REUNION INDUSTRIES INC, 424B3, 1998-07-06

REUNION INDUSTRIES INC
424B3, 1998-07-06
PLASTICS PRODUCTS, NEC

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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-56153

REUNION INDUSTRIES, INC.

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD AUGUST 4, 1998

To Stockholders of Reunion Industries, Inc.:

NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of REUNION
INDUSTRIES, INC., a Delaware corporation (the "Company"), which shall also
constitute the Company's annual meeting, will be held at the Holiday Inn
Select Stamford, 700 Main Street, Stamford, Connecticut, at 10:00 a.m., local
time, on August 4, 1998 (the "Special Meeting"), for the following purposes:

1. To elect six directors to the Company's Board of Directors;

2. To approve the adoption by the Board of Directors of the Company of
the 1998 Stock Option Plan of Reunion Industries, Inc. and the reservation
of 600,000 shares of Common Stock of the Company for issuance thereunder
(the "New Option Plan");

3. To consider and act upon a proposal to approve the Merger Agreement,
dated as of May 31, 1998 (as amended, the "Merger Agreement"), between the
Company and Chatwins Group, Inc., a Delaware corporation that currently
owns approximately 38% of the Company's outstanding Common Stock
("Chatwins"), which provides, among other things, for (i) Chatwins to be
merged with and into the Company, with the Company being the surviving
corporation (the "Merger"), (ii) the conversion of each share of common
stock of Chatwins outstanding immediately prior to the Merger into the
right to receive a number of shares of the Company's Common Stock
determined in the manner set forth in the Merger Agreement, plus cash in
lieu of any fractional share interests and (iii) the conversion of the
outstanding preferred stock of Chatwins into preferred stock of the
Company. Consummation of the Merger will entail the issuance by the Company
to Chatwins' securities holders of either 8.5 million or 9.0 million shares
of the Company's Common Stock, depending upon whether Chatwins is able to
complete a certain acquisition at or prior to the Effective Time (as
defined in the Merger Agreement). As a result of the Merger the Board of
Directors of the Company, to help assure that the Company's substantial tax
benefits (in the form of net operating loss carryforwards) will continue to
be available to offset future taxable income by decreasing the likelihood
of an "ownership change" for federal income tax purposes, will extend until
a date at least three years from the effective date of the Merger, certain
stock transfer restrictions contained in the Company's Certificate of
Incorporation; and

4. To transact such other business as may properly come before the
meeting or any adjournment thereof.

The Board of Directors of the Company has fixed the close of business on
June 26, 1998 as the record date for the determination of stockholders of
the Company entitled to notice of and to vote at the Special Meeting and at
any adjournment thereof. Only holders of record on such date will be
entitled to vote at the Special Meeting. A copy of the Proxy
Statement/Prospectus relating to the Special Meeting and a Form of Proxy
accompany this Notice. The Proxy Statement/Prospectus also relates to the
shares of Common Stock to be issued to the stockholders of Chatwins in
connection with the Merger.

PLEASE COMPLETE, DATE, SIGN AND MAIL THE ENCLOSED PROXY IN THE ACCOMPANYING
RETURN ADDRESSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. IF YOU LATER DESIRE TO REVOKE OR CHANGE YOUR PROXY FOR ANY REASON, YOU
MAY DO SO AT ANY TIME BEFORE THE VOTING BY DELIVERING TO THE COMPANY A WRITTEN
NOTICE OF REVOCATION OR A DULY EXECUTED PROXY BEARING A LATER DATE OR BY
ATTENDING THE SPECIAL MEETING AND VOTING IN PERSON.

By Order of the Board of Directors,

/s/ RICHARD L. EVANS
-------------------------------------
RICHARD L. EVANS, Secretary
Stamford, Connecticut
July 1, 1998

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9,000,000 SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE

REUNION INDUSTRIES, INC.
ONE STAMFORD LANDING
62 SOUTHFIELD AVENUE
STAMFORD, CONNECTICUT 06902

----------------

PROXY STATEMENT/PROSPECTUS
FOR SPECIAL MEETING OF STOCKHOLDERS OF REUNION INDUSTRIES, INC.
TO BE HELD AUGUST 4, 1998

THE INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROXY STATEMENT/ PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF
THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD
BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

----------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

----------------

SEE "RISK FACTORS" ON PAGE 19 OF THIS PROXY STATEMENT/PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS THAT STOCKHOLDERS SHOULD CONSIDER PRIOR TO
EXECUTING A PROXY OR CASTING A VOTE.

----------------

THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS JULY 1, 1998
<PAGE>

PROXY STATEMENT/PROSPECTUS

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
DESCRIPTION NUMBER
- ----------- ------
<S> <C>
Available Information................................................... 3
Incorporation by Reference.............................................. 4
Summary................................................................. 5
Risk Factors............................................................ 19
The Special Meeting..................................................... 25
Proposal I. The Election of Directors................................... 27
Proposal II. The New Option Plan........................................ 31
Proposal III. The Merger................................................ 36
Ownership Information................................................... 72
Management Information.................................................. 77
Certain Relationships and Related Transactions and Material Contacts
with the Company Being Acquired........................................ 79
Deadline for Stockholder Proposals...................................... 89
Annex A: Merger Agreement............................................... A-1
Annex B: New Option Plan................................................ B-1
Annex C: Fairness Opinion............................................... C-1
Annex D: Company Certificate of Incorporation........................... D-1
Annex E: Company Bylaws................................................. E-1
</TABLE>

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AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Reports, proxy statements, information statements and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549 and at the Commission's Regional Offices at
7 World Trade Center, Suite 1300, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
information may be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission maintains a Web site (address http://www.sec.gov) that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The Common
Stock is, and the Common Stock to be issued in connection with the Merger will
be, listed for quotation on the NASDAQ Small-Cap. Market and the Pacific Stock
Exchange, and reports, proxy and information statements, and other information
concerning the Company can be inspected at such exchanges.

The Company's Annual Report on Form 10-K as filed with the Commission for
the year ended December 31, 1997, including certified financial statements and
the financial schedules, excluding exhibits thereto, as well as the Company's
Quarterly Reports on Form 10-Q, are available at no charge to stockholders
upon written or oral request to Richard L. Evans, Secretary, at the address
set forth in the following paragraph. A copy of the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, containing the financial
statements of the Company for the year ended December 31, 1997, as well as the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998
and other information is being sent to stockholders of the Company together
with this Proxy Statement/Prospectus.

THIS PROXY STATEMENT/PROSPECTUS CONSTITUTES A PART OF A REGISTRATION
STATEMENT ON FORM S-4 FILED BY THE COMPANY UNDER THE SECURITIES ACT OF 1933
(THE "SECURITIES ACT"), WITH RESPECT TO THE OFFERING OF COMMON STOCK IN
CONNECTION WITH THE MERGER. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONTAIN
ALL OF THE INFORMATION IN THE FORM S-4 AND EXHIBITS THERETO. HOWEVER, THE
COMPANY BELIEVES THAT THE SUMMARY DESCRIPTIONS CONTAINED IN THIS PROXY
STATEMENT/PROSPECTUS OF ANY CONTRACT, AGREEMENT OR OTHER DOCUMENT FILED AS AN
EXHIBIT TO THE FORM S-4 ACCURATELY DESCRIBE THE MATERIAL PROVISIONS OF SUCH
CONTRACT, AGREEMENT OR OTHER DOCUMENT. FOR COMPLETE INFORMATION AS TO ANY SUCH
CONTRACT, AGREEMENT OR OTHER DOCUMENT, STOCKHOLDERS SHOULD REFER TO THE
APPLICABLE EXHIBIT TO THE FORM S-4. THE FORM S-4 AND THE EXHIBITS THERETO
FILED BY THE COMPANY WITH THE COMMISSION MAY BE INSPECTED AT THE PUBLIC
REFERENCE FACILITIES OF THE COMMISSION LISTED ABOVE. A COPY OF ANY AND ALL OF
THE INFORMATION (NOT INCLUDING THE EXHIBITS TO SUCH INFORMATION UNLESS SUCH
EXHIBITS ARE SPECIFICALLY INCORPORATED HEREIN BY REFERENCE) IN ANY DOCUMENTS
INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS BUT NOT DELIVERED
HEREWITH SHALL BE PROVIDED WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM A PROXY STATEMENT/PROSPECTUS IS DELIVERED, UPON
WRITTEN OR ORAL REQUEST OF SUCH PERSON TO RICHARD L. EVANS, REUNION
INDUSTRIES, INC. ONE STAMFORD LANDING, 62 SOUTHFIELD AVENUE, STAMFORD,
CONNECTICUT 06902, TELEPHONE 203-324-8858. IN ORDER TO ENSURE TIMELY DELIVERY,
ANY REQUEST SHOULD BE MADE AT LEAST FIVE BUSINESS DAYS PRIOR TO THE SPECIAL
MEETING DATE.

NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, ANY SECURITIES,
OR SOLICITATION OF A PROXY, IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

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INCORPORATION BY REFERENCE

The following documents filed with the Commission by the Company (File No.
1-7726) and by Chatwins (File No. 33-63274) pursuant to the Exchange Act are
incorporated herein by reference, included as exhibits hereto and are being
delivered to the Company's stockholders together with this Proxy
Statement/Prospectus:

1. The Company's Annual Report on Form 10-K for the year ended December
31, 1997 (the "Company's 10-K").

2. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998 (the "Company's 10-Q")

3. Chatwins' Annual Report on Form 10-K for the year ended December 31,
1997 ("Chatwins' 10-K")

4. Chatwins' Quarterly Report on Form 10-Q for the quarter ended March
31, 1998 ("Chatwins' 10-Q")

In addition, the following portions of these documents are specifically
incorporated herein by reference: Item 1 of the Company's 10-K and Item 1 of
Chatwins' 10-K entitled "Business"; Item 5 of the Company's 10-K and Item 5 of
Chatwins' 10-K entitled "Market for the Registrant's Common Equity and Related
Stockholder Matters"; Item 6 of the Company's 10-K and Item 6 of Chatwins' 10-
K entitled "Selected Financial Data"; Item 7 of the Company's 10-K and Item 7
of Chatwins' 10-K entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations"; Item 8 of the Company's 10-K entitled
"Consolidated Financial Statements and Supplementary Data" and Item 8 of
Chatwins' 10-K entitled "Financial Statements and Supplementary Data"; Item 9
of the Company's 10-K and Item 9 of Chatwins' 10-K entitled "Changes in and
Disagreements with Accountants on Accounting and Financial Disclosure"; and
Part I of the Company's 10-Q and Part I of Chatwins' 10-Q entitled "Financial
Information".

All reports and definitive proxy or information statements filed by the
Company and Chatwins subsequent to the date of this Proxy Statement/Prospectus
and prior to the date of the Special Meeting shall be deemed to be
incorporated by reference into this Proxy Statement/Prospectus from the date
of filing of such documents. Any statement contained in a document
incorporated by reference into this Proxy Statement/Prospectus shall be deemed
to be modified or superseded for purposes of this Proxy Statement/Prospectus
to the extent that a statement contained herein or in any subsequently filed
report, proxy or information statement modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy
Statement/Prospectus.

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SUMMARY

The following is a brief summary of certain information contained elsewhere
or incorporated by reference in this Proxy Statement/Prospectus. This summary
is not, and is not intended to be, complete and is qualified in its entirety by
reference to the more detailed information contained or incorporated by
reference in this Proxy Statement/Prospectus and the Annexes hereto.
Stockholders are urged to read this Proxy Statement/Prospectus and the Annexes
hereto in their entirety.

THE COMPANIES

The Company

Reunion Industries, Inc., a Delaware corporation (the "Company"), through its
wholly owned subsidiary Oneida Rostone Corp. ("ORC"), manufactures high volume,
precision plastic products and provides engineered plastics services. ORC's
Oneida division, acquired in September 1995, designs and produces injection
molded parts and provides secondary services such as hot stamping, welding,
printing, painting and assembly of such products. In addition, Oneida designs
and builds custom molds at its tool shops in order to produce component parts
for specific customers. ORC's Rostone division, acquired in February 1996,
compounds and molds thermoset polyester resins. The acquisitions in November
1996 of Data Packaging Limited ("DPL"), which operates in Ireland, and of the
assets and business of Quality Molded Products, Inc. ("QMP", now part of the
Oneida division), have expanded the Company's custom injection molding
capacity. The Company is also engaged in wine grape agricultural operations in
Napa County, California. The complete mailing address of the Company's
principal executive offices is Reunion Industries, Inc. One Stamford Landing,
62 Southfield Avenue, Stamford, Connecticut 06902, and the telephone number is
(203) 324-8858.

Chatwins

Chatwins Group, Inc., a Delaware corporation ("Chatwins"), through its six
manufacturing divisions, designs, manufactures and markets a broad range of
fabricated and machined industrial parts and products, primarily for sale to
original equipment manufacturers in a variety of industries. Chatwins'
principal fabricated and machined products, and the divisions that produce
them, include large, seamless pressure vessels for highly pressurized gases
produced by the CP Industries division ("CPI"), high quality steel and aluminum
grating produced by the Klemp division ("Klemp"), industrial hydraulic and
pneumatic cylinders produced by the Hanna division ("Hanna"), industrial cranes
and large mill equipment produced by the Alliance Machine Company division
("Alliance"), cold-rolled steel leaf springs produced by the Steelcraft
division ("Steelcraft") and high quality roll formed storage racks produced by
the Auto-Lok division ("Auto-Lok"). Chatwins also has a small oil and gas
division ("Europa"). The complete mailing address of Chatwins' principal
executive offices is Chatwins Group, Inc. 300 Weyman Plaza, Suite 340,
Pittsburgh, Pennsylvania 15236, and the telephone number is (412) 885-5501.

