<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 21, 1996
REGISTRATION NO. 33-64325
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO THE
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) 324-8858
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
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<TABLE>
<CAPTION>
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)
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<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share......... 3,855,085 shs $5.50 $21,202,967.50 $7,311.97
</TABLE>
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(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.
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<PAGE>
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:
<TABLE>
<CAPTION>
LOCATION IN PROXY
FORM S-4 ITEM NUMBER STATEMENT/PROSPECTUS
-------------------- --------------------
<C> <S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration
Statement and Outside Front Cover Forepart of Registration Statement and
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; Risk
Factors; 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 Securities Not Applicable
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-2 Not Applicable
Registrants......................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOCATION IN PROXY
FORM S-4 ITEM NUMBER STATEMENT/PROSPECTUS
-------------------- --------------------
<C> <S> <C>
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 Solicited.. Outside Front Cover Page of Proxy
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...
</TABLE>
<PAGE>
REUNION RESOURCES COMPANY
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 22, 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 March 22, 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
February 20, 1996 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,
/s/ Richard L. Evans
RICHARD L. EVANS,
Secretary
Houston, Texas
February , 1996
<PAGE>
SUBJECT TO COMPLETION, DATED FEBRUARY 21, 1996
3,855,085 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 MARCH 22, 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 "RISK FACTORS" ON PAGE 7 OF THIS PROXY STATEMENT/PROSPECTUS 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 FEBRUARY , 1996
<PAGE>
PROXY STATEMENT/PROSPECTUS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
DESCRIPTION PAGE NUMBER
- ----------- -----------
<S> <C>
Available Information............................................... 3
Summary............................................................. 4
Risk Factors........................................................ 7
The Special Meeting................................................. 9
Proposal I. The Election of Directors............................... 11
Proposal II. The Merger............................................. 13
Ownership Information............................................... 24
Management Information.............................................. 26
Certain Relationships and Related Transactions...................... 31
</TABLE>
<PAGE>
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 Richard L. Evans, Secretary, 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. However, the Company believes that the
summary descriptions contained in this Proxy Statement/Prospectus of any
contract, agreement or other document filed as an exhibit to the Form S-4
accurately describe the material provisions of such contract, agreement or
other document. For complete information as to any such contract, agreement or
other document, 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 Richard L. Evans, Secretary Reunion Resources Company, 2801 Post
Oak Boulevard, Suite 400, Houston, Texas 77056, telephone number (713) 627-
9277. Following the earlier of (i) the effective time of the Merger and (ii)
March 31, 1996, such requests should be made to Mr. Evans at One Stamford
Landing, 62 Southfield Avenue, Stamford, Connecticut 06902, telephone number
(203) 324-8858.
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
<PAGE>
SUMMARY
MEETING AND PROPOSALS
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 March 22, 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 February [ ], 1996.
At the Special Meeting, stockholders will be asked to consider and act upon
the following:
(i) Proposal I: The election of five directors to the Board of Directors
of the Company (See "Proposal I: The Election of Directors");
(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."); and
(iii) To transact such other business as may properly come before the
Special Meeting or any adjournment thereof.
CONSEQUENCES OF APPROVAL OF PROPOSALS
With the exception of the Transfer Restrictions, the New Authorized Stock (as
defined below), a new name, and the New Indemnity Restriction (as defined
below), 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.
The Transfer Restrictions. The Transfer Restrictions, set forth in
Article V of New Subsidiary's Certificate of Incorporation, are designed to
prevent any person or group of persons from becoming a 5% 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%
shareholder by prohibiting and voiding any transfer or agreement to
transfer stock to the extent that it would cause the transferee to hold
such a prohibited ownership percentage (See "Risk Factors" and "Proposal
II. The Merger--Transfer Restrictions").
The New Authorized Stock. New Subsidiary is authorized pursuant to
Article IV of its Certificate of Incorporation to issue (i) 20,000,000
shares of New Common Stock, par value $.01 per share,
4
<PAGE>
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 "Risk Factors" and "Proposal II. The Merger--The
New Authorized Stock"). The Board of Directors of the Company (to become
the Board of Directors of New Subsidiary upon effectiveness of the Merger)
does not have any present plans to issue any of the New Authorized Stock.
New Name. The corporate name of New Subsidiary is Reunion Industries,
Inc., as set forth in Article I of its Certificate of Incorporation.
The New Indemnity Restriction. Section 12.8 of New Subsidiary's
Certificate of Incorporation contains a limitation on New Subsidiary's
obligation to indemnify its directors that the Registrant's Certificate of
Incorporation does not contain (the "New Indemnity Restriction"). Section
12.8 provides that New Subsidiary is required to indemnify any of its
directors against liabilities arising out of their services on behalf of
the corporation in connection with an action, suit or proceeding, whether
civil, criminal, administrative, arbitrative or investigative (a
"Proceeding"), that was 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. See "Proposal II: The Merger--The New
Indemnity Restriction". Management is not aware of any pending or
threatened Proceeding that would be affected by the New Indemnity
Restriction.
Except as revised to reflect the changes to New Subsidiary's Certificate of
Incorporation described above, the Bylaws of New Subsidiary are substantially
identical to the Company's Bylaws.
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.
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
3,855,085 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".
5
<PAGE>
NO APPRAISAL RIGHTS
Pursuant to Section 262 of the Delaware General Corporation Law (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.
DESCRIPTION OF COMPANY
The Company, through its wholly-owned subsidiary Oneida Rostone Corp.
("ORC"), is engaged in the manufacturing of high volume, precision plastic
products and providing engineered plastics services. ORC's Oneida division,
acquired in September 1995, 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. ORC's Rostone division, acquired in February 1996, compounds and
molds thermoset polyester resins. Rostone's products consist of proprietary
bulk and sheet molding compounds, both for internal use and for sale to other
manufacturers, and of custom molded parts for the electrical, appliance,
business machine and other markets.
The Company is also engaged in producing and selling crude oil and natural
gas in the United States, and in real estate development and wine grape
agricultural operations in Napa County, California. The Company is currently
pursuing the sale of its oil and gas assets and has engaged an investment bank
in furtherance of this pursuit.
6
<PAGE>
RISK FACTORS
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" and "--Anti-Takeover Effects") 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" and "--Anti-Takeover Effects".
7
<PAGE>
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" and "--Anti-Takeover
Effects".
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THE SPECIAL MEETING
DATE, TIME, PLACE AND PURPOSE OF THE SPECIAL MEETING
The Special Meeting will be held on March 22, 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:
(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 to stockholders of the proposed
Merger, see "Proposal II. The Merger--Federal Income Tax Consequences to
Stockholders". 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
February 20, 1996 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 3,855,085 shares of Existing Common
Stock issued and outstanding and entitled to vote at the Special Meeting. As of
such date, there were approximately 1,680 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 Richard L. Evans, 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.
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 February [ ], 1996. 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
9
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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 3,855,085 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 to be
voted by directors, executive officers and Chatwins Group, Inc. ("Chatwins"),
aggregating 1,826,490 shares as of the Record Date, or approximately 47.4% 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").
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<PAGE>
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 would 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.
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. Management believes that all of the shares of Existing Common Stock to
be voted by directors, executive officers and Chatwins, aggregating 1,826,490
shares as of the Record Date, or approximately 47.4% of the issued and
outstanding Existing Common Stock (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 CURRENT AND PROPOSED DIRECTORS
DIRECTORS AND NOMINEES
<TABLE>
<CAPTION>
NAME STATUS AGE
---- ------ ---
<S> <C> <C>
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
</TABLE>
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
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<PAGE>
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.
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, General Counsel and Secretary of Cooper Cameron Corporation, an oil
field manufacturing company. Prior thereto he was Senior 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.".
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<PAGE>
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.
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<PAGE>
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
current Board of Directors of the Company approved the Merger Agreement by
unanimous vote on October 26, 1995.
