunion Industries, Inc., a Delaware corporation (the "Corporation"), in Delaware shall be Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of the Corporation's registered agent at such address is The Corporation Trust Company. SECTION 1.2 Other Offices. The Corporation may also have offices at such other places, both within or without the State of Delaware, as the Board of Directors may from time to time appoint or as the business of the Corporation may require. ARTICLE II STOCKHOLDERS MEETINGS SECTION 2.1 Place of Meetings. All meetings of the Stockholders shall be held at the registered office of the Corporation or at such other place, within or without the State of Delaware, as the Board of Directors may from time to time determine. SECTION 2.2 Annual Meetings. An annual meeting of the Stockholders shall be held each year at such time and on such date as shall be designated by resolution of the Board of Directors for the election of Directors and the transaction of such other business as may properly be brought before the meeting; provided, however, that each successive annual meeting shall be held on a date within thirteen months after the date of the preceding annual meeting. SECTION 2.3 Special Meetings. Special meetings of the Stockholders may be called at any time by the President, or a majority of the Board of Directors, or the holder or holders of not less than one-fifth of all the shares of capital stock of the Corporation outstanding and entitled to vote at the particular meeting. If called by the Stockholders, such request shall be in writing delivered to the Secretary of the Corporation and shall state the time, place and purpose or purposes of the meeting. On the written request of any person or persons who have duly called a special meeting, it shall be the duty of the Secretary to call such meeting to be held not less than ten days nor more than sixty days after receipt of such notice. If the Secretary shall neglect or refuse to issue such call, the person or persons making the request may do so. SECTION 2.4 Notice of Meetings. Written notice of every meeting of the Stockholders shall be given by or at the direction of the person or persons authorized to call the meeting, to each stockholder of record entitled to vote at the meeting, at least ten days prior to the date named for the meeting, unless a greater period of notice is required by law in a particular case. Such notice need not be given to Stockholders not entitled to vote at the meeting unless such stockholders are entitled by law to such notice in a particular case. Notice shall be deemed to have been properly given to a stockholder when delivered to him personally, or when deposited in the United States mail with first class postage prepaid, and directed to his address appearing on the books of the Corporation or supplied by him to the Corporation for the purpose of notice; and a certificate or affidavit by the Secretary or an Assistant Secretary or a transfer agent shall be prima facie evidence of the giving of any notice required by these Bylaws. Such notice shall specify the place, day and hour of the meeting, and shall state the nature of the business to be transacted if required by law and to the extent required by law. SECTION 2.5 Waiver of Notice. Whenever any written notice is required to be given to a stockholder under the provisions of applicable law, by the Certificate of Incorporation, or by these Bylaws, a waiver thereof in writing, signed by him either before or after the time stated herein, and whether before or after the meeting, shall be deemed equivalent of due notice. Unless otherwise required by the Certificate of Incorporation or these Bylaws and except in the case of a special meeting, neither the business to be transacted at the meeting, nor the purpose of the meeting, need be specified in the waiver of notice of such meeting. Attendance of any person, either in person or by proxy, at any meeting shall constitute a waiver of notice of such meeting, except when a person entitled to notice attends the meeting for the express purpose of objecting to the transaction of any business because the meeting was not lawfully called or convened. SECTION 2.6 Notice of Adjournments. On adjournment of an annual or special meeting of Stockholders, it shall not be necessary to give any notice of the adjourned meeting or of the business to be transacted thereat, other than by announcement at the meeting at which such adjournment is taken. At any adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting originally called. SECTION 2.7 Quorum. The presence, in person (including participation by telephone or similar communication as provided in Section 8.3) or by proxy, of the Stockholders entitled to cast at least a majority of the votes which all Stockholders are entitled to cast on the particular matter shall constitute a quorum for the purpose of considering such matter at any meeting of the Stockholders for the election of Directors or for the transaction of other business, except as otherwise provided by law or these Bylaws. The Stockholders present at a duly-organized meeting can continue to do business until adjournment, notwithstanding the withdrawal of enough Stockholders to leave less than a 2 quorum. If, however, any meeting of Stockholders cannot be organized because a quorum has not attended, the Stockholders entitled to vote thereat, present in person or by proxy, shall have the power to adjourn the meeting to such time and place as they may determine, until such time as a quorum shall be present in person or by proxy. SECTION 2.8 Stockholders Entitled to Vote. Subject to the provision of this section and except as may be