<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) May 24, 1996
------------------------
REUNION INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
1-7726 06-1439715
- ---------------------------- ---------------------------------
(Commission File Number) (IRS Employer Identification No.)
One Stamford Landing, 62 Southfield Avenue. Stamford, CT 06902
- -------------------------------------------------------- -----------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 324-8858
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Not Applicable
- -------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 24, 1996, Reunion Industries, Inc. ("Reunion") and Tri-Union
Development Corporation ("Tri-Union"), a wholly-owned subsidiary of Tribo
Petroleum Corporation ("Tribo"), consummated the transactions contemplated by a
Stock Purchase Agreement, dated April 2, 1996, between Tri-Union, as Tribo's
assignee, and Reunion, as successor by merger to Reunion Resources Company (the
"Agreement"). Pursuant to the Agreement, Tri-Union acquired from Reunion all of
the issued and outstanding capital stock of Reunion Energy Company ("REC") which
owned substantially all of Reunion's oil and gas assets. The adjusted purchase
price was $11,578,485, of which $2,200,000 is payable by Tri-Union to Reunion
pursuant to a subordinated promissory note due November 25, 1996 (the "Note").
The Note bears interest at 12% per annum through November 25, 1996 and at a 15%
per annum default rate thereafter until paid. Tri-Union's payment of the Note
generally is subordinate to payment of its indebtedness to a bank incurred to
acquire REC. The Note is secured by a pledge of all of Tri-Union's issued and
outstanding capital stock, including an irrevocable proxy to vote such shares in
certain instances, and a guaranty by Tribo. Tribo's performance of its guaranty
also generally is subordinate to Tri-Union's payment of its bank debt incurred
to acquire REC. Tri-Union was formed in May 1996 to acquire REC. REC was
merged into Tri-Union on May 24, 1996, and substantially all of Tri-Union's
assets secure its bank debt. The description herein of the transactions covered
by the Agreement, the Note and related security documents is qualified in its
entirety by reference thereto which either previously have been filed with the
Commission or are filed herewith as exhibits hereto.
The purchase price paid for REC's stock reflected adjustments pursuant to
the Agreement for intercompany cash transfers by REC to Reunion and certain
expenditures by REC between January 1 and May 24, 1996. Of the aggregate
$7,999,081 cash paid by Tri-Union on May 24, Reunion used $5,048,817 to pay in
full related-party indebtedness. This included $3,664,064 owed by Oneida
Rostone Corp. ("Oneida"), a wholly-owned subsidiary of Reunion, to Chatwins
Group, Inc. ("Chatwins"), a controlling shareholder of Reunion, and
approximately $1,384,753 owed by Reunion to Charles E. Bradley, Sr., Reunion's
President and Chief Executive Officer. When Reunion acquired Oneida from a
subsidiary of Chatwins in September 1995, Reunion agreed to cause Oneida to
repay its existing indebtedness to Chatwins (plus interest thereon at 10% per
annum from September 1, 1995), before September 15, 1997 or earlier from any net
proceeds of any sale of material assets of Reunion. Similarly, when Reunion
borrowed $1,350,000 from Mr. Bradley in November 1995, Reunion agreed to repay
the debt (plus interest thereon at 10% per annum) before September 15, 1997 or
earlier from any net proceeds of any sale of material assets of Reunion
remaining after Oneida's indebtedness to Chatwins was repaid.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired. Not applicable.
(b) Pro Forma Financial Information. Filed herewith.
2
<PAGE>
(c) Exhibits.
2.1 Stock Purchase Agreement, dated April 2, 1996, between Tribo
Petroleum Corporation and Reunion Resources Company (incorporated by reference
to Exhibit 2.1 to Reunion's Current Report on Form 8-K dated April 2, 1996).
2.2 Subordinated Promissory Note Due 1996, made May 24, 1996 by Tri-
Union Development Corporation in favor of Reunion Industries, Inc. in the
original principal amount of $2,200,000 (filed herewith).
2.3 Pledge Agreement, dated as of May 24, 1996, between Tribo
Petroleum Corporation, as pledgor, and Reunion Industries, Inc., as secured
party, covering all issued and outstanding capital stock of Tri-Union
Development Corporation (filed herewith).
2.4 Guaranty, dated May 24, 1996, made by Tribo Petroleum Corporation
in favor of Reunion Industries, Inc. (filed herewith).
2.5 Stock Purchase Agreement, dated September 14, 1995, between
Reunion Resources Company and Chatwins Holdings, Inc. relating to purchase of
Oneida Molded Plastics Corp. (incorporated by reference to Exhibit 10.44 to
Reunion's Current Report on Form 8-K dated September 14, 1995).
2.6 Letter Agreement, dated September 14, 1995, between Chatwins
Group, Inc. and Reunion Resources Company (incorporated by reference to Exhibit
10.45 to Reunion's Current Report on Form 8-K dated September 14, 1995).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
June 5, 1996 REUNION INDUSTRIES, INC.
By: /s/ Richard L. Evans
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Richard L. Evans,
Executive Vice President
3
<PAGE>
REUNION INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
The accompanying unaudited pro forma consolidated condensed financial
statements and related notes are presented in accordance with Securities and
Exchange Commission (the "Commission") rules and regulations to show the pro
forma effects of the Company's sale of the common stock of its subsidiary
Reunion Energy Company ("REC"), including substantially all of the Company's oil
and gas assets (the "Oil and Gas Disposition"). The sale of REC to a subsidiary
of Tribo Petroleum Corporation was consummated on May 24, 1996. The adjusted
purchase price was $11,578,485, including $2,200,000 payable pursuant to a
subordinated promissory note due November 25, 1996. The proceeds received at
closing were adjusted, pursuant to the Stock Purchase Agreement, for cash
transfers and certain other expenditures by REC subsequent to January 1, 1996.
The unaudited pro forma consolidated condensed balance sheet is based on
the assumption that the Oil and Gas Disposition was completed on March 31, 1996.
The unaudited pro forma consolidated condensed statements of operations for the
year ended December 31, 1995 and for the three months ended March 31, 1996 are
presented as if the Oil and Gas Disposition had occurred on January 1, 1995.
The pro forma consolidated condensed statements of operations for these periods
also include the pro forma effects of the Company's acquisition of Oneida Molded
Plastics Corp. ("Oneida") on September 14, 1995 and of Rostone Corporation
("Rostone") on February 2, 1996 as previously reported.
Pro forma data are based on assumptions and include adjustments as
explained in the notes to the unaudited pro forma consolidated condensed
financial statements. The pro forma data are not necessarily indicative of the
financial results that would have occurred had the transactions been effective
on January 1, 1995 and as of March 31, 1996, and should not be viewed as
indicative of operations in future periods. The unaudited pro forma
consolidated condensed financial statements should be read in conjunction with
the accompanying notes and with the Company's Annual Report on Form 10-K for the
year ended December 31, 1995 and Quarterly Report on Form 10-Q for the three
months ended March 31, 1996 which have been previously filed with the
Commission.
<PAGE>
REUNION INDUSTRIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
MARCH 31, 1996
(In Thousands)
<TABLE>
<CAPTION>
Pro Forma Adjustments
--------------------------
Reunion Oil & Gas Debt
Historical Business Sold Repayment Pro Forma
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $ 246 $ 7,971 (1) $(4,992)(2) $ 3,225
Receivables 8,171 8,171
Notes Receivable 2,200 (1) 2,200
Inventories 4,294 4,294
Other Current Assets 1,988 1988
------- -------- ------- -------
Total Current Assets 14,699 10,171 (4,992) 19,878
Property, Plant and Equipment, Net 26,600 26,600
Net Assets of Discontinued Operations 10,334 (10,171)(1) 163
Goodwill 8,961 8,961
Other Assets 5,707 5,707
------- -------- ------- -------
$66,301 $ 0 $(4,992) $61,309
======= ======== ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current Portion of Long Term Debt $ 5,503 $ 5,503
Accounts Payable 5,779 5,779
Other Current Liabilities 6,846 (177)(2) 6,669
------- -------- ------- -------
Total Current Liabilities 18,128 0 (177) 17,951
Long-term Debt 9,473 9,473
Long-term Debt - Related Parties 5,852 (4,815)(2) 1,037
Other Liabilities 2,137 2,137
------- -------- ------- -------
Total Liabilities 35,590 0 (4,992) 30,598
------- -------- ------- -------
Stockholders' Equity
Common Stock 40 40
Additional Paid-in Capital 31,037 31,037
Retained Earnings 1,432 1,432
Less Treasury Shares (1,798) (1,798)
------- -------- ------- -------
Total Shareholders' Equity 30,711 0 0 30,711
------- -------- ------- -------
$66,301 $ 0 $(4,992) $61,309
======= ======== ======= =======
</TABLE>
<PAGE>
REUNION INDUSTRIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(In Thousands, except per share amounts)
<TABLE>
<CAPTION>
Rostone
---------------
Month Ended
Reunion January 31, 1996 Oil & Gas Pro Forma
Historical (pre-acquistion) Business Sold Adjustments Pro Forma
<S> <C> <C> <C> <C> <C>
Operating Revenue
Plastic Products $13,952 $2,326 $16,278
Agriculture 0
------- ------ --- ---- -------
13,952 2,326 0 0 16,278
Operating Costs and Expenses
Plastic Products - Cost of Sales 11,766 2,039 (48)(a) 13,757
Agriculture - Operating Costs 75 75
Selling, General and Administrative 2,082 243 26 (b) 2,351
------- ------ ---- ---- -------
13,923 2,282 0 (22) 16,183
Operating Income (Loss) 29 44 0 22 95
Other Income and (Expense)
Interest Expense (595) (151) 120 (d) (626)
Other, Including Interest Income 28 20 48
------- ------ --- ---- -------
(567) (131) 0 120 (578)
Income (Loss) Before Taxes (538) (87) 0 142 (483)
Provision for Income Taxes (4) 30 (30)(g) (4)
------- ------ --- ---- -------
Income (Loss) form Continuing Operations $ (542) $ (57) $ 0 $112 $ (487)
======= ====== === ==== =======
Earnings per Common and Common
Equivalent Share $ (0.14) $ (0.13)
======= =======
Weighted Average Number of Common
and Common Equivalent Shares 3,855 3,855
======= =======
</TABLE>
<PAGE>
REUNION INDUSTRIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(In Thousands, except per share amounts)
<TABLE>
<CAPTION>
Oneida Rostone
---------------- -----------------
Eight and 1/2 Year
Months Ended Ended
Reunion Sept. 14, 1995 December 31, 1995 Pro Forma
Historical (pre-acquistion) (pre-acquistion) Adjustments Pro Forma
<S> <C> <C> <C> <C> <C>
Operating Revenue
Plastic Products $10,855 $26,225 $28,310 $65,390
Agriculture 0
------- ------- ------- ----- -------
10,855 26,225 28,310 0 65,390
Operating Costs and Expenses
Plastic Products - Cost of Sales 9,251 21,948 24,879 (555)(a) 55,523
Agriculture - Operating Costs 291 291
Selling, General and Administrative 4,648 2,442 2,367 499 (b) 9,956
------- ------- ------- ----- -------
14,190 24,390 27,246 (56) 65,770
Operating Income (Loss) (3,335) 1,835 1,064 56 (380)
Other Income and (Expense)
Interest Expense (508) (627) (1,363) (95)(c)
124 (d) (2,469)
Gain on Sale of Property 169 169
Other, Including Interest Income 93 (122) (106) 266 (b)
(125)(e)
289 (f) 295
------- ------- ------- ----- -------
(246) (749) (1,469) 459 (2,005)
Income (Loss) Before Taxes (3,581) 1,086 (405) 515 (2,385)
Provision for Income Taxes (420) (8) 340 (g) (88)
------- ------- ------- ----- -------
Income (Loss) form Continuing Operations $(3,581) $ 666 $ (413) $ 855 $(2,473)
======= ======= ======= ===== =======
Earnings per Common and Common
Equivalent Share $ (0.93) $ (0.65)
======= =======
Weighted Average Number of Common
and Common Equivalent Shares 3,832 3,832
======= =======
</TABLE>
<PAGE>
REUNION INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The unaudited pro forma consolidated condensed balance sheet is based on
the Company's unaudited balance sheet at March 31, 1996 and upon the adjustments
described below. The unaudited pro forma consolidated condensed statements of
operations for the year ended December 31, 1995 and for the three months ended
March 31, 1996 are based on the Company's audited financial statements for the
year ended December 31, 1995, Oneida's audited (pre-acquisition) financial
statements for the eight and one-half months ended September 14, 1995, Rostone's
audited (pre-acquisition) financial statements for the year ended December 31,
1995 and Rostone's unaudited (pre-acquisition) financial statements for the
month ended January 31, 1996, and upon the adjustments described below. The
business sold in the Oil and Gas Disposition was classified as discontinued
operations in the Company's December 31, 1995 and March 31, 1996 financial
statements.
NOTE 2. PRO FORMA ADJUSTMENTS
The unaudited pro forma consolidated condensed balance sheet reflects the
following adjustments as though the Oil and Gas Disposition had occurred on
March 31, 1996:
(1) To record the Oil and Gas Disposition.
(2) To record the repayment of
related-party debt and interest from
the proceeds of the Oil and Gas
Disposition.
The unaudited pro forma consolidated condensed statements of operations
reflect the following adjustments as though the Oil and Gas Disposition, the
Oneida acquisition and the Rostone acquisition had each occurred on January 1,
1995:
(a) To record adjustments to depreciation and amortization expense resulting
from the allocation of purchase price to fixed assets in connection with
the Oneida and Rostone acquisitions.
(b) To reverse amortization of goodwill recorded in Oneida's pre-acquisition
financial statements and record amortization of goodwill resulting from the
Oneida and Rostone acquisitions on the straight-line method over a 15 year
period.
(c) To record incremental interest expense on related party debt resulting from
an interest
<PAGE>
rate of 10% pursuant to the Oneida acquisition, compared to
7.5% historically, and from reclassification of intercompany interest and
income tax liabilities.
(d) To reduce interest expense for related-party debt repaid with the proceeds
of the Oil and Gas Disposition.
(e) To eliminate interest income earned by Reunion for the pre-acquisition
period resulting from the payment of the Oneida acquisition purchase price.
(f) To eliminate amortization recorded in Rostone's pre-acquisition financial
statements related to a now-expired covenant not to compete.
(g) To eliminate the federal income tax provision (benefit) on Oneida and
Rostone due to the allocation of the Company's net operating losses carried
forward.