The Merger 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 to be voted by directors,
executive officers and Chatwins, aggregating 1,826,490 shares as of the Record
Date, or approximately 47.4% of the issued and outstanding Existing Common
Stock (see "Ownership Information--Security Ownership of Certain Beneficial
Owners and Management"), will be voted in favor of the Merger.
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 proxies to vote all of
their respectively-owned shares of Existing Common Stock (the "Chatwins
Proxies"). Also in
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<PAGE>
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", 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 Transfer Restrictions, if a stockholder transfers or agrees to
transfer Stock, the transfer will be prohibited
15
<PAGE>
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 "Risk
Factors" and "--Anti-Takeover Effects".
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 Directors
determines that the Transfer Restrictions are no longer necessary; or (iii) the
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<PAGE>
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.
ANTI-TAKEOVER EFFECTS
The consummation of the Merger, which would result in the implementation of
the Transfer Restrictions and the authorization of the New Authorized Stock,
may have the effect of preventing or discouraging an attempt by another person
or entity to acquire control of New Subsidiary. In addition to impeding the
acquisition of a significant or controlling interest in New Subsidiary, the
Transfer Restrictions and New Authorized Stock may render it more difficult for
a third party to effect a merger or similar transaction, even if such
transaction is favored by a majority of the independent stockholders. The
Transfer Restrictions may have the effect of discouraging or defeating mergers,
proxy contests, or management changes that stockholders may deem in the best
interests of New Subsidiary. The Transfer Restrictions may also have the effect
of preventing a party from acquiring an interest in New Subsidiary that would
be large enough to enable such party to effect a change in management of New
Subsidiary. Similarly, the New Authorized Stock may enable New Subsidiary to
dilute the percentage ownership of any party attempting to acquire a
controlling interest in New Subsidiary or a percentage ownership sufficient to
effect a change in management of New Subsidiary. See "Risk Factors--Market
Considerations", "--Additional Common Stock", and "--Blank Check Preferred
Stock".
The Company has proposed the Merger, however, to effect the Transfer
Restrictions in order to protect the availability of the Company's significant
NOLs (see "--Preservation of Tax Benefits"), and has proposed the New
Authorized Stock to provide flexibility for financing New Subsidiary's
activities and meeting other corporate needs in the future (see "--The New
Authorized Stock"), and not as part of an anti-takeover plan or strategy. Any
issuance of shares of the New Authorized Stock by New Subsidiary is subject to
the Transfer Restrictions (see Section 5.1 of New Subsidiary's Certificate of
Incorporation, a copy of which is included in this Proxy Statement/Prospectus
as ANNEX B), which will limit, if not prevent, the use of the New Authorized
Stock as an anti-takeover device while the Transfer Restrictions are in effect.
No employment, credit or other agreements to which the Company is party,
individually or in the aggregate, are likely to have any anti-takeover effects.
Other than i) the Transfer Restrictions, ii) the New Authorized Stock, iii)
Article VI of the Certificate of Incorporation and Section 3.1 of the By-laws
of New Subsidiary, which establish a maximum number of directors (12), and iv)
Article IX of the Certificate of Incorporation and Section 2.10 of the By-laws,
which abolish cumulative voting by stockholders in director elections, no
provisions of New Subsidiary's Certificate of Incorporation or By-laws can be
considered to have an anti-takeover effect.
The Merger has not been proposed to forestall or hinder any specific effort
to accumulate the Company's securities or to obtain control of the Company by
means of a merger, tender offer, solicitation in opposition to management or
otherwise. At the present time, the Board of Directors does not have any plan
or intention to propose any anti-takeover measures in future proxy
solicitations.
MERGER STRUCTURE
The Merger will be accomplished under the Delaware General Corporation Law
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. At the
Effective Time of the Merger, each share of New Common Stock theretofore issued
and outstanding and held by the Company shall be retired and cancelled and
shall cease to exist without the payment of any
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<PAGE>
consideration therefor. 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.
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, containing the New Indemnity Restriction, which requires New
Subsidiary to indemnify a director of the corporation in connection with any
Proceeding initiated by such director only if the initiation of such Proceeding
was authorized in writing by the Board of Directors of the corporation.
Approval of the Merger Agreement by the stockholders of the Company will result
in the implementation of items (i) through (iv) above. 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.
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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 3,855,085 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 Blank Check Preferred
Stock, par value $.01 per share. See "Risk Factors--Additional Common Stock"
and "--Blank Check Preferred 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
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<PAGE>
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.
THE NEW INDEMNITY RESTRICTION
Both the Company's and, subject to the New Indemnity Restriction, New
Subsidiary's Certificate of Incorporation provide that present and former
directors, 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 DGCL against all losses, liabilities, and expenses incurred
in connection with any threatened, pending, or completed action, suit or
proceeding instituted against or involving such person by virtue of his or her
position as a director of the corporation or person serving at the request of
the corporation. DGCL Section 145(a) 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. DGCL Section 145(b)
applies a similar standard of care in the case of derivative actions except
that in such cases indemnification extends only to expenses (including
attorneys' fees) incurred in connection with defense or settlement of such an
action. Where, in a derivative action, the person is adjudged to be liable
to the corporation, such person may be indemnified only if and to the extent
that the Court of Chancery of
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<PAGE>
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. DGCL Section 145(c)
further provides that where a director of a corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred
to in subsections (a) and (b) he shall be indemnified against expenses,
including attorneys' fees, incurred in connection therewith.
The New Indemnity Restriction set forth in Section 12.8 of the Certificate of
Incorporation of New Subsidiary (a copy of which is included as ANNEX B to this
Proxy Statement/Prospectus) is not in the Company's Certificate of
Incorporation and constitutes the only variation between the indemnification
provisions of the Certificate of Incorporation of the Company and the
indemnification provisions of New Subsidiary's Certificate of Incorporation.
The New Indemnity Restriction limits New Subsidiary's obligation to indemnify
its directors against liabilities arising out of their services on behalf of
the corporation by mandating indemnification of a director in connection with
an action, suit or proceeding, whether civil, criminal, administrative,
arbitrative or investigative (a "Proceeding") that such director initiated only
if the director's initiation of such Proceeding (or part thereof) was
authorized in writing by the Board of Directors. That is, should a director of
New Subsidiary initiate a Proceeding, including either a direct or derivative
lawsuit, the New Indemnity Restriction would permit New Subsidiary to refuse
indemnification of such director unless the initiation of the Proceeding was
approved in writing by the Board of Directors. For instance, if a director of
New Subsidiary has a dispute with New Subsidiary that relates to his duties as
a director, including disputes over his compensation, with respect to which he
commences a direct Proceeding against the corporation, the New Indemnity
Restriction would permit New Subsidiary to refuse to indemnify the director for
the expenses he incurs in such Proceeding. In addition, should a director of
New Subsidiary commence a derivative Proceeding on behalf of New Subsidiary
after a majority of the Board had determined that such suit was not in the best
interests of New Subsidiary, the New Indemnity Restriction would similarly
permit New Subsidiary not to indemnify the director for his expenses relating
to such Proceeding. Assuming that the majority's decision had been made in good
faith and in its sound business judgment, the New Indemnity Restriction would
protect the corporation from unnecessary expense. On the other hand, if the
majority's decision was the result of self-dealing or otherwise a breach of
fiduciary obligations owed to New Subsidiary and its shareholders, the New
Indemnity Restriction may have the effect of deterring legitimate claims that
might otherwise be brought by or in the right of New Subsidiary.
The New Indemnity Restriction has been added solely for the purpose of
limiting the indemnification obligations of the New Subsidiary and not in
response to any specific set of circumstances. There is not any pending or, to
the Company's knowledge, threatened Proceeding that would be affected by the
New Indemnity Restriction.