otherwise provided by law or by the Certificate of Incorporation, every shareholder shall have the right at every Stockholders' meeting to cast one vote for every share having voting power standing in his name on the books of the Corporation; and if, by law or by Certificate of Incorporation, holders of shares not having the right to vote shall be entitled to vote at a particular meeting by reason of the particular business involved, every such holder of shares without voting power shall, subject to the Certificate of Incorporation, be entitled to one vote for every share standing in his name on the books of the Corporation. In the event the Board of Directors shall fix a time, not less than ten or more than sixty days prior to the date of any meeting of Stockholders, as a record date for the determination of the Stockholders entitled to notice of and to vote at any such meeting, only such Stockholders as shall be Stockholders of record on the date so fixed shall be entitled to notice of, or to vote at, such meeting notwithstanding any transfer of shares on the books of the Corporation after such record date. If a record date shall not be fixed by the Board of Directors for a particular Stockholders' meeting, transferees of shares which are transferred on the books of the Corporation within ten days next preceding the date of such meeting shall not be entitled to notice of or to vote at such meeting. SECTION 2.9 Stockholders May Vote in Person or by Proxy. Every stockholder entitled to vote may vote either in person or by proxy. Every proxy shall be executed in writing by a stockholder, or by his duly-authorized attorney-in-fact and filed with the Secretary of the Corporation before or at time of meeting. A proxy, unless coupled with an interest, shall be revocable at will, notwithstanding any other agreement or any provision in the proxy to the contrary, but the revocation of a proxy shall not be effective until notice thereof has been given to the Secretary of the Corporation. No unrevoked proxy shall be valid after eleven months from the date of its execution, unless a longer time is expressly provided therein, but in no event shall a proxy, unless coupled with an interest, be voted on after three years from the date of its execution. A proxy shall not be revoked by the death or incapacity of the maker unless, before the vote is counted or the authority is exercised, written notice of such death or incapacity is given to the Secretary of the Corporation. SECTION 2.10 Elections of Directors; No Cumulative Voting. Elections for Directors need not be by ballot except on demand made by a stockholder at the election and before the voting begins there shall be no cumulative voting and Directors shall be elected by a plurality of the votes cast, in person or by proxy, at a meeting of Stockholders by the holders of shares entitled to vote therein. 3 SECTION 2.11 Voting. When a quorum exists at any meeting, and unless otherwise provided by law, the Certificate of Incorporation or these Bylaws, the acts of the Stockholders present, in person or by proxy, entitled to cast at least a majority of the votes which all Stockholders present are entitled to cast shall be the acts of the Stockholders. SECTION 2.12 Voting List. The officer or agent having charge of the transfer books for shares of the Corporation shall make, at least ten days before each meeting of Stockholders, a complete list of the Stockholders entitled to vote at the meeting arranged in alphabetical order, with the address of and the number of shares held by each, which list shall be kept on file at the registered office of the Corporation, and shall be subject to inspection by any stockholder at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting, and shall be subject to the inspection of any stockholder during the whole time of the meeting. SECTION 2.13 Inspectors of Election. In advance of any meeting of Stockholders, the Board of Directors shall appoint Inspectors of Election, who may, but need not be, Stockholders to act at such meeting or any adjournment thereof. If Inspectors of Election are not so appointed, the Chairman of any such meeting shall make such appointment at the meeting. The number of Inspectors shall be one or three. No person who is a candidate for office shall act as an Inspector. In case any person appointed as an Inspector fails to appear or fails or refuses to act, the vacancy may be filled by appointment made by the Board of Directors in advance of the convening of the meeting, or at the meeting by the person acting as Chairman. The Inspectors of Election determine (i) the number of shares outstanding and the voting power of each, (ii) the shares represented at the meeting and the validity of proxies and ballots, (iii) the count of all votes and ballots and (iv) a record of the disposition to any challenges to any determination made by the Inspectors. The Inspectors shall also certify their determination of the number of shares represented at the meeting and their count of all votes and ballots cast. They shall make a written report of any matter determined by them and execute a certificate of any fact found by them. If there be three Inspectors of Election, the decision, act or certificate of a majority shall be effective in all respects as the decision, act, or certificate of all. SECTION 2.14 Informal Action by Stockholders. Except as may be otherwise provided by law or by the Certificate of Incorporation, notwithstanding anything to the contrary contained in these Bylaws, any action which may be taken at a meeting of the Stockholders may be taken without a meeting, if a consent in writing, setting forth the action so taken, shall (A) be signed by Stockholders with a number of outstanding shares having not less than the minimum number of votes necessary to authorize or take the action at a meeting at which all shares entitled to vote thereon were present and voted and (B) be filed with the Secretary of the Corporation. 