THE SPECIAL MEETING

This Proxy Statement/Prospectus is being furnished in connection with the
solicitation of proxies by and on behalf of the Board of Directors of the
Company, for use at the special meeting of holders of the common stock, par
value $.01 per share, of the Company (the "Common Stock"), which shall also
constitute the Company's annual meeting, to be held on August 4, 1998 at 10:00
a.m., local time, at the Holiday Inn Select Stamford, 700 Main Street,
Stamford, Connecticut, and any adjournment thereof (the "Special Meeting").
This Proxy Statement/Prospectus and accompanying Notice of Special Meeting of
Stockholders and form of Proxy are first being mailed to stockholders on or
about July 1, 1998.

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At the Special Meeting, stockholders will be asked to consider and act upon
the following specific proposals:

(i) PROPOSAL I: THE ELECTION OF DIRECTORS. The affirmative vote by
holders of a plurality of the shares of Common Stock voted by the Company's
stockholders entitled to vote thereon at the Special Meeting will be
required to elect each candidate for director set forth below. If elected
at the Special Meeting, the following six nominees for director will
continue to comprise the entire Board of Directors of the Company, each of
whom would hold such office until his successor is duly elected and
qualified at the next annual meeting of stockholders of the Company or
until he earlier dies, resigns or is removed from office in accordance with
applicable law (See "Proposal I. The Election of Directors"):

Thomas N. Amonett
Charles E. Bradley, Sr.
Thomas L. Cassidy
W.R. Clerihue
Franklin Myers
John G. Poole

(ii) PROPOSAL II: ADOPTION OF NEW OPTION PLAN. On June 1, 1998 the
Company's Board of Directors adopted the 1998 Stock Option Plan of Reunion
Industries, Inc. (the "New Option Plan"), a full and complete copy of which
is attached to this Proxy Statement/Prospectus as ANNEX B. The Board of
Directors now recommends that the stockholders of the Company approve the
adoption of the New Option Plan. The affirmative vote of the holders of at
least a majority of the shares of the Common Stock entitled to vote thereon
will be required for such approval. The following is a brief summary of the
principal terms of the New Option Plan (See "Proposal II. The New Option
Plan"):

General Structure. The New Option Plan is intended to provide
incentives for key employees, consultants and non-employee directors of
the Company and its subsidiaries through the granting of options,
thereby stimulating their personal and active interest in the Company's
development and financial success, and inducing them to remain in the
Company's service. Under the New Option Plan, not more than 600,000
shares of Common Stock are authorized for issuance upon exercise of
options. The New Option Plan provides for the issuance of both non-
qualified stock options and incentive stock options.

Administration. The New Option Plan will be administered by the
Compensation Committee or a subcommittee thereof, consisting of at least
two "Non-Employee Directors" (as defined by Section 16b-3 of the
Exchange Act). However, most decisions regarding option awards to non-
employee directors under the New Option Plan will be made by the Board
of Directors.

Amendment and Termination. Amendments of the New Option Plan to
increase the maximum number of shares as to which options may be granted
in the aggregate or to any individual (except for adjustments) require
the approval of the Company's stockholders holding at least a majority
of the shares then entitled to vote thereon. In all other respects the
New Option Plan can be amended, modified, suspended or terminated by the
Committee, unless such action would otherwise require stockholder
approval as a matter of applicable law, regulation or rule. No
termination date is specified for the New Option Plan.

Terms and Provisions of Options. Each grant or issuance of options
under the New Option Plan will be set forth in a separate agreement with
the person receiving the award and will indicate the type, terms and
conditions of the award. Nonqualified stock options ("NQSOs") will
provide for the right to purchase Common Stock at a specified price
which may not be less than 85% of the fair market value on the date of
grant and usually will become exercisable (in the discretion of the
Committee) in one or more installments after the grant date. NQSOs may
be granted for any term specified by the

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Committee. Incentive stock options ("ISOs"), if granted, will be
designed to comply with the provisions of the Internal Revenue Code of
1986 (the "Code") and will be subject to restrictions contained in the
Code, including exercise prices equal to at least 100% of fair market
value of Common Stock on the grant date and a ten year restriction on
their term. ISOs may be granted only to employees.

Options and other rights to acquire Common Stock of the Company
granted under the New Option Plan may provide for their termination,
acceleration or continuance upon dissolution or liquidation of the
Company, the merger or consolidation of the Company into another
corporation, or the acquisition by another corporation of all or
substantially all of the Company's assets. Options and other rights
granted under the New Option Plan may provide that in the event of a
"change in control" of the Company (as defined in the option agreement)
all previously unexercisable options and rights become immediately
exercisable unless such options and rights, or portions thereof, are
determined by the Committee to constitute, when exercised, "excess
parachute payments" (as defined in Section 280G of the Code).

The grant and exercise of all options under the New Option Plan shall
in all respects be subject to the Transfer Restrictions (see "Proposal
III. The Merger--Extension of Transfer Restrictions; Preservations of
Tax Benefits") as provided in the Company's Certificate of
Incorporation. If the Merger and the New Option Plan are approved by the
stockholders at the Special Meeting, the New Option Plan shall be deemed
to become effective immediately following the Effective Time of the
Merger (as such terms are defined in Proposal III, below).

Eligibility and Awards. Options under the New Option Plan may be
granted to individuals who are then officers or other employees of the
Company or any of its present or future subsidiaries and who are
determined by the Committee to be key employees. Such awards also may be
granted to consultants of the Company selected by the Committee and non-
employee directors selected by the Board of Directors for participation
in the New Option Plan.

Effect on Current Plans and Awards. In the event that the New Option
Plan is adopted by the stockholders of the Company at the Special
Meeting, further awards may continue to be made under the two existing
option plans of the Company. On February 12, 1998 the Board of Directors
of the Company resolved to grant options to purchase 15,000 shares of
Common Stock to each of the Company's four non-employee directors (Mr.
Amonett, Mr. Cassidy, Mr. Myers, Mr. Clerihue) and to Mr. Poole. These
options will be granted under the New Option Plan and, accordingly, are
subject to the approval of the adoption of the New Option Plan by the
stockholders at the Special Meeting. On May 19, 1998 the Board of
Directors of the Company granted ISOs to purchase 75,000 shares of
Common Stock to Mr. Bradley. This grant was made under the 1993 Plan and
will not be affected by the New Option Plan (See "Proposal II. The New
Option Plan").

(iii) PROPOSAL III: APPROVAL OF THE MERGER AGREEMENT. On June 1, 1998 the
Company's Board of Directors unanimously approved the Merger Agreement,
dated as of May 31, 1998 (the "Original Merger Agreement"), between the
Company and Chatwins, which currently owns approximately 38% of the
Company's outstanding Common Stock, subject to receipt of a definitive
Fairness Opinion which was subsequently delivered on June 3, 1998 (the
"Original Fairness Opinion"). See "Proposal III. The Merger--Background and
Reasons for Merger". On June 25, 1998 Chatwins and the Company executed
Amendment No. 1 to the Original Merger Agreement ("Amendment No. 1" and the
Original Merger Agreement as so amended being referred to herein as the
"Merger Agreement"). A full and complete copy of Amendment No. 1 is
attached to this Proxy Statement/Prospectus as part of Annex A. The Board
of Directors now recommends that the stockholders of the Company approve
the Merger Agreement. The affirmative vote of the holders of at least a
majority of the shares of Common Stock entitled to vote thereon will be
required for such approval. Approval of the Merger Agreement will permit
the Company to consummate a transaction pursuant to which, among other
things, (i) Chatwins will be merged with and

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into the Company, with the Company being the surviving corporation (the
"Merger"), (ii) each share of common stock of Chatwins outstanding
immediately prior to the Merger will be converted into the right to receive
a number of shares of the Company's Common Stock determined in the manner
set forth in the Merger Agreement, plus cash in lieu of any fractional
share interests and (iii) the outstanding preferred stock of Chatwins (the
"Chatwins Preferred") will be converted into preferred stock of the
Company. The following is a brief summary of the principal terms of the
Merger (See "Proposal III. The Merger.").

Background and Reasons for Merger. On June 1, 1998 the Board of Directors
unanimously resolved that the Original Merger Agreement and the transactions
contemplated thereby are in the best interests of the stockholders of the
Company, and approved the Original Merger Agreement and the transactions
contemplated thereby. Messrs. Amonett, Clerihue and Myers, each directors who
do not have other interests in the transactions considered, voted separately
and approved the Original Merger Agreement and the transactions contemplated
thereby. In reaching these decisions, the Board of Directors and such
disinterested directors considered a number of factors, including the opinion
of Legg Mason Wood Walker, Incorporated ("Legg Mason") that the consideration
to be paid by the Company in connection with the Merger was fair to the Company
and the stockholders of the Company, other than Chatwins, from a financial
point of view. Chatwins and the Company amended the Original Merger Agreement
on June 25, 1998 pursuant to Amendment No. 1 to provide that the Chatwins
Preferred will be converted at the Effective Time into preferred stock of the
Company rather than notes of the Company. This change was made to reduce the
amount of debt on the Company's post merger balance sheet in order to improve
its ability to remain in compliance with the financial covenants of the New
Facilities (see "--Refinancing"). On June 25, 1998 Legg Mason issued to the
Board of Directors of the Company a letter stating that its opinion contained
in the Original Fairness Opinion is not changed by virtue of the amendments to
the Original Merger Agreement effected by Amendment No. 1 (the Original
Fairness Opinion as so updated on June 25, 1998 being referred to herein as the
"Fairness Opinion"). A full and complete copy of Legg Mason's June 25, 1998
opinion letter is attached to this Proxy Statement/Prospectus as part of Annex
C. (See " Proposal III. The Merger--Background of the Merger" and "Opinion of
the Company's Financial Advisor").

General Merger Terms. Pursuant to the Merger Agreement, a full and complete
copy of which is attached to this Proxy Statement/Prospectus as ANNEX A,
Chatwins will be merged with and into the Company, with the Company being the
surviving corporation. The Company's Certificate of Incorporation (including
the Transfer Restrictions) and By-Laws will be the certificate of incorporation
and by-laws of the combined company following the Merger. The Company's Board
of Directors immediately after the Merger will consist of the persons serving
on the Company's Board of Directors immediately prior to the Merger, and the
Company's executive officers immediately after the Merger will consist of
persons serving as the Company's executive officers immediately prior to the
Merger in their same respective positions, with the addition of Mr. Lawyer and
Mr. Poole (See "Proposal I. The Election of Directors--Nominees" and
"Management Information--Executive Officers").

At the Effective Time of the Merger, each share of common stock of Chatwins
theretofore issued and outstanding and held by the stockholders of Chatwins
shall be automatically converted into the right to receive a number of shares
of Common Stock determined in the manner set forth in the Merger Agreement,
plus cash in lieu of any fractional share interests. The aggregate number of
shares of the Company's Common Stock that will be issued to Chatwins
stockholders in connection with the Merger will be either 8,500,000 shares or
9,000,000 shares, depending upon whether Chatwins is able to consummate the
King-Way Acquisition (See "Proposal III. The Merger--King-Way Acquisition") at
or prior to the Effective Time for a purchase price substantially equal to the
present owner's cost to acquire King-Way (including fees and expenses) plus
interest on such amounts at such owner's cost of capital (estimated to be
approximately $19.1 million) (the "King-Way Price"). The shares of the
Company's Common Stock currently owned by Chatwins, aggregating approximately
38% of the issued

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and outstanding Common Stock, as well as a warrant to purchase an additional
75,000 shares of the Company's Common Stock owned by Chatwins, will be retired
at the Effective Time.

At the Effective Time of the Merger, the outstanding shares of Chatwins
Preferred will be automatically converted into preferred stock of the Company
(the "Reunion Preferred"). The Reunion Preferred issued to the holders of the
Chatwins Preferred as of the Effective Time will have the following material
preferences, privileges, restrictions and rights. The Reunion Preferred will be
redeemable (i) at any time at the option of the Company and (ii) after three
years at the option of the holders thereof, at a redemption value equal to the
redemption value of the Chatwins Preferred as of the Effective Time (the
"Initial Redemption Value") plus all accrued but unpaid Preferred Dividend (the
"Total Redemption Value"). The Company anticipates that the Initial Redemption
Value will be approximately $8,300,000. The holders of the Reunion Preferred
will be entitled to cumulative dividends thereon equal to 10% of the Initial
Redemption Value per annum, which will accrue from the Effective Date (the
"Preferred Dividend"). The Preferred Dividend will be payable as and when the
Board of Directors of the Company determines. The Reunion Preferred will not be
entitled to any voting rights (except as required by law) and will not have any
right of conversion into the Common Stock or any other securities of the
Company. Upon a liquidation of the Company, the holders of the Reunion
Preferred will be entitled to be paid, out of the assets of the Company
available for payment to the holders of the Company's capital stock, an amount
equal to the Total Redemption Value on the date of payment. In the event of a
liquidation of the Company no payments will be made and no assets will be
distributed to the holders of the Common Stock of the Company until the holders
of the Reunion Preferred shall have been paid the Total Redemption Value.

In connection with the Merger the Company will also succeed to Chatwins'
rights with respect to certain indebtedness of Mr. Poole and Mr. Bradley to
Chatwins aggregating $1,000,745. This indebtedness will be amended and restated
at the Effective Time to become three-year promissory notes made by Mr. Poole
and Mr. Bradley in favor of the Company bearing interest, payable quarterly in
arrears, at a rate of 10% per annum (the "Stockholder Notes").

Effective Time of Merger

The Merger will be consummated on the earliest practicable date after all of
the conditions thereto have been waived or satisfied (See "Proposal III. The
Merger--Conditions to the Consummation of the Merger; Regulatory
Requirements"), including the approval by the Company's stockholders at the
Special Meeting. The Company and Chatwins have designated August 5, 1998 as the
Effective Date in the Merger Agreement, although there can be no assurances
that the Merger will be consummated by that time. The Merger will become
effective immediately upon the filing of a Certificate of Merger in accordance
with the Delaware General Corporation Law ("DGCL").

King-Way Acquisition

The Merger Agreement provides that the aggregate number of shares of the
Company's Common Stock to be issued to the stockholders of Chatwins in
connection with the Merger will be 8,500,000 unless, at or prior to the
Effective Time, Chatwins shall have acquired (or shall have acquired the
unconditional right to acquire) for an amount not in excess of the King-Way
Price all of the rights, title and interests of Stanwich Acquisition Corp.
("SAC") in and to SAC's King-Way material handling and order selection systems
business ("King-Way"), in which case the aggregate number of shares of the
Company's Common Stock to be issued to the stockholders of Chatwins in
connection with the Merger will be 9,000,000.