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 February 12, 1996 the last sale price of the Existing Common
Stock as reported by the NASDAQ Small-Cap. Market was $5 1/16 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 "Risk Factors--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
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<PAGE>
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 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
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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 TO STOCKHOLDERS
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.
Consummation of the Merger is not conditioned upon the receipt of a ruling
from the Internal Revenue Service as to the tax consequences of the
transactions, and no such ruling has been requested. The Board of Directors
believes that, and has received an opinion of Richards & O'Neil, LLP to the
effect that,
(i) the Merger will be treated as a tax-free reorganization under Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
(ii) the Company and New Subsidiary each will be a party to the
reorganization within the meaning of Section 368(b) of the Code;
(iii) no gain or loss will be recognized by the Company's stockholders on
the receipt of shares of New Common Stock in exchange for shares of
Existing Common Stock;
(iv) the tax basis of shares of New Common Stock received pursuant to the
Merger will equal the tax basis of the shares of Existing Common Stock
exchanged therefor; and
(v) provided that the shares of Existing Common Stock are held as capital
assets at the time of the Merger, the holding period of the shares of New
Common Stock received in the Merger will include the holding period of the
shares of Existing Common Stock exchanged therefor.
In rendering its opinion, Richards & O'Neil has considered the applicable
provisions of the Code, Treasury Regulations, pertinent judicial authorities,
interpretive rulings of the Internal Revenue Service, and such other
authorities as they have considered relevant.
FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY
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. See "Risk
Factors--Continuation of Net Operating Loss Carryforwards". 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.
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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. See "--Anti Takeover Effects".
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.
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OWNERSHIP INFORMATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 1995, the Company had outstanding 3,855,085 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 December 31, 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.
<TABLE>
<CAPTION>
AMOUNT
AND PERCENT
NATURE OF OF
NAME (AND ADDRESS OF 5% BENEFICIAL OWNERS) OWNERSHIP CLASS
- ------------------------------------------ --------- -------
<S> <C> <C>
Chatwins Group, Inc.
300 Weyman Plaza, Suite 340
Pittsburgh, PA 15236..................................... 1,862,490(1) 47.4%
Parkdale Holdings Corporation N.V.
Nieuwestraat 4-6, P.O. Box 210
Curacao, Netherlands Antilles............................ 271,280(2) 7.0%
Thomas N. Amonett.......................................... 66,000(3) 1.7%
Charles E. Bradley, Sr..................................... 1,862,490(4) 47.4%
Thomas L. Cassidy.......................................... 5,000 0.1%
John G. Poole.............................................. 0 0.0%
Franklin Myers............................................. 141,210(5) 3.6%
W. Kyle Willis............................................. 47,000(6) 1.2%
All Current Directors and Executive Officers as a group.... 2,018,490(7) 49.9%
</TABLE>
- --------
(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 192,000 shares of Existing Common Stock.
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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 December 31, 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 105,750 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 43,980 shares of Existing Common Stock. The
shares covered by the Rights equal 299,730 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
1,031,160 unconverted pre-Recapitalization shares, representing the right to
receive approximately 43,980 shares of Existing Common Stock (or cash, in the
case of fractional shares).
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<PAGE>
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:
<TABLE>
<CAPTION>
NAME POSITION AGE
---- -------- ---
<C> <S> <C>
Charles E. Bradley, Sr.(1)............ Current Director, President and 65
Chief Executive Officer of the
Company
Richard L. Evans(2)................... Executive Vice President, Chief 43
Financial Officer, and
Secretary of the Company
David N. Harrington(3)................ President and Chief Operating 54
Officer, ORC
</TABLE>
- --------
(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. Harrington has served as Chief Operating Officer of ORC (formerly
Oneida) since December 1989 and as President of ORC 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"):
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------- ------------------------
STOCK
NAME AND PRINCIPAL OTHER ANNUAL OPTIONS ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION(1) (SHARES) COMPENSATION(2)
------------------ ---- -------- -------- --------------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
- --------
(1) Includes automobile allowance.
(2) Company contributions under nondiscriminatory defined contribution plan and
certain health insurance plans for which all employees are eligible.
27
<PAGE>
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
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING 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)
--------------- -------- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Thomas N. Amonett....... -- -- 10,000(2) 10,000 -- --
W. Kyle Willis.......... 4,500 $15,335(3) 53,500 7,000 $159,867 --
</TABLE>
- --------
(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. Under the
terms of these agreements if, prior to December 31, 1996, more than 25% of the
outstanding Existing Common Stock is acquired by any person other than Parkdale
(a "Change-in-Control") and Mr. Amonett's or Mr. Willis's employment is
terminated for any reason within one year thereafter, 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
constituted a Change-in-Control under these agreements, and the termination of
the employment of Mr. Amonett and Mr. Willis as employees of the Company on
January 1, 1996 triggered their rights to compensation and benefits under their
respective agreement. Mr. Willis has been paid a lump sum of $268,000 in full
satisfaction of the Company's obligations to him under his agreement with the
Company. In lieu of a lump sum payment Mr. Amonett has elected to continue to
be paid his compensation, an aggregate of $346,000 over two years, through
December 31, 1997 and will continue to receive employee benefits during this
period. Mr. Amonett may elect to receive a lump sum payment of the balance due
him by the Company at any time before December 31, 1997.
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.
28
<PAGE>
COMPENSATION COMMITTEE REPORT
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 1,867,490 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 currently a member of the
Compensation Committee), provided consulting services to the Company for
$150,000 during 1994 under contractual arrangements entered in 1992 (see
"Certain Relationships and Related Transactions--Parkdale Holdings Corporation
N.V." for a discussion of Mr. Myers' and Parkdale's relationship to the
Company; see "Certain Relationships and Related Transactions--Chatwins Group,
Inc. and Affiliates" and "Proposal II. The Merger--Preservation of Tax
Benefits" for a discussion of Mr. Myers' involvement in the Chatwins
Acquisition).
29
<PAGE>
See "Proposal I. The Election of Directors--Charles E. Bradley, Sr.",
"Proposal II. The Merger-- Preservation of Tax Benefits", "Ownership
Information--Security Ownership of Certain Beneficial Owners and Management",
and "Certain Relationships and Related Transactions--Chatwins Group, Inc. and
Affiliates" for a discussion of Mr. Bradley's relationship to Chatwins, the
Chatwins Acquisition, and Mr. Bradley's and Chatwins' relationship to the
Company.
See "Proposal I. The Election of Directors--Thomas L. Cassidy", "Proposal II.
The Merger--Preservation of Tax Benefits", "Ownership Information--Security
Ownership of Certain Beneficial Owners and Management", and "Certain
Relationships and Related Transactions--Chatwins Group, Inc. and Affiliates"
for a discussion of Mr. Cassidy's relationship to Chatwins, the Chatwins
Acquisition, and Mr. Cassidy's and Chatwins' relationship to the Company.
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
Charles E. Bradley, Sr., Chairman*
- -------- Thomas L. Cassidy*
* The Compensation Committee of the Board of Directors of the Company furnished
the above 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.
30
<PAGE>
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:
[PASTE UP CHART]
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
- --------
(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.
31
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CHATWINS GROUP, INC. AND AFFILIATES
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
"Oneida Acquisition"). 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 $4,932,940 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/Chatwins 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 Oneida/Chatwins Debt was subsequently
memorialized by a Subordinated Promissory Note issued by Oneida to Chatwins.
Interest on this note is payable monthly. 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.