4 ARTICLE III DIRECTORS SECTION 3.1 Number and Term of Office. The business and affairs of the Corporation shall be managed by a Board of not less than three nor more than twelve Directors who shall be natural persons of full age. Initially, the number of Directors shall be four, and thereafter, it shall be such number as shall have been last specified by resolution (if any) of the Board of Directors. Directors need not be residents of Delaware or Stockholders of the Corporation. At each annual meeting, the Directors shall be elected by the Stockholders to serve for the term of one year until their respective successors shall be elected and shall qualify. SECTION 3.2 Vacancies. Vacancies in the Board of Directors, whether or not caused by an increase in the number of Directors, may be filled by a majority of the remaining members of the Board though less than a quorum or by a sole remaining director. In the event one or more Directors shall resign, effective at a future date, such vacancy or vacancies shall be filled by a majority of the remaining Directors though less than a quorum or by a sole remaining director. Each person so elected shall be a director until his successor is elected by the Stockholders, who may make such election at the next annual meeting of the Stockholders or at any special meeting duly called for that purpose and held prior thereto. SECTION 3.3 Place of Meetings. The meetings of the Board of Directors may be held at such places, within or without the State of Delaware, as a majority of the Directors may from time to time by resolution determine, or as may be designated in the notice or waiver of notice of a particular meeting; in the absence of specification, such meetings shall be held at the registered office of the Corporation. SECTION 3.4 First Meeting. The first meeting of each newly elected Board of Directors shall be held immediately after the annual meeting of the Stockholders at the same location as the Stockholders' meeting for the purpose of organization, the election of officers and the transaction of other business, or such meeting may convene at such other time and place as may be fixed by resolution of the Stockholders adopted at the meeting at which the Directors were elected or by the written consent of all the Directors. If such meeting is held immediately after the Stockholders' meeting at which the Directors were elected, each director shall have received at least two days' written notice of the proposed meeting or shall have signed a written waiver of such notice. SECTION 3.5 Regular Meetings. Regular meetings of the Board of Directors may be held at such times as the Board may by resolution determine. If any day fixed for a 5 regular meeting shall be a legal holiday, then the meeting shall be held at the same hour and place on the next succeeding secular day. SECTION 3.6 Special Meetings. Special meetings of the Board of Directors may be called at any time by the Chairman of the Board or the President, and shall be called on the written request of any two or more Directors delivered to the Secretary. Any such request by Directors shall state the time and place of the proposed meeting, and on receipt of such request, it shall be the duty of the Secretary to promptly call such meeting. If the Secretary shall neglect to issue such call, the Directors making the request may issue the call. SECTION 3.7 Notice of Meetings. Regular meetings of the Board of Directors may be held without notice. If such meeting is to be held at other than the usual time and place, written notice of such meeting shall be given in the manner described herein. Notice of all special meetings shall be given by mailing the same by overnight mail at least forty-eight hours, or by telegraphing or telephoning the same, or by giving personal notice thereof at least forty-eight hours before the time named for such meeting. Any written notice herein required may be given to a director either personally, or by sending a copy thereof through the mail, or by telegram, charges prepaid, to his address appearing on the books of the Corporation or supplied by him to the Corporation for the purpose of notice. If the notice is sent by mail or by telegraph, it shall be deemed to have been given to the person entitled thereto when deposited in the United States mail or the telegraph office for transmission to such person. Such notice shall specify the place, date and hour of the meeting, and shall also state the nature of the business to be transacted at the meeting if and to the extent required by law. SECTION 3.8 Waiver of Notice. Whenever any written notice is required by law or the Certificate of Incorporation or these Bylaws to be given to a director, a waiver thereof in writing, signed by him either before or after the time stated therein, and whether before or after the meeting, shall be deemed equivalent to notice. Attendance of any director at any meeting shall constitute a waiver of notice of such meeting, except when such director attends the meeting for the express purpose of objecting to the transaction of any business because the meeting was not lawfully called or convened. SECTION 3.9 Quorum. At all meetings of the Board, a majority of the total Directors in office shall constitute a quorum for the transaction of business, and the acts of a majority of the Directors present (including participants by telephone or similar communication