<PAGE>
EXHIBIT 2.2
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
("ACT"), OR UNDER ANY APPLICABLE STATE SECURITIES LAWS, AND IT CANNOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE HYPOTHECATED EXCEPT
IN ACCORDANCE WITH THE TERMS HEREOF AND THE REGISTRATION REQUIREMENTS OF THE
ACT AND SUCH STATE LAWS OR UPON DELIVERY TO THE COMPANY OF AN OPINION OF LEGAL
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
SUBORDINATED PROMISSORY NOTE DUE 1996
$2,200,000 Houston, Texas May 24, 1996
TRI-UNION DEVELOPMENT CORPORATION, a Texas corporation (the
"COMPANY"), for value received, promises to pay to REUNION INDUSTRIES, INC., a
Delaware corporation ("REUNION"), the principal amount of $2,200,000, plus
interest on the principal balance outstanding from time to time. This Note is
issued pursuant to the Stock Purchase Agreement dated April 2, 1996, between the
Company, as assignee of Tribo Petroleum Corporation, a Texas corporation
("TRIBO") and sole shareholder of the Company, and Reunion (the "PURCHASE
AGREEMENT"). The principal amount of this Note represents the balance of the
Purchase Price (as defined in the Purchase Agreement) payable by the Company to
Reunion for the capital stock of Reunion Energy Company, a former Delaware
corporation ("REC") which has been merged into the Company.
1. DEFINITIONS. As used in this Note, each parenthetically
-----------
capitalized term elsewhere in this Note has the meaning so ascribed to it and
other capitalized terms have the meaning given them in this Section 1 unless
specifically indicated otherwise:
"BRIDGE DOCUMENTS" means this Note, the Pledge Agreement and the
Guaranty, and all documents and instruments executed and delivered in connection
therewith.
"CHANGE IN CONTROL" means the occurrence of either of the following
events: (i) any Person becomes, after the date hereof, the "beneficial owner"
(as defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934,
as amended) directly or indirectly, of securities of the subject corporation
representing more than fifty percent (50%) of the combined voting power of such
corporation's then outstanding securities, or (ii) as a result of, or in
connection with a contested election of directors, the individuals who were
directors of the subject corporation before such election cease to constitute a
majority of its Board of Directors.
/s/ RB
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INITIALS
<PAGE>
"COMERICA CREDIT AGREEMENT" means the letter loan agreement dated as
of July 7, 1995, among Tribo, as borrower, and Comerica Bank-Texas, as lender,
(as the same may be renewed, amended, modified, extended, refinanced, or
otherwise supplemented from time to time), pursuant to which such lender may
extend credit to Tribo of up to $1,500,000.
"CREDIT AGREEMENT" means the Credit Agreement dated as of May 24,
1996, among the Company, as borrower, and the Senior Indebtedness Holder, as
lender (as the same may be renewed, amended, modified, extended, refinanced, or
otherwise supplemented from time to time), pursuant to which such lender is
extending credit to the Company.
"DEFAULT" is defined in Section 10.
"DEFAULT RATE" means an annual interest rate equal to 15% per annum.
"DISTRIBUTION" for any Person means, with respect to any shares of any
capital stock, other equity securities or equivalent interests, or any
partnership interest issued by that Person, (a) the retirement, redemption,
purchase, withdrawal, or other acquisition for value of such interests
(including the purchase of warrants, rights, or other options to acquire such
interests), (b) the declaration or payment of any dividend or distribution on or
with respect to such interests, (c) any loan or advance by that Person to, or
other investment by that Person in, the holder of any of such interests, and (d)
any other payment by that Person with respect to such interests.
"EQUITY FINANCING" means (a) Tribo's issuance or sale for cash of any
class of its securities or its incurrence of indebtedness for borrowed money, or
(b) the Company's issuance or sale for cash of any class of its securities with
Reunion's prior written consent or incurrence of indebtedness for borrowed money
which is subordinated in writing to the Senior Indebtedness and approved by
Reunion (except if extended pursuant to Section 9(b)(iii)) and the Senior
Indebtedness Holder in writing.
"FINANCIAL STATEMENTS" means a compiled consolidated balance sheet of
Tribo as of December 31, 1995, and related statements of income or loss and
changes in stockholder's equity for the fiscal year then ended, and a
consolidated balance sheet of Tribo as of March 31, 1996, and related statements
of income or loss and changes in stockholder's equity for the three-month period
then ended.
"GUARANTY" means the Guaranty of even date herewith being made by
Tribo in Reunion's favor to secure payment and performance of the Company's
obligations under this Note and Tribo's obligations under the Pledge Agreement,
as such Guaranty may be amended or otherwise changed from time to time with
Reunion's prior written consent.
"INDEBTEDNESS" means with respect to any Person at any date, (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than current trade liabilities incurred in
the ordinary course of business and payable in accordance with customary
practices), (b) any other indebtedness of such Person which is
/s/ RB
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INITIALS
Page 2 of 15 Pages
<PAGE>
evidenced by a note, bond, debenture, letter of credit, guarantee or similar
instrument, (c) all obligations of such Person under any lease of property, real
or personal, the obligations of the lessee in respect of which are required in
accordance with generally accepted accounting principles to be capitalized on a
balance sheet of the lessee, (d) all obligations of such Person in respect of
acceptances issued or created for the account of such Person (other than
endorsements in the ordinary course of business) and (e) all liabilities of the
type referred to in clauses (a) through (d) above that are secured by any lien,
charge, security interest or encumbrance on any property owned by such Person
even though such Person has not assumed or otherwise become liable for the
payment thereof.
"MATURITY DATE" means November 25, 1996.
"NOTE" means this Subordinated Promissory Note Due 1996 as may be
renewed, amended, modified, extended, refinanced, or otherwise supplemented from
time to time with Reunion's prior written consent.
"PERSON" means any individual, entity, or association.
"PLEDGE AGREEMENT" means the Pledge Agreement of even date herewith
being made by Tribo in Reunion's favor pursuant to which Tribo is pledging to
Reunion the Company's capital stock to secure payment and performance of the
Company's obligations under this Note and Tribo's obligations under the
Guaranty, as such Pledge Agreement may be amended or otherwise changed from time
to time with Reunion's prior written consent.
"PROXY" means that certain irrevocable proxy granted by Tribo to
Reunion in respect of the Company's voting securities pursuant to Section 11 of
the Pledge Agreement.
"ROC" means Reunion Operating Company, a Delaware corporation which
was a wholly-owned subsidiary of REC and became a wholly-owned subsidiary of the
Company upon consummation of the merger of REC into the Company.
"SENIOR INDEBTEDNESS" means any Indebtedness of the Company under the
Credit Agreement.
"SENIOR INDEBTEDNESS HOLDER" means Bank One, Texas, N.A., a national
banking association, as the lender to the Company of the Senior Indebtedness
evidenced by the Credit Agreement, and its successors and assigns.
"SUBSIDIARY" of any Person means any entity of which at least 50% (in
number of votes) of the stock (or equivalent interest) is owned of record or
beneficially, directly or indirectly, by that Person. Unless the context
otherwise clearly requires, any reference to a "Subsidiary" is a reference to a
Subsidiary of the Company.
2. INTEREST RATE. From the date of this Note through (but not
-------------
including) the Maturity Date, interest shall accrue on the unpaid principal
balance of this Note at an annual fixed rate
/s/ RB
------------
INITIALS
Page 3 of 15 Pages
<PAGE>
equal to 12% per annum. Interest will be calculated on the basis of the actual
number of days elapsed over a year composed of 365 days (or 366 days, as the
case may be).
3. PAYMENT TERMS. Subject to Section 6:
-------------
(a) The outstanding principal balance of this Note together with all
accrued and unpaid interest and all unpaid fees, expenses, and costs due from
the Company to Reunion under the terms of this Note, are due and payable on the
Maturity Date.
(b) Subject to Section 3(c), each payment or prepayment hereunder
shall be made by wire transfer to an account designated by Reunion; provided,
however, that if Reunion does not provide wire transfer instructions within one
business day of the due date for any payment hereunder, then such payment shall
be made by check certified by, or cashier's check issued by a United States
federally-regulated financial institution and delivered to Reunion's principal
executive office located at One Stamford Landing, 62 Southfield Avenue,
Stamford, Connecticut 06902.
(c) At Reunion's option and if accepted in writing by Reunion, all or
any portion of the unpaid balance of this Note may be paid by reducing the
amount of such unpaid balance by the amount of any Purchase Price adjustment to
be made pursuant to Sections 6.1 or 6.2 of the Purchase Agreement and to which
Reunion has agreed in writing or has been ordered to pay by the Arbitration
Accountant (as defined in the Purchase Agreement) or a court of competent
jurisdiction after exhaustion of all appeals or after expiration of the
applicable appeals period if no appeal is made.
4. PREPAYMENT. Except as otherwise provided in Section 6, the
----------
Company may prepay all or any part of this Note at any time without premium or
penalty. All prepayments shall be applied first to accrued but unpaid interest
and then to unpaid principal.
5. PAST DUE AMOUNTS. All past due principal and interest shall
----------------
accrue interest until paid at the Default Rate.
6. SUBORDINATION.
-------------
(a) The Indebtedness represented by, and all obligations in respect
of, this Note and the payment of principal of, premium, if any, interest on and
all other amounts owing in respect of, this Note (collectively, the
"SUBORDINATED OBLIGATIONS") are expressly subordinate to all Senior
Indebtedness. For purposes hereof, the term "subordinate" means that, unless
and until the Senior Indebtedness has been paid in full in cash, Reunion will
not demand of the Company or Tribo under the Guaranty or commence any proceeding
against the Company or Tribo under the Guaranty for collection of, or receive
from the Company or Tribo, any payment of or on account of, the Subordinated
Obligations; provided, however, that (i) upon and after the Maturity Date, the
Company may pay and Reunion may receive interest on the Subordinated Obligations
(1) so long as Reunion has not received written notice from the Senior
Indebtedness Holder stating that the Senior Indebtedness is in monetary default
for
/s/ RB
------------
INITIALS
Page 4 of 15 Pages
<PAGE>
failure to pay principal or interest when due on the Senior Indebtedness or (2)
after cure of any such default; (ii) upon and after the Maturity Date, Reunion
may foreclose upon, and exercise its other rights in respect of, the collateral
given to secure the Subordinated Obligations (but may not otherwise proceed to
enforce any rights against the Company); (iii) at any time, Reunion may
accelerate the Subordinated Obligations, seek to enforce any of its rights
against the Company or Tribo, or join in any involuntary proceeding in
bankruptcy against the Company or Tribo, but only if the Senior Indebtedness
Holder has taken any of such actions; (iv) after the Maturity Date, the Company
may pay and Reunion may receive payment of such a portion of the principal due
on the Subordinated Obligations as the Senior Indebtedness Holder, the Company
and Reunion may agree; and (v) at any time, the Company may pay and Reunion may
receive principal and interest on the Subordinated Obligations paid from the
cash proceeds of an Equity Financing (1) so long as Reunion has not received
written notice from the Senior Indebtedness Holder stating that the Senior
Indebtedness is in monetary default for failure to pay principal or interest
when due on the Senior Indebtedness or (2) after cure of any such default.
Notwithstanding anything to the contrary in this Note, Reunion may at any time
exercise its rights in respect of the Proxy in accordance with the terms
thereof.
(b) Upon distribution to creditors of the Company in (i) a total or
partial liquidation, winding up or dissolution of the Company (whether
voluntarily or involuntarily) or (ii) in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or its
property, or in an assignment for the benefit of creditors or any marshaling of
the Company's assets and liabilities, the holders of Senior Indebtedness will be
entitled to receive payment in full in cash of all amounts payable in respect of
such Senior Indebtedness before Reunion will be entitled to receive any payment
with respect to this Note.
(c) In the event that, notwithstanding the occurrence of any of the
events described in Subsections 6(a) and (b), any payment or distribution of
assets of the Company or Tribo is received by the holders of this Note which is
not permitted hereby, such payment or distribution shall be held in trust for
the benefit of, and shall be paid over or delivered to, the holders of the
Senior Indebtedness.
(d) Reunion acknowledges that, in extending credit under the Credit
Agreement, the Senior Indebtedness Holder is entitled to rely upon the
subordination of the Subordinated Obligations to the payment in full in cash of
the Senior Indebtedness as contained in this Note.
(e) The Company and Reunion shall not amend this Note and Reunion
shall not cause any amendment to the Guaranty without the prior written consent
of the Senior Indebtedness Holder so long as the Senior Indebtedness remains
outstanding.
7. NO IMPAIRMENT. Section 6 and the proviso to Section 11(a) (and
-------------
all defined terms used in such sections) shall constitute a continuing offer to
all Persons who become holders of, or continue to hold, Senior Indebtedness, and
such provisions are made for the benefit of the holders of Senior Indebtedness,
and such Persons are conclusively presumed to have relied upon such provisions;
and such holders are made obligees hereunder, and they or each of them may
enforce such
/s/ RB
------------
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<PAGE>
provisions. No right of any present or future holder of any Senior Indebtedness
to enforce the subordination or other provisions referred to in this Section 7
shall at any time in any way be prejudiced or impaired by any act or failure to
act on the part of the Company or Reunion, or by any non-compliance by the
Company or Reunion with the terms, provisions and covenants of this Note,
regardless of any knowledge thereof any such holder may have or be otherwise
charged with.
8. REPRESENTATIONS AND WARRANTIES. The Company represents
------------------------------
and warrants to Reunion as follows:
(a) Organization. Each of the Company and ROC is a corporation duly
------------
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has full requisite power and authority to carry
on its business as it is now being conducted and to own and operate the
properties now owned and operated by it, and is duly qualified or licensed to do
business and is in good standing and authorized to do business in all
jurisdictions in which the character of the properties owned or the nature of
the business conducted by it make such qualification or licensing necessary,
except in such jurisdictions where the failure to be so qualified or in good
standing would not have a material adverse effect on the business or financial
condition of the Company and ROC, taken as a whole. The Company's authorized
capital stock consists of 1,000 shares of common stock, no par value per share,
of which 1,000 shares are issued, outstanding and owned by Tribo. ROC's
authorized capital stock consists of 1,000 shares of common stock, par value
$1.00 per share, of which 1,000 shares are issued, outstanding and owned by the
Company. All such shares of the Company and ROC (i) have been duly authorized
and validly issued, (ii) are fully paid and nonassessable, (iii) are free and
clear of any liens, restrictions, claims or rights of any other Person except as
contemplated by the Pledge Agreement, (iv) are not subject to any voting or
similar agreement, warrant, option or other acquisition right of any Person
except as contemplated by the Pledge Agreement, and (v) are not subject to any
transfer restriction except for restrictions imposed by securities laws.