On February 2, 1996, Rostone Corporation ("Rostone"), a Delaware corporation,
was merged with and into Oneida, a wholly-owned subsidiary of the Company (the
"Rostone/Oneida Merger"), pursuant to a Merger Agreement (the "Rostone/Oneida
Agreement") dated as of December 22, 1995. Pursuant to the Rostone/Oneida
Agreement Oneida, as the surviving corporation, changed its name to Oneida
Rostone Corp. ("ORC"). The purchase price payable by ORC under the
Rostone/Oneida Agreement to the stockholders of Rostone is an amount up to
$4,000,503 as follows: (i) $503 in 1996, (ii) up to $2,000,000 in 1997 if
Rostone
32
<PAGE>
achieves specified levels of earnings before interest and taxes (as provided in
the Rostone/Oneida Agreement) for the calendar year 1996 and (iii) up to
$2,000,000 in 1998 if Rostone achieves specified levels of earnings before
interest and taxes (as provided in the Rostone/Oneida Agreement) for the
calendar year 1997. Under the terms of ORC's Loan Facility (described below),
all such payments may only be made from equity contributions the Company may
provide to ORC. The financial terms of the transaction were determined based on
Rostone's financial position and results of operations for the fiscal year
ended December 31, 1994 and for the eleven months ended November 30, 1995. The
terms of the Rostone/Oneida Merger were approved by the unanimous vote of the
directors of the Company, including by all disinterested directors.
In connection with the Oneida Acquisition and the Rostone/Oneida Merger, the
Company hired Prudential Securities Incorporated ("Prudential") to act as its
financial advisor and to provide opinions as to the fairness of the
consideration paid by the Company in connection with each of the Oneida
Acquisition (the "Oneida Consideration") and the Rostone/Oneida Merger (the
"Rostone Merger Consideration"). Prudential has issued its opinions, dated
September 7, 1995 and January 15, 1996, respectively, that, as of such dates,
the Oneida Consideration and the Rostone Merger Consideration paid by the
Company were fair to the Company from a financial point of view. In the case of
the Oneida Consideration, Prudential based its opinion of fairness on, among
other factors, its review of (i) certain of Oneida's historical financial data
and certain internal financial statements and other financial and operating
data of Oneida prepared by the management of Oneida, (ii) Oneida's projections
as to future financial performance, (iii) industry data relating to Oneida's
business, (iv) the financial terms of the Purchase Agreement relating to the
Oneida Acquisition (the "Oneida Agreement") as compared to the financial terms
of certain other transactions deemed relevant by Prudential, (v) publicly
available information concerning certain other companies deemed comparable to
Oneida by Prudential and the trading history of the stock of each such company,
(vi) the Oneida Agreement and certain related documents, and (vii) such other
factors as Prudential deemed relevant to its opinion. In the case of the
Rostone Merger Consideration, Prudential based its opinion of fairness on,
among other factors, its review of (i) Rostone's historical financial data and
other information regarding Rostone prepared by Rostone's and the Company's
management, (ii) financial projections prepared by Rostone's and the Company's
management, relating to the sales, earning and prospects for Rostone's
business, (iii) the financial terms of a draft of the Rostone/Oneida Agreement
dated January 3, 1996, (iv) the financial terms of certain other transactions
deemed relevant by Prudential, (v) publicly available information concerning
certain other companies that Prudential deemed comparable to Rostone, and the
trading history of the common stock of each such company, and (vi) discussions
with senior officers of Rostone and the Company concerning the financial
condition and prospects for Rostone. The Oneida Consideration and the Rostone
Merger Consideration were initially determined by the respective parties to
those transactions, with Prudential thereafter rendering its opinion as to the
fairness thereof from a financial point of view. No instructions or limitations
were given to or imposed upon the scope of Prudential's investigation related
to the opinions. In rendering its opinions, Prudential relied without
independent verification upon the accuracy and completeness of the financial
and other information publicly available and provided to it by the Company, by
Oneida, and by Rostone, and did not make or obtain any independent appraisals
of the properties, facilities or other assets of Oneida or Rostone.
Prudential is a nationally-recognized investment banking firm. As part of its
investment banking business, it is engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, negotiated and
competitively bid underwritings, secondary distributions of listed and unlisted
securities, and private placements and valuations for estate, corporate and
other purposes. Prudential also acts as financial advisor in connection with
tender offers and mergers and acquisitions, and conducts trading in listed and
unlisted securities. Prudential was selected by the management of the Company
on the basis of its reputation and experience. In the ordinary course of
business Prudential may trade the common stock of the Company for its own
account and for the accounts of customers, and accordingly at any time may hold
a long or short position in the common stock of the Company, and certain
accounts of Prudential's customers hold common stock of the Company.
For its services in rendering its opinions, the Company has paid Prudential's
fees totalling $300,000 and has reimbursed Prudential for $52,185 aggregate
expenses incurred in rendering its opinions. The Company
33
<PAGE>
has agreed to indemnify Prudential against certain liabilities which Prudential
may incur arising out of its issuance of the opinions. The complete texts of
Prudential's opinions are included as Exhibits to the Registration Statement on
Form S-4 of which this Prospectus/Proxy Statement is a part. Prudential's
opinions are available for inspection and copying at the principal executive
offices of the Company during its regular business hours by any interested
equity holder of the Company or his representative who has been so designated
in writing.
Rostone, located in Lafayette, Indiana, compounds and molds thermoset
polyester resins. Rostone's products consist of proprietary bulk and sheet
molding compounds, both for internal use and for sale to other manufacturers,
and custom molded parts for the electrical, appliance, business machine and
other markets. For the nine months ended September 30, 1995 (unaudited),
Rostone had net sales of approximately $21.1 million, operating profit of
approximately $1.4 million and net income of approximately $0.3 million. For
the year ended December 31, 1994, Rostone had net sales of approximately $25.6
million, operating profit of approximately $1.4 million and a net loss of
approximately $0.2 million.
Contemporaneous with the Rostone acquisition, ORC and its wholly-owned
subsidiary, Oneida Molded Plastics, Corp. of North Carolina ("OMPC-NC"),
amended and restated the terms of their secured credit facility (the "Loan
Facility") with Congress Financial Corporation ("Congress") to provide for term
loans in an aggregate principal amount of $6,600,000 and revolving loans
initially in an aggregate principal amount of up to $9,400,000. The loan
proceeds borrowed on February 2, 1996 were primarily used to refinance
Rostone's bank and institutional debt.
In the Rostone/Oneida Merger ORC acquired 100% of the preferred and common
stock of Rostone from CGI Investment Corp. ("CGII") a company owned 51% by SPI
and 49% by Chatwins. Charles E. Bradley, Sr., a Director and President and
Chief Executive Officer of the Company, John G. Poole, a nominee for Director
of the Company, and Richard L. Evans, Executive Vice President, Chief Financial
Officer and Secretary of the Company, are officers, directors and/or
shareholders of SPI. Prior to the Rostone/Oneida Merger certain officers of
Oneida were also serving as officers of Rostone and CGII.
Prior to the Rostone/Oneida Merger, Rostone was indebted to CGII pursuant to
a $250,000 promissory note dated May 21, 1993. The note, which had an
outstanding balance of $367,742 (principal and accrued interest) on February 2,
1996 and continues as an obligation of ORC, is subordinated to the prior
payment of indebtedness owing by ORC to Congress, except that if certain
conditions are met, regularly scheduled monthly interest payments may be paid
when due.
As of February 2, 1996 the outstanding balance of the Oneida/Chatwins Debt
was $3,553,952 (principal and accrued interest), which continues as an
obligation of ORC and is subordinated to the prior payment of indebtedness
owing by ORC to Congress, except that if certain conditions are met, regularly
scheduled monthly interest payments may be paid when due and principal may be
paid out of equity or subordinated loans that may be advanced by the Company to
ORC.
Prior to the Rostone/Oneida Merger, Rostone was the lessee of certain
equipment beneficially owned by Chatwins and Mr. Bradley. Chatwins and Mr.
Bradley share the risks and benefits under the lease pro rata in proportion to
the purchase price of the equipment paid to the equipment manufacturer by each
(57% for Chatwins and 43% for Mr. Bradley). At any time during the lease term
Rostone (ORC) may purchase the equipment upon the payment of the amount which,
when combined with its prior lease payments, will return to Chatwins and Mr.