9
<PAGE>

The Company estimates the King-Way Price will be approximately $19.1 million
on the Effective Date. If consummated by Chatwins prior to the Effective Time,
the King-Way Acquisition and the payment of the King-Way Price may involve the
payment of cash by Chatwins, the issuance of notes or other debt obligations by
Chatwins, the issuance of Chatwins Preferred or other securities of Chatwins,
or any combination of the foregoing. If Chatwins should issue equity securities
other than its common stock or Chatwins Preferred in order to acquire King-Way
prior to the Effective Time, the Merger Agreement will be further amended to
provide for the conversion of such securities at the Effective Time consistent
with the terms of the Merger as presently agreed. In the event that the King-
Way Acquisition is not consummated by Chatwins prior to the Effective Time but
at the Effective Time Chatwins possess the unconditional right to do so, the
payment of the King-Way Price by the Company at or after the Effective Time may
involve the payment of cash by the Company, the issuance of notes or other debt
obligations of the Company, the issuance of Reunion Preferred, or any
combination of the foregoing.

King-Way was acquired by SAC from The Kingston-Warren Corporation on November
3, 1997 for a purchase price of $18,050,000, subject to certain adjustments.
The King-Way business is currently operating within the facility of Chatwins'
Auto-Lok division. SAC is a privately-held company whose common stock is owned
42.5% by Mr. Bradley (President, Chief Executive Officer and a Director of the
Company), 42.5% by a member of Mr. Bradley's family and 15% by Mr. Evans
(Executive Vice President, Chief Financial Officer and Secretary of the
Company). Mr. Bradley is the President and a director of SAC and Mr. Evans is
the Treasurer and a director of SAC. Stanwich Financial Services Corp.
("Stanwich Financial"), which is owned 42.5% by Mr. Charles E. Bradley Sr.
("Mr. Bradley"), 42.5% by his son, Charles E. Bradley Jr. ("Mr. Bradley Jr."),
7.5% by Mr. Poole and 7.5% by a third party, is the holder of approximately
$13.5 million of debt and $5.6 million of preferred stock issued by SAC.
Furthermore, as of the date of this Proxy Statement/Prospectus certain
agreements, including a loan settlement agreement, have been reached in
principal whereby Stanwich Financial could acquire an aggregate of 371,280
shares of Common Stock (see "Ownership Information--Security Ownership by
Certain Beneficial Owners and Management").

At the time King-Way was available for purchase, management of Chatwins was
desirous of acquiring King-Way as a strategic acquisition by its Auto-Lok
division. King-Way and Auto-Lok are both in the business of producing
industrial and commercial storage racks and materials handling systems. King-
Way's computerized systems were thought to be an important line extension to
Auto-Lok's more traditional storage and materials handling systems. Chatwins
was not, however, able to consummate the acquisition because of restrictions
under its financing agreements. Mr. Bradley therefore organized and capitalized
SAC to acquire and hold King-Way until such time as it could be acquired by
Chatwins.

Because King-Way had been operated as a division of The Kingston-Warren
Corporation, it was necessary to establish King-Way's business in new
facilities with appropriate overhead support. Meanwhile, Auto-Lok possessed
surplus floor space, production work force, administrative organization and
equipment (the "Surplus Capacity") that could be utilized to continue King-
Way's operations. Accordingly, SAC and the Auto-Lok division of Chatwins
entered into a Service Agreement pursuant to which King-Way would utilize Auto-
Lok's Surplus Capacity in consideration for cash fees approximately equal to
Auto-Lok's costs of providing the Surplus Capacity plus a right of first
negotiation to acquire King-Way from SAC.

There can be no assurance that Chatwins will consummate or have the right to
consummate the King-Way acquisition at or prior to the Effective Time. (See
"Proposal III. The Merger--King-Way Acquisition").

Cash in Lieu of Fractional Shares

No certificate or scrip representing fractional shares of Common Stock will
be issued in the Merger upon the surrender for exchange of Chatwins securities,
and any fractional share interests will not entitle the owner to vote or to any
rights of a stockholder of the Company. In lieu of any such fractional shares,
each person who would otherwise have been entitled to a fraction of a share of
Common Stock shall receive a cash payment from the Company in lieu of such
fractional share (see "Proposal III. The Merger---Cash in Lieu of Fractional
Shares").

10
<PAGE>

Fairness Opinion

Legg Mason has acted as the Company's financial advisor in connection with
the Merger, and on June 3 and June 25, 1998 rendered its Fairness Opinion to
the Board of Directors of the Company stating that, as of May 27, 1998, the
consideration to be paid by the Company pursuant to the Merger Agreement was
fair, from a financial point of view, to the Company and its stockholders other
than Chatwins. The Fairness Opinion is incorporated by reference into this
Proxy Statement/Prospectus in its entirety, and a full and complete copy of the
Fairness Opinion is attached as ANNEX C to this Proxy Statement/Prospectus.

Refinancing

At the Effective Time, the Company intends to enter into senior secured
credit facilities (the "New Facilities") aggregating $127,000,000 underwritten
by Bank of America National Trust & Savings Association and arranged by
BancAmerica Robertson Stephens ("BARS"). The New Facilities will be divided
into two separate components, (i) a $50,000,000 seven year revolving credit
facility (the "Revolver") and (ii) a $77,000,000 seven year amortizing term
loan facility (the "Term Loan"), both of which will bear interest at IBOR
(European Interbank Offered Rate) plus 2.0%. The principal amount of the Term
Loan is required to be amortized in equal quarterly payments in each year as
follows: $7,750,000 in year one, $9,500,000 in year two, $11,500,000 in year
three, $11,500,000 in year four, $12,250,000 in year five, $12,250,000 in year
six, and $12,250,000 in year seven.

The proceeds of the New Facilities will be used to retire substantially all
of the borrowings of Chatwins and the Company as well as certain related party
debt, and to consolidate these obligations under one facility following the
Merger (the "Refinancing"). Specifically, the proceeds of the Refinancing will
be used to retire (i) the Chatwins $50 million principal amount of 13% Senior
Notes (the "Chatwins Senior Notes") issued by Chatwins pursuant to its
Indenture, dated May 1, 1993 with State Street Bank & Trust Company, as
Trustee, (the "Trustee") as amended (the "Chatwins Indenture"), (ii) Chatwins'
revolving credit loans outstanding to Congress Financial Corporation
("Congress"), (iii) the term and revolving credit loans outstanding from
Congress to the Company's subsidiary, ORC, and (iv) certain other indebtedness
owed by the Company and ORC (including approximately $1,017,000 owed by ORC to
Mr. Bradley). The proceeds of the Refinancing may also be used to pay all or a
portion of the King-Way Price and to satisfy the transaction costs associated
with the Merger and the Refinancing (See "Proposal III. The Merger--
Refinancing"). The remaining balance of the Revolver commitment will be
available for working capital needs and permitted acquisitions. The Company
will be required to pay BARS a closing fee equal to 1.50% of the aggregate
amount available under the New Facilities ($1,905,000), the first $500,000 non-
refundable installment of which was paid in May 1998, one-half by the Company
and one-half by Chatwins, in connection with the issuance of a commitment
letter to the Company with respect to the New Facilities. The New Facilities
will be secured by a first priority lien on substantially all of the Company's
assets.

Possible Additional Debt Offering

The Company is currently exploring the possible consummation of a high-yield
debt offering or placement following the Merger (an "Additional Debt Offering")
to raise capital primarily for acquisitions, working capital and other purposes
including the redemption of all or a portion of the Reunion Preferred and/or
the refinancing of all or a portion of any other securities or notes or other
debt obligations issued or incurred by the Company in connection with the King-
Way Acquisition (See "Proposal III. The Merger--King-Way Acquisition"). The
Company has engaged in preliminary discussions with at least one investment
bank in order to assess the feasibility of the Company pursuing an Additional
Debt Offering. There can be no assurance, however, that an Additional Debt
Offering will be pursued or consummated by the Company after the Merger. The
determination of whether to attempt to do so will be made by the Company
following the consummation of the Merger.

11
<PAGE>

Accounting Treatment

The Merger will be accounted for as a purchase under APB Opinion No. 16
"Business Combinations". Chatwins will be the acquirer for purposes of applying
purchase accounting to the Merger, and therefore Chatwins' assets and
liabilities will continue to be carried at their historical book values after
the Merger, and 62% of the Company's assets and liabilities (representing the
percentage of the Company's Common Stock not currently owned by Chatwins) will
be revalued at fair value at the time of the Merger, with the excess of (i) the
"purchase price" of the Merger over (ii) the fair value of 62% of the Company's
assets and liabilities designated as goodwill to be amortized by the Company
over fifteen years.

No Solicitations

The Company and Chatwins have agreed in the Merger Agreement that so long as
the Merger Agreement is in effect, neither the Company nor Chatwins will, or
will permit its officers, directors or other agents to, take any action to
seek, initiate, negotiate, or encourage, or enter into or participate in any
discussions regarding, any offer from any third party to acquire any securities
of such party, or to sell securities of the Company or Chatwins to such third
party, to merge or consolidate with such third party, or to otherwise acquire
any significant portion of the assets of such third party or to sell its assets
to such third party.

Conditions to Consummation of the Merger; Regulatory Requirements

The obligation of each of Chatwins and the Company to consummate the Merger
is subject, among other things, to the prior fulfillment of the following
conditions: the Company receiving the requisite stockholder approval under the
DGCL; the representations and warranties of the other party remaining true in
all material respects; the respective covenants of the other party having been
performed in all material respects; the expiration or early termination of the
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
(the "H-S-R Act"); the receipt of all other orders, consents or approvals,
governmental or otherwise, that may be required; there being an enforceable
agreement to consummate the Refinancing at the Effective Time; and no material
changes having occurred in the business, assets or financial conditions of the
other party to the Merger.

The Company's obligation to consummate the Merger is further conditioned upon
(i) the receipt by the Company from Legg Mason of the Fairness Opinion (which
condition has been satisfied) (See "--Fairness Opinion"), and (ii) Chatwins'
having caused all of its outstanding warrants (the "Chatwins Warrants") either
to be converted into Chatwins common stock (which shall have no effect on the
number of shares of Common Stock to be issued in connection with the Merger) or
to expire.

Chatwins' obligation to consummate the Merger is further conditioned upon (i)
the registration statement on SEC Form S-4, of which this Proxy
Statement/Prospectus is a part, having been filed by the Company with the SEC
and declared "effective" in accordance with Section 8(a) of the Securities Act,
(ii) the Company having complied with all applicable "Blue Sky" state
securities regulatory obligations with respect to the Merger, and (iii) the
Company retaining its Pacific Stock Exchange and NASDAQ Small-Cap. Market
listings following the Merger and causing the shares of Common Stock to be
issued in connection with the Merger to be listed thereon.

Amendment, Extension or Termination

12
<PAGE>

Agreement (i) if the Merger is not consummated within 90 days after the date of
the Merger Agreement, unless such failure to close was caused by a breach of
the Merger Agreement by the party seeking to terminate, (ii) if the other party
has breached certain representations, warranties and covenants contained in the
Merger Agreement and such breach has not been cured within 10 days, or (iii) if
a court or governmental or regulatory authority has issued a final order
restricting or prohibiting the Merger.

Appraisal Rights

Pursuant to Section 262 of the DGCL, no holder of the Company's Common Stock
will have appraisal rights in connection with the Merger because the Common
Stock is listed on a national securities exchange. All stockholders of Chatwins
entitled to vote on the Merger waived any dissenter or appraisal rights under
the DGCL in connection with the Merger.

Resale by Chatwins Affiliates.

Chatwins stockholders who, at the time the Merger was submitted to the
Chatwins stockholders for approval, are deemed to be affiliates of Chatwins for
purposes of Rule 145 under the Securities Act (each, a "Chatwins Affiliate")
will be subject to certain restrictions with respect to the resale of the
Common Stock (collectively, the "Affiliate Shares") received by them in the
Merger. Chatwins stockholders who are not Chatwins Affiliates may resell the
Common Stock acquired by them in connection with the Merger free of such
restrictions.

Exemption of Merger from and Extension of Transfer Restrictions; Preservation
of Tax Benefits

Under the Code, net operating loss carryforwards ("NOLs") for federal tax
purposes offset taxable income in future years and eliminate income taxes
otherwise payable on such taxable income (except for purposes of calculating
alternative minimum tax liability). As of December 31, 1997, the Company's NOLs
were approximately $215.9 million. The Company's NOLs expire as follows: $8.1
million in 1998, $43.2 million in 1999, $87.3 million in 2000 and $77.3 million
during the years 2001 through 2012. Because the Merger will result in the
application of the reverse acquisition rules under the Code, if the Merger is
consummated the Company's NOLs will expire on an accelerated schedule as
follows: $8.1 million at the Effective Time of the Merger, $43.2 million on
December 31, 1998, $87.3 million in 1999, $27.9 million in 2000 and $49.4
million during the years 2001 through 2011.

On June 20, 1995 Chatwins acquired 1,450,000 shares of Common Stock,
approximately 38% of the Company's outstanding Common Stock, held by Parkdale
Holdings Corporation N.V. ("Parkdale") (the "Chatwins Acquisition"). As a
result of the Chatwins Acquisition, the availability of the Company's NOLs
might have been limited if further ownership changes resulted in an "ownership
change" as defined in the Code and the Treasury Regulations promulgated
thereunder in the subsequent three year period (an "Ownership Change") through
June 19, 1998.