(b) Authorization, Compliance, and No Default. The execution and
-----------------------------------------
delivery by the Company of this Note, and the performance by it of its
obligations hereunder (i) are within its corporate power, (ii) have been duly
authorized by all necessary corporate action, (iii) require no action by or in
respect of, or filing with, any governmental authority applicable to it or ROC,
or the consent or approval of any Person which has not been obtained and
delivered to Reunion, (iv) do not violate any provision of the articles or
certificate of incorporation, or bylaws of the Company or ROC, (v) do not
violate any material provision of law applicable to the Company or ROC, (vi) do
not violate any material agreements to which the Company or ROC is a party
including, without limitation, the Senior Indebtedness (and no material default
exists on the part of the Company or ROC under any agreement to which it is a
party), and (vii) will not result in the creation or imposition of any lien on
any asset of the Company or ROC, except pursuant to the Pledge Agreement and
except for such liens the foreclosure or enforcement of which, either
individually or in the aggregate, would not have a material adverse effect upon
the financial condition, operations, assets or business of the Company and ROC,
taken as a whole.
/s/ RB
------------
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<PAGE>
(c) Enforceability. This Note constitutes a valid and legally binding
--------------
obligation of the Company, enforceable against the Company in accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, debtor relief, or similar laws affecting the rights of creditors
generally.
(d) Litigation. Except as disclosed to Reunion in writing prior to
----------
the date of this Agreement or in the schedules to the Purchase Agreement,
neither the Company nor ROC is subject to, or aware of the threat of, any
litigation, investigation, or proceedings involving the Company or ROC.
(e) Subsidiaries. As of the date of this Note, assuming consummation
------------
of the transactions contemplated by the Purchase Agreement, (i) REC has been
merged with and into the Company in accordance with the laws of the jurisdiction
of incorporation of each of the Company and REC, with the Company surviving such
merger, and (ii) the Company's only Subsidiary is ROC.
(f) Ownership of Assets; Liens. As of the date of this Note, assuming
--------------------------
consummation of the transactions contemplated by the Purchase Agreement, the
Company's only assets are the capital stock of ROC and those assets of REC to
which it succeeded by merger and cash or cash equivalents. Each of the Company
and ROC has Marketable Title (as defined in the Purchase Agreement) to its
Properties (as defined in the Purchase Agreement), and good title to personal
property which is material to the operation of its business. No lien exists on
any property of the Company or ROC except for (i) liens which secure the Senior
Indebtedness, (ii) inchoate liens which arise in the ordinary course of
business, (iii) Permitted Encumbrances (as defined in the Purchase Agreement) as
to the Properties (as defined in the Purchase Agreement), or (iv) liens the
foreclosure or enforcement of which, either individually or in the aggregate,
would not have a material adverse effect upon the financial condition,
operations, assets or business of the Company and ROC, taken as a whole.
(g) Debt. Neither the Company nor ROC is an obligor on any
----
Indebtedness other than the Senior Indebtedness and the Subordinated
Obligations.
(h) Insurance. Each of the Company and ROC has in effect insurance
---------
coverage with reputable insurers, which in respect of amounts, types and risks
insured, is that which is usual and customary in the oil and gas industry for
prudent owners and operators of properties similar to the properties owned by
the Company and ROC.
9. COVENANTS AND AGREEMENTS. Until the Subordinated Obligations are
------------------------
paid in full in cash, the Company unconditionally covenants, agrees and
represents as follows:
(a) Payment. Subject to Section 6 above, the Company shall pay the
-------
amounts due under the terms of this Note on the date such amounts are due.
/s/ RB
------------
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<PAGE>
(b) Indebtedness Limitation. The Company shall not, and shall not
-----------------------
cause or allow ROC to, incur Indebtedness other than (i) the Senior Indebtedness
in the amount borrowed under the Credit Agreement, as in effect on the date
hereof, to purchase REC's capital stock, (ii) the Subordinate Obligations, and
(iii) Indebtedness for borrowed money 100% of the proceeds of which are used to
cure a monetary default for failure to pay principal or interest when due on the
Senior Indebtedness.
(c) Distributions. The Company shall not, and shall not allow or
-------------
cause ROC to (i) make any Distributions, except that ROC may make Distributions
to the Company, or (ii) extend credit to any Person except in the ordinary
course of business.
(d) Items to be Furnished. The Company shall cause copies of all
---------------------
notices and information, including financial information, delivered by the
Company or ROC to, and received by either of them from, the holder of the Senior
Indebtedness to be promptly delivered to Reunion. If the holder of the Senior
Indebtedness does not require the Company to deliver monthly financial
statements, then within 20 days after the end of each calendar quarter during
the period before this Note is paid in full, the Company shall deliver to
Reunion a consolidated balance sheet of the Company as of the last day of the
immediately preceding quarter, and related statements of income or loss and
changes in stockholder's equity for the three-month period then ended. All
financial statements delivered to Reunion pursuant to this subsection (d) shall
be prepared in accordance with generally accepted accounting principles
consistently followed by the Company throughout the periods indicated and fairly
present the consolidated financial position and results of operations of the
Company as of the respective dates and for the respective periods indicated.
(e) Maintenance of Existence, Assets, Business and Shareholder. The
----------------------------------------------------------
Company shall, and shall cause ROC to (i) maintain their respective corporate
existence in their respective state of organization and their respective
authority to transact business in all other jurisdictions where it is required
to be qualified to do business by reason of the nature and extent of their
respective businesses and properties, (ii) maintain all licenses, permits, and
franchises necessary for their respective businesses, (iii) keep all of their
respective assets that are necessary to their respective businesses in good
operating condition (normal wear and tear excepted), and (iv) operate their
respective businesses in a manner at least as consistent as REC and ROC has
operated their respective businesses to date. Except as contemplated by the
Pledge Agreement, the Company shall not take, fail to take or permit to be taken
any action which would cause (1) Tribo to cease being the of record and
beneficial owner of 100% of the Company's issued and outstanding capital stock
or (2) the Company to cease being the of record and beneficial owner of 100% of
ROC's issued and outstanding capital stock. The Company shall not recognize or
give effect to any transfer by Tribo of shares of the Company's capital stock
except under the Pledge Agreement.
(f) Insurance. The Company shall, at its cost and expense, maintain
---------
insurance covering the Company and ROC with responsible insurance companies in
such amounts and against such risks as is usual and customary in the oil and gas
industry for prudent owners and operators of properties similar to the
properties owned by the Company or ROC. The
/s/ RB
------------
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<PAGE>
Company's insurance must provide for at least 30 days prior notice to Reunion of
any cancellation thereof. Satisfactory evidence of such insurance must be
supplied to Reunion 10 days prior to each policy renewal.
(g) Further Assurances. The Company shall, and shall cause ROC to,
------------------
take such action as Reunion may reasonably request to carry out more effectively
the terms of this Note and the Proxy, including, executing, acknowledging,
delivering, and recording or filing additional instruments or documents.
(h) Expenses. Subject to Section 6, the Company shall promptly pay
--------
upon demand all reasonable costs and fees incurred, and out-of-pocket expenses
paid by Reunion (including, without limitation, the out-of-pocket expenses and
reasonable fees of Reunion's counsel) in connection with (i) any amendment,
waiver, or consent in respect of this Note, or (ii) the enforcement of the
obligations of the Company arising under this Note or the exercise of any rights
arising under this Note, including, without limitation, any workout or
restructure and any action taken in connection with any debtor relief laws, and
in the case of (i) and (ii), all of which shall be a part of the Subordinated
Obligations and shall accrue interest, if not paid upon demand, at the Default
Rate until repaid.
(i) Liens. The Company shall not, and shall not cause or allow ROC
-----
to, create, incur, or suffer to exist any Lien upon any of their respective
assets, except (i) liens which secure the Senior Indebtedness, (ii) inchoate
liens which arise in the ordinary course of business, (iii) as to the Properties
(as defined in the Purchase Agreement), Permitted Encumbrances (as defined in
the Purchase Agreement), or (iv) liens the foreclosure or enforcement of which,
either individually or in the aggregate, would not have a material adverse
effect upon the financial condition, operations, assets or business of the
Company and ROC taken as a whole.
(j) Compliance with Laws and Documents. The Company shall not, and
----------------------------------
shall not cause or allow ROC to, violate the provisions of any laws applicable
to either of them or any agreement to which either of them is a party, to the
extent that such violations individually or collectively would have a material
adverse effect upon the financial condition, operations, assets or business of
the Company and ROC taken as a whole.
(k) Subsidiaries, Mergers and Dissolutions. The Company shall not,
--------------------------------------
and shall not cause or allow ROC to, form or otherwise acquire a Subsidiary or
other equity interest in any other Person. Neither the Company nor ROC shall
merge or consolidate with any other Person or dispose of all or substantially
all of its assets, liquidate, wind up, or dissolve (or suffer any such asset
disposition, liquidation, winding up, or dissolution), except that ROC may merge
into the Company if (i) the Company is the surviving corporation and (ii) the
Company gives Reunion advance written notice of such merger.
(l) Disposition of Assets. The Company shall not, and shall not cause
----------------------
or allow ROC to, sell, assign, lease, transfer, or otherwise dispose of any of
their respective assets, other than (i) sales in the ordinary course of
business, (ii) the sale, discount, or transfer of
/s/ RB
------------
INITIALS
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<PAGE>
delinquent accounts receivable in the ordinary course of business for purposes
of collection, (iii) occasional sales of immaterial assets for consideration not
less than fair market value, (iv) dispositions of assets that are obsolete or
have negligible fair market value, (v) sales of equipment for a fair and
adequate consideration (but if replacement equipment is necessary for the proper
operation of the business, the sold equipment must be promptly replaced), and
(vi) sales in one or more transactions of any assets which individually or in
the aggregate do not have a fair market value of more than 10% of the Purchase
Price, as defined in, and adjusted pursuant to, the Purchase Agreement.
(m) New Businesses. The Company shall not, and shall not cause or
--------------
allow ROC to, engage in any business except the business in which each of them
currently is engaged.
(n) Articles, Bylaws and Stock Records. The Company shall not, and
-----------------------------------
shall not cause or allow ROC to, amend their respective articles or certificate
of incorporation or bylaws, or violate any of the provisions thereof; provided,
however, that this Section 9(n) shall not prohibit or excuse the Company from
complying with its obligations under Section 6.5 of the Purchase Agreement to
cause ROC to amend its articles of incorporation to change its name. The
Company shall not, and shall not cause or allow ROC to, enter into any
agreement, transaction or other arrangement which would limit or preclude
Reunion from exercising the Proxy, including, without limitation, any voting or
similar arrangement covering shares of the capital stock of the Company or ROC.
The Company shall make notations in its stock books and records of the existence
of Pledge Agreement and Proxy.
(o) Prohibited Arrangements. The Company shall not, and shall not
-----------------------
cause or allow ROC to, enter into any arrangement with any director or officer
of the Company or ROC in his or her capacity as such which (i) cannot be
terminated immediately by the Company or ROC without penalty or (ii) provides
for any compensation in connection with termination of his or her status as a
director or officer of the Company or ROC. All directors and officers of the
Company and ROC shall hold their respective directorships and offices subject to
removal at any time and for any reason or no reason as a direct or indirect
result of Reunion's exercise of the Proxy. No such removal shall constitute a
breach by the Company or ROC of any agreement or other arrangement relating to
any relationship between the Company or ROC and any of their respective
directors or officers, or create or otherwise give rise to any obligation on the
part of the Company, ROC or Reunion to compensate any such removed director or
officer. The Company shall, and shall cause ROC to, make all of their
respective directors and officers elected or appointed on or after the date
hereof and before Reunion first exercises the Proxy (the "SUBJECT DIRECTORS AND
OFFICERS") aware of the provisions of this Section 9(o) before they become
directors or officers of the Company or ROC, and deliver written evidence of
same to Reunion.
(p) Stock Certificate Legend. Until the Subordinated Obligations have
------------------------
been paid in full in cash, all certificates representing the Company's voting
securities shall conspicuously bear the following legend:
/s/ RB
------------
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<PAGE>
THE SECURITIES EVIDENCED HEREBY ARE SUBJECT TO TRANSFER RESTRICTIONS AND AN
IRREVOCABLE PROXY IN FAVOR OF REUNION INDUSTRIES, INC. PURSUANT TO THE
TERMS OF THAT CERTAIN PLEDGE AGREEMENT, DATED MAY 24, 1996, MADE BY TRIBO
PETROLEUM CORPORATION IN FAVOR OF REUNION INDUSTRIES, INC. THE CORPORATION
WILL FURNISH, WITHOUT CHARGE, A COPY OF SUCH PLEDGE AGREEMENT TO THE RECORD
HOLDER OF THIS CERTIFICATE ON WRITTEN REQUEST TO THE SECRETARY OF THE
CORPORATION AT ITS PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE.
10. EVENTS OF DEFAULT. "DEFAULT" means the occurrence of one or more of
-----------------
the following:
(a) Payment. The Company fails to pay the outstanding principal amount of
-------
this Note and all accrued and unpaid interest on the Maturity Date.
(b) Representations. Any representations or warranties made in any of the
---------------
Bridge Documents (i) which contain no materiality qualification are inaccurate
in any material respect as of the time made, or (ii) which contain a materiality
qualification are inaccurate as of the time made; provided however, that if (1)
any representation or warranty made in the Bridge Documents is inaccurate, (2)
such representation or warranty concerns assets or liabilities of REC to which
the Company succeeded by merger of REC into the Company, or assets or
liabilities of ROC, (3) Reunion made the same or similar representation or
warranty as to REC or ROC in the Purchase Agreement which was inaccurate as of
the time made or deemed made in the Purchase Agreement, and (4) the Company or
Tribo relied upon such representation or warranty by Reunion in making the
subject representation or warranty in the Bridge Documents, then the inaccuracy
of such representation or warranty in any of the Bridge Documents shall not be a
Default.
(c) Performance of Obligations. The Company or Tribo fails to fully and
--------------------------
timely perform, discharge or observe any terms, covenants, or conditions
contained in any of the Bridge Documents to which it is a party as and when
required.
(d) Voluntary Bankruptcy. The Company, ROC or Tribo (i) files a petition
--------------------
seeking an order for relief under bankruptcy or other debtor relief laws, (ii)
seeks, consents to, or does not contest the appointment of a receiver or trustee
for itself or for all or any substantial part of its property, (iii) is
voluntarily adjudicated a bankrupt or insolvent, (iv) makes a general assignment
for the benefit of its creditors, or (v) admits in writing its inability to pay
its debts as they mature.
(e) Involuntary Bankruptcy. A petition is filed against the Company, ROC
----------------------
or Tribo seeking an order for relief under bankruptcy or other debtor relief
laws and such petition is not dismissed within 90 days after being filed, or a
court of competent jurisdiction enters an order, judgment or decree appointing a
receiver or trustee for the Company, ROC or Tribo, or for all or any substantial
part of their respective property, and such order, judgment or decree is not
discharged or stayed within 60 days after its entry.