Bradley the amounts paid by each of them to the manufacturer plus interest
thereon at 13.5% per annum, compounded monthly from the date of each co-
venturer's payment to the equipment manufacturer. Chatwins and Mr. Bradley's
rights to payment under the lease are subordinated to the prior payment of
indebtedness owing by ORC to Congress, except that if certain conditions are
met, regularly scheduled monthly lease payments may be made when due and the
amount due on exercise of ORC's purchase option may be paid out of the proceeds
of purchase money financing provided by a non-affiliate of ORC and permitted
under the terms of the Loan Facility.
34
<PAGE>
On November 1, 1995 and November 2, 1995, respectively, Mr. Bradley made
loans of $850,000 and $500,000 to the Company, which the Company then used as
part of a $1,550,000 loan it advanced to Oneida evidenced by a 10% promissory
note of Oneida payable November 2, 1997. Oneida used these funds to repay a
portion of the Oneida/Chatwins Debt. The Company issued two notes to Mr.
Bradley for the $1,350,000 he advanced, each bearing interest at a rate of 10%
per annum and each due and payable on September 14, 1997. According to the
terms of these notes, should the Company sell any of its material assets it
will prepay the notes in an amount equal to the proceeds of such sale which
remain (if any), after the Company loans to ORC a portion of the net proceeds
of such sale in an amount sufficient to permit ORC to repay the Oneida/Chatwins
Debt. The Company's rights to payment under the $1,550,000 note issued by ORC
are subordinated to the prior payment of indebtedness owing by ORC to Congress,
except that if certain conditions are met, regularly scheduled monthly interest
payments may be paid when due.
To facilitate the closing of the Rostone/Oneida Merger and the Loan Facility
Mr. Bradley entered into several financial arrangements with Congress and an
existing creditor of Rostone. To induce Congress to consummate the Loan
Facility Mr. Bradley guaranteed the obligations of ORC and OMPC-NC under the
Loan Facility subject to a cap of $4 million, which cap declines over time to
$2 million. Mr. Bradley will receive a credit support fee from ORC and OMPC-NC
in an aggregate amount equal to one percent (1%) per annum of the amount
guaranteed, payable monthly. Mr. Bradley's rights to payment of the monthly
installments of the credit support fee are subordinated to the prior payment of
indebtedness owing by ORC to Congress, except that if certain conditions are
met, the monthly installments may be paid when due. As a further inducement to
Congress Mr. Bradley entered into an environmental indemnity agreement pursuant
to which Mr. Bradley agrees to indemnify Congress against liabilities that may
arise from environmental problems that may be associated with ORC's existing
properties and to reimburse Congress for certain investigatory and cleanup
costs that Congress may incur should Congress request that those activities be
performed by ORC and should ORC fail to perform them.
To induce an existing creditor of Rostone to permit the Rostone/Oneida Merger
and Loan Facility to be consummated, Mr. Bradley agreed to purchase from this
creditor 50% of the $2,034,225 owing to him by Rostone on February 2, 1996 if
this indebtedness was restated to provide for quarterly amortization over a two
year period with interest at 10% per annum payable quarterly subject, however,
to a subordination agreement with Congress. As a result of this transaction,
Mr. Bradley and the creditor each holds a note from ORC in the amount of
$1,017,112.50 bearing interest at 10% per annum which is subordinated to the
prior payment of indebtedness owing by ORC to Congress, except that if certain
conditions are met, regularly scheduled payments of interest may be paid when
due.
Chatwins has informed the Company that it intends to propose 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
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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.
By Order of the Board of Directors,
/s/ Richard L. Evans
Richard L. Evans
CORPORATE SECRETARY
Houston, Texas
February , 1996
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ANNEX A
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.
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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").
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:
(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;
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(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:
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ANNEX B
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,
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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"):
(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.
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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) 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
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
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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 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
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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.
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 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.
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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 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
B-6
<PAGE>
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 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.
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,
B-7
<PAGE>
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 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
B-8
<PAGE>
REVOCABLE PROXY
REUNION RESOURCES COMPANY
/X/ PLEASE MARK VOTES AS IN THIS EXAMPLE
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE SPECIAL MEETING OF
STOCKHOLDERS TO BE HELD ON MARCH 22, 1996. The undersigned stockholder of
Reunion Resources Company (the "Company") hereby appoints Charles E. Bradley,
Sr., Thomas L. Cassidy, or Franklin Myers, or any of them, attorneys and proxies
of the undersigned, each with full power of substitution, to vote on behalf of
the undersigned at the Special Meeting of Stockholders of the Company to be held
at the offices of Richards & O'Neil, LLP 885 Third Avenue, New York, New York,
on Friday, March 22, 1996, at 10:00 a.m., New York time, and at any
adjournments thereof, all of the shares of common stock in the name of the
undersigned or which the undersigned may be entitled to vote:
Please be sure to sign and date this Proxy in the box below.
_________________________________
Stockholder sign above
_________________________________
Co-Holder (if any) sign above
Date_____________________________
1. The election as directors (except as indicated below) of all nominees.
For All
For / / Withhold / / Except / /
THOMAS N. AMONETT FRANKLIN MYERS JOHN G. POOLE THOMAS L. CASSIDY
CHARLES E. BRADLEY, SR.
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
THE BOX "FOR ALL EXCEPT" AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED
BELOW.)
____________________________________
2. The approval of the merger of the Company with and into Reunion Industries,
Inc. (the "Merger").
For / / Against / / Abstain / /
3. In their discretion, upon such other matters as may properly come before the
meeting; hereby revoking any proxy or proxies heretofore given by the
undersigned.
For / / Against / / Abstain / /
PLEASE CHECK BOX IF YOU PLAN TO ATTEND SPECIAL MEETING: / /
The Board of Directors recommends a vote FOR the nominees named above,
and FOR approval of the Merger; if no specification is made, the shares will be
voted for such nominees and for the Merger.
The undersigned hereby acknowledges receipt of the Notice of Special
Meeting of Stockholders and the Proxy Statement furnished herewith.
Signature should agree with name printed hereon. If Stock is held in the
name of more than one person, EACH joint owner should sign. Executors,
administrators, trustees, guardians and attorneys should indicate the capacity
in which they sign. Attorneys should submit powers of attorney.
<PAGE>
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 in such cases
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
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
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
23.1 --Consents of Richards & O'Neil, LLP (included in Exhibits 5.1 and
8.1)
23.2 --Consent of Prudential Securities Incorporated
24.1 --Power of Attorney (included on signature pages hereto)
99.1 --Opinion of Prudential Securities Incorporated, dated September
7, 1995
99.2 --Opinion of Prudential Securities Incorporated, dated January 15,
1996
</TABLE>
II-1
<PAGE>
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
II-2
<PAGE>
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.
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
<PAGE>
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 Stamford, State of
Connecticut on the 21st day of February, 1996.
REUNION INDUSTRIES, INC.
By /s/ Charles E. Bradley, Sr.
___________________________________
Charles E. Bradley, Sr.
President and Chief Executive
Officer
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 21st day of February, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Charles E. Bradley, Sr. President, Chief Executive February 21, 1996
____________________________________ Officer, Director
Charles E. Bradley, Sr.
/s/ Thomas N. Amonett* Director February 21, 1996
____________________________________
Thomas N. Amonett
/s/ Thomas L. Cassidy* Director February 21, 1996
____________________________________
Thomas L. Cassidy
/s/ Franklin Myers* Director February 21, 1996
____________________________________
Franklin Myers
/s/ Richard L. Evans* Executive Vice President and February 21, 1996
____________________________________ Chief Financial Officer
Richard L. Evans
</TABLE>
- --------
* By Charles E. Bradley, Sr., pursuant to a Power of Attorney.