as provided in Section 8.3) at a meeting at which a quorum is present shall be the acts of the Board of Directors, except as may otherwise be specifically provided by law, by the Certificate of Incorporation or by these Bylaws. SECTION 3.10 Adjournment. Adjournment or adjournments of any regular or special meetings may be taken, and it shall not be necessary to give any notice of the 6 adjourned meeting or of the business to be transacted thereat other than by announcement at the meeting at which such adjournment is taken. At any adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the original meeting. SECTION 3.11 Informal Action. Notwithstanding anything to the contrary contained in these Bylaws, any action which may be taken at a meeting of the Directors or by the members of a committee duly appointed by the Board of Directors may be taken without a meeting, if a written consent setting forth the action so taken shall be signed by all of the Directors or the members of the committee, as the case may be, and shall be filed with the Secretary of the Corporation. SECTION 3.12 General Powers. The Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute, by the Certificate of Incorporation or by these Bylaws, directed or required to be exercised and done by the Stockholders. Without limiting the generality of the foregoing, the powers of the Board shall include the power to authorize increases in the Corporation's indebtedness and to mortgage and pledge its assets. SECTION 3.13 Committees. The Board of Directors may, by resolution adopted by a majority of the whole Board, designate one or more of its members to constitute an executive committee which to the extent provided in such resolution, shall have and exercise the authority of the Board of Directors in the management of the business of the Corporation and may authorize the seal of the Corporation to be affixed to all papers that may require it; provided, however, that no such committee shall have the power to amend the Certificate of Incorporation (except that a committee may, to the extent authorized by the resolutions providing for the issuance of shares of stock adopted by the Board of Directors as provided by the Delaware General Corporation Law (the "DGCL"), fix any of the preferences or rights of the shares), adopt an agreement of merger or consolidation, recommend the sale of all or substantially all the Corporation's assets or property to the Stockholders, recommend a dissolution of the Corporation or a revocation of dissolution to the Stockholders, or amend these Bylaws and provided further that, unless the resolution expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Each committee shall keep regular minutes of its proceedings and report the same to the Board at each regular meeting of the Board. The Board of Directors may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of such committee. Unless an alternate has been designated and is present at the meeting, in the absence or disqualification of a member of the committee, the members thereof present at any meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board of Directors to 7 act at the meeting in place of any such absent or disqualified member. Vacancies in the membership of the committees shall be filled by the Board of Directors at a regular or special meeting of the Board. SECTION 3.14 Compensation of Directors. Directors may receive such reasonable compensation for their services as shall be provided by a resolution adopted by a majority of the Board of Directors. SECTION 3.15 Removal of Directors. A director or the entire Board of Directors may be removed, with or without cause, by the affirmative vote of the holders of a majority of the shares of the Corporation entitled to vote in the election of Directors. At the meeting at which such director(s) are removed, the Stockholders may elect new director(s), in accordance with the provisions of these Bylaws to fill a vacancy or vacancies caused by the removal of such director(s). In case any vacancy so created shall not be filled by the Stockholders at such meeting, such vacancy may be filled by the Directors so provided in Section 3.2. SECTION 3.16 Directors' Liability. To the fullest extent permitted by the DGCL, now in effect and as amended from time to time, a director of the Corporation shall not be personally liable to the Corporation or its Stockholders for monetary damages for breach of a fiduciary duty as a director, provided that this section shall not eliminate or limit the liability of a director for (a) any breach of the director's duty of loyalty to the Corporation or its Stockholders, (b) acts or omissions not in good faith, (c) unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the DGCL or (d) any transaction from which the director derived an improper personal benefit. ARTICLE IV OFFICERS SECTION 4.1 Executive Officers. The executive officers of the Corporation shall be elected annually by the Board of Directors and shall be a Chairman of the Board, a President, a Secretary and a Treasurer. One or more additional Vice Presidents, and such other officers and assistant officers also may be elected or appointed as the Board of Directors may authorize from time to time. Any number of offices may held by the same person, except that the President shall not also hold the office of Secretary. In addition to the powers and duties prescribed by these Bylaws, the officers and assistant officers shall have such authority and shall perform such duties as from time to time shall be prescribed by the Board. The officers and assistant officers of the Corporation shall hold office until their successors are chosen and have