(f) Other Indebtedness. A default or event of default occurs under the
------------------
terms of the Credit Agreement or Comerica Credit Agreement.
/s/ RB
------------
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<PAGE>
(g) Change of Control. A Change of Control in the Company, ROC or Tribo
-----------------
occurs.
11. REMEDIES OF REUNION.
-------------------
(a) Subject to Section 6, upon the occurrence and during the continuance of
a Default, Reunion has the following rights (provided that, in respect of a
Default under Section 10(a), Reunion may only exercise such rights if the
Subordinated Obligations have not been paid in full in cash before February 24,
1997):
(1) Acceleration. Reunion may, at its option, declare the entire
------------
principal balance of this Note and the accrued and unpaid interest thereon,
immediately due and payable without notice of Default, notice of intent to
accelerate, notice of acceleration, or any other notice, presentment, protest,
demand or action of any kind or nature whatsoever (each of which is hereby
expressly waived by the Company), whereupon the entire indebtedness under this
Note shall become immediately due and payable.
(2) Other Rights. Reunion shall have all rights and remedies
------------
available at law or equity or under the Pledge Agreement or Guaranty and the
same (i) shall be cumulative and concurrent, (ii) may be pursued separately,
successively, or concurrently against the Company or Tribo, as the case may be,
(iii) may be exercised as often as occasion therefor shall arise, it being
agreed by the Company that the exercise or failure to exercise any of the same
shall in no event be construed as a waiver or release thereof or of any other
right or remedy, and (iv) are intended to be, and shall be, nonexclusive.
(b) Proxy. The Company acknowledges and agrees that the Proxy and exercise
-----
thereof is in addition to, and not in limitation of, Reunion's rights under
subsection (a) of this Section 11. The Company shall indemnify, defend and hold
harmless Reunion, its directors, officers and shareholders, and ROC and those of
the Company's and ROC's directors and officers who are not Subject Directors and
Officers, to the extent such indemnified persons are not responsible for Losses
(defined below) indemnified against pursuant hereto, from and against any and
all losses, claims, damages, expenses or liabilities (including reasonable
attorneys' fees) (collectively, "Losses") as the same may arise or be made
against or be incurred by such indemnified persons, or to which such indemnified
persons may be subject in connection with, arising out of, or having a
reasonable relation to, any breach by the Company or ROC of Section 9(o) or any
exercise of the Proxy, including, without limitation, the removal of any Subject
Directors and Officers. No indemnified person hereunder shall be, or be deemed
to be responsible for Losses indemnified against pursuant hereto in connection
with the exercise or enforcement by, for or on behalf of, Reunion of its rights
under Section 9(o) or of the Proxy.
/s/ RB
------------
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<PAGE>
12. CONDITIONS TO REUNION'S OBLIGATIONS. Reunion will be obligated under
-----------------------------------
the terms of this Note after all of the following items have been executed
and/or delivered to Reunion, and/or completed, as applicable:
(1) Certificate of chief executive officer and secretary or assistant
secretary of the Company dated the date of this Note, being reasonably
satisfactory to Reunion, and certifying (i) the incumbency and signatures of the
officers who are duly authorized to execute and deliver this Note and cause the
Company to perform its obligations hereunder, (ii) attached true, complete and
correct copies of resolutions of the Company's Board of Directors authorizing
the Company's making of, and performance of its obligations under, this Note,
(iii) attached true, complete and correct copies of the Company's articles or
certificate of incorporation and bylaws, in each case as amended through the
date of this Note, and that there have been no additional filed or authorized
amendments to any of such articles or certificates of incorporation, and there
have been no additional completed or authorized amendments to such bylaws, (iv)
attached true, complete and correct copies of the certificate and articles of
merger in respect of the merger of REC into the Company, as filed in each
jurisdiction of incorporation of the Company and REC, and as certified by the
subject secretary of state, and (v) attached true, complete and correct copies
of the written evidence contemplated by Section 9(o) that the Subject Directors
and Officers have been made aware of the provisions thereof.
(2) Certificate of chief executive officer and secretary or assistant
secretary of Tribo dated the date of this Note, being reasonably satisfactory to
Reunion, and certifying (i) the incumbency and signatures of the officers who
are duly authorized to execute and deliver the Pledge Agreement and Guaranty and
cause the Company to perform its obligations thereunder, (ii) attached true,
complete and correct copies of resolutions of Tribo's Board of Directors
authorizing Tribo's making of, and performance of its obligations under, the
Pledge Agreement and Guaranty, and (iii) attached true, complete and correct
copies of Tribo's certificate and articles of incorporation and bylaws, in each
case as amended through the date of this Note, and that there have been no
additional filed or authorized amendments to any of such articles of
incorporation, and there have been no additional completed or authorized
amendments to such bylaws.
(3) Certificate of secretary or assistant secretary of ROC dated the
date of this Note, being reasonably satisfactory to Reunion, and certifying
attached true, complete and correct copies of ROC's certificate of incorporation
and bylaws, in each case as amended through the date of this Note, and that
there have been no additional filed or authorized amendments to any of such
articles of incorporation, and there have been no additional completed or
authorized amendments to such bylaws.
/s/ RB
------------
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<PAGE>
(4) Financial Statements of Tribo, such Financial Statements to be
reasonably satisfactory to Reunion.
(5) Consummation of the transactions contemplated by the Purchase
Agreement, including, without limitation, with respect to the opinion of counsel
to Purchaser (as defined therein) to be delivered pursuant to Section 4.2.3 of
the Purchase Agreement (i) the inclusion therein of an opinion to the effect
that the Company is successor by merger to REC, and (ii) appropriate changes to
the opinions otherwise contemplated by such Section 4.2.3 to reflect that the
Company is making the Note, and Tribo is making the Pledge Agreement and
Guaranty, and in respect of (i) and (ii), in form and substance reasonably
satisfactory to Reunion.
(6) Consummation of the merger of REC into the Company.
(7) This Note, in form and substance satisfactory to Reunion.
(8) Guaranty and deliveries contemplated thereby upon execution and
delivery thereof, all to be in form and substance reasonably satisfactory to
Reunion.
(9) Pledge Agreement and deliveries contemplated thereby upon
execution and delivery thereof, all to be in form and substance reasonably
satisfactory to Reunion.
(10) Copies of the Credit Agreement, Senior Note and Senior Security
Documents and drafts thereof as they become available to the Company.
(11) Copies of the Comerica Credit Agreement and related loan
documents and drafts thereof as they become available to Tribo.
13. TIME OF ESSENCE. Time is of the essence in the Company's performance
---------------
of its obligations under this Note.
14. CAPTIONS. The captions, headings, and arrangements used in this Note
--------
are for convenience only and do not affect or modify the terms of this Note.
References to sections are to sections of this Note unless otherwise indicated.
15. APPLICABLE LAW. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
--------------
ACCORDANCE WITH THE INTERNAL LAWS, AND NOT THE LAWS OF CONFLICT, OF THE STATE OF
TEXAS AND THE LAWS OF THE UNITED STATES APPLICABLE TO TRANSACTIONS WITHIN SUCH
STATE.
/s/ RB
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<PAGE>
16. BINDING EFFECT. This Note and Reunion's rights hereunder shall inure
--------------
to the benefit of, and be enforceable by its successors and permitted assigns.
Reunion cannot assign this Note or its rights hereunder without the Company's
prior written consent. The Company's rights and obligations under this Note
cannot be assigned or delegated, respectively, without Reunion's prior written
consent.
NOTICE: THE RIGHTS AND OBLIGATIONS OF THE COMPANY AND REUNION SHALL BE
DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY
PRIOR ORAL AGREEMENTS BETWEEN THE COMPANY AND REUNION ARE SUPERSEDED BY AND
MERGED INTO SUCH WRITINGS. THIS NOTE (AS AMENDED IN WRITING FROM TIME TO TIME)
REPRESENTS THE FINAL AGREEMENT BETWEEN THE COMPANY AND REUNION AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS BY THE COMPANY AND REUNION. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE COMPANY AND REUNION.
TRI-UNION DEVELOPMENT CORPORATION
By: /s/ Richard Bowman
----------------------
Name: Richard Bowman
--------------
Title: President
---------
Agreed and Accepted:
REUNION INDUSTRIES, INC.
By: /s/ Richard L. Evans
--------------------
Name: Richard L. Evans
----------------
Title: Executive Vice President
------------------------
/s/ RB
------------
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<PAGE>
EXHIBIT 2.3
PLEDGE AGREEMENT
This PLEDGE AGREEMENT, dated as of May 24, 1996 (this "AGREEMENT"), is
between TRIBO PETROLEUM CORPORATION, a Texas corporation (with its successors,
the "COMPANY"), and REUNION INDUSTRIES, INC., a Delaware corporation ("SECURED
PARTY").
RECITALS:
A. Contemporaneously with the execution and delivery of this Agreement,
the following events, among others, are occurring:
(1) TRI-UNION DEVELOPMENT CORPORATION, a Texas corporation ("BORROWER"), in
its capacity as assignee of the Company's rights as purchaser under that certain
Stock Purchase Agreement, dated as of April 2, 1996, between the Company or its
wholly-owned subsidiary and Secured Party ("STOCK PURCHASE AGREEMENT"), is
purchasing from Secured Party all of the issued and outstanding capital stock of
Reunion Energy Company, a Delaware corporation ("REC");
(2) Borrower is executing and delivering to Secured Party a Subordinated
Promissory Note due 1996 of even date herewith, made payable to Secured Party in
the original principal amount of $2,200,000 (as renewed, amended, modified,
extended, refinanced, or otherwise supplemented from time to time, the "NOTE")
which represents a portion of the purchase price under the Stock Purchase
Agreement; and
(3) REC is being merged into Borrower, with Borrower surviving such merger
and REC's wholly-owned Subsidiary, Reunion Operating Company, a Delaware
corporation ("ROC"), becoming a wholly-owned Subsidiary of the Company.
B. Borrower is a direct wholly-owned Subsidiary of the Company.
C. The Company will benefit from Borrower's execution of the Note because
the Note is part of the purchase price under the Purchase Agreement for, and
facilitates the acquisition of, all of REC's outstanding capital stock, which
acquisition is beneficial to the Company's business operations.
D. It is expressly understood among Borrower, the Company and Reunion
that the execution and delivery of this Agreement is a condition precedent to
Reunion's obligations to extend credit under the Note.
E. In connection with the execution and delivery of the Note, the Company
has agreed, among other things, to grant a lien and continuing security interest
in and to the capital stock of Borrower to secure Borrower's obligations under
the Note and the Company's obligations under the Guaranty (defined below).
<PAGE>
AGREEMENT:
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions.
-----------
As used in this Agreement, each parenthetically capitalized term
elsewhere in this Agreement has the meaning so ascribed to it. Terms used but
not defined in this Agreement have the respective meanings ascribed to them in
the Note. The following additional terms, as used in this Agreement, have the
following respective meanings:
AFFILIATE of a Person means any other Person who directly or
indirectly controls, or is controlled by, or is under common control with, that
Person. For purposes of this definition "control," "controlled by," and "under
common control with" mean possession, directly or indirectly, of power to direct
(or cause the direction of) management or policies (whether through ownership of
voting securities, or other ownership interest, by contract, or otherwise).
COLLATERAL means all of the property referred to in subsection 3(a) of
this Agreement.
DEFAULT means a "DEFAULT" under and as defined in the Note.
GUARANTY means the Guaranty of even date herewith being made by the
Company contemporaneously herewith in Secured Party's favor to secure payment
and performance of Borrower's obligations under the Note and the Company's
obligations under this Agreement.
OBLIGATION means the Indebtedness as defined in and represented by,
and all obligations in respect of, the Note and the Guaranty, and the payment of
principal of, premium, if any, interest on and all other amounts owing in
respect of, the Note and the Guaranty.
PERSON means any individual, entity, or association.
PLEDGED STOCK means all of the issued and outstanding capital stock of
Borrower now owned or hereafter acquired by the Company (or any Subsidiary or
Affiliate of the Company), including the stock identified on Exhibit A, any
---------
additional or substitute shares of capital stock of Borrower now owned or
hereafter acquired by the Company (or any Subsidiary or Affiliate of the
Company) issued after the date hereof.
PROCEEDS means all proceeds, in whatever form, arising from the
collection, sale, lease, exchange, assignment, licensing or other disposition
of, or other realization upon, the Collateral, whether now existing or hereafter
arising.
PROXY means that certain irrevocable proxy granted by the Company to
Secured Party in respect of Borrower's voting securities pursuant to Section 11
of this Agreement.
-2-
<PAGE>
SECURITY INTERESTS means the security interests in the Collateral
granted hereunder securing the Obligation.
SUBSIDIARY of any Person means any entity of which at least 50% (in
number of votes) of the stock (or equivalent interest) is owned of record or
beneficially, directly or indirectly, by that Person. Unless the context
otherwise clearly requires, any reference to a "Subsidiary" is a reference to a
Subsidiary of the Company. The term "Subsidiary" excludes Atasca Properties,
Ltd., a Texas limited partnership.
UCC means the Uniform Commercial Code as in effect on the date hereof
in the State of Texas; provided, however, that to the extent that the perfection
or the effect of perfection or non-perfection of the Security Interest in any
Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than Texas, "UCC" means the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof relating
to such perfect or effect of perfection or non-perfection.
SECTION 2. Representations, Warranties and Certain Agreements.
--------------------------------------------------
A. The Company represents and warrants as follows:
(a) The Company has valid and marketable title to all of the
Collateral free and clear of any security interest, mortgage, pledge, claim,
lien, charge, option, defect, encumbrance or other right or interest of any
other Person (collectively or individually, an "ENCUMBRANCE") and has the
absolute and unrestricted right, power, authority and capacity to pledge the
Collateral in the manner provided in this Agreement free and clear of any
Encumbrance. Except for the Proxy, none of the Pledged Stock is subject to any
voting trust, voting agreement or other agreement or understanding with respect
to the voting thereof. The Pledged Stock described on Exhibit A hereto is all
---------
of the issued and outstanding capital stock of Borrower as of the date hereof
and it is held beneficially and of record by the Company. There are no
outstanding convertible securities, subscriptions, options, warrants, calls or
similar commitments to purchase, issue or sell any of the Pledged Stock and
there is no outstanding agreement of Borrower to issue or sell any shares of its
capital stock or any securities or obligations convertible into its capital
stock. All of the Pledged Stock has been duly authorized and validly issued, is
fully paid and non-assessable and none of the Pledged Stock was issued in
violation of the preemptive rights of any Person.