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION OF EXHIBIT PAGE
-------- ---------------------- ----
<C> <S> <C>
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
23.1 --Consents of Richards & O'Neil, LLP (included in Exhibits 5.1
and 8.1)
23.2 --Consent of Prudential Securities Incorporated
24.1 --Power of Attorney (included on signature pages hereto)
99.1 --Opinion of Prudential Securities Incorporated, dated
September 7, 1995
99.2 --Opinion of Prudential Securities Incorporated, dated January
15, 1996
</TABLE>
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
REUNION INDUSTRIES, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
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
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
(iii)
<PAGE>
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.
<PAGE>
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
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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.
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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.
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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
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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
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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
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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
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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.
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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.
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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
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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.
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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.
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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
<PAGE>
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
<PAGE>
EXHIBIT 4.1
REUNION INDUSTRIES, INC.
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE CUSIP
--------------------
COMMON STOCK, PAR VALUE $.01
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON ASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE $.01, OF
- ---------------------------Reunion Industries, Inc.-------------------------
(HEREINAFTER CALLED THE CORPORATION), TRANSFERABLE ON THE BOOKS OF THE
CORPORATION BY THE HOLDER HEREOF IN PERSON OR BY DULY AUTHORIZED ATTORNEY, UPON
SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED. THIS CERTIFICATE IS NOT VALID
UNTIL COUNTERSIGNED BY THE TRANSFER AGENT.
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS, A STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES
THEREOF AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES
AND/OR RIGHTS.
WITNESS THE FACSIMILE SEAL OF THE CORPORATION AND THE FACSIMILE
SIGNATURES OF ITS DULY AUTHORIZED OFFICERS.
DATED
/s/ Richard L. Evans [corporate seal of /s/ Charles E. Bradley, Sr.
- ----------------------- the corporation] ---------------------------
Secretary Chairman of the Board
<PAGE>
REUNION INDUSTRIES, INC.
THE CORPORATION'S CERTIFICATE OF INCORPORATION CONTAINS RESTRICTIONS
PROHIBITING THE SALE, TRANSFER, DISPOSITION, PURCHASE OR ACQUISITION OF ANY
CAPITAL STOCK OF THE CORPORATION WITHOUT THE AUTHORIZATION OF THE CORPORATION'S
BOARD OF DIRECTORS OR DESIGNATED OFFICER BY OR TO ANY HOLDER (A) WHO
BENEFICIALLY OWNS DIRECTLY OR THROUGH ATTRIBUTION (AS DETERMINED UNDER SECTION
382 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED FROM TIME TO TIME (THE
"IRC")) 5% OR MORE OF ANY CLASS OF THE THEN ISSUED AND OUTSTANDING SHARES OF
CAPITAL STOCK OF THE CORPORATION OR (B) WHO, UPON THE SALE, TRANSFER,
DISPOSITION, PURCHASE OR ACQUISITION OF ANY SHARES OF CAPITAL STOCK OF THE
CORPORATION, WOULD BENEFICIALLY OWN DIRECTLY OR THROUGH ATTRIBUTION (AS
DETERMINED UNDER SECTION 382 OF THE IRC) 5% OR MORE OF ANY CLASS OF THE THEN
ISSUED AND OUTSTANDING SHARES OF CAPITAL STOCK OF THE CORPORATION. THE
CORPORATION WILL FURNISH A COPY OF ITS CERTIFICATE OF INCORPORATION TO THE
HOLDER OF RECORD OF THIS CERTIFICATE WITHOUT CHARGE UPON WRITTEN REQUEST TO THE
CORPORATION AT ITS PRINCIPAL PLACE OF BUSINESS.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of survivorship and not as tenants
in common
UNIF GIFT MIN ACT Custodian
---------------- -------------
(Cust) (Minor)
under Uniform Gifts to Minors Act
Additional abbreviations may also be used though not in the above list
FOR VALUE RECEIVED HEREBY SELF ASSIGN AND TRANSFER UNTO
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFICATION NUMBER OF ASSIGNEE
/ /
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, AS ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------ SHARES
OF THE CAPITAL STOCK REPRESENTED BY THE WITHIN CERTIFICATE AND DO HEREBY
IRREVOCABLY CONSTITUTE AND APPOINT
- ---------------------------------------------------------------------- ATTORNEY
TO TRANSFER THE SAID STOCK ON THE BOOKS OF THE WITHIN NAMED CORPORATION WITH
FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED
---------------------------
-------------------------------
NOTICE: THE SIGNATURE TO THE ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATEVER.
<PAGE>
EXHIBIT 5.1
February 21, 1996
Reunion Resources Company
One Stamford Landing
62 Southfield Avenue
Stamford, Connecticut 06902
Re: Common Stock, $.01 Par Value,
of Reunion Industries, Inc.
---------------------------
Gentlemen:
As counsel for Reunion Resources Company ("Reunion"), we have
participated in the preparation and filing of a registration statement on Form
S-4 (the "Registration Statement") for the registration of 3,855,085 shares of
common stock, par value $.01 per share (the "Common Stock"), of Reunion
Industries, Inc. (the "Company").
In this connection, we have reviewed (i) the Certificate of
Incorporation and Bylaws of the Company, (ii) the Registration Statement, (iii)
resolutions adopted by the Boards of Directors of the Company and of Reunion and
(iv) such other documents, records and papers as we have deemed necessary or
appropriate in order to give the opinion set forth herein. We have, with your
consent, relied as to factual matters on certificates or other documents
furnished by the Company or its officers and directors and by governmental
authorities and upon such other documents and data that we have deemed
appropriate. We have assumed the authenticity of all documents submitted to us
as originals and the conformity to original documents of all documents submitted
to us a copies.
<PAGE>
Reunion Industries, Inc.
February 13, 1996
Page 2
Based on and subject to the foregoing, and subject to (i) the
satisfaction (or waiver, if permitted) of all of the conditions to the merger of
Reunion with and into the Company (the "Merger") set forth in the Merger
Agreement by and between Reunion and the Company, dated as of November 14, 1995,
including, but not limited to, approval of the Merger Agreement by the holders
of a majority of the outstanding shares of Reunion's common stock entitled to
vote thereon, (ii) the execution, acknowledgment and filing by the Company of a
valid Certificate of Merger with the Secretary of State of Delaware to effect
the Merger, and (iii) the surrender of the certificates representing the
outstanding shares of Reunion common stock, along with the properly completed
letters of transmittal, in accordance with the procedure described in the
Registration Statement, we are of the opinion that the Common Stock, if and when
issued under the circumstances contemplated by this letter and the Registration
Statement, will be legally issued, fully-paid and nonassessable.
We express no opinion as to the laws of any jurisdiction other than
as set forth in the General Corporation Law of the State of Delaware. The
opinion set forth in this letter is effective as of the date hereof. No
expansion of our opinion may be made by implication or otherwise. We express no
opinions other than as herein expressly set forth.
We hereby consent to the reference to the undersigned under the
heading "Proposal II: The Merger - Legal Matters" in the Proxy
Statement/Prospectus included in the Registration Statement, and in all
amendments thereto, and to the filing of this opinion by the Company as Exhibit
5.1 to the Registration Statement.
Very truly yours,
/s/ Richards & O'Neil, LLP
<PAGE>
EXHIBIT 8.1
February 21, 1996
Reunion Resources Company
One Stamford Landing
62 Southfield Avenue
Stamford, Connecticut 06902
Re: Merger Of Reunion Resources Company Into Its
Wholly-owned Subsidiary, Reunion Industries, Inc.