qualified, unless they are sooner removed from office as provided by these Bylaws. The Board of Directors may add to the title of any officer or 8 assistant officer a word or words descriptive of his powers or the general character of his duties. If the office of any officer or assistant officer becomes vacant for any reason, the vacancy shall be filled by the Board of Directors. SECTION 4.2 Agents or Employees. The Board of Directors may by resolution designate the officer or officers who shall have authority to appoint such agents or employees as the needs of the Corporation require. In the absence of such designation, this function may be performed by the Chairman of the Board or the President and may be delegated by him to others in whole or in part. SECTION 4.3 Salaries. The salaries of all officers of the Corporation shall be fixed by the Board of Directors or by authority conferred by resolution of the Board. The Board may fix the salaries or other compensation of assistant officers, agents and employees of the Corporation, but in the absence of such action, this function shall be performed by the Chairman of the Board or the President or by others under their supervision. SECTION 4.4 Removal of Officers, Agents or Employees. Any officer, agent or employee of the Corporation may be removed or his authority revoked by resolution of the Board of Directors whenever, in its judgment, the best interests of the Corporation will be served thereby, if such removal or revocation shall be without prejudice to the rights, if any, of the person so removed to receive compensation or other benefits in accordance with the terms of existing contracts. Any agent or employee of the Corporation likewise may be removed by the Chairman of the Board or the President or, subject to their supervision, by the person having authority with respect to the appointment of such agent or employee. SECTION 4.5 Chairman of the Board and President; Powers and Duties. (a) The Chairman of the Board shall, if present, preside at all meetings of the Board of Directors and exercise and perform such other powers and duties as may from time to time be assigned to him by the Board of Directors or prescribed by these Bylaws. (b) Subject to such supervisory powers, if any, as may be given by the Board of Directors to the Chairman of the Board, if there be such an officer, the President shall be the Chief Executive Officer of the Corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the Corporation. He shall preside at all meetings of the Stockholders and in the absence of the Chairman of the Board, or if there be none, at all meetings of the Board of Directors. He shall be ex officio member of all the standing committees, including the executive committee, if any, and shall have the general powers and duties of management usually vested in the office of president of a corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors or these Bylaws. 9 SECTION 4.6 Vice President: Powers and Duties. The Vice President shall, in the absence or disability of the President, perform the duties and exercise the powers of the President; and if there be more than one Vice President, their seniority in performing such duties and exercising such powers shall be determined by the Board of Directors or, in default of such determination, by the order in which they were first elected. Each Vice President also shall have such powers and perform such duties as may be assigned to him by the Board. SECTION 4.7 Secretary: Powers and Duties. The Secretary shall attend all meetings of the Board and all meetings of the Stockholders and act as clerk thereof and record all the votes and minutes thereof in books to be kept for that purpose; and shall perform like duties for the executive committee of the Board of Directors when required. He shall give, or cause to be given notice of all meetings of the Stockholders and of the Board of Directors, and shall perform such other duties as may be prescribed by the Board, the Chairman or the President. He shall keep in custody the corporate seal of the Corporation, and may affix the same to any instrument requiring it and attest the same. The Secretary shall enforce the restriction on the transfer of the Corporation's capital stock set forth in Article 5 of these Bylaws. In connection therewith, the Secretary shall supervise the Corporation's transfer agent and/or registrar: SECTION 4.8 Treasurer; Powers and Duties. The Treasurer shall be the chief financial officer and shall cause full and accurate accounts of receipts and disbursements to be kept in books belonging to the Corporation. He shall see to the deposit of all monies and other valuable effects in the name and to the credit of the Corporation in such depository or depositories as may be designated by the Board of Directors, subject to the disbursement or deposition on orders signed in such manner as the Board of Directors shall prescribe. He shall render to the Chairman of the Board and to the Directors, at the regular meetings of the Board or whenever the Chairman of the Board or the Board may require it, an account of all his transactions as Treasurer and of the results of operations and financial condition of the Corporation. If required by the Board, the Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as may be satisfactory to the Board for the faithful discharge of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, records, money and other property of whatever kind in his possession or under his control belonging to the Corporation. SECTION 4.9 Delegation of Officer's Duties. Any officer may delegate duties to his assist (if any) appointed by the Board; and in case of the absence of any officer or assistant officer of the Corporation, or for any other reason that the Board of Directors may deem sufficient, the Board may delegate or authorize the delegation of his powers or duties, for the time being, to any person. 