The Transfer Restrictions (see "Proposal III. The Merger--Exemption of Merger
from and Extension of Transfer Restrictions; Preservation of Tax Benefits")
were established by the Company to prevent an Ownership Change from occurring.
In view of the facts that three years have passed since the Chatwins
Acquisition, and during such period there has been no material change in the
percentage ownership of the Company by a direct or indirect holder whose
changes in ownership must be taken into account for purposes of determining
whether an Ownership Change has occurred, the Board of Directors has
determined, based upon an opinion of Finn Dixon & Herling LLP, that the Merger
itself will not result in an Ownership Change and therefore will not jeopardize
the Company's full utilization of its NOLs under Section 382 of the Code.
Accordingly, the Board's approval of the issuance of Common Stock in connection
with the Merger required by the Transfer Restrictions has been granted.

13
<PAGE>

The Company believes that the Transfer Restrictions were successful in
preventing an Ownership Change during the three years subsequent to the
Chatwins Acquisition, but the transactions contemplated by the Merger will
again create a risk that, absent the continuance of the Transfer Restrictions
for at least three years after the Merger, an Ownership Change could result if
other persons acquire 5% or more of the Common Stock in the future.
Accordingly, if the Merger is consummated, the Board of Directors of the
Company will extend the Transfer Restrictions until the day after the third
anniversary of the date of the Merger to reduce these risks.

Accordingly, the Common Stock outstanding immediately prior to the Merger,
the Common Stock to be issued by the Company to the stockholders of Chatwins in
connection with the Merger and any Common Stock issuable upon exercise of
options granted under any of the Company's stock option plans, including the
New Option Plan, will be subject to the Transfer Restrictions, which are set
forth in Article Fifth of the Certificate of Incorporation of the Company, a
copy of which is included as ANNEX D to this Proxy Statement/Prospectus. All
Common Stock certificates will contain a legend informing holders and
transferees of the Transfer Restrictions.

Comparative Rights of Stockholders

The rights of Chatwins' stockholders are currently governed by the DGCL,
Chatwins' Restated Certificate of Incorporation, and Chatwins' bylaws. Upon
consummation of the Merger, Chatwins' stockholders will become stockholders of
the Company, and their rights as stockholders of the Company will be governed
by the DGCL, the Company's Certificate of Incorporation (a copy of which is
attached hereto as ANNEX D) and the Company's Bylaws (a copy of which is
attached hereto as ANNEX E). For a discussion of various material differences
between the rights of Chatwins' stockholders and the rights of the Company's
stockholders, see "Proposal III. The Merger--Comparative Rights of Security
Holders".

Market For Common Stock

The Common Stock is listed for quotation on the NASDAQ Small-Cap. Market
under the symbol "RUNI" and on the Pacific Stock Exchange under the symbol
"RUN". Following the Merger, the Common Stock, including all Common Stock
issued in connection with the Merger, will be listed for quotation on the
NASDAQ Small-Cap. Market under the symbol "RUNI" and on the Pacific Stock
Exchange under the symbol "RUN". The table below reflects the high and low
sales prices of the Common Stock on the NASDAQ Small-Cap. Market for the
periods presented. The 1998 periods separately present the high and low prices
through May 14, 1998, the last day preceding the announcement that the Company
had entered into negotiations regarding the terms of the proposed Merger, and
dates subsequent to that announcement. The last sale price of the Common Stock
as reported by the NASDAQ Small-Cap. Market on May 14, 1998 was $6.00 per
share, and on June 22, 1998 was $6.3125 per share. There is no active trading
market for Chatwins' capital stock.

<TABLE>
<CAPTION>
PERIOD HIGH LOW
------ ------ ------
<S> <C> <C>
May 15 through June 22, 1998............................... $7.625 $6.125
January 1 through May 14, 1998............................. $6.250 $4.750
Calendar Year 1997......................................... $5.250 $3.125
Calendar Year 1996......................................... $5.125 $3.500
</TABLE>

Risk Factors

IN CONSIDERING WHETHER TO APPROVE THE MERGER AGREEMENT AND THE MERGER, THE
COMPANY'S STOCKHOLDERS SHOULD CAREFULLY REVIEW AND CONSIDER THE INFORMATION
CONTAINED HEREIN UNDER THE CAPTION "RISK FACTORS".

14
<PAGE>

VOTING OF DIRECTORS, EXECUTIVE OFFICERS AND AFFILIATE SHARES

The Company. The percentage of outstanding shares of Common Stock entitled to
vote at the Special Meeting held by directors, executive officers and their
respective affiliates, including Chatwins, is approximately 40.9%. The
affirmative vote by holders of a plurality of the shares of Common Stock voted
by the Company's stockholders entitled to vote thereon at the Special Meeting
will be required to elect each candidate for director and the affirmative vote
of the holders of at least a majority of the shares of Common Stock entitled to
vote thereon is required to approve each of the New Option Plan and the Merger
Agreement at the Special Meeting. Management believes that all of the shares of
Common Stock to be voted by directors, executive officers and Chatwins will be
voted in favor of each of the proposals. (See "Ownership Information--Security
Ownership of Certain Beneficial Owners and Management").

Chatwins. Pursuant to the DGCL, the Merger Agreement must be approved by the
affirmative vote of the holders of at least a majority of the common stock of
Chatwins entitled to vote thereon. The percentage of outstanding shares of
Chatwins' common stock entitled to vote for approval of the Merger held by
directors or executive officers of Chatwins and their respective affiliates is
approximately 98.6%. On May 31, 1998 the Merger Agreement was approved and
adopted by the stockholders of Chatwins by unanimous written consent. Chatwins'
stockholders have waived their dissenter and appraisal rights under the DGCL in
connection with the Merger.

SELECTED FINANCIAL DATA

The summary selected financial data set forth below has been derived from the
historical financial statements of the Company and Chatwins, respectively. The
selected financial data should be read in conjunction with, among other things,
Item 6 of the Company's 10-K and Item 6 of Chatwins' 10-K entitled "Selected
Financial Data", Item 8 of the Company's 10-K entitled "Consolidated Financial
Statements and Supplementary Data", Item 8 of Chatwins' 10-K entitled
"Financial Statements and Supplementary Data", and Item 7 of the Company's 10-K
and Item 7 of Chatwins' 10-K entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations", which are incorporated by
reference herein. All data are reported in thousands, except for per share
data.

THE COMPANY

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
(1) (2)(3) (2)(4) (2) (2)(5)
<S> <C> <C> <C> <C> <C>
Continuing Operations Data
Operating Revenue............... $93,378 $60,305 $10,855 $ 1,619 $ 760
Loss From Continuing Operations. (981) (2,694) (3,581) (660) (4,117)
Income (Loss) Per Share--
Continuing Operations--
Diluted........................ $ (0.25) $ (0.70) $ (0.93) $ (0.17) $ (1.16)
Balance Sheet Data
Total Assets.................... $72,059 $75,176 $51,935 $51,639 $55,238
Long-term Obligations........... $12,654 $15,575 $ 7,947 $ 2,693 $ 3,332
Cash Dividends per Common Share. $ -0- $ -0- $ -0- $ -0- $ -0-
</TABLE>
- --------
(1) Loss from continuing operations includes a $1.0 million charge for
writedown of excess equipment and a $0.9 million charge for equity in the
write-off of joint venture development costs.
(2) During 1997, the Company's Board of Directors resolved to retain the
Company's agricultural operations which had previously been classified as
discontinued operations. The Selected Financial Data for prior years have
been reclassified to present the agricultural operations as continuing
operations.

15
<PAGE>

(3) Includes the results of operations of Rostone subsequent to the Rostone
Acquisition on February 2, 1996. Includes the results of QMP and DPL
subsequent to their acquisitions on November 18, 1996.
(4) Includes the results of operations of Oneida subsequent to the Oneida
Acquisition on September 14, 1995.
(5) Includes a change in the Company's proportionate share of agricultural
revenues and expenses and a $1.6 million write down of agricultural assets.

CHATWINS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(4) (4) (4) (4)
<S> <C> <C> <C> <C> <C>
Earnings Data(1):
Net Sales...................... $188,920 $153,480 $183,408 $154,710 $111,457
Income From Continuing
Operations.................... $ 2,321 $ 17 $ 4,425 $ 1,255 $ 662
Income (Loss) Per Share--
Continuing Operations--
Diluted(2).................... $ 6.37 $ (1.49) $ 13.55 $ 2.74 $ 0.29
Balance Sheet Data
Total Assets................... $111,269 $101,330 $106,290 $ 94,491 $ 71,953
Total Long-term Debt(3)........ $ 50,723 $ 50,746 $ 50,770 $ 51,646 $ 55,943
Cash Dividends per Common
Share......................... $ 0 $ 0 $ 0 $ 0 $ 0
</TABLE>
- --------
(1) Chatwins holds a minority voting interest in the Company which it accounts
for under the equity method. Income from continuing operations is presented
excluding Chatwins' equity in the results of operations of the Company. On
September 14, 1995, Chatwins sold Oneida to the Company. Such transaction
was treated as the disposal of a portion of a line of business with
Oneida's historical operating results and resulting gain on sale classified
within continuing operations through September 14, 1995.
(2) Includes the dilutive effect of the Chatwins Warrants.
(3) Excludes borrowings under revolving credit facilities.
(4) Certain amounts for the years from 1993 through 1996 have been previously
restated to reflect the correction of errors in inventory values at
Chatwins' Klemp division.

16
<PAGE>

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

The following unaudited pro forma selected financial information for the most
recent fiscal year and interim period has been derived from the unaudited pro
forma consolidated condensed financial statements included elsewhere in this
Proxy Statement/Prospectus (See "Proposal III. The Merger--Unaudited Pro Forma
Consolidated Condensed Financial Statements") which give effect to the Merger
and the Refinancing as if they had occurred on January 1, 1997 for income data
and for balance sheet data, with and without the consummation of the King-Way
Acquisition, as of the dates indicated. The pro forma data is not necessarily
indicative of the actual or future operating results or financial position that
would have occurred or will occur upon consummation of the Merger and the
Refinancing. The pro forma presentation is subject to the assumptions set forth
in the notes to the unaudited pro forma consolidated financial information
appearing elsewhere in this Proxy Statement/Prospectus. The information
presented should be read in conjunction with such unaudited pro forma
consolidated financial information and notes thereto and the financial
statements contained in the Company's 10-K and Chatwins' 10-K. All data are
reported in thousands, except for per share data.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1998 YEAR ENDED DECEMBER 31, 1997
----------------------------- -----------------------------
PRO FORMA PRO FORMA
------------------ ------------------
REUNION WITHOUT INCLUDING REUNION WITHOUT INCLUDING
HISTORICAL KING-WAY KING-WAY HISTORICAL KING-WAY KING-WAY
---------- -------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS DATA
Net Sales............... $26,368 $ 70,115 $ 74,433 $93,378 $282,298 $298,875
Income (Loss) From
Continuing Operations.. 274 2,012 1,964 (981) 6,512 6,799
Income Available to
Common Shareholders.... 274 1,808 1,760 (981) 5,709 5,996
Income (Loss) From
Continuing Ops--Per
Share
Basic................. $ 0.07 $ 0.17 $ 0.15 $ (0.25) $ 0.52 $ 0.53
Diluted............... 0.07 0.16 0.15 (0.25) 0.52 0.52
BALANCE SHEET DATA
Total Assets............ $73,263 $174,663 $196,292 $72,059 $171,349 $191,790
Long-Term Obligations
and redeemable
preferred stock........ 10,767 76,138 95,238 12,654 77,953 96,653
Cash Dividends Per
Common Share............ 0.00 0.00 0.00 0.00 0.00 0.00
</TABLE>

17
<PAGE>

COMPARATIVE PER COMMON SHARE DATA

The following table sets forth the following historical and pro forma per
share data of the Company and Chatwins for the most recent fiscal year and
interim period: (i) book value per share; (ii) cash dividends declared per
share; and (iii) income (loss) per share from continuing operations. The pro
forma data is not necessarily indicative of the actual or future operating
results or financial position that would have occurred or will occur upon
consummation of the Merger (with or without the consummation of the King-Way
Acquisition) and the Refinancing. The pro forma presentation is subject to the
assumptions set forth in the notes to the unaudited pro forma consolidated
financial information appearing elsewhere in this Proxy Statement/Prospectus.
The information presented should be read in conjunction with such unaudited pro
forma consolidated financial information and notes thereto and the financial
statements contained in the Company's 10-K and Chatwins' 10-K.

<TABLE>
<CAPTION>
MARCH 31, 1998 DECEMBER 31, 1997
--------------------------------------- ---------------------------------------
PRO FORMA PRO FORMA
----------------- -----------------
WITHOUT WITHOUT
REUNION CHATWINS KING- INCLUDING REUNION CHATWINS KING- INCLUDING
HISTORICAL HISTORICAL WAY KING-WAY HISTORICAL HISTORICAL WAY KING-WAY
---------- ---------- ------- --------- ---------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Book Value Per Share.... 7.37 (30.33) 0.26 0.25 7.35 (31.09) 0.22 0.21
Cash Dividends Per
Share.................. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Income (Loss) Per Share
From Continuing
Operations
Basic................. 0.07 1.38 0.17 0.15 (0.25) 7.68 0.52 0.53
Diluted............... 0.07 1.14 0.16 0.15 (0.25) 6.37 0.52 0.52
Weighted Average Number
of Common Shares
Basic................. 3,857 10,907 11,407 3,855 10,905 11,405
Diluted............... 3,968 11,018 11,518 3,855 11,018 11,518
</TABLE>

18
<PAGE>

RISK FACTORS

THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED BY HOLDERS OF THE COMPANY'S
COMMON STOCK IN EVALUATING HOW TO CAST THEIR VOTES AT THE SPECIAL MEETING.
THESE FACTORS SHOULD BE CONSIDERED IN CONJUNCTION WITH THE OTHER INFORMATION
CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS.