(b) Contemporaneously with the execution and delivery of this
Agreement, the Company has delivered to Secured Party the Pledged Stock
described on Exhibit A hereto. No Collateral is in the possession of any Person
---------
asserting any claim thereto or security interest therein, except that Secured
Party or its designee may have possession of Collateral as contemplated hereby.
(c) Assuming that Secured Party is in continuous possession of the
Pledged Stock, the Security Interests will constitute valid and perfected
security interests in such Collateral prior to all other liens.
-3-
<PAGE>
(d) This Agreement, including, without limitation, the Proxy,
constitutes a valid and legally binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, debtor relief, or similar
laws affecting the rights of creditors generally.
(e) The Company's execution and delivery of this Agreement and the
performance by it of its obligations hereunder (i) are within its corporate
power, (ii) have been duly authorized by all necessary corporate action, (iii)
require no action by or in respect of, or filing with, governmental authority
applicable to it or its Subsidiaries, or the consent or approval of any Person
which has not been obtained and delivered to Secured Party, (iv) do not violate
any provision of the articles or certificate of incorporation, or bylaws of the
Company or any of its Subsidiaries, (v) do not violate any material provision of
law applicable to the Company or any of its Subsidiaries, (vi) do not violate
any material agreements to which any of the Company or its Subsidiaries is a
party including, without limitation, the Senior Indebtedness (as defined in the
Note) (and no material default exists on the part of the Company or any of its
Subsidiaries under any agreement to which it is a party), and (vii) will not
result in the creation or imposition of any lien on any asset of the Company or
any of its Subsidiaries, except pursuant to this Agreement and except for such
liens the foreclosure or enforcement of which, either individually or in the
aggregate, would not have a material adverse effect upon the financial
condition, operations, assets or business of Borrower, or the Company and its
Subsidiaries, including Borrower, taken as a whole.
(f) The value of the consideration received and to be received by the
Company is reasonably worth at least as much as its liability under this
Agreement, and such liability may reasonably be expected to benefit the Company
directly or indirectly.
B. The Company agrees as follows:
(a) The Company will not change the location of its chief executive
office or chief place of business unless it shall have given Secured Party prior
notice thereof.
(b) The Company may not change its name or corporate structure in any
manner unless it shall have given Secured Party prior notice thereof.
(c) The Company shall keep full and accurate books and records
relating to the Collateral and will make a notation in those books and records
that the Pledged Stock is pledged as collateral to secure the Obligation.
(d) The Pledged Stock will at all times include all of the issued and
outstanding capital stock of Borrower, and the Company shall remain the of
record and beneficial owner of 100% of Borrower's issued and outstanding capital
stock.
(e) The Company shall not become a party to any agreement, commitment
or understanding referred to in subsection 2.A(a) above.
-4-
<PAGE>
(f) The Company shall take such action as Secured Party may reasonably
request to carry out more effectively the terms of this Agreement and the Proxy,
including, executing, acknowledging, delivering, and recording or filing
additional instruments or documents.
SECTION 3. The Security Interests.
----------------------
(a) The Company, to secure the full and punctual payment of the
Obligation and to secure the performance of all of the obligations of Borrower
under the Note and of the Company under the Guaranty, hereby grants to Secured
Party a continuing security interest in and to all of the following property of
the Company, whether now owned or existing or hereafter acquired or arising and
regardless of where located:
(i) all books and records of the Company, pertaining to any of the
property described in this subsection (a);
(ii) the Pledged Stock owned or held by the Company and all of the
Company's rights and privileges with respect thereto including, without
limitation, all dividends, interest, principal and other payments and
distributions made upon or with respect to the Pledged Stock; and
(iii) all Proceeds of all or any of the property described in
clauses (i) and (ii) of this subsection to the extent that such Proceeds consist
of cash or other property which would constitute Collateral pursuant to such
clauses (i) and (ii).
(b) The Security Interests are granted as security only and shall not
subject Secured Party to, or transfer or in any way affect or modify, any
obligation or liability of the Company with respect to any of the Collateral or
any transaction in connection therewith.
SECTION 4. Delivery of Pledged Stock.
-------------------------
If at any time or from time to time after the date hereof the Company
shall receive any stock required to be pledged hereunder, the Company shall
promptly:
(i) deliver to Secured Party each such share of stock, accompanied by
instruments of transfer or assignment duly executed in blank, to be held by
Secured Party as collateral for the Obligation in accordance with this
Agreement; and
(ii) execute, deliver, file and record any and all instruments,
assignments, agreements, financing statements and other documents
necessary, to the extent determined by and in form and substance reasonably
satisfactory to Secured Party, to perfect or continue the perfection of a
security interest in such stock for the benefit of Secured Party.
-5-
<PAGE>
SECTION 5. General Authority.
-----------------
The Company hereby irrevocably appoints Secured Party its true and lawful
attorney, with full power of substitution, in the name of the Company, Secured
Party, or otherwise, for the sole use and benefit of Secured Party, but at the
Company's expense, to the extent permitted by law to exercise, at any time and
from time to time while a Default exists, all or any of the following powers
with respect to all or any of the Collateral:
(i) to ask for, demand, sue for, collect, receive and give acquittance
for any and all moneys due or to become due thereon or by virtue thereof;
(ii) to commence, settle, compromise, compound, adjust, prosecute or
defend any claim, suit, action or proceeding with respect thereto;
(iii) to sell, transfer, assign or otherwise deal in or with the same
or any party thereof or the Proceeds or avails thereof, as fully and
effectually as if Secured Party were the absolute owner thereof; and
(iv) to extend the time of payment of any or all thereof and to make
any allowance and other adjustments with reference thereof;
provided, however, that Secured Party shall give the Company not less than ten
days prior written notice of the time and place of any sale or other intended
disposition of any of the Collateral pursuant to clause (iii) above. The
Company agrees that such notice constitutes "reasonable notification" within the
meaning of Section 9-504(c) of the UCC.
SECTION 6. Record Ownership of Pledged Stock; Notices.
------------------------------------------
(a) While a Default exists, Secured Party may at any time or from time
to time, cause any or all of the Pledged Stock to be transferred of record
into the name of Secured Party or its nominee. If Secured Party transfers
any Pledged Stock into its name or the name of its nominee, Secured Party
will thereafter promptly give the Company copies of any notices and
communications received by Secured Party with respect to any such Pledged
Stock. If such Default is cured or waived, Secured Party shall then cause
any Pledged Stock so transferred into its name to be transferred into the
Company's name.
(b) If a Default exists, the Company will promptly give to Secured
Party copies of any notices and communications received by the Company with
respect to any Pledged Stock.
-6-
<PAGE>
SECTION 7. Right to Receive Distributions on Pledged Stock.
-----------------------------------------------
(a) While a Default exists, Secured Party shall have the right to
receive and retain as additional security hereunder all dividends,
interest, principal and other payments and distributions made upon or with
respect to the Pledged Stock all of which shall be promptly applied to the
Obligation. The Company shall take all such action necessary or
appropriate, or as Secured Party may reasonably request, to give effect to
such right. Any dividends, interest, principal and other payments and
distributions which are received in respect of the Pledged Stock by the
Company while a Default exists shall be received in trust for the benefit
of the Secured Party and shall be segregated from other funds of the
Company and shall (to the extent so directed by Secured Party) promptly be
paid over to Secured Party (with any necessary endorsement). All such
dividends, interest, principal and other payments and distributions shall
be delivered to Secured Party upon demand.
(b) So long as no Default exists, the Company shall have full power
and authority to receive and retain all dividends, distributions, and other
payments in respect of Pledged Stock pledged to Secured Party hereunder.
SECTION 8. Right to Vote Pledged Stock; Releases.
-------------------------------------
(a) Unless a Default exists and subject to the terms of the Proxy, the
Company shall have the right, from time to time, to vote and to give
consents, ratifications and waivers with respect to the Pledged Stock and
other Collateral that the Company owns and Secured Party shall, upon
receiving a written request from an authorized financial officer of the
Company deliver to the Company or as specified in such request, such
proxies, powers of attorney, consents, ratifications and waivers as shall
be reasonably requested by the Company in respect of any of the Pledged
Stock owned by the Company which are registered in the name of Secured
Party or its nominee and any other Collateral owned by the Company.
(b) If a Default exists, and in addition to Secured Party's rights
under the terms of the Proxy, Secured Party shall have the right, to the
extent permitted by law, to vote and to give consents, ratifications and
waivers and take any other action with respect to all the Pledged Stock
with the same force and effect as if Secured Party were the absolute and
sole owner thereof. The Company shall at the request of Secured Party take
all such action as may be necessary or appropriate to give effect to the
rights granted to Secured Party pursuant to the immediate preceding
sentence.
SECTION 9. Remedies Upon Enforcement Notice.
--------------------------------
(a) If a Default exists, Secured Party may exercise all rights of a
secured party under the UCC (whether or not in effect in the jurisdiction
where such rights are exercised) and, without limiting the foregoing,
Secured Party may sell the Collateral or any part thereof at public or
private sale, for cash, credit or for future delivery, and
-7-
<PAGE>
at such price or prices as are commercially reasonable under the
circumstances, provided that (i) Secured party shall give the Company 10
days prior notice of any such sale, and (ii) in respect of a Default under
Section 10(a) of the Note, Secured Party may not exercise any such rights
unless the Obligation has not been paid in full in cash by February 24,
1997. Secured Party may be the purchaser of any or all of the Collateral
so sold at any public sale (or, if the Collateral is of a type customarily
sold in a recognized market or is of a type which is the subject of widely
distributed standard price quotations, at any private sale). The Company
will execute and deliver such documents and take such other lawful actions
Secured Party deems necessary or advisable in order that any such sale may
be made in compliance with law. Upon any such sale Secured Party shall
have the right to deliver, assign and transfer to the purchaser thereof the
Collateral so sold. Each purchaser at any such sale shall hold the
Collateral so sold to it absolutely and free from any claim or right of
whatsoever kind, including any equity or right of redemption of the Company
which may be waived, and the Company to the extent permitted by law, hereby
specifically waives all rights of redemption, stay or appraisal which it
has or may have under any law now existing or hereafter adopted. The
notice (if any) of such sale required by Section 5 of this Agreement shall
(1) in case of a public sale, state the time and place fixed for such sale,
and (2) in the case of a private sale, state the day after which such sale
may be consummated. Any such public sale shall be held at such time or
times within ordinary business hours and at such place or places as Secured
Party may fix in the notice of such sale. At any such sale the Collateral
may be sold in one lot as an entirety or in separate lots, as Secured Party
may determine. Secured Party shall not be obligated to make any such sale
pursuant to any such notice. Secured Party may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
the sale, and such sale may be made at any time or place to which the same
may be so adjourned. Subject to Section 6, Secured Party, instead of
exercising the power of sale herein conferred upon it, may proceed by a
suit or suits at law or in equity to foreclose the Security Interests and
sell the Collateral, or any portion thereof, under a judgment or decree of
a court or courts of competent jurisdiction.
(b) The Company recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws, Secured Party may be compelled, with respect to any sale
of all or any part of the Pledged Stock, to limit purchasers to those who
will agree, among other things, to acquire the Pledged Stock for their own
account, for investment and not with a view to the distribution or resale
thereof. The Company acknowledges that any such private sales may be at
prices and on terms less favorable to Secured Party than those obtainable
through a public sale without such restrictions, and, notwithstanding such
circumstances, agree that any such private sale shall be deemed to have
been made in a commercially reasonable manner and that Secured Party shall
have no obligation to engage in public sales and no obligation to delay the
sale of any Pledged Stock for the period of time necessary to permit the
issuer thereof to register it for public sale.
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<PAGE>
(c) For the purpose of enforcing any and all rights and remedies under
this Agreement Secured Party shall have access to and use the Company's
books and records relating to the Collateral.
SECTION 10. Application of Proceeds.
-----------------------
During the time a Default exists, the proceeds of any sale of, or other
realization upon, all or any part of the Collateral shall be delivered to
Secured Party.
SECTION 11. Proxy.
-----
(a) Without limiting Secured Party's other rights under this Agreement
or its rights under subsection (a) of Section 11 of the Note, if the
Obligation has not been paid in full in cash before February 24, 1997 or
any Default described in Section 10(b), (c), (d), (e), (f) or (g) of the
Note occurs or Secured Party has reasonable grounds to believe that a
breach of Section 9(b), (c), (e), (i), (j), (k), (l), (m), (n) or (o) of
the Note or Section 12(b), (c), (e), (i), (j), (k), (l), (m), (n) or (o) of
the Guaranty is imminent and Borrower and the Company have not in good
faith assured Secured Party that Borrower and the Company will prevent such
breach from occurring, then from and after the earlier of February 24,
1997, the date of such Default or the date of such pending breach and
continuing until the Obligation is paid in full in cash, the Company, by
its execution and delivery of this Agreement, hereby appoints Secured Party
as the Company's proxy to vote and act for the Company at all meetings and
on all actions of or which can be taken by stockholders of Borrower in the
same manner and to the same extent as if the Company voted and/or acted,
such proxy to be exercised by Secured Party its sole and absolute
discretion. The proxy granted by this Section 11 is granted in respect of
all of Borrower's issued and outstanding voting securities as security for
Borrower's payment of the Obligation. THE PROXY GRANTED BY THIS SECTION 11,
BEING COUPLED WITH AN INTEREST, SHALL BE IRREVOCABLE UNTIL THE OBLIGATION
HAS BEEN PAID IN FULL IN CASH. Until the Obligation has been paid in full
in cash, all certificates representing Borrower's voting securities shall
conspicuously bear the following legend:
THE SECURITIES EVIDENCED HEREBY ARE SUBJECT TO TRANSFER RESTRICTIONS AND AN
IRREVOCABLE PROXY IN FAVOR OF REUNION INDUSTRIES, INC. PURSUANT TO THE
TERMS OF THAT CERTAIN PLEDGE AGREEMENT, DATED MAY 24, 1996, MADE BY TRIBO
PETROLEUM CORPORATION IN FAVOR OF REUNION INDUSTRIES, INC. THE CORPORATION
WILL FURNISH, WITHOUT CHARGE, A COPY OF SUCH PLEDGE AGREEMENT TO THE RECORD
HOLDER OF THIS CERTIFICATE ON WRITTEN REQUEST TO THE SECRETARY OF THE
CORPORATION AT ITS PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE.
(b) The Company shall not enter into any agreement, transaction or
other arrangement which would limit or preclude Secured Party from
exercising the Proxy, including, without limitation, any voting or similar
arrangement covering shares of Borrower's capital stock.