10 ARTICLE V SHARES OF CAPITAL STOCK SECTION 5.1 Certificates of Shares. Subject to requirements prescribed by law and the Certificate of Incorporation of the Corporation, the share certificates of the Corporation shall be in such form as shall be approved by the Board of Directors. All certificates representing shares shall be registered in the share register as they are issued, and those of the same class or series shall be consecutively numbered. Every share certificate shall bear the signature of the Chairman of the Board or the President or Vice President and of the Secretary or an Assistant Secretary or the Treasurer, and shall be sealed with the corporate seal. Whenever a certificate is countersigned by a transfer agent, one or both of the officers' or assistant officers' signatures and the seal may be in facsimile engraved or printed. In case any officer or assistant officer whose signature appears on any share certificate shall have ceased to be such because of death, resignation or otherwise, before the certificate is issued, it may be issued by the Corporation with the same effect as if he had not ceased to be such at the date of its issue. SECTION 5.2 Registered Stockholders. The Corporation shall be entitled to treat the registered holder of any share or shares as the holder thereof in fact and law and shall not be bound to recognize any equitable or other claim to, or interest in, such shares on the part of any other person, whether or not it shall have express or other notice thereof, save as otherwise expressly provided by law. SECTION 5.3 Transfer of Shares. Shares of the Corporation shall be transferred only on the books of the Corporation upon the surrender to the Corporation or its transfer agent of the share certificate or certificates therefor, duly endorsed by the person named therein or accompanied by proper evidence of succession, assignment or authority to transfer such shares; provided no transfers of shares shall be made while the books of the Corporation are closed against transfers as hereinafter provided in these ByLaws. On transfer, the surrendered certificate or certificates shall be cancelled, a new certificate or certificates shall be issued to the person entitled thereto, and the transaction shall be recorded on the books of the Corporation. SECTION 5.4 Restriction on Transfer. Transfers of shares may be restricted in any lawful manner by law, by the Certificate of Incorporation or by contract if a copy of the contract is filed with the Corporation, provided that notice of the restrictions shall be typed or printed conspicuously on the share certificate. SECTION 5.5 Replacement of Certificates. The Board of Directors may direct a new share certificate to be issued in place of any share certificate theretofore issued by the Corporation and claimed to have been lost, destroyed or mutilated, on the claimant's 11 furnishing an affidavit of the facts and, if required by the Board of Directors, a bond of indemnity in such amount or in open penalty and in such form, with such surety thereon, as the Board may approve for the protection of the Corporation and its officers and agents. ARTICLE VI RECORD DATE SECTION 6.1 Directors May Fix Record Date. The Board of Directors may fix a time not less than ten nor more than sixty days prior to (a) the date of any meeting of the Stockholders, or (b) the date fixed for payment of any dividend or distribution or for the allotment of rights, or (c) the date when any change or conversion or exchange of shares will be made or go into effect, as a record date for the determination of the Stockholders entitled to notice of, or to vote at, any such meeting, entitled to receive any such dividend, distribution or allotment of rights or to exercise the rights in respect to any such change, conversion or exchange of shares. In any such case, only the Stockholders who are Stockholders of record on the date so fixed shall be entitled to notice of and to vote at such meeting, to receive such dividend, distribution or allotment of rights or to exercise such rights, as the case may be, notwithstanding any transfer of shares on the books of the Corporation after the record date so fixed. The Board of Directors may close the books of the Corporation against the transfer of shares during the whole or any part of such period; and in any such case, appropriate notice of such closing shall be given to each Stockholder of record at the latest address appearing on the stock records of the Corporation or supplied by such Stockholder to the Corporation for the purpose of such notice. ARTICLE VII DIVIDENDS AND WORKING CAPITAL SECTION 7.1 Dividends. Subject to the limitations prescribed by law and the provisions of the Certificate of Incorporation relating thereto, the Board of Directors, at any regular or special meeting, may declare dividends on the outstanding shares of the Corporation out of assets legally available for such dividends to such extent as the Board may deem advisable. Dividends may be paid in cash, in property, or in shares of capital stock of the Corporation. SECTION 7.2 Reserve Fund. Before payment of any dividend, there may be set aside out of earned surplus of the Corporation such sum or sums as the Board of Directors may, from time to time, in its absolute discretion, deem proper as a reserve fund to meet contingencies or for such other purposes as the Board shall deem conducive to the interests of the Corporation, and the Board may vary or abolish any such reserve fund in its absolute discretion. 