Cautionary Statement Regarding Forward-Looking Statements

The following statements are or may constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995
(the "PSLRA"):

(i) certain statements, including possible or assumed future results of
operations of the Company, with or without the Merger and the Refinancing
having been consummated, contained in this Proxy Statement/Prospectus,
including any forecasts, projections and descriptions of anticipated cost
savings or other synergies that may be referred to herein, and certain
statements that may be incorporated by reference from documents filed with
the Commission by the Company or Chatwins, including any statements
contained herein or therein regarding the development of possible or
assumed future results of operations of business, the markets for the
products and services of the Company or Chatwins, anticipated capital
expenditures, regulatory or legal developments, competition or the effects
of the Merger and the Refinancing, growth strategies and penetrations of
new markets, mergers and joint ventures, financings and/or refinancings,
transactions with affiliates, the effects of the year 2000 problem on
electronic technology on which the Company is directly or indirectly
dependent;

(ii) any statements preceded by, followed by or that include the words
"believes", "expects", "anticipates", "intends", or similar expressions;
and

(iii) other statements contained or incorporated by reference herein
regarding matters that are not historical facts.

Because such statements are subject to risks, uncertainties and other
factors, actual results may differ materially from those expressed or implied
by such forward-looking statements. Risks, uncertainties and other factors
that could cause actual results to differ materially include, but are not
limited to, domestic and international economic conditions which affect the
volume and pricing of sales of business and consumer goods, the cost and
availability of materials, labor and other goods and services used in the
Company's and Chatwins' operations, the cost of interest on the Company's
debt, and other factors discussed under "Risk Factors". The Company's
stockholders are cautioned not to place undue reliance on such statements.
Such statements speak only as of the date of this Proxy Statement/Prospectus,
and the Company expressly disclaims any obligation or undertaking to release
publicly any updates or revisions to such forward-looking statements to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events. All subsequent written and oral forward-
looking statements attributable to the Company or Chatwins or persons acting
on its or their behalf are expressly qualified in their entirety by the
cautionary statements contained or referred to in this section.

Expenses of Merger

Upon consummation of the Merger, the Company expects to incur charges,
currently estimated to be approximately $6.5 million in connection with the
combination of the companies, including prepayment penalties and other costs
of the related Refinancing. This amount is a preliminary estimate only and is
therefore subject to change. There can be no assurance that the Company will
not incur additional charges to reflect costs associated with the Merger, nor
can there be any assurance that the Company will realize the anticipated
benefits of the Merger. Business acquisitions such as the Merger involve a
number of special risks and challenges, including the diversion of
management's attention, assimilation of the operations and personnel of the
acquired company, incorporation of acquired product lines into existing
product lines, adverse short-term effects on reported operating results,
amortization of acquired intangible assets, assumption of liabilities of the
acquired company,

19
<PAGE>

possible loss of key employees and difficulty of presenting a unified
corporate image. No assurance can be given that the Merger will not ultimately
have a material adverse effect on the Company or that the Merger will succeed
in enhancing the Company's business.

Extension of Transfer Restrictions

Following the Merger, the Common Stock will remain subject to the Transfer
Restrictions. Furthermore, the Board of Directors has determined to extend the
Transfer Restrictions beyond their scheduled expiration in April 1999. This
extension will last until at least the day after the third anniversary of the
effective date of the Merger (the "Effective Date"). There can be no assurance
that such an extension of the Transfer Restrictions in connection with the
Merger will not adversely affect the market price of the Common Stock.

The Transfer Restrictions (i) may have the effect of impeding the
acquisition of a significant or controlling interest in the Company, (ii) may
render it more difficult to effect a merger or similar transaction even if
such transaction is favored by a majority of the independent stockholders and
(iii) may serve to entrench management. (See "Proposal III. The Merger--
Preservation of Tax Benefits" and "--Anti-Takeover Effects"). The purpose of
the Transfer Restrictions is to preserve tax benefits, however, not to
insulate management from change. The Company believes that the tax benefits of
the Transfer Restrictions outweigh any anti-takeover effect that they may
have. Any anti-takeover effect of the Transfer Restrictions will end when the
Transfer Restrictions terminate, which, if the Merger is consummated, will
occur on the earlier of: (i) the day after the third anniversary of the
Effective Date of the Merger; (ii) the repeal of Section 382 of the Code if
the Company's Board of Directors determines that the Transfer Restrictions are
no longer necessary; or (iii) the beginning of a taxable year of the Company
as to which the Company's Board of Directors determines prior to the beginning
of such taxable year that no NOLs or other tax benefits otherwise available to
the Company may be carried forward. In addition, the Company's Board, under
certain circumstances, may accelerate or further extend the termination date
of the Transfer Restrictions. (See "Proposal III. The Merger--Termination of
Transfer Restrictions").

Notwithstanding the extension of the Transfer Restrictions, the Company may
be unable to prevent every transaction that could cause an Ownership Change
for federal income tax purposes. Any such Ownership Change may severely limit
the Company's ability to utilize the NOLs. Further, there can be no assurance
that legislation will not be adopted that would limit the Company's ability to
utilize the NOLs in future periods. However, the Company is not aware of any
proposed legislation for changes in the tax laws that could impact the ability
of the Company to utilize the NOLs as described below.

The extension of the Transfer Restrictions is based upon the Company having
received the legal opinion of Finn Dixon & Herling LLP that the extension of
the Transfer Restrictions in connection with the Merger is reasonably
necessary or desirable to preserve certain tax benefits under the Code and the
regulations thereunder, but the Company has not received or requested and does
not intend to request or receive a legal opinion on the prospective
effectiveness of the Transfer Restrictions in preserving the NOLs. Although
the Company believes that the Transfer Restrictions, as designed, can
effectively preserve the NOLs, future transactions cannot be predicted or
addressed with the degree of certainty necessary to support a legal opinion.
Accordingly, no assurances of counsel are or can be given to the Company and
its stockholders that the NOLs will not, in spite of the Transfer
Restrictions, be severely limited under Section 382 of the Code by reason of
an Ownership Change resulting from any such future transactions.

Increased Debt Obligations; Restrictive Covenants

In connection with the Merger, the Company intends to enter into the New
Facilities and may incur debt in connection with the King-Way Acquisition, the
redemption of the Reunion Preferred and/or an Additional Debt Offering (See
"Proposal III. The Merger--General Merger Terms" and "--Refinancing").
Although the Company believes that the New Facilities are prudent and
supportable given the Company's projected operating revenues following the
Merger, it will result in the Company incurring indebtedness that is
substantial in relation to its stockholders' equity. The increased leverage of
the Company, among other effects, (i) will require the

20
<PAGE>

Company to dedicate a substantial portion of the Company's cash flow resulting
from the New Facilities and any Additional Debt Offering from operations to
the payment of principal and interest on its indebtedness, thereby reducing
the funds available to the Company for other purposes, (ii) could materially
and adversely affect the Company's ability to obtain additional financing for
working capital, acquisitions or other purposes, and (iii) could make the
Company more vulnerable to industry downturns and competitive pressures. The
issuance of Reunion Preferred in connection with the Merger, and the payment
or accumulation of dividends thereon, further increases the Company's
exposures by adding an additional material financial obligation to be
satisfied out of the proceeds of the Company's operations or future
borrowings.

The Company's ability to repay or to refinance its obligations with respect
to the New Facilities will depend on its financial and operating performance,
which, in turn, is subject to prevailing economic and competitive conditions
and to certain financial, business and other factors, many of which are beyond
the Company's control. These factors could include operating difficulties,
increased operating costs, raw material or product prices, the response of
competitors, regulatory developments and delays in implementing strategic
projects.

If the Company's cash flow and capital resources are insufficient to fund
its debt service obligations under the New Facilities and any Additional Debt
Offering, the Company may be forced to reduce or delay capital expenditures,
sell assets or seek to obtain additional equity capital (possibly including an
additional preferred stock issuance) or restructure its debt. There can be no
assurance that the Company's cash flow and capital resources will be
sufficient for payment of principal of and interest on its indebtedness in the
future, or that any such alternative measures would be successful or would
permit the Company to meet its scheduled debt service obligations.

The New Facilities will contain a number of covenants that may restrict the
ability of the Company to, among other things, dispose of assets, merge or
consolidate with another entity, incur additional indebtedness, create liens,
make capital expenditures, pay dividends or make other investments or
acquisitions. The New Facilities will also contain requirements that the
Company maintain certain financial ratios and may restrict the ability of the
Company to prepay the Company's other indebtedness as well as the Preferred
Dividend. The ability of the Company to comply with such provisions may be
affected by events that are beyond the Company's control. The breach of any of
these covenants could result in a default under the New Facilities and a
subsequent acceleration of such indebtedness. In addition, as a result of
these covenants the ability of the Company to respond to changing business and
economic conditions and to secure additional financing, if needed, may be
restricted significantly, and the Company may be prevented from engaging in
transactions that might otherwise be considered beneficial to the Company.
(See "Proposal III. The Merger--Refinancing").

Notwithstanding the foregoing, the Company believes that the New Facilities
will satisfy the Company's current liquidity needs on terms that would not be
available to the Company absent the consummation of the Merger.

Additional Common Stock and Reunion Preferred Issuance; Dilution; Liquidity

In connection with the Merger, the Company will issue either 8.5 million or
9.0 million shares of Common Stock to the stockholders of Chatwins and will
cancel and retire the 1.45 million shares of Common Stock owned by Chatwins,
resulting in a net issuance of either 7.05 million or 7.55 million shares of
Common Stock. This will result in the dilution of the aggregate ownership
interest of the current stockholders of the Company other than Chatwins from
approximately 62% free of any prior claim by holders of preferred stock before
the Merger to approximately 20% subject to the preference rights of the
Reunion Preferred after the Merger. This issuance of Common Stock and Reunion
Preferred, in some cases, in connection with the Merger will have the effect,
among other things, of (i) diluting the per share equity interest of the
current stockholders of the Company, (ii) reducing the aggregate voting power
of the current stockholders of the Company, (iii) reducing the current
stockholders' interests in the assets of the Company in the event of
liquidation, (iv) preventing or discouraging an attempt by another person or
entity to acquire control of the Company following effectiveness of the Merger
without the approval of its Board of Directors, and (v) possibly reducing
liquidity to stockholders and/or

21
<PAGE>

entrenching of management. (See "Proposal III. The Merger--Anti-Takeover
Effects"). The adoption of the New Option Plan could result in up to 600,000
shares of Common Stock being issued to employees, consultants and non-employee
directors of the Company that will result in further dilution.

Control By Beneficial Owners of Chatwins

As of the date of this Proxy Statement/Prospectus, Chatwins is the record
owner of approximately 38% of the outstanding Common Stock of the Company,
owns a currently exercisable warrant to purchase an additional 1% of the
Company's Common Stock. Accordingly, the beneficial owners of the common stock
of Chatwins currently have the right to vote up to approximately 38% of the
Company's Common Stock and upon exercise of the warrant would have the right
to vote approximately 39% of the Company's Common Stock. (See "Ownership
Information--Security Ownership of Certain Beneficial Owners and Management").

At the Effective Time of the Merger, pursuant to the Merger Agreement, the
Company will cancel and retire the shares of the Common Stock of the Company
and the warrant to purchase Common Stock of the Company owned by Chatwins.
This stock and warrant have been valued as assets of Chatwins in determining
the Merger consideration. In connection with the Merger, the stockholders of
Chatwins will be issued Common Stock of the Company representing up to
approximately 80% of the Common Stock of the Company. Included in this
ownership following the Merger is the ownership by the Charles E. Bradley, Sr.
Family Limited Partnership (the "Bradley FLP"), of which Mr. Bradley is the
sole general partner, of approximately 38% of the Common Stock of the Company
(the voting rights in respect of which will be controlled after the Effective
Time by Mr. Bradley's son, Kimball Bradley) and the ownership by Mr. Poole of
approximately 12% of the Common Stock of the Company (assuming in both cases
that all of the Chatwins Warrants are exercised into common stock of Chatwins
prior to the Effective Time). In addition, on May 19, 1998 Mr. Bradley was
granted options to acquire an additional 75,000 shares of Common Stock by the
Board of Directors of the Company and, if the New Option Plan is adopted, Mr.
Poole will acquire options to purchase an additional 15,000 shares of the
Common Stock of the Company. Both Mr. Bradley and Mr. Poole will also be
eligible under the New Option Plan for option grants in the future. As of the
date of this Proxy Statement/Prospectus Mr. Bradley and Mr. Poole are also
beneficial owners of all of the Chatwins Preferred which will be converted
into the Reunion Preferred pursuant to the Merger Agreement. (See "Ownership
Information--Security Ownership of Certain Beneficial Owners and Management").

Furthermore, Mr. Bradley (42.5%), Mr. Bradley Jr. (42.5%), and Mr. Poole
(7.5%) are also beneficial owners of an aggregate 92.5% of Stanwich Financial.
As of the date of this Proxy Statement/Prospectus certain agreements,
including a loan settlement agreement, have been reached in principal whereby
Stanwich Financial could acquire an aggregate of 371,280 shares of Common
Stock (see "Ownership Information--Security Ownership by Certain Beneficial
Owners and Management").

As a result of the Merger, the beneficial owners of Chatwins will have the
ability to control the election of directors and the appointment of officers
of the Company and will have the ability to approve important corporate
matters, such as amendments to the Certificate of Incorporation and By-Laws of
the Company, mergers, business acquisitions, dispositions and share issuances,
without the approval of the other stockholders of the Company.