-------------------------------------------------
Gentlemen:
We have acted as special counsel to Reunion Resources Company, a
Delaware corporation ("Reunion"), in connection with the transaction
contemplated by the Merger Agreement (the "Merger Agreement") dated as of
November 14, 1995 between Reunion and its wholly-owned subsidiary, Reunion
Industries, Inc. ("New Subsidiary"), a Delaware corporation, pursuant to which
Reunion is being merged into New Subsidiary, which will be the surviving
corporation (the "Merger"). At the Effective Time of the Merger, each share of
New Subsidiary common stock heretofore issued and outstanding and held by
Reunion shall be retired and cancelled and shall cease to exist without the
payment of any consideration therefor. Each share of Reunion common stock issued
and outstanding shall be automatically converted, by reason of the Merger
and without any action on the part of the holders thereof, into the right to
receive one fully paid and non-assessable share of New Subsidiary common stock;
the shares of Reunion shall cease to exist as such and shall exist only as the
right to receive shares of New Subsidiary common stock. This opinion is being
furnished pursuant to Section 5.1(c) of the Merger Agreement and all capitalized
terms herein, unless otherwise specified, have the meanings assigned thereto in
the Merger Agreement.
<PAGE>
Reunion Industries, Inc.
February 13, 1996
Page 2
In connection with our opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
the Merger Agreement and such other documents as we have deemed necessary or
appropriate for the opinions set forth below. In our examination we have assumed
the genuineness of all signatures, the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted to us as certified or photostatic copies and the authenticity of the
originals of such latter documents. As to any facts material to this opinion
which we did not independently establish or verify, we have relied upon the
foregoing documents and statements and representations of officers and other
representatives of Reunion.
In rendering our opinion, we have considered the applicable provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, pertinent judicial authorities, interpretative rulings of the
Internal Revenue Service (the "Service"), and such other authorities as we have
considered relevant.
Based solely upon the foregoing and upon the assumptions set forth
herein, and subject to the caveats set forth below, we are of the opinion that
under present law, for federal income tax purposes, (i) the Merger will be
treated as a tax-free reorganization under Section 368(a) of the Code; (ii)
Reunion and New Subsidiary each will be a party to the reorganization within the
meaning of Section 368(b) of the Code; (iii) no gain or loss will be recognized
by Reunion stockholders on the receipt of New Subsidiary shares at the Effective
Time of the Merger in exchange for shares of Reunion common stock; (iv) the tax
basis of shares in New Subsidiary received in the Merger will equal the tax
basis of the shares of Reunion exchanged therefor; and (v) provided that the
shares of Reunion are held as capital assets at the time of the Merger, the
holding period of the shares of New Subsidiary received in the Merger will
include the holding period of the shares of Reunion exchanged therefor.
Except as set forth above, we express no other opinion as to the tax
consequences, whether federal, state, local or foreign, of the Merger. We hereby
consent to the reference to the undersigned under the heading "Proposal II. The
Merger - Federal Income Tax Consequences to Stockholders" in the Proxy
Statement/Prospectus included in the registration statement related to the
Merger (the "Registration Statement"), and in all amendments thereto, and to the
filing of this opinion by New Subsidiary as Exhibit 8.1 to the Registration
Statement. We are furnishing this opinion to you solely in connection with the
<PAGE>
Reunion Industries, Inc.
February 13, 1996
Page 3
Merger and this opinion is not to be used, circulated, quoted or otherwise
referred to for any other purpose.
Very truly yours,
/s/ Richards & O'Neil, LLP
<PAGE>
EXHIBIT 23.2
[LOGO OF PRUDENTIAL SECURITIES APPEARS HERE]
February 15, 1996
By Facsimile and Courier
Mr. Richard Evans
Reunion Resources Company
2801 Post Oak Blvd.
Suite 400
Houston, TX 77056
Dear Mr. Evans:
We hereby (i) consent to the reference to the undersigned in the Registration
Statement on Form S-4 of Reunion Industries, Inc., as attached, and (ii) give
permission for our opinions with respect to the Oneida acquisition and the
Oneida/Rostone merger to be attached in their entireties as exhibits to such
filing.
As you will recall from our engagement letters, the opinions may be included in
their entireties in any communication by Reunion Resources Company to its
stockholders. The opinions may not, however, be summarized, excerpted from or
otherwise publicly referred to in any manner without the prior consent of
Prudential Securities. Except as set forth above, without the prior written
consent of Prudential Securities, neither our oral nor written advise may be
publicly disclosed. In addition, Prudential Securities may not be otherwise
publicly referred to without its prior consent.
Sincerely,
Prudential Securities Incorporated
Prudential Securities Incorporated, One New York Plaza, New York, NY 10292
Tel 212-776-1000
<PAGE>
EXHIBIT 99.1
[LOGO OF PRUDENTIAL SECURITIES APPEARS HERE]
September 7, 1995
Board of Directors
Reunion Resources Company
2801 Post Oak Boulevard
Houston, TX 77056
Dear Sirs:
Reunion Resources Company, a Delaware corporation ("Reunion"), and Chatwins
Holdings, Inc., ("Chatwins") a Delaware corporation, have entered into a Stock
Purchase Agreement dated as of September 7, 1995 (the "Purchase Agreement")
pursuant to which, among other things, Reunion will purchase all of the 601
issued and outstanding shares of common stock, par value $100 per share, and all
of the 25,000 issued and outstanding shares of preferred stock, par value $100
per share, of Oneida Molded Plastics Corporation, ("Oneida") a New York
corporation and a wholly-owned subsidiary of Chatwins, for approximately $3.1
million in cash. (The 601 issued and outstanding shares of common stock and the
25,000 issued and outstanding shares of preferred stock of Oneida are
collectively referred to herein as the "Shares".) As of September 5, 1995,
Oneida has (i) approximately $4.4 million in indebtedness to Congress Financial
Corporation, which indebtedness is secured by substantially all of Oneida's
assets; (ii) approximately $826,000 in indebtedness to other parties; and (iii)
approximately $4.9 million in indebtedness to Chatwins. All of the indebtedness
will remain outstanding following consummation of the transaction and Reunion is
not assuming any obligation with respect to any of such indebtedness, except as
provided in section 3.2 of the Purchase Agreement. After the purchase of the
Shares by Reunion, Oneida will become a wholly-owned subsidiary of Reunion. The
terms and conditions of the acquisition are more fully set forth in the Purchase
Agreement.
You have asked us to enter an opinion with respect to the fairness, from a
financial point of view, of the consideration to be paid by Reunion for the
Shares pursuant to the Purchase Agreement.
In conducting our analysis and arriving at the opinion stated herein, we
have reviewed such information and considered such financial data and other
factors as we deemed appropriate under the circumstances, including but not
limited to the following: (i) certain of Oneida's historical financial data and
certain internal financial statements and other financial and operating data of
Oneida prepared by the management of Oneida; (ii) Oneida's projections as to
future financial performance; (iii) industry data relating to Oneida's business;
(iv) the financial terms of the Purchase Agreement as
<PAGE>
[LOGO OF PRUDENTIAL SECURITIES APPEARS HERE]
Board of Directors
Reunion Resources Company
September 7, 1995
Page 2
compared to the financial terms of certain other transactions we deemed
relevant; (v) publicly available information concerning certain other companies
that we deemed comparable to Oneida and the trading history of the stock of each
such company; (vi) the Purchase Agreement and certain related documents; and
(vii) such other factors as we deemed relevant to our opinion. We have met with
the senior officers of Oneida to discuss its financial condition and prospects
and such other matters as we deemed relevant. Our opinion is based on economic,
financial and market conditions as they exist and can be evaluated on the date
hereof.
In connection with our review and analysis, we have relied upon the
accuracy and completeness of the financial data and other information that was
provided to us by Oneida or is publicly available, and have not independently
verified any such information. With respect to the financial projections, we
have assumed that they have been reasonably prepared on bases reflecting the
best current available estimates and judgments of Oneida's management as to the
future financial performance of Oneida, including the maintenance of its
relationships with significant customers at recent historical net sales levels.