12 ARTICLE VIII MISCELLANEOUS PROVISIONS SECTION 8.1 Corporate Records. The Corporation shall keep at its registered office or principal place of business an original or duplicate record of the proceedings of the Stockholders and of the Directors and the original or copy of its Bylaws, including all amendments and alterations thereto to date, certified by the Secretary of the Corporation, and shall keep at its registered office or principal place of business or at the office of a transfer agent within the State of Delaware an original or duplicate share register giving the names of the Stockholders and showing their respective addresses, the number and classes of shares held by each, the numbers and dates of the certificates issued thereto, and the numbers and dates of cancellation of all certificates surrendered for cancellation. The Corporation shall keep at its registered office or at its principal place of business complete and accurate books or records of account. SECTION 8.2 Execution of Written Instruments. All contracts, deeds, mortgages, obligations, documents and instruments, whether or not required by seal, may be executed by the Chairman of the Board or the President or a Vice President and attested by the Secretary or the Treasurer or an Assistant Secretary or Assistant Treasurer, or may be executed or attested, or both, by such other person or persons as may be specifically designated by resolution of the Board of Directors. All checks, notes, drafts and orders for the payment of money shall be signed by such one or more officers or agents as the Board of Directors may from time to time designate. SECTION 8.3 Telecommunications. One or more Directors or Stockholders may participate in a meeting of the Board, a committee of the Board or the Stockholders by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. SECTION 8.4 Corporate Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its incorporation and the words "Corporate Seal of Delaware." Such seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced. 13 ARTICLE IX INDEMNIFICATION SECTION 9.1 Indemnification: Actions by Third Parties. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil or criminal, administrative or investigative (other than an action by or in the right of the Corporation) because he is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit, or proceeding, except when the act or failure to act giving rise to the claim for indemnification is determined by a court to have constituted willful misconduct or recklessness. SECTION 9.2 Indemnification: Actions by or in the Right of the Corporation. The Corporation shall indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action or suit by or in the right of the Corporation to procure judgment in its favor because he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the defense or settlement of such action or suit, except when the act or failure to act giving rise to the claim for indemnification is determined by a court to have constituted willful misconduct or recklessness. SECTION 9.3 Advances. Expenses incurred by a director, employee, or agent of the Corporation or a person who is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise in defending a civil or criminal action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding on receipt of an undertaking by or on behalf of such person to repay such amount, if it is ultimately determined that the person is not entitled to indemnification by the Corporation. SECTION 9.4 Non-exclusivity. The indemnification and advancement of expenses provided hereunder shall not be deemed exclusive of any rights to which a person seeking indemnification or advancement of expenses may be entitled under the DGCL, the Certificate of Incorporation, any agreement or vote of the Stockholders or disinterested Directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. The indemnification and advancement of expenses 14 provided hereunder shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person; provided, however, that the right to indemnification which any such person may have under any provision of the Certificate of Incorporation or these Bylaws shall be limited to the provisions thereof and hereof in effect at the time such person was acting as a director, officer, employee or agent. SECTION 9.5 Insurance. The Corporation may purchase and maintain insurance at its expense for the benefit of any person who is or was a director, officer, employee or agent of the Corporation against any expenses, liability or loss asserted against or incurred by him, whether or not the Corporation would have the power to indemnity such director, officer, employee or agent under the DGCL or other applicable law. In addition, the Corporation may operate a fund of any nature to secure its indemnification obligations. ARTICLE X AMENDMENTS OF BY-LAWS SECTION 10.1 Amendments. Except as otherwise provided by law, these Bylaws may be altered, amended, supplemented or repealed by the affirmative vote of a majority of the Board of Directors or by the affirmative vote of the Stockholders holding at least a majority of the shares of capital stock entitled to vote in the election of directors, at any regular or special meeting of the Board or of the Stockholders, as the case may be, convened after notice of that purpose. Further, these Bylaws may be altered, amended, supplemented or repealed by unanimous written consent of all of the Directors or written consent of the Stockholders holding at least a majority of the shares entitled to vote thereon, without a meeting. 15 -----END PRIVACY-ENHANCED MESSAGE-----