Possible Conflicts of Interest

Each of the Company and Chatwins are being represented by separate legal
counsel in connection with the Merger, and the Company has retained Legg
Mason, an investment banking firm, to conduct evaluations of the relative
values of the Company and Chatwins. In addition, one-half of the directors on
the Board of Directors of the Company, which is unanimously recommending
approval of the Merger Agreement and the Merger by the stockholders of the
Company at the Special Meeting, have no affiliation, whether by security
ownership or otherwise, with Chatwins. Nevertheless, certain relationships
between the directors, officers and stockholders of the Company and Chatwins
could raise the question of conflicts of interest in the negotiation of the
terms and conditions of the Merger, including, without limitation, (i) Mr.
Bradley, a director of the Company since June 20, 1995 and the President and
Chief Executive Officer of the Company since October 26, 1995, is the Chairman

22
<PAGE>

and a director of Chatwins and a beneficial owner of approximately 57% of the
outstanding (and 48% of the fully diluted) common stock of Chatwins owned of
record by the Bradley FLP, (ii) Mr. Poole, a director of the Company since
April 19, 1996, is a director of Chatwins and a beneficial owner of
approximately 80% of the outstanding (and 66% of the fully diluted) common
stock of Chatwins (approximately 57% of the outstanding shares and 47% of the
fully diluted shares being by virtue of the right to vote the Chatwins common
stock held of record by the Bradley FLP), (iii) Thomas L. Cassidy, a director
of the Company since June 20, 1995, was a director of Chatwins until June 1997
and currently owns Chatwins' Warrants which will be converted prior to the
Effective Time into less than 1% of the outstanding and fully diluted common
stock of Chatwins (see "Ownership Information--Security Ownership of Certain
Beneficial Owners and Management"). Mr. Bradley, Mr. Poole and Mr. Cassidy are
also holders of an aggregate $4.35 million principal amount of Chatwins Senior
Notes and Mr. Bradley and Mr. Poole are beneficial owners of all of the
Chatwins Preferred. Mr. Bradley and Mr. Evans (Executive Vice President, Chief
Financial Officer and Secretary of the Company) are the owners of 42.5% and
15%, respectively, of the common stock of SAC and Mr. Bradley and Mr. Poole
are the owners of 42.5% and 7.5%, respectively, of Stanwich Financial, which
in turn is the holder of $13.5 million of debt and $5.6 million of preferred
stock issued by SAC. As of the date of this Proxy Statement/Prospectus certain
agreements, including a loan settlement agreement, have been reached in
principal whereby Stanwich Financial could acquire an aggregate of 371,280
shares of Common Stock. Additionally, Chatwins is currently the record owner
of approximately 38% of the Common Stock of the Company. See "Proposal III.
The Merger--Refinancing", "Material Contacts with the Company Being Acquired
and Certain Relationships and Related Transactions". (See "Ownership
Information--Security Ownership of Certain Beneficial Owners and Management"
and "Certain Relationships and Related Transactions").

Merger Consideration Not Determinable at Time of Vote

The number of shares of Common Stock to be issued by the Company to the
holders of common stock of Chatwins in connection with the Merger will be
either 8.5 million shares or 9.0 million shares, depending upon whether
Chatwins is able to consummate the King-Way Acquisition at or prior to the
Effective Time. (See "Proposal III. The Merger--King-Way Acquisition").
Because the Special Meeting will be held, and stockholder votes on the Merger
will be cast, prior to Chatwins' deadline for being able to complete the King-
Way Acquisition, the Company's stockholders may not know at the time they vote
on the Merger whether the final merger consideration to Chatwins' stockholders
will be 8.5 million shares or 9.0 million shares of Common Stock, and they may
not know the form of payment (cash, notes or Reunion Preferred) of the King-
Way Price as a result of consummation of the King-Way Acquisition.

Competition

The respective industries in which the Company and Chatwins operate are
highly competitive. Within each industry there are a large number of
competitors, many of whom have significantly greater financial, technical,
marketing and human resources and greater name recognition than the Company
and Chatwins. Competitive pressures and other factors could cause the
Company's and Chatwins' products and services to lose market acceptance or
result in significant price erosion, with a material adverse effect upon
results of operations.

Appraisal Rights

Pursuant to Section 262 of the DGCL, no holder of the Company's Common Stock
will have appraisal rights in connection with the Merger because the Common
Stock is listed on a national securities exchange. All the stockholders of
Chatwins entitled to vote on the Merger have waived their dissenter and
appraisal rights under the DGCL in connection with the Merger.

Anti-Takeover Effects

The consummation of the Merger, which would result in the extension of the
Transfer Restrictions and the issuance of either 8.5 million or 9.0 million
shares of Common Stock (and the cancellation of 1,450,000 shares now owned by
Chatwins), may have the effect of preventing or discouraging an attempt by
another person or

23
<PAGE>

entity to acquire control of the Company. In addition to impeding the
acquisition of a significant or controlling interest in the Company, the
Transfer Restrictions and new Common Stock issuance resulting in the control
by the beneficial owners of Chatwins of up to 80% of the Common Stock (See
"Ownership Information--Security Ownership of Certain Beneficial Owners and
Management") may render it more difficult for a third party to effect a merger
or similar transaction with the Company, even if such transaction is favored
by a majority of the independent stockholders. The Transfer Restrictions and
this consolidation of control may have the effect of discouraging or defeating
mergers, proxy contests, or management changes that stockholders may deem in
the best interests of the Company and may also have the effect of preventing a
party from acquiring an interest in the Company that would be large enough to
enable such party to effect a change in management of the Company. (See
"--Extension of Transfer Restrictions"). The Company has proposed the Merger,
however, for the reasons set forth in this Proxy Statement/Prospectus (See
"Proposal III. The Merger--Reasons for the Merger and Board of Directors'
Recommendation") and has extended the Transfer Restrictions in order to protect
the availability of the Company's significant NOLs (See "--Preservation of Tax
Benefits"), and not as part of an anti-takeover plan or strategy.

24
<PAGE>

THE SPECIAL MEETING

DATE, TIME, PLACE AND PURPOSE OF THE SPECIAL MEETING

The Special Meeting, which shall also constitute the Company's annual
meeting, will be held on August 4, 1998, at 10:00 a.m. local time, at the
Holiday Inn Select Stamford, 700 Main Street, Stamford, Connecticut. At the
Special Meeting, the Company's stockholders will be asked to consider and act
upon the following:

(1) PROPOSAL I: The election of six directors to the Board of Directors
of the Company (See "Proposal I. The Election of Directors");

(2) PROPOSAL II: The approval of the adoption by the Board of Directors
of the Company of the New Option Plan and the reservation of 600,000 shares
of Common Stock for issuance thereunder (See "Proposal II. The New Option
Plan");

(3) PROPOSAL III: The approval of the Merger Agreement between the
Company and Chatwins, the current owner of approximately 38% of the
Company's outstanding Common Stock, which provides, among other things, for
(i) Chatwins to be merged with and into the Company, with the Company being
the surviving corporation, (ii) the conversion of each share of common
stock of Chatwins outstanding immediately prior to the Merger into the
right to receive a number of shares of the Company's Common Stock
determined in the manner set forth in the Merger Agreement, plus cash in
lieu of any fractional share interests and (iii) the conversion of the
outstanding Chatwins Preferred into Reunion Preferred. Consummation of the
Merger will entail the issuance by the Company to Chatwins' securities
holders of either 8.5 million or 9.0 million shares of the Company's Common
Stock, depending upon whether Chatwins is able to complete the King-Way
Acquisition at or prior to the Effective Time. As a result of the Merger
the Board of Directors of the Company, to help assure that the Company's
substantial tax benefits (in the form of net operating loss carryforwards)
will continue to be available to offset future taxable income by decreasing
the likelihood of an Ownership Change for federal income tax purposes, will
extend, for three years from the Effective Date of the Merger, certain
stock transfer restrictions contained in the Company's Certificate of
Incorporation (See "Proposal III. The Merger"); and

(4) Such other business as may properly come before the Special Meeting
or any adjournment thereof.

For a discussion of the tax consequences to the common stockholders of the
Company and Chatwins of the proposed Merger, see "Proposal III. The Merger--
Federal Income Tax Consequences to Chatwins Stockholders" and "Federal Income
Tax Consequences to the Company and Current Stockholders". The Company
believes that no material federal or state regulatory approvals or filings are
necessary in connection with the Merger, other than (i) compliance with the H-
S-R Act and (ii) registrations of the Company's Common Stock to be issued in
the Merger under applicable securities laws.

RECORD DATE; PROXY INFORMATION

The Board of Directors of the Company has fixed the close of business on
June 26, 1998 as the record date (the "Record Date") for the determination of
stockholders of the Company entitled to notice of and to vote at the Special
Meeting. Only holders of record of Common Stock on the Record Date will be
entitled to notice of and to vote at the Special Meeting. At the close of
business on June 25, 1998, there were 3,862,565 shares of Common Stock issued
and outstanding and approximately 1,436 holders of record of Common Stock.

Stockholders are requested to complete, date, sign and promptly return the
accompanying Form of Proxy in the enclosed envelope. All shares of Common
Stock represented by properly executed proxies returned to the Company prior
to or at the Special Meeting will be voted at the Special Meeting in
accordance with the instructions marked thereon, unless such proxy has been
revoked.

25
<PAGE>

EXECUTED PROXIES WITH NO INSTRUCTIONS INDICATED THEREON WILL BE VOTED FOR
ELECTION OF MANAGEMENT'S NOMINEES AS DIRECTORS, FOR APPROVAL OF THE ADOPTION
OF THE NEW OPTION PLAN AND FOR APPROVAL OF THE MERGER AGREEMENT.

Any stockholder who executes and delivers a proxy may unconditionally revoke
it at any time before it is voted by delivering to Richard L. Evans, Secretary
of the Company, at 62 Southfield Avenue, One Stamford Landing, Stamford,
Connecticut 06902, a written notice of revocation or a duly executed proxy
bearing a later date, or by attending the Special Meeting and voting in person
(although attendance at the Special Meeting will not, in and of itself,
constitute a revocation of a proxy).

It is not anticipated that any matters other than those set forth in this
Proxy Statement/Prospectus will be brought before the Special Meeting.
However, if any other matters properly come before the Special Meeting, the
persons named as proxies will vote upon such matters in their discretion in
accordance with their best judgment.

This Proxy Statement/Prospectus and the accompanying Notice of Special
Meeting of Stockholders and Form of Proxy are first being mailed to
stockholders on or about July 1, 1998. The proxies are being solicited by the
Company by action of the Company's Board of Directors. The Company will bear
the costs of soliciting the proxies. In addition to the use of the mails,
proxies may be solicited by personal contact, telephone or telegraph by
directors, officers, employees or representatives of the Company. The Company
will reimburse brokers or other persons holding stock in their names, or in
the names of nominees, for their reasonable expenses in forwarding proxy
soliciting materials to beneficial owners.

QUORUM; VOTE REQUIRED

As of June 25, 1998 the Company had outstanding 3,862,565 shares of Common
Stock. Stockholders are entitled to one vote for each share of Common Stock
held as of the Record Date on each matter voted on at the Special Meeting.
Stockholders do not have cumulative voting rights. The presence, in person or
by proxy, of the holders of a majority of the issued and outstanding shares of
Common Stock entitled to vote at the Special Meeting is necessary to
constitute a quorum to transact business. Abstentions and broker non-votes
will be treated as present for determining whether a quorum has been reached.
If a quorum is not present or represented at the Special Meeting, the
stockholders that are present in person or by proxy who are entitled to vote
at the Special Meeting may, by majority vote, adjourn the Special Meeting from
time to time until a quorum is present or represented. Approval of (i) the New
Option Plan and (ii) the Merger Agreement will require the affirmative vote of
the holders of a majority of the shares of Common Stock entitled to vote
thereon, and the election of each of the director nominees will require the
affirmative vote by holders of a plurality of the shares of Common Stock voted
by the Company's stockholders entitled to vote thereon at the Special Meeting,
assuming that a quorum is present or represented. Stockholders of the Company
will not have dissenters rights of appraisal in connection with the Merger.
See "Proposal III. The Merger--Appraisal Rights".

All shares of Common Stock represented by properly executed proxies returned
to the Company will be voted at the Special Meeting. Votes submitted as
abstentions on matters to be voted on at the Special Meeting will be counted
as votes against such matters. Broker non-votes will effectively be votes
against the proposed election of Directors, the New Option Plan and the Merger
Agreement.

Management believes that all of the shares of Common Stock to be voted by
directors, executive officers and Chatwins, aggregating 1,578,675 shares as of
June 25, 1998, or approximately 40.9% of the issued and outstanding Common
Stock, will be voted in favor of the election of the director nominees, for
approval of the New Option Plan and for approval of the Merger Agreement. (See
"Ownership Information--Security Ownership of Certain Beneficial Owners and
Management").

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<PAGE>

PROPOSAL I. THE ELECTION OF DIRECTORS

At the Special Meeting, the stockholders of the Company will be asked to
vote for the election of six directors to the Board of Directors of the
Company. The candidates proposed by management for election at the Special
Meeting, listed in the table set forth in "Nominees" below, are Thomas N.
Amonett, Charles E. Bradley, Sr., Thomas L. Cassidy, W.R. Clerihue, Franklin
Myers, and John G. Poole. If elected, these candidates would comprise the
entire Board of Directors of the Company, and would hold office until their
successors are duly elected and qualified at the next annual meeting of
stockholders of the Company or until they earlier die, resign or are removed
from office in accordance with applicable law. If the Merger is consummated,
the Board of Directors of the Company immediately prior to the Merger will be
the Board of Directors of the Company immediately after the Merger. The
persons listed as "Nominees" in the table below comprise the entire Board of
Directors of the Company as of the date of this Proxy Statement/Prospectus.

The affirmative vote by holders of a plurality of the shares of Common Stock
voted by the Company's stockholders entitled to vote thereon at the Special
Meeting will be required to elect each nominee for director. Management
believes that all of the shares of Common Stock to be voted by directors,
executive officers and Chatwins, aggregating 1,578,675 shares as of June 25,
1998, or approximately 40.9% of the issued and outstanding Common Stock (see
"Ownership Information--Security Ownership by Certain Beneficial Owners and
Management"), will be voted in favor of the election of each of the
candidates. The Company knows of no family relationships between any director
or executive officer and any other director or executive officer of the
Company. Certain biographical information with respect to the current and
proposed directors of the Company is set forth in "Nominees" below.

THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF THE ELECTION OF THE PROPOSED DIRECTORS

NOMINEES

<TABLE>
<CAPTION>
NAMES DIRECTOR SINCE AGE
----- -------------- ---
<S> <C> <C>
Thomas N. Amonett(1)(2)................................ 1992 54
Charles E. Bradley, Sr................................. 1995 68
Thomas L. Cassidy(1)................................... 1995 70
W.R. Clerihue(1)(2).................................... 1996 75
Franklin Myers(2)(3)................................... 1995 45
John G. Poole.......................................... 1996 55
</TABLE>
- --------
(1) Member, Compensation Committee of the Board of Directors
(2) Member, Audit Committee of the Board of Directors
(3) Prior to his reappointment in October 1995, Mr. Myers was a Director of
the Company from July 1992 to June 1995.
- --------

The following is a summary of the business experience of each director
during the past five years. If not otherwise indicated, each director has been
engaged in his current occupation for at least five years.