-9-
<PAGE>
(c) The Company shall not, and shall not cause or allow Borrower or
ROC to, enter into any arrangement with any director or officer of Borrower
or ROC in his or her capacity as such which (i) cannot be terminated
immediately by the Company, Borrower or ROC without penalty or (ii)
provides for any compensation in connection with termination of his or her
status as a director or officer of Borrower or ROC. All directors and
officers of Borrower and ROC shall hold their respective directorships and
offices subject to removal at any time and for any reason or no reason as a
direct or indirect result of Secured Party's exercise of the Proxy. No
such removal shall constitute a breach by the Company, Borrower or ROC of
any agreement or other arrangement relating to any relationship between the
Company, Borrower or ROC and any of Borrower's or ROC's directors or
officers, or create or otherwise give rise to any obligation on the part of
the Company, Borrower, ROC or Secured Party to compensate any such removed
director or officer. The Company shall cause Borrower and ROC to make all
of their respective directors and officers elected or appointed on or after
the date hereof and before Secured Party first exercises the Proxy (the
"SUBJECT DIRECTORS AND OFFICERS") aware of the provisions of this Section
11(c) before they become directors or officers of Borrower or ROC, and to
deliver written evidence of same to Secured Party.
(d) The Company shall indemnify, defend and hold harmless Secured
Party, its directors, officers and stockholders, and Borrower, ROC and
those of Borrower's and ROC's directors and officers who are not Subject
Directors and Officers, to the extent such indemnified persons are not
responsible for Losses (defined below) indemnified against pursuant hereto,
from and against any and all losses, claims, damages, expenses or
liabilities (including reasonable attorneys' fees) (collectively, "Losses")
as the same may arise or be made against or be incurred by such indemnified
persons, or to which such indemnified persons may be subject in connection
with, arising out of, or having a reasonable relation to, any breach by the
Company, Borrower or ROC of this Section 11 or Borrower or ROC of Section
9(o) of the Note or any exercise of the Proxy, including, without
limitation, the removal of any Subject Directors and Officers. No
indemnified person hereunder shall be, or be deemed to be responsible for
Losses indemnified against pursuant hereto in connection with the exercise
or enforcement by, for or on behalf of, Secured Party of its rights under
Section 9(o) of the Note or of the Proxy.
SECTION 12. Termination of Security Interests; Release of Collateral.
--------------------------------------------------------
After the Obligation has been paid in full in cash, the Security Interests
shall terminate and all rights to the Collateral shall revert and be released to
the Company. At any time and from time to time prior to such termination of the
Security Interests, Secured Party may release any of the Collateral. Upon any
such termination of the Security Interests or release of Collateral, Secured
Party will, at the Company's expense, deliver to the Company any Collateral so
released that is in its possession and execute and deliver such documents,
certificates or other instruments as the Company shall reasonably request to
evidence the termination of the Security Interests or the release of such
Collateral, as the case may be.
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SECTION 13. Notices.
-------
All notices, requests and other communications between the Company and
Secured Party under this Agreement shall be in writing to be effective and shall
be deemed to have been given (a) if by telecopy, when transmitted to the
appropriate telecopy number (and all communications sent by telecopy must be
confirmed promptly thereafter by telephone; but any requirement in this
parenthetical shall not affect the date when the telecopy shall be deemed to
have been delivered), (b) if by mail, on the third business day after it is
enclosed in an envelope and properly addressed, stamped, sealed, certified mail,
return receipt requested, and deposited in the appropriate official postal
service, or (c) if by any other means, when actually delivered. Until changed
by giving fifteen days advance notice pursuant to this Agreement, the address
(and telecopy number) for Secured Party and the Company are as follows:
TRIBO PETROLEUM CORPORATION REUNION INDUSTRIES, INC.
1100 Louisiana, Suite 2880 One Stamford Landing
Houston, Texas 77002 62 Southfield Avenue
Southfield, Connecticut 06902
Telephone: 713/659-7551 Telephone: 203/325-0551
Facsimile: 713/659-5436 Facsimile: 203/325-3923
SECTION 14. Waivers; Estoppel; Non-Exclusive Remedies.
-----------------------------------------
(a) No failure on the part of Secured Party to exercise, no delay in
exercising, and no course of dealing with respect to, any right under this
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise by Secured Party of any right under this Agreement preclude any other
or further exercise thereof or the exercise of any other right.
(b) The Company, to the extent it may lawfully do so, (i) agrees that it
will not at any time, in any manner whatsoever, claim or take the benefit or
advantage of any appraisement, valuation, stay, extension, moratorium, turnover
or redemption law, or any law permitting it to direct the order in which the
Collateral shall be sold, now or at any time hereafter in force, which may
delay, prevent or otherwise affect the performance or enforcement of this
Agreement, (ii) hereby waives all benefit or advantage of all such laws and
covenants and (iii) agrees that it will suffer and permit the execution of every
such power as though no such law were in force.
(c) The Company, to the extent it may lawfully do so, on behalf of itself
and all who claim through or under it, including, without limitation, any and
all subsequent creditors, vendees, assignees and lienors, waives and releases
all rights to demand or to have any marshalling of the Collateral upon any sale,
whether made under any power of sale granted in this Agreement or pursuant to
judicial proceedings or upon foreclosure or any enforcement of this Agreement
and consents and agrees that all the Collateral may at any such sale be offered
and sold as an entirety.
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<PAGE>
(d) The Company waives, to the extent permitted by applicable law, presentment,
demand, protest, notice of intent to accelerate, notice of acceleration,
and any other notice of any kind (except notices explicitly required under
this Agreement or the Note) in connection with this Agreement and any
action taken by Secured Party with respect to the Collateral.
(e) The rights in this Agreement are cumulative and are not exclusive of
any other remedies provided by law or any other contract.
SECTION 15. Successors and Assigns.
----------------------
The terms of the Note restrict the assignment of the Obligation. This
Agreement is for the benefit of Secured Party and its successors and permitted
assigns, and in the event of an assignment of all or any of the Obligation, the
rights hereunder, to the extent applicable to the indebtedness so assigned,
shall be transferred with such indebtedness. This Agreement shall be binding on
the Company and Secured Party and their respective successors and permitted
assigns.
SECTION 16. Changes in Writing.
------------------
Neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally, but only in writing signed by or on behalf of
the Company and Secured Party.
SECTION 17. Texas Law.
---------
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS, AND NOT THE LAWS OF CONFLICT, OF THE STATE OF TEXAS, AND THE LAWS
OF THE UNITED STATES APPLICABLE TO TRANSACTIONS IN TEXAS.
SECTION 18. Severability.
------------
If any provision hereof is invalid and unenforceable in any jurisdiction,
then, to the fullest extent permitted by law, (i) the other provisions hereof
shall remain in full force and effect in such jurisdiction; and (ii) the
invalidity or unenforceability of any provision hereof in any jurisdiction shall
not affect the validity or enforceability of such provision in any other
jurisdiction.
SECTION 19. Submission to Jurisdiction; Waiver of Jury Trial.
------------------------------------------------
THE COMPANY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS AND OF ANY TEXAS STATE COURT
SITTING IN HARRIS COUNTY, TEXAS, FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY
SUCH
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<PAGE>
PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. THE COMPANY
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its authorized officer as of the day and year first above written.
TRIBO PETROLEUM CORPORATION
By: /s/ Richard Bowman
------------------
Name: Richard Bowman
--------------
Title: President
---------
-13-
<PAGE>
EXHIBIT A
PLEDGED STOCK
-------------
<TABLE>
<CAPTION>
AUTHORIZED
AND PLEDGED
CORPORATE OUTSTANDING PAR STOCK CERTIFICATE PERCENTAGE
NAME SHARES VALUE INTEREST NUMBER OWNED
- -------------- ----------- ----- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Tri-Union 1,000 $0 100% 1 100%
Development
Corporation
</TABLE>
<PAGE>
EXHIBIT 2.4
GUARANTY
THIS GUARANTY (as may be amended, this "GUARANTY") is executed as of May
24, 1996, by the undersigned ("GUARANTOR") for the benefit of REUNION
INDUSTRIES, INC., a Delaware corporation ("REUNION"),
RECITALS
A. TRI-UNION DEVELOPMENT CORPORATION, a Texas corporation ("BORROWER"),
in its capacity as assignee of Guarantor's rights as purchaser under that
certain Stock Purchase Agreement, dated as of April 2, 1996, between Guarantor
or its wholly-owned subsidiary and Reunion ("STOCK PURCHASE AGREEMENT"), is
purchasing from Reunion all of the issued and outstanding capital stock of
Reunion Energy Company, a Delaware corporation ("REC").
B. Contemporaneously with the execution and delivery of this Guaranty,
Borrower is executing and delivering to Reunion a Subordinated Promissory Note
due 1996 of even date herewith, made payable to Reunion in the original
principal amount of $2,200,000 (as renewed, amended, modified, extended,
refinanced, or otherwise supplemented from time to time, the "NOTE") which
represents a portion of the purchase price under the Stock Purchase Agreement.
C. Contemporaneously with the execution and delivery of this Guaranty,
Guarantor also is executing and delivering to Reunion a Pledge Agreement of even
date herewith covering the outstanding capital stock of Borrower, and certain
other documents related to the credit extended under the terms of the Note (such
documents, the Note, this Guaranty and such Pledge Agreement collectively, the
"LOAN PAPERS").
D. Contemporaneously with the execution and delivery of this Guaranty,
REC is merging with and into Borrower, with Borrower surviving such merger (the
"MERGER"), and Reunion Operating Company, a Delaware corporation ("ROC") and
wholly-owned subsidiary of REC, is becoming a wholly-owned subsidiary of
Borrower.
E Borrower is a direct wholly-owned Subsidiary of Guarantor.
F. Guarantor will benefit from Borrower's execution of the Note because
the Note is part of the purchase price under the Purchase Agreement for, and
facilitates the acquisition of, all of REC's outstanding capital stock, which
acquisition is beneficial to Guarantor's business operations.
G. It is expressly understood among Borrower, Guarantor and Reunion that
the execution and delivery of this Guaranty is a condition precedent to
Reunion's obligations to extend credit under the Note.
H. In Guarantor's judgment, the value of the consideration received and
to be received by it under the Loan Papers is reasonably worth at least as much
as its liability and obligations under this Guaranty, and such liability and
obligations may reasonably be expected to benefit Guarantor directly or
indirectly.
<PAGE>
NOW, THEREFORE, in consideration of the premises and other valuable
consideration, the receipt and adequacy of which are acknowledged, Guarantor
guarantees to Reunion the prompt payment of the Guaranteed Debt (defined below)
at maturity (by acceleration or otherwise) and at all times after maturity, as
follows:
1. Definitions. UNLESS OTHERWISE DEFINED IN THIS GUARANTY, ANY
-----------
CAPITALIZED TERM USED IN THIS GUARANTY SHALL HAVE THE MEANING GIVEN THAT TERM IN
THE NOTE. The following terms shall have the following meanings as used in this
Guaranty:
1.1 "BORROWER" shall include, without limitation, Borrower, Borrower as a
debtor-in-possession, and any receiver, trustee, liquidator, conservator,
custodian, or similar party appointed for Borrower or for all or substantially
all of Borrower's assets pursuant to any liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization
or similar Debtor Relief Law in effect from time to time and affecting the
rights of creditors generally.
1.2 "BORROWER SUBORDINATED DEBT" means any obligation of the Borrower to
Guarantor whether (a) it exists now or arises in the future, is direct,
indirect, fixed, contingent, liquidated, unliquidated, joint, several, or joint
and several, (b) is due or to become due to Guarantor, (c) is held by or is to
be held by Guarantor, (d) created directly or acquired by assignment or
otherwise, or (e) evidenced by a writing.
1.3 "COMERICA CREDIT AGREEMENT" means the letter loan agreement dated as
of July 7, 1995, among Tribo Petroleum Corporation, as borrower, and Comerica
Bank-Texas, as the lender, (as the same may be renewed, amended, modified,
extended, refinanced, or otherwise supplemented from time to time), pursuant to
which such lender may extend credit to the Company of up to $1,500,000.
1.4 "COMERICA INDEBTEDNESS" means any Indebtedness of the Company under
the Comerica Credit Agreement.
1.5 "CREDIT AGREEMENT" means the Credit Agreement dated as of May 24,
1996, among Borrower and Bank One, Texas, N.A., a national banking association,
as the lender, (as the same may be renewed, amended, modified, extended,
refinanced, or otherwise supplemented from time to time).
1.6 "DEBTOR RELIEF LAW" means Title 11 of the United States Code and all
other applicable liquidation, conservatorship, bankruptcy, fraudulent transfer,
moratorium, rearrangement, receivership, insolvency, reorganization, suspension
or payments, or similar laws in effect from time to time affecting the rights of
creditor generally.
1.7 "DEFAULT" means a "DEFAULT" under and as defined in the Note.
2
<PAGE>
1.8 "DISTRIBUTION" for any Person means, with respect to any share of
any capital stock, other equity securities or equivalent interests, or any
partnership interest issued by that Person, (a) the retirement, redemption,
purchase, withdrawal, or other acquisition for value of such interests
(including the purchase of warrants, rights, or other options to acquire such
interests), (b) the declaration or payment of any dividend or distribution on or
with respect to such interests, (c) any loan or advance by that Person to, or
other investment by that Person in, the holder of any of such interests, and (d)
any other payment by that Person with respect to such interests.
1.9 "FINANCIAL STATEMENTS" means a compiled consolidated balance sheet of
the Guarantor as of December 31, 1995, and related statements of income or loss
and changes in stockholder's equity for the fiscal year then ended, and a
consolidated balance sheet of the Guarantor as of March 31, 1996, and related
statements of income or loss and changes in stockholder's equity for the three-
month period then ended.
1.10 "GUARANTEED DEBT" means the Indebtedness represented by, and all
obligations in respect of, the Note and the Pledge Agreement, and any and all
reasonable costs and fees incurred, and out-of-pocket expenses paid by Reunion
to enforce Borrower's, Guarantor's or any other obligor's payment and other
obligations under the Note and the Pledge Agreement. Guarantor agrees that
GUARANTEED DEBT includes, without limitation, amounts that would become due but
for the operation of any applicable provision of Title 11 of the United States
Code (including, without limitation, 11 U.S.C. (S)(S) 502 and 506), together
with all accrued and unpaid interest (including, without limitation, all post-
petition interest if Borrower or any Subsidiary voluntarily files a bankruptcy
case, or is the subject of an involuntarily filed bankruptcy case, under Title
11 of the United States Code).