We have neither made nor obtained any independent appraisals of the properties
or facilities of Oneida.
We have also assumed that the Congress Financial Corporation indebtedness
will be extended for one year from the date of closing which is expected to be
no later than September 11, 1995, and that the transaction contemplated herein
will not give rise to any acceleration of such indebtedness.
It is understood that this letter is for the information of the Board of
Directors of Reunion only and must not be used for any other purposes without
our prior written consent.
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the consideration to be paid by Reunion pursuant to the Purchase
Agreement is fair to Reunion from a financial point of view.
Very truly yours,
Prudential Securities Incorporated
<PAGE>
EXHIBIT 99.2
[LOGO OF PRUDENTIAL SECURITIES APPEARS HERE]
January 15, 1996
The Board of Directors
Reunion Resources Company
2801 Post Oak Boulevard
Houston, TX 77056
Dear Sirs:
Oneida Molded Plastics Corporation, a New York corporation ("Oneida"), a wholly-
owned subsidiary of Reunion Resources Company, a Delaware corporation
("Reunion"), and Rostone Corporation, a Delaware corporation ("Rostone"),
propose to enter into a Merger Agreement (the "Agreement") providing for the
merger of Rostone with and into Oneida. Pursuant to the Agreement, and as more
fully described therein, at the "Effective Time" (as defined in the Agreement):
(i) each share of common stock of Rostone, par value $0.40 per share (the
"Rostone Common Stock"), and each share of preferred stock of Rostone, par value
$0.01 per share (the "Rostone Preferred Stock"), shall be converted into the
right to receive $0.01 per share ("Deferred Consideration A") on the date on
which Reunion consummates the sale of certain oil and gas assets; (ii) each
share of Rostone Preferred Stock shall be converted into the right to receive a
cash payment on March 31, 1997 equal to eight times the amount, if any, by which
"Rostone EBIT" (as defined in the Agreement) for the calendar year 1996 exceeds
$2,200,000, up to a maximum payment of $2,000,000 ("Deferred Consideration B"),
divided by the aggregate number of shares of Rostone Preferred Stock, provided
that the aggregate cumulative amount of Deferred Consideration A and Deferred
Consideration B paid in connection with the Rostone Preferred Stock shall not
exceed $2,905,000, and each share of Rostone Common Stock shall be converted
into the right to receive the balance, if any, of Deferred Consideration B not
paid in connection with the Rostone Preferred Stock divided by the aggregate
number of shares of Rostone Common Stock; (iii) each share of Rostone Preferred
Stock shall be converted into the right to receive a cash payment on March 31,
1998 equal to eight times the amount, if any, by which Rostone EBIT for the
calendar year 1997 exceeds $2,450,000, up to a maximum payment of $2,000,000
("Deferred Consideration C"), divided by the aggregate number of shares of
Rostone Preferred Stock, provided that the aggregate cumulative amount of
Deferred Consideration A, Deferred Consideration B and Deferred Consideration C
paid in connection with the Rostone Preferred Stock shall not exceed $2,905,000,
and each share of Rostone Common Stock shall be converted into the right to
receive the balance, if any, of Deferred Consideration C not paid in connection
with the Rostone Preferred Stock divided by the aggregate number of shares of
Rostone Common Stock; and (iv) Oneida, as the surviving corporation, shall
assume the aggregate principal amount of debt and capital leases of Rostone,
together with all accrued and unpaid interest thereon outstanding on the Closing
Date (as defined in the Agreement) (the "Debt").
<PAGE>
[LOGO OF PRUDENTIAL SECURITIES APPEARS HERE]
The Board of Directors
Reunion Resources Company
January 15, 1996
Page 2
In addition, we understand that the Debt to be assumed by Oneida, as the
surviving corporation, pursuant to the Agreement, amounts to approximately
$11,686,187. The amounts referred to in clauses (i) through (ii) of the first
paragraph hereof, and in the first sentence of this paragraph, are hereafter
collectively referred to as the "Merger Consideration".
Furthermore, we understand that (i) approximately 94% of the Rostone Common
Stock is owned by C.G.I. Investment Corporation ("C.G.I.I.") and approximately
6% of the Rostone Common Stock is owned by two private individuals; (ii) 51% of
the common stock of C.G.I.I. is owned by Stanwich Partners, Inc. ("Stanwich")
and 49% of the common stock of C.G.I.I. is owned by Chatwins Group, Inc.
("Chatwins"), 100% of the common stock of which in turn is owned by Stanwich;
and (iii) Chatwins controls approximately 45% of the common stock of
Reunion.
You have asked us to render an opinion, with respect to the fairness, from a
financial point of view, to Reunion of the Merger Consideration to be paid
pursuant to the Agreement.
In conducting our analysis and arriving at the opinion stated herein, we have,
among other things: (i) reviewed Rostone's historical financial data and other
information regarding Rostone prepared by the management of Rostone and Reunion
("Management"); (ii) reviewed certain information, including financial
projections prepared by Management, relating to the sales, earnings and
prospects for Rostone's business; (iii) reviewed the financial terms of a draft
of the Agreement dated January 3, 1996; (iv) reviewed the financial terms of
certain other transactions we deemed relevant; (v) reviewed publicly available
information concerning certain other companies that we deemed to be comparable
to Rostone, and the trading history of the common stock of each such company;
(vi) conducted discussions with senior officers of Rostone and Reunion
concerning the financial condition and prospects of Rostone; and (vii) reviewed
such other financial studies and analyses, and performed such other
investigations and taken into account such other matters, as we deemed relevant
to our opinion.
Prudential Securities Incorporated ("Prudential Securities") was retained by
Reunion pursuant to a letter agreement dated November 29, 1995 to render an
opinion with regard to the proposed transaction. We received a retainer fee from
Reunion, and we will receive an additional fee in connection with this opinion,
as set forth in the letter agreement referred to above. Prudential Securities
has previously provided financial services to Reunion for which we have received
fees. In addition, in the ordinary course of business, we may trade the common
stock of Reunion for our own account and for the accounts of customers, and
accordingly at any time may hold a long or short position in such common stock,
and certain accounts of our customers hold common stock of Reunion.
<PAGE>
[LOGO OF PRUDENTIAL SECURITIES APPEARS HERE]
The Board of Directors
Reunion Resources Company
January 15, 1996
Page 3
In preparing our opinion, we have, without independent verification, relied upon
the accuracy and completeness of the financial data and other information
reviewed by us that was provided to us by Management, or is publicly available.
With respect to the financial projections prepared by Management, we have
assumed that they represent the best currently available estimates and judgments
of Management as to the future financial performance of Rostone, and we have not
undertaken any independent analysis to verify the reasonableness of the
assumptions underlying such financial forecasts. We have neither made nor
obtained any independent appraisals of the properties, facilities or other
assets of Rostone. We note that for each of the three years ending December 31,
1992, 1993 and 1994, Rostone has received qualified audit opinions from Price
Waterhouse L.L.P. We have assumed that Rostone EBIT for the calendar years 1996
and 1997 will be calculated pursuant to the Agreement on a stand alone basis. In
addition, we have assumed that all the transactions contemplated by the
Agreement will be consummated on the basis of the terms and provisions of the
January 3, 1996 draft of the Agreement. Our opinion is necessarily based on
economic, financial and market conditions as they exist and can be evaluated on
the date hereof.
It is understood that this letter is for the information of the Board of
Directors of Reunion only, and must not be used for any other purpose without
our prior written consent.
Based upon and subject to the foregoing, we are of the opinion that, as of the
date hereof, the Merger Consideration to be paid pursuant to the Agreement is
fair, from a financial point of view, to Reunion.
Very truly yours,
/s/ Prudential Securities Incorporated
PRUDENTIAL SECURITIES INCORPORATED