Thomas N. Amonett has served as a Director of the Company since July 1, 1992
and served as the President and Chief Executive Officer of the Company from
July 1, 1992 until October 26, 1995. Mr. Amonett also served as the President
of Reunion Energy Company, then a wholly-owned subsidiary of the Company in
the oil and gas operating business, from July 1, 1992 until May 24, 1996. Mr.
Amonett is currently President, Chief Executive Officer and a Director of
American Residential Services, Inc., a company providing equipment and
services relating to residential heating, ventilating, air conditioning,
plumbing, electrical and indoor air quality systems and appliances. From July,
1996 until June, 1997, Mr. Amonett was Interim President and Chief Executive
Officer of Weatherford Enterra, Inc., an energy services and manufacturing
company. Prior to his affiliation with the Company, he had been engaged in the
practice of law with Fulbright & Jaworski in Houston,

27
<PAGE>

Texas, where he was of counsel for more than five years. Mr. Amonett remains a
Director of Weatherford Enterra, Inc. and also serves as a Director of Petro
Corp Incorporated, a Houston-based oil and gas company, ITEQ, Inc. a provider
of manufactured equipment, engineered systems and services used in the
processing, treatment, storage and movement of gases and liquids, and Home
USA, Inc., a retailer of manufactured housing.

Charles E. Bradley, Sr. became a Director of the Company on June 20, 1995
and was appointed President and Chief Executive Officer of the Company on
October 26, 1995. Mr. Bradley was a co-founder of Stanwich Partners, Inc.
("SPI") in 1982 and has served as its President since that time. SPI is a
private investment company. Mr. Bradley has been a Director of Chatwins since
1986 and Chairman of the Board of Chatwins since 1988. Mr. Bradley is a
Director of DeVlieg-Bullard, Inc. ("DBI"), a machine tool parts and services
company, General Housewares Corp., a manufacturer and distributor of
housewares, Consumer Portfolio Services, Inc. ("CPS"), engaged in the business
of purchasing, selling and servicing retail automobile installment sales
contracts, NAB Asset Corporation ("NAB"), engaged in mortgage and construction
lending, Audits and Surveys, Inc., an international marketing research firm,
and Zydeco Energy Inc., an oil and gas reserve development company. Mr.
Bradley is currently the Chairman of the Board of DBI, Chairman and CEO of NAB
as well as President and acting Chief Financial Officer and a Director of
Sanitas Inc., an inactive company, and President, acting Chief Financial
Officer and a Director of Texon Energy Corporation, an inactive company.

Thomas L. Cassidy became a Director of the Company on June 20, 1995. Mr.
Cassidy has been a Managing Director of Trust Company of the West ("TCW"), an
investment management firm, since 1984. He is also a Senior Partner of TCW
Capital, an affiliate of TCW. He is a Director of DBI, Holnam Inc., a cement
manufacturing company, and Spartech Corporation, a plastics manufacturing
company. Mr. Cassidy was a director of Chatwins from March 1993 to June 1997.

W. R. Clerihue was elected to the Board of Directors in December 1996 in
connection with the Board's decision to increase the number of directors from
five to six. Mr. Clerihue has been Chairman of the Board of Directors of
Spartech Corporation since October 1991.

Franklin Myers served as a Director of the Company from July 1, 1992 until
June 20, 1995, when he resigned contemporaneously with the sale of 1,450,000
shares of the Company's common stock by Parkdale to Chatwins. Mr. Myers was
reappointed as a Director of the Company on October 26, 1995. On April 1,
1995, Mr. Myers became Senior Vice President, General Counsel and Secretary of
Cooper Cameron Corporation, an oil field manufacturing company. Prior thereto
he was Senior Vice President and General Counsel of Baker Hughes Incorporated,
an international oil field service and equipment company, for more than six
years.

John G. Poole became a Director of the Company on April 19, 1996. Mr. Poole
was a co-founder of SPI with Mr. Bradley in 1982 and has served as SPI's Vice
President since that time. Mr. Poole has been a Director of Chatwins since
1988, and is also a director of DBI, CPS and Sanitas, Inc.

DIRECTOR COMPENSATION

Directors not otherwise compensated by the Company receive annual retainers
of $18,000 for service on the Board and $500 for each Board or Committee
meeting attended. Compensation paid to non-employee directors during 1997 for
service in all Board capacities aggregated $104,000. Directors are reimbursed
for the actual cost of any travel expenses incurred. Additionally, if the New
Option Plan is approved by the stockholders of the Company at the Special
Meeting, non-employee directors of the Company will be eligible for awards
thereunder. On February 12, 1998 the Board of Directors resolved to grant,
subject to approval of the New Option Plan at the Special Meeting, options to
purchase 15,000 shares of Common Stock to each of Mr. Amonett, Mr. Cassidy,
Mr. Clerihue, Mr. Myers and Mr. Poole.

In the event that the Merger is consummated Mr. Poole will be compensated as
an officer of the Company and will no longer be compensated as a non-employee
director of the Company (See "Management Information").

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<PAGE>

BOARD AND COMMITTEE ACTIVITY; STRUCTURE AND COMPENSATION

During 1997, the Board convened on six regularly or specially scheduled
occasions. The Compensation Committee of the Board held one meeting in 1997
and the Audit Committee held two meetings. Each of the present directors of
the Company attended all of the meetings of the Board and of each committee on
which he served during his respective tenure in 1997, except that Mr. Bradley
and Mr. Cassidy were each absent at one (different) Board meeting.

The Company's operations are managed under the broad supervision and
direction of the Board of Directors, which has the ultimate responsibility for
the establishment and implementation of the Company's general operating
philosophy, objectives, goals and policies. Pursuant to delegated authority,
certain Board functions may be discharged by one or more standing committees
of the Board. The Compensation Committee, which is comprised of Messrs.
Amonett, Cassidy (Chairman) and Clerihue, is responsible for the formulation
and adoption of all executive compensation, benefit and insurance programs,
subject to full Board approval where legally required or in those instances
where the underlying benefit philosophy might be at variance with preexisting
Board policies. The Compensation Committee also supervises the administration
of all executive compensation and benefit programs, including the
establishment of any specific criteria against which all annual performance
based benefits are to be measured. The Audit Committee, comprised of Messrs.
Amonett, Clerihue and Myers (Chairman), assists the Board in assuring that the
accounting and reporting practices of the Company are in accordance with all
applicable requirements. The Audit Committee reviews with the Company's
independent auditors the scope of the proposed audit work and meets with the
auditors to discuss matters pertaining to the audit and any other matter which
the Committee or the auditors may wish to discuss. In addition, the Audit
Committee would recommend the appointment of new independent auditors to the
Board of Directors if future circumstances were to indicate that such action
was desirable. The Board of Directors does not maintain executive or
nominating committees. Stockholders who may wish to suggest individuals for
possible future consideration for Board positions should direct
recommendations to the Board of Directors at the Company's principal offices.

The Company's Board of Directors will maintain the same committees
immediately following the Merger as are currently established by the Company's
Board of Directors, and the members of various committees of the Company's
Board of Directors immediately prior to the Merger will remain the members of
the committees immediately following the Merger.

COMPENSATION COMMITTEE REPORT

The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation for 1997:

The Board of Directors pursues a philosophy of seeking to improve the
Company's performance and to maximize stockholder value by, among other
things, relating executive compensation and stock-based benefits to the
Company's performance. In general, executive financial rewards may be
segregated into the following significant components: base compensation,
bonus, and stock option and other benefit plans.

Base compensation for senior executives is intended to be competitive
with that paid in comparably situated companies, but with a reasonable
degree of financial security and flexibility afforded to those individuals
who are regarded by the Board of Directors as acceptably discharging the
levels and types of responsibility implicit in the various senior executive
positions. While the committee's principal concern is with establishing
compensation programs and setting executive compensation at levels which
are somewhat reflective of those prevailing in the molded plastics industry
for similar executive positions, no comparability studies were conducted
for executive salaries to be paid in 1997.

Under the supervision of the Compensation Committee, annual bonuses
reflect a policy of requiring a specified level of Company performance for
the year before any bonuses are earned by senior executives, with bonuses
for achieving higher levels of performance directly related to the level
achieved. In setting

29
<PAGE>

performance criteria, the Committee will consider the total compensation
payable or potentially available to the chief executive and other
executives officers. While the development of any business necessarily
involves numerous factors, the board's primary emphasis will be on
encouraging management to increase the Company's net assets and cash flow,
and in certain instances, rationalization of certain Company businesses or
assets. The $51,000 award from the Company's ORC subsidiary to Mr.
Harrington in 1997 was based upon his attainment of specific earnings
objectives as set forth in his employment agreement. The $75,000 bonus
awarded to Mr. Evans was at the discretion of the Board, based upon his
performance in managing the acquisitions, divestitures, financial and
administrative activities of the Company.

The Board of Directors is of the view that properly designed and
administered long-term, stock-based incentives for senior executives
closely align the executives' economic interests with those of stockholders
and provide a direct and continuing focus upon the goal of constantly
striving to maximize stockholder value. The compensation committee intends,
with any necessary concurrence of the Board of Directors, to continue to
consider alternate forms of stock-based incentives with a view to achieving
the maximum possible performance based benefit to all senior executives at
the least possible cost and the greatest attainable economic efficiency to
the Company, with such benefits designed as nearly as practicable to
directly align the economic interests of professional managers with those
of the Company's stockholders.

Pursuant to applicable rules of the Securities and Exchange Commission,
as of June 22, 1998 members of the compensation committee are deemed to own
beneficially an aggregate of 54,000 shares, or 1.4%, of the Company's
outstanding Common Stock. See "Ownership Information--Security Ownership of
Certain Beneficial Owners and Management".

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

See "--Thomas N. Amonett above"

See "--Thomas L. Cassidy" above, "Ownership Information--Security Ownership
of Certain Beneficial Owners and Management", and "Certain Relationships and
Related Transactions--Chatwins Group, Inc. and Affiliates" for a discussion of
Mr. Cassidy's relationship to Chatwins and Mr. Cassidy's and Chatwins'
relationship to the Company.

THE COMPENSATION COMMITTEE
Thomas L. Cassidy, Chairman
Thomas N. Amonett
W.R. Clerihue

30
<PAGE>

PROPOSAL II. THE NEW OPTION PLAN

On June 1, 1998 the Company's Board of Directors unanimously adopted the
1998 Stock Option Plan of Reunion Industries, Inc. (the "New Option Plan").
The stockholders are asked to approve the adoption of the New Option Plan at
the Special Meeting. In general, the New Option Plan provides additional
incentives to selected key employees, non-employee directors and consultants
of the Company. The purpose of the New Option Plan is to further the long-term
stability and financial success of the Company by retaining key employees,
directors and consultants who are able to contribute to the financial success
of the Company. Moreover, the Board of Directors believes that offering the
key employees, directors and consultants of the Company the opportunity to
become owners of capital stock of the Company will help to align further their
interests with those of the Company's stockholders generally. As of June 1,
1998, there were a combined 118,250 additional shares of Common Stock
available for the grant of options under two plans adopted by predecessors to
the Company, the Buttes Gas & Oil Co. 1992 Nonqualified Stock Option Plan (the
"1992 Plan") and the Reunion Resources Company 1993 Incentive Stock Plan (the
"1993 Plan"). The 1992 Plan and the 1993 Plan will remain in effect regardless
of whether the New Option Plan is adopted at the Special Meeting. The
affirmative vote of the holders of a majority of the shares of the Company's
Common Stock entitled to vote thereon will be required for approval of the New
Option Plan.

Management believes that all of the shares of Common Stock to be voted by
directors, executive officers and Chatwins, aggregating 1,578,675 shares as of
June 25, 1998, or approximately 40.9% of the issued and outstanding Common
Stock (see "Ownership Information--Security Ownership of Certain Beneficial
Owners and Management"), will be voted in favor of the adoption of the New
Option Plan.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL
OF THE NEW OPTION PLAN.

DESCRIPTION OF NEW OPTION PLAN

The following is a description of the material provisions of the New Option
Plan. A copy of the proposed New Option Plan is set forth in ANNEX B to this
Proxy Statement/Prospectus. The summary which follows is not intended to be
complete and reference should be made to the New Option Plan for a complete
statement of its terms and provisions.

The principal purposes of the New Option Plan are to provide incentives for
independent directors, key employees and consultants of the Company and its
subsidiaries through granting of options, thereby stimulating their personal
and active interest in the Company's development and financial success, and
inducing them to remain in the Company's employ.

Under the New Option Plan, not more than 600,000 shares of Common Stock (or
their equivalent in other equity securities) are authorized for issuance upon
exercise of options. The shares available under the New Option Plan upon
exercise of stock options may be either previously unissued shares or treasury
shares, and may be equity securities of the Company other than Common Stock.
The New Option Plan provides for appropriate adjustments in the number and
kind of shares subject to the New Option Plan and to outstanding grants
thereunder in the event of a distribution, stock dividend or certain other
types of recapitalizations, including restructuring.

If any portion of a stock option terminates or lapses unexercised, or is
canceled upon grant of a new option (which may be a higher or lower exercise
price than the option so canceled), the shares which were subject to the
unexercised portion of such option will continue to be available for issuance
under the New Option Plan.

ADMINISTRATION

The New Option Plan is administered by the Compensation Committee or other
committee of the Board (referred to herein as the "Committee"), consisting of
at least two directors who are both "non-employee

31
<PAGE>

directors" (as defined by Section 16b-3 of the Exchange Act) and "outside
directors" (as defined in Section 162(m)(4) of the Code). However, most
decisions regarding non-employee directors under the New Option Plan will be
made by the Board of Directors. The Committee (or the Board of Directors in
the case of non-employee directors) is authorized to select from among the
eligible employees, directors and consultants the individuals to whom options
are to be granted and to determine the number of shares to be subject thereto
and the terms and conditions thereof, consistent with the New Option Plan. The
Committee is also authorized to adopt, amend and rescind rules relating to the
administration of the New Option Plan.