1.11 "INDEBTEDNESS" means with respect to any Person at any date, (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than current trade liabilities incurred in
the ordinary course of business and payable in accordance with customary
practices), (b) any other indebtedness of such Person which is evidenced by a
note, bond, debenture, letter of credit, guarantee or similar instrument, (c)
all obligations of such Person under any lease of property, real or personal,
the obligations of the lessee in respect of which are required in accordance
with generally accepted accounting principles to be capitalized on a balance
sheet of the lessee, (d) all obligations of such Person in respect of
acceptances issued or created for the account of such Person (other than
endorsements in the ordinary course of business), and (e) all liabilities of the
type referred to in clauses (a) through (d) above that are secured by any lien,
charge, security interest or encumbrance on any property owned by such Person
even though such Person has not assumed or otherwise become liable for the
payment thereof.
1.12 "PERSON" means any individual, entity, or association.
1.13 "PLEDGE AGREEMENT" means the Pledge Agreement of even date herewith
being made by Guarantor contemporaneously herewith in Reunion's favor pursuant
to which Guarantor is pledging to Reunion the Borrower's capital stock to secure
payment and
3
<PAGE>
performance of Borrower's obligations under the Note and Guarantor's obligations
under this Guaranty.
1.14 "PROXY" means that certain irrevocable proxy granted by the Borrower
to Reunion in respect of Borrower's voting securities pursuant to Section 11 of
the Pledge Agreement.
1.15 "SENIOR INDEBTEDNESS" means any Indebtedness of the Borrower under the
Credit Agreement.
1.16 "SUBSIDIARY" of any Person means any entity of which at least 50% (in
number of votes) of the stock (or equivalent interest) is owned of record or
beneficially, directly or indirectly, by that Person. The term "Subsidiary"
excludes Atasca Properties, Ltd., a Texas limited partnership.
2. Guaranty. This is an absolute, irrevocable, continuing and general
--------
guaranty of payment of the Guaranteed Debt. This Guaranty will remain in effect
until the Guaranteed Debt is paid in full in cash. Any permitted holder or
assignee of the Guaranteed Debt may enforce this Guaranty. Guarantor may not
rescind or revoke its obligations to Reunion with respect to the Guaranteed
Debt.
3. Consideration. Guarantor represents and warrants that the value of
-------------
the consideration received and to be received by it is reasonably worth at least
as much as its liability under this Guaranty, and such liability may reasonably
be expected to benefit Guarantor directly or indirectly.
4. Limitation; Fraudulent Conveyance. It is the intention of Guarantor
---------------------------------
and Reunion that the amount of the Guaranteed Debt not exceed the maximum amount
permitted by fraudulent conveyance, fraudulent transfer or similar laws
applicable to Guarantor. Accordingly, and notwithstanding anything to the
contrary in this Guaranty, any Loan Paper, or any other agreement or instrument
executed in connection with the payment of any of the Guaranteed Debt, if, after
giving effect to this Guaranty and applicable laws, the obligations of Guarantor
under this Guaranty would otherwise by set aside, terminated, annulled or
avoided for such reason by a court of competent jurisdiction in a proceeding
actually pending before such court, the amount of the Guaranteed Debt shall be
limited to the maximum amount permitted by applicable laws which would not, (a)
render Guarantor insolvent, (b) result in the fair saleable value of the
Guarantor's assets being less than the amount required to pay its debts and
other liabilities (including contingent liabilities) as they mature, or (c)
leave Guarantor with unreasonably small capital to carry out its business as
conducted prior to the execution of this Guaranty and as proposed to be
conducted, including its capital needs.
5. Waiver. Guarantor waives all defenses to the enforcement of this
------
Guaranty (and rights which may be asserted as defenses to the enforcement of
this Guaranty) including, but not limited to, (a) any right to require Reunion
to do any of the following before Guarantor is obligated to pay the Guaranteed
Debt or before Reunion may proceed against Guarantor, (i) sue or exhaust
remedies against Borrower and other guarantors or obligors, (ii) sue on an
accrued right of action in respect of any of the Guaranteed Debt or bring any
other action, exercise any other right, or exhaust all other
4
<PAGE>
remedies, or (iii) enforce rights against Borrower's assets or the collateral
pledged by Borrower or Guarantor to secure the Guaranteed Debt, (b) notice that
this Guaranty has been accepted by Reunion, (c) any right of Guarantor to
receive notice from Reunion of changes which affect the creditworthiness of
Borrower, and (d) presentation, presentment, demand for payment, protest, notice
of protest, notice of dishonor or nonpayment of any Indebtedness, notice of
intent to accelerate, notice of acceleration, notice of any suit or other action
by Reunion against Borrower, Guarantor or any other Person and any notice to any
party liable for the obligation which is the subject of the suit or action.
Guarantor waives each of the foregoing rights or defenses regardless
whether they arise under (1) Section 34.01 et seq. of the Texas Business and
Commerce Code, as amended, (2) Section 17.001 of the Texas Civil Practice and
Remedies Code, as amended, (3) Rule 31 of the Texas Rules of Civil Procedure, as
amended, or (4) common law, in equity, under contract, by statute, or otherwise.
6. Default by Borrower. Subject to Section 6 of the Note, upon the
-------------------
occurrence of a Default, Reunion may, at its option, declare immediately due and
payable the unpaid balance (plus accrued and unpaid interest) of the Guaranteed
Debt and Guarantor shall, on demand, pay to Reunion the amount of the Guaranteed
Debt then due and payable.
7. Subordination. All Borrower Subordinated Debt shall be expressly
-------------
subordinated in right of payment and enforcement of remedies to the final
payment in full of the Guaranteed Debt. Guarantor agrees not to receive or
accept any payment from Borrower with respect to the Borrower Subordinated Debt
at anytime a Default has occurred and is continuing; and, in the event Guarantor
receives any payment in trust for Reunion and promptly turn it over to Reunion,
in the form received (with any necessary endorsements), to be applied to the
Guaranteed Debt.
8. No Release. Guarantor agrees that its obligations under this Guaranty
----------
shall not be released, diminished, impaired, reduced or affected by the
occurrence of any one or more of the following events: (a) Reunion's taking or
accepting any other security or guaranty for any or all of the Guaranteed Debt;
(b) any release, surrender, exchange, subordination or loss of any security in
connection with any or all of the Guaranteed Debt; (c) any full or partial
release of the liability of any other obligor of the Guaranteed Debt; (d) the
Borrower becomes insolvent, is subject to any Debtor Relief Law, or lacks
corporate authority to execute or perform obligations under the Loan Papers; (e)
any extension or rearrangement of the maturity, pricing or payment of any or all
of the Guaranteed Debt, or any adjustment, indulgence, forbearance, or
compromise granted or given by Reunion to Borrower, Guarantor, or any other
obligor of the Guaranteed Debt; (f) any neglect, delay, omission, failure or
refusal of Reunion to take or prosecute any action to collect all or any part of
the Guaranteed Debt, to foreclose liens on collateral securing the Guaranteed
Debt, or take or prosecute any action in connection with any Loan Paper; (g) any
failure of Reunion to notify Guarantor of (1) any renewal, extension, or
assignment of all or any part of the Guaranteed Debt, (2) the release of any
liens on collateral securing the Guaranteed Debt, (3) any other action Reunion
has taken or refrained from taking against Borrower, or (4) any new agreement
between Reunion and Borrower, it being understood that Reunion is not required
to give Guarantor any notice of any circumstances with respect to or in
connection with the Guaranteed Debt; (h) all or part of the Guaranteed Debt is
or becomes unenforceable against Borrower because it exceeds the amount
permitted by applicable
5
<PAGE>
law; (i) the act of creating the Guaranteed Debt (or any part of the Guaranteed
Debt) is ultra vires or Borrower's representatives exceeded their authority or
violated their fiduciary duties when they created the Guaranteed Debt; (j) any
governmental authority (1) determines that any payment of the Guaranteed Debt to
Reunion constitutes a preference under any Debtor Relief Law or (2) requires
Reunion to refund the payment or transfer the amount of the payment to another
person (and in each such instance this Guaranty shall be reinstated in an amount
equal to the amount of the refunded or transferred payment); or (k) any
discharge, release, or other forgiveness of Borrower's personal liability for
the payment of the Guaranteed Debt.
9. Cumulative Rights; Liability for Other Indebtedness of Borrower. The
---------------------------------------------------------------
rights of Reunion under this Guaranty are cumulative with any other rights that
Reunion may have against Guarantor. The exercise by Reunion of any right or
remedy under this Guaranty, the Loan Papers, or at law or in equity, will not
preclude the concurrent or subsequent exercise of any other right or remedy. If
Guarantor becomes liable for any other Indebtedness owing by Borrower to
Reunion, that liability will not be impaired or affected by this Guaranty.
10. Reliance and Duty to Remain Informed. Guarantor confirms that it has
------------------------------------
executed and delivered this Guaranty after reviewing the Loan Papers and such
other information as it has deemed appropriate in order to make its own credit
analysis and decision to execute and deliver this Guaranty. Because Borrower is
a wholly-owned subsidiary of Guarantor, Guarantor is intimately familiar with
Borrower's operations and financial condition. Guarantor has made its own
independent investigation with respect to Borrower's creditworthiness and in
executing and delivering this Guaranty, Guarantor is not relying on any
representations or warranty by Reunion as to such creditworthiness. Guarantor
expressly assumes the responsibility to remain informed of the financial
condition of Borrower and any circumstances affecting (a) Borrower's ability to
perform under the Loan Papers to which Borrower is a party or (b) any collateral
securing all or any part of the Guaranteed Debt.
11. Representations and Warranties. Guarantor represents and warrants to
------------------------------
Reunion as follows:
(a) Organization. Each of the Guarantor and its Subsidiaries is a
------------
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, has full requisite power and authority to
carry on its business as it is now being conducted and to own and operate the
properties now owned and operated by it, and is duly qualified or licensed to
do business and is in good standing and authorized to do business in all
jurisdictions in which the character of the properties owned or the nature of
the business conducted by it make such qualification or licensing necessary,
except in such jurisdictions where the failure to be so qualified or in good
standing would not have a material adverse effect on the business or financial
condition of the Guarantor and its Subsidiaries, taken as a whole. The
Guarantor's authorized capital stock consists of 1,000 shares of common stock,
of which 1,000 shares are issued, outstanding and owned by Richard Bowman. All
such shares are free and clear of any liens, restrictions, claims or rights of
any other Person and are not subject to any voting or similar agreement,
warrant, option or other acquisition right of
6
<PAGE>
any Person or subject to any transfer restriction except for restriction's
imposed by securities laws.
(b) Authorization, Compliance and No Default. The execution and delivery
----------------------------------------
of the Guarantor of this Guaranty and the performance by it of its obligations
hereunder (i) are within its corporate power, (ii) have been duly authorized by
all necessary corporate action, (iii) require no action by or in respect of, or
filing with, any governmental authority applicable to it or its Subsidiaries, or
the consent or approval of any Person which has not been obtained and delivered
to Reunion, (iv) do not violate any provision of the articles or certificate of
incorporation, or bylaws of the Guarantor or any of its Subsidiaries, (v) do not
violate any material provision of law applicable to the Guarantor or any of its
Subsidiaries, (vi) do not violate any material agreements to which any of the
Guarantor or its Subsidiaries is a party including, without limitation, the
Senior Indebtedness (and no material default exists on the part of the Guarantor
or any of its Subsidiaries under any agreement to which it is a party), and
(vii) will not result in the creation or imposition of any lien on any asset of
the Guarantor or any of its Subsidiaries, except pursuant to the Pledge
Agreement and except for such liens the foreclosure or enforcement of which,
either individually or in the aggregate, would not have a material adverse
effect upon the financial condition, operations, assets or business of Borrower
and ROC, taken as a whole, or the Guarantor and its Subsidiaries, including
Borrower and ROC, taken as a whole.
(c) Enforceability. This Guaranty constitutes a valid and legally binding
--------------
obligation of the Guarantor, enforceable against the Guarantor in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, debtor relief, or similar laws affecting the rights
of creditors generally.
(d) Litigation. Except as disclosed to Reunion in writing prior to the
----------
date of this Guaranty or in the schedules to the Purchase Agreement, neither the
Guarantor nor its Subsidiaries are subject to, or are aware of the threat of,
any litigation, investigation, or proceedings involving them.
(e) Subsidiaries. All of the issued and outstanding shares of capital
------------
stock (or similar voting interests) of Borrower and ROC are duly authorized,
validly issued, fully paid and non-assessable, and owned beneficially and of
record by Guarantor and Borrower, respectively, free and clear of any liens,
restrictions, claims or rights of any other Person, and not subject to any
voting or similar agreement, warrant, option or other acquisition right of any
Person or subject to any transfer restriction except for restrictions imposed by
the Loan Papers or by securities laws. The Merger has been consummated and
Borrower's only Subsidiary is ROC.
(f) Ownership of Assets, Liens. Each of Borrower and ROC has Marketable
--------------------------
Title (as defined in the Purchase Agreement) to its Properties (as defined in
the Purchase Agreement). Each of the Guarantor and its Subsidiaries other than
Borrower and ROC has (i) good and indefeasible title to its real property, (ii)
a vested leasehold interest in all of its leaseholds, and (iii) good title to
personal property which is material to the operation of its
7
<PAGE>
business. No lien exists on any property of the Guarantor or its Subsidiaries,
except (i) as to Borrower, liens which secure the Senior Indebtedness, (ii) as
to Guarantor and its Subsidiaries other than Borrower and ROC, liens which
secure the Comerica Indebtedness, (iii) inchoate liens which arise in the
ordinary course of business, (iv) Permitted Encumbrances (as defined in the
Purchase Agreement) as to the Properties (as defined in the Purchase Agreement)
of Borrower and ROC, or (iv) liens the foreclosure or enforcement of which,
either individually or in the aggregate, would not have a material adverse
effect upon the financial condition, operations, assets or business of Borrower
and ROC, taken as a whole, or the Guarantor or its Subsidiaries, including
Borrower and ROC, taken as a whole.
(g) Debt. Neither the Guarantor nor its Subsidiaries are obligors on any
----
Indebtedness other than (i) as to Borrower, the Senior Indebtedness, (ii) as to
Guarantor and its Subsidiaries other than Borrower and ROC, the Comerica
Indebtedness and Indebtedness in the Financial Statements, and (iii) as to
Guarantor, the Guaranteed Debt.
(h) Insurance. The Guarantor and its Subsidiaries have in effect insurance
---------
coverage with reputable insurers, which in respect of amounts, types and risks
insured, is that which is usual and customary in the oil and gas industry for
prudent owners and operators of properties similar to the properties owned by
the Guarantor and its Subsidiaries.
(i) Financial Statements. True, complete and correct copies of the
--------------------
Financial Statements are attached hereto as EXHIBIT A. The Financial Statements
have been prepared in accordance with generally accepted accounting principles
consistently followed by the Guarantor throughout the periods indicated and
fairly present the consolidated financial position and results of operations of
the Guarantor as of the respective dates and for the respective periods
indicated.
12. Covenants. Until the Guaranteed Debt is paid in full in cash, the
---------
Guarantor unconditionally covenants, agrees and represents as follows:
(a) Payment. The Guarantor shall pay the amounts due under the terms of
-------
this Guaranty on the date such amounts are due.
(b) Indebtedness Limitation. The Guarantor shall not (and shall not allow
-----------------------
or cause its Subsidiaries other than Borrower to) incur Indebtedness other than
the Comerica Indebtedness and the Guaranteed Debt. The Guarantor shall not
allow or cause Borrower to incur Indebtedness other than (i) the Senior
Indebtedness in the amount borrowed under the Credit Agreement, as in effect on
the date hereof, to purchase REC's capital stock, and (ii) the Subordinated
Obligations (as defined in the Note).
(c) Distributions. The Guarantor shall not, and shall not allow or cause
-------------
Borrower or ROC to (i) make any Distributions, except that ROC may make
Distributions to Borrower, or (ii) extend credit to any Person except in the
ordinary course of business.
8
<PAGE>
(d) Items to be Furnished. The Guarantor shall cause copies of all
---------------------
notices and information, including financial information, delivered by the
Guarantor or its Subsidiaries to, and received by any of them from, the holder
of the Senior Indebtedness or the Comerica Indebtedness to be promptly delivered
to Reunion. Within 20 days after the end of each calendar quarter during the
period before this Guaranty is paid in full, the Guarantor shall deliver to
Reunion a consolidated balance sheet of the Guarantor as of the last day of the
immediately preceding quarter, and related statements of income or loss and
changes in stockholder's equity for the three-month period then ended. All
financial statements delivered to Reunion pursuant to this subsection (d) shall
be prepared in accordance with generally accepted accounting principles
consistently followed by the Guarantor throughout the periods indicated and
fairly present the consolidated financial position and results of operations of
the Guarantor as of the respective dates and for the respective periods
indicated.
(e) Maintenance of Existence, Assets, and Business. The Guarantor shall,
----------------------------------------------
and shall cause its Subsidiaries to, (1) maintain their respective corporate
existence in their respective state of organization and their respective
authority to transact business in all other jurisdictions where its is required
by the nature and extent of their respective businesses and properties, (2)
maintain all licenses, permits, and franchises necessary for their respective
businesses, (3) keep all of their assets that are necessary to their respective
businesses in good operating condition (normal wear and tear excepted), and (4)
operate their respective businesses in the manner operated to date.
(f) Insurance. The Guarantor shall, at its cost and expense, maintain
---------
insurance covering the Guarantor and its Subsidiaries with responsible insurance
companies in such amounts and against such risks as is usual and customary in
the oil and gas industry for prudent owners and operators of properties similar
to the properties owned by the Guarantor and its Subsidiaries. The Guarantor's
insurance must provide for at least 30 days' prior notice to Reunion of any
cancellation thereof. Satisfactory evidence of such insurance must be supplied
to Reunion 10 days prior to each policy renewal.
(g) Further Assurances. The Guarantor shall, and shall cause its
------------------
Subsidiaries to, take such action as Reunion may reasonably request to carry out
more effectively the terms of this Guaranty, the Note and the Loan Papers
(including the Proxy), including executing, acknowledging, delivering, and
recording or filing additional instruments or documents.
(h) Expenses. The Guarantor shall promptly pay upon demand all reasonable
--------
costs and fees incurred, and out-of-pocket expenses paid by Reunion (including,
without limitation, the out-of-pocket expenses and reasonable fees of Reunion's
counsel) in connection with (1) any amendment, waiver, or consent in respect of
this Guaranty or the Pledge Agreement, or (2) the enforcement of the obligations
of the Guarantor arising under this Guaranty or the Pledge Agreement or the
exercise of any rights arising under this Guaranty or the Pledge Agreement,
including, without limitation, any workout or restructure and any action taken
in connection with any Debtor Relief Laws, and in the case of (1) and (2), all
of which shall be a part of the Guaranteed Debt and shall accrue interest, if
not paid upon demand, at the Default Rate (as defined in the Note) until repaid.
9
<PAGE>
(i) Liens. The Guarantor shall not (and shall not cause or allow its
-----
Subsidiaries to) create, incur, or suffer to exist any lien upon any of its
assets, except (1) as to Borrower, liens which secure the Senior Indebtedness,
(2) as to Guarantor and its Subsidiaries other than Borrower or ROC, liens which
secure the Comerica Indebtedness, (3) inchoate liens which arise in the ordinary
course of business, (4) as to the Properties (as defined in the Purchase
Agreement) of Borrower and ROC, Permitted Encumbrances (as defined in the
Purchase Agreement), or (5) liens the foreclosure or enforcement of which,
either individually or in the aggregate, would not have a material adverse
effect upon the financial condition, operations, assets or business of Borrower
and ROC, taken as a whole, or the Guarantor and its Subsidiaries, including
Borrower and ROC, taken as a whole.
(j) Compliance with Laws and Documents. The Guarantor shall not (and shall
----------------------------------
not cause or allow its Subsidiaries to) violate the provisions of any laws
applicable to it, any agreement to which it is a party, to the extent that such
violations individually or collectively would have a material adverse effect
upon the financial condition, operations, assets or business of Borrower and
ROC, taken as a whole, or the Guarantor and its Subsidiaries, including Borrower
and ROC, taken as a whole.
(k) Mergers and Dissolutions. The Guarantor shall not (and shall not cause
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or allow its Subsidiaries to) merge or consolidate with any other Person or
dispose of all or substantially all of its assets, liquidate, wind up, or
dissolve (or suffer any such asset disposition, liquidation, winding up, or
dissolution) except that a Subsidiary of the Guarantor may merge or consolidate
with another Subsidiary of the Guarantor, and the Guarantor may merge or
consolidate with one or more of its Subsidiaries if the Guarantor is the
surviving corporation; provided, however, that neither Borrower nor ROC shall
merge with or into any other Person. In the case of each merger or
consolidation permitted under this subsection, the Guarantor shall give Reunion
advance written notice of such merger or consolidation.
(l) Disposition of Assets. The Guarantor shall not cause or allow Borrower
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or ROC to sell, assign, lease, transfer, or otherwise dispose of any of its
assets, other than (1) sales in the ordinary course of business, (2) the sale,
discount, or transfer of delinquent accounts receivable in the ordinary course
of business for purposes of collection, (3) occasional sales of immaterial
assets for consideration not less than fair market value, (4) dispositions of
assets that are obsolete or have negligible fair market value, (5) sales of
equipment for a fair and adequate consideration (but if replacement equipment is
necessary for the proper operation of the business, the sold equipment must be
promptly replaced), and (6) sales in one or more transactions of any assets
which individually or in the aggregate do not have a fair market value of more
than 10% of the Purchase Price, as defined in, and adjusted pursuant to, the
Purchase Agreement. This subsection (1) shall also apply to prohibited asset
dispositions by the Guarantor and its Subsidiaries other than Borrower and ROC
to the extent that such dispositions, individually or in the aggregate, would
violate Section 12(k) or have a material adverse effect upon the financial
condition, operations, assets, or business of Borrower and ROC, taken as a
whole, or the Guarantor and its Subsidiaries, including Borrower and ROC, taken
as a whole. In addition and notwithstanding any other provision of this
subsection (l), the Guarantor shall not directly or
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indirectly cease to own (i) of record and beneficially 100% of Borrower's issued
and outstanding capital stock or (ii) beneficially 100% of ROC's issued and
outstanding capital stock, and Guarantor shall not permit Borrower to cease to
own of record and beneficially 100% of ROC's issued and outstanding capital
stock.
(m) New Business. The Guarantor shall not cause or allow Borrower or ROC
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to engage in any business except as to Borrower, the business to which it
succeeded by the Merger, and as to ROC, the business in which it currently is
engaged. The Guarantor shall not (and shall not cause or allow its Subsidiaries
other than Borrower and ROC to) engage in any business (except the business in
which each of them currently is engaged) to the extent that any such engagement,
individually or in the aggregate, would have a material adverse effect upon the
financial condition, operations, assets or business of Borrower and ROC, taken
as a whole, or the Guarantor and its Subsidiaries, including Borrower and ROC,
taken as a whole.
(n) Articles and Bylaws. The Guarantor shall not, and shall not cause or
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allow Borrower or ROC to, amend their respective articles or certificate of
incorporation or bylaws, or violate any of the provisions thereof; provided,
however, that this Section 12(n) shall not prohibit or excuse Borrower from
complying with its obligations under Section 6.5 of the Purchase Agreement to
cause ROC to amend its articles of incorporation to change its name. The
Guarantor shall not cause or allow any of its Subsidiaries other than Borrower
and ROC to amend their respective articles or certificate of incorporation or
bylaws, or violate any of the provisions thereof to the extent that any such
amendment or violation, individually or in the aggregate, would have a material
adverse effect upon the financial condition, operations, assets or business of
Borrower and ROC, taken as a whole, or the Guarantor and its Subsidiaries,
including Borrower and ROC, taken as a whole. The Guarantor shall not, and
shall not permit or cause any of its Subsidiaries to, enter into any agreement,
transaction or other arrangement which would limit or preclude Reunion from
exercising the Proxy, including, without limitation, any voting or similar
arrangement covering shares of capital stock of Borrower.
(o) Prohibited Arrangements. Neither the Guarantor, Borrower nor ROC shall
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enter into any arrangement with any director or officer of Borrower or ROC in
his or her capacity as such which (1) cannot be terminated immediately by
Guarantor, Borrower or ROC without penalty or (2) provides for any compensation
in connection with termination of his or her status as a director or officer of
Borrower or ROC. All directors and officers of Borrower and ROC shall hold
their respective directorships and offices subject to removal at any time and
for any reason or no reason as a direct or indirect result of Reunion's exercise
of the Proxy. No such removal shall constitute a breach by the Guarantor,
Borrower or ROC of any agreement or other arrangement relating to any
relationship between Borrower or ROC and any of their respective directors or
officers, or create or otherwise give rise to any obligation on the part of the
Guarantor, Reunion, Borrower or ROC to compensate any such removed director or
officer. The Guarantor shall cause Borrower and ROC to make all of their
respective directors and officers elected or appointed on or after the date
hereof and before Reunion first exercises the Proxy (the "SUBJECT DIRECTORS AND
OFFICERS") aware of the
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provisions of this subsection (o) before they become directors or officers of
Borrower or ROC, and to deliver written evidence of same to Reunion. The
Guarantor shall indemnify, defend and hold harmless Reunion, its directors,
officers and shareholders, and Borrower and ROC and those of their respective
directors and officers who are not Subject Directors and Officers, to the extent
such indemnified persons are not responsible for Losses (defined below)
indemnified against pursuant hereto, from and against any and all losses,
claims, damages, expenses or liabilities (including reasonable attorneys' fees)
(collectively, "Losses") as the same may arise or be made against or be incurred
by such indemnified persons, or to which such indemnified persons may be subject
in connection with, arising out of or having a reasonable relation to any breach
by the Guarantor, Borrower or ROC of this Section 12 or Section 9(o) of the Note
or any exercise of the Proxy, including, without limitation, the removal of any
Subject Directors and Officers. No indemnified person hereunder shall be, or be
deemed to be responsible for Losses indemnified against pursuant hereto in
connection with the exercise or enforcement by, for or on behalf of, Reunion of
its rights under this Section 12 or Section 9(o) of the Note or of the Proxy.
13. Claims of Borrower. The Guaranteed Debt may not be reduced,
------------------
discharged or released as a result of any existing or future offset, claim or
defense of Borrower (or any other obligor) against Reunion or against payment of
the Guaranteed Debt, whether such offset, claim or defense arises in connection
with the Guaranteed Debt or otherwise. Such claims and defenses include,
without limitation, failure of consideration, breach of warranty, fraud, statute
of frauds, bankruptcy, incapacity, infancy, statute of limitations, lender
liability, accord and satisfaction, usury, forged signature, mistake,
impossibility, frustration of purpose, and unconscionability.
14. Binding Agreement; Successors and Assigns. This Guaranty is binding
-----------------------------------------
on Guarantor and its successors. Guarantor may not assign its rights or
delegate its obligations under this Guaranty. This Guaranty inures to the
benefit of Reunion and its successors and assigns. If all or part of the
Guaranteed Debt is assigned in accordance with the Note, the rights and benefits
under this Guaranty will be transferred with (and to the extent of) such
Indebtedness.
15. Notices. All notices, requests and other communications between the
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Guarantor and Reunion under this Guaranty shall be in writing to be effective
and shall be deemed to have been given (a) if by telecopy, when transmitted to
the appropriate telecopy number (and all communications sent by telecopy must be
confirmed promptly thereafter by telephone; but any requirement in this
parenthetical shall not affect the date when the telecopy shall be deemed to
have been delivered), (b) if by mail, on the third business day after it is
enclosed in an envelope and properly addressed, stamped, sealed, certified mail,
return receipt requested, and deposited in the appropriate official postal
service, or (c) if by any other means, when actually delivered. Until changed
by giving fifteen days advance notice pursuant to this Guaranty, the address
(and telecopy number) by Reunion and the Guarantor are as follows:
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TRIBO PETROLEUM CORPORATION REUNION INDUSTRIES, INC.
1100 Louisiana, Suite 2880 One Stamford Landing
Houston, Texas 77002 62 Southfield Avenue
Southfield, Connecticut 06902
Telephone: 713/659-7551 Telephone: 203/325-0551
Facsimile: 713/659-5436 Facsimile: 203/967-3923
Nothing in this Paragraph 15 shall be construed to require any notice to
Guarantor not otherwise expressly required in this Guaranty.
16. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN
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ACCORDANCE WITH THE INTERNAL LAWS, AND NOT THE LAWS OF CONFLICT, OF THE STATE OF
TEXAS AND THE LAWS OF THE UNITED STATES APPLICABLE TO TRANSACTIONS IN TEXAS.
17. NO ORAL AGREEMENTS. THE RIGHTS AND OBLIGATIONS OF REUNION AND
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GUARANTOR SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND
INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY
AND MERGED INTO SUCH WRITINGS. THIS GUARANTY (AS AMENDED IN WRITING FROM TIME
TO TIME) REPRESENTS THE FINAL AGREEMENT BETWEEN REUNION AND GUARANTOR AND MAY
NOT BE CONTRADICTED BY EVIDENCE OR PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS BY REUNION AND GUARANTOR. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN REUNION AND GUARANTOR.
This Guaranty is executed as of the date set forth above.
TRIBO PETROLEUM CORPORATION,
a Texas corporation
By: /s/ Richard Bowman
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Name: Richard Bowman
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Title: President
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