PAYMENT FOR SHARES

The exercise or purchase price for all options to acquire shares of the
Company's Common Stock, together with any applicable tax required to be
withheld, must be paid in full in cash at the time of exercise or purchase or
may, with the approval of the Committee, be paid in whole or in part in Common
Stock of the Company owned by the Optionee (or issuable upon exercise of the
option) and having a fair market value on the date of exercise equal to the
aggregate exercise price of the shares so to be purchased. The Committee may
also provide, in the terms of an option or other right, that the purchase
price may be payable within thirty days after the date of exercise. The
Committee may also authorize other lawful consideration to be applied to the
exercise or purchase price of an award.

AMENDMENT AND TERMINATION

Amendments of the New Option Plan to increase the number of shares as to
which options may be granted in the aggregate or to any individual (except for
adjustments) require the approval of the Company's stockholders. In all other
respects the New Option Plan can be amended, modified, suspended or terminated
by the Board or the Committee, unless such action would otherwise require
stockholder approval as a matter of applicable law, regulation or rule.
Amendments of the New Option Plan will not, without the consent of the
participant, affect such person's rights under an award previously granted,
unless the award itself otherwise expressly so provides. No termination date
is specified for the New Option Plan.

ELIGIBILITY

Options under the New Option Plan may be granted to individuals who are then
officers or other employees of the Company or any of its present or future
subsidiaries determined by the Committee to be key employees. Such awards also
may be granted to consultants of the Company selected by the Committee and
non-employee directors selected by the Board of Directors for participation in
the New Option Plan. Approximately 25 officers and other employees will be
eligible to participate in the New Option Plan following the Merger. More than
one option may be granted to a key employee, non-employee director or
consultant.

AWARDS UNDER THE NEW OPTION PLAN

The New Option Plan provides that the Committee may grant stock options.
Each grant will be set forth in a separate agreement with the person receiving
the award and will indicate the type, terms and conditions of the award.

Nonqualified stock options ("NQSOs") will provide for the right to purchase
Common Stock at a specified price which may not be less than 85% of the fair
market value on the date of grant and usually will become exercisable (in the
discretion of the Committee) in one or more installments after the grant date.
NQSOs may be granted for any term specified by the Committee.

Incentive stock options, if granted, will be designed to comply with the
provisions of the Code and will be subject to restrictions contained in the
Code, including exercise prices equal to at least 100% of fair market value of
Common Stock on the grant date and a ten year restriction on their term.
Incentive stock options may be granted only to employees.

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<PAGE>

MISCELLANEOUS PROVISIONS OF THE NEW OPTION PLAN

Options granted under the New Option Plan may provide for their termination
upon dissolution or liquidation of the Company, the merger or consolidation of
the Company into another corporation, or the acquisition by another
corporation of all or substantially all of the Company's assets; but in such
event the Committee may also give Optionees the right to exercise their
outstanding options or rights in full during some period prior to such event,
even though the options have not yet become fully exercisable. Options granted
under the New Option Plan may provide that in the event of a corporate
transaction (as defined in the option agreement) in the discretion of the
Committee (or the Board in the case of option granted to non-employee
directors), all previously unexercisable options may become immediately
exercisable unless such options, or portions thereof, are determined by the
Committee to constitute, when exercised, "excess parachute payments" (as
defined in Section 280G of the Code). If any option does not contain such
limitation, and its exercisability is accelerated upon a change in control, it
is possible that an Optionee may be liable for an excise tax on the amount
attributable to such acceleration (and any other payments made in connection
with such change in control). If the Merger and the New Option Plan are
approved by the stockholders at the Special Meeting, the New Option Plan shall
be deemed to become effective immediately following the Effective Time of the
Merger.

The New Option Plan specifies that the Company may make loans to New Option
Plan participants to enable them to exercise options granted under the New
Option Plan. The terms and conditions of such loans, if any are made, are to
be set by the Committee.

The dates on which options under the New Option Plan first become
exercisable and on which they expire will be set forth in individual stock
option agreements setting forth the terms of the awards. Such agreements
generally will provide that options expire upon termination of the Optionee's
status as an employee, consultant or director, although the Committee may
provide that such options continue to be exercisable following a termination
without cause, or following a corporate transaction, or because of the
Optionee's retirement, death, disability or otherwise. The period during which
the right to exercise an Option vests in the Optionee shall be set by the
Committee. However, unless the Committee states otherwise no option will be
exercisable by an Optionee subject to Section 16 of the Exchange Act within
the period ending six months and one day after the date the Option is granted.
The grant and exercise of all options under the New Option Plan shall in all
respects be subject to the Transfer Restrictions.

No option to acquire Common Stock granted under the New Option Plan may be
assigned or transferred by the Optionee, except by will or the laws of
intestate succession, although the shares underlying such rights may be
transferred if all applicable restrictions, including the Transfer
Restrictions, have lapsed or are otherwise inapplicable. During the lifetime
of the holder of any option, subject to the Transfer Restrictions the option
may be exercised only by the holder.

The Company requires participants to discharge withholding tax obligations
in connection with the exercise of any option granted under the New Option
Plan as a condition to the issuance or delivery of stock or payment of other
compensation pursuant thereto. Shares held by or to be issued to a participant
may also be used to discharge tax withholding obligations related to exercise
of options, subject to the discretion of the Committee to disapprove such use.
In addition, the Committee may grant to employees a cash bonus in the amount
of any tax related to awards.

FEDERAL INCOME TAX CONSEQUENCES

The income tax consequences of the New Option Plan under current federal law
are summarized below. The discussion is intended to provide only general
information. State and local income tax consequences are not discussed.

Non-Qualified Stock Options.

Holders of non-qualified stock options will not realize income for federal
income tax purposes as a result of the grant of the option, but normally will
realize compensation income upon exercise of the non-qualified stock

33
<PAGE>

option to the extent that the fair market value of the shares on the date of
exercise of the option exceeds the aggregate option exercise price paid. The
Company (or the corporation that is the employer of the Optionee) is entitled
to a deduction in the same amount at the time of exercise of the option,
provided that the Company (or the corporation that is the employer of the
Optionee) reports on a timely basis the taxes on the ordinary income realized
by an Optionee upon the exercise of a non-qualified stock option.

Optionees who are subject to the short-swing profits restrictions of Section
16(b) of the Exchange Act ("Insiders") may be affected by Section 83(c) of the
Code. Section 83(c) provides generally that, unless the Insider otherwise
elects, so long as the sale of securities at a profit could subject an Insider
to suit under Section 16(b), the imposition and calculation of the tax on any
compensation income realized will be deferred until the six-month Section
16(b) period expires. Amendments to the rules under Section 16 of the Exchange
Act, effective May 1, 1991, provide that option exercises will not constitute
"purchases" for Section 16(b) purposes. As a result, Section 83(c) will no
longer apply to option exercises (provided the option has been held for six
months or more) and Insiders will be taxed on the difference between the
option exercise price and the fair market value of the stock at the date of
exercise.

Pursuant to the New Option Plan, a holder of non-qualified stock options may
exercise such options through delivery of shares of the Company's Common Stock
already held by such holder. The tax consequences resulting from the exercise
of non-qualified stock options through the delivery of already-owned shares
are not completely certain. The Internal Revenue Service in a published ruling
has taken the position that the tax consequences of exercising options with
shares of the Company's Common Stock must be determined separately for the
number of shares received upon exercise equal to the number of shares
surrendered (as a tax-free exchange of stock for stock) and the remaining
shares received upon exercise (as compensation income). Specifically, to the
extent the number of shares of the Company's Common Stock acquired upon
exercise of the options equals the number of shares of Common Stock delivered,
the Optionee will not recognize gain and the Optionee's basis in the Common
Stock acquired upon such exercise will equal the Optionee's basis in the
surrendered shares of the Common Stock. Any additional shares of the Common
Stock acquired upon such exercise will result in compensation income to the
Optionee in an amount equal to their then fair market value and, accordingly,
the basis in such additional shares of the Common Stock will be their fair
market value.

Also, a holder exercising a non-qualified stock option may elect to pay for
the shares of stock purchased upon exercise and all applicable withholding
taxes by having a portion of the shares of stock purchased upon exercise sold
by the holder's broker and the proceeds of the sale paid to the Company. The
holder will realize additional gain or loss on the sale of the shares of stock
by the holder's broker based on the difference between the fair market value
of the shares of stock on the exercise date and the sale price.

Incentive Stock Options.

Holders of incentive stock options will not realize income for federal
income tax purposes upon either the grant of the option or its exercise.
However, the amount by which the fair market value of the shares purchased
upon exercise of the option exceeds the option price will be an "item of
adjustment" for purposes of alternative minimum tax. Upon the sale or other
taxable disposition of the shares purchased upon exercise of the option,
capital gain will normally be recognized in the full amount of the difference
between the amount realized and the option exercise price if no disposition of
the shares has taken place within either (i) two years from the date of grant
of the option or (ii) one year from the date of transfer of the shares to the
Optionee upon exercise. If the shares are sold or otherwise disposed of before
the end of such one-year or two-year periods, the difference between the
option price and the fair market value of the shares on the date on which the
option is exercised will be taxed as ordinary income; the balance of the gain,
if any, will be taxed as capital gain. If there is a disposition of the shares
before the expiration of such one-year or two-year periods and the amount
realized is less than the fair market value of the shares at the date of
exercise, the Optionee's ordinary income is limited to the amount realized
less the option exercise price paid. The Company (or other employer
corporation) will be entitled to a tax deduction in regard to an incentive
stock option only to the extent the Optionee has ordinary income upon sale or
other disposition of the shares received upon exercise of the option.

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<PAGE>

As with non-qualified stock options, a holder of incentive stock options may
exercise such options through delivery of shares of the Company's Common Stock
already held by such holder. Although the analysis in this paragraph is under
study by the Internal Revenue Service, pursuant to Proposed Treasury
Regulation Section 1.422A-2, the tax consequences of exercising incentive
stock options with shares of the Company's Common Stock must be analyzed
separately for the number of shares received upon exercise equal to the number
of shares surrendered (as a tax-free exchange of stock for stock) and the
remaining shares received upon exercise (as an incentive stock option
transaction). Specifically, the Optionee's basis in the Company's Common Stock
acquired upon such exercise, to the extent of the number of shares delivered,
is equal to his or her basis in the surrendered shares. The Optionee's basis
in any additional shares of Common Stock acquired upon such exercise is zero.
If an Optionee delivers Common Stock acquired by the exercise of incentive
stock options to acquire other Common Stock in connection with the exercise of
incentive stock options, such Optionee will recognize compensation income on
the transaction if the delivered Common Stock has not been held for the
required one-year or two-year holding period. In addition, any sale or other
disposition of Common Stock acquired by exercising the incentive stock options
through delivery of the Company's Common Stock, within the one-year or two-
year period, will be viewed first as a disposition of Common Stock with the
zero basis.

A holder exercising an incentive stock option may elect to pay for the
shares of stock purchased upon exercise by having a portion of the shares of
stock purchased upon exercise sold by the holder's broker and the proceeds of
the sale paid to the Company. The sale of the shares of stock by the holder's
broker will be a disposition of the shares before the end of the one-year or
two-year holding period. As a result, the difference between the option price
of the shares of stock sold by the broker and the fair market value of the
shares of stock, determined on the date on which the option is exercised, will
be taxed as ordinary income; the balance of any gain will be taxed as capital
gain. If the amount realized on the sale of the stock sold by the broker is
less than the fair market value of the shares on the date of exercise, the
holder's ordinary income is limited to the amount realized less the option
exercise price paid. The Company (or other employer corporation) will be
entitled to a tax deduction to the extent the holder has ordinary income upon
the sale of the shares of stock sold by the holder's broker.

Section 162(m) Limitation

In general, under Section 162(m) of the Code, compensation expense
deductions of publicly-held corporations may be limited to the extent total
compensation (including base salary, annual bonus, stock option exercises and
non-qualified benefits paid) for certain executive officers exceeds $1 million
in any one year. However, under Code Section 162(m), the deduction limit does
not apply to certain "performance-based compensation" established by an
independent compensation committee which is adequately disclosed to, and
approved by, stockholders.

The Company has attempted to structure the New Option Plan in such a manner
that, subject to obtaining stockholder approval of the New Option Plan, the
remuneration attributable to such plan which meets the other requirements of
Code Section 162(m) will not be subject to the $1,000,000 limitation. The
Company has not, however, requested a ruling from the IRS or an opinion of
counsel regarding this issue.

OUTSTANDING OPTION GRANTS UNDER THE NEW OPTION PLAN

On February 12, 1998 the Board of Directors of the Company resolved to grant
15,000 options to each of the Company's four non-employee directors (Mr.
Amonett, Mr. Cassidy, Mr. Myers, Mr. Clerihue) and to Mr. Poole. These options
will be granted under the New Option Plan and, accordingly, are subject to the
approval of the adoption of the New Option Plan by the stockholders at the
Special Meeting. On May 19, 1998 the Board of Directors of the Company granted
ISOs to purchase 75,000 shares of Common Stock to Mr. Bradley. This grant was
made under the 1993 Plan and will not be affected by the adoption of the New
Option Plan.

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PROPOSAL III. THE MERGER

At the Special Meeting, the Company's stockholders will be asked to approve
the Merger Agreement, pursuant to which Chatwins will be merged with and into
the Company, with the Company being the surviving corporation. The Merger
Agreement has been unanimously approved by each of the Company's and Chatwins'
Board of Directors and by the stockholders of Chatwins and is included as
ANNEX A to this Proxy Statement/Prospectus.

The Merger Agreement must be approved by the holders of a majority of the
shares of Common Stock entitled to vote on such a proposal. Management
believes that all of the shares of Common Stock to be voted by directors,
executive officers and Chatwins, aggregating 1,578,675 shares as of June 25,
1998, or approximately 40.9% of the issued and outstanding Common Stock (see
"Ownership Information--Security Ownership of Certain Beneficial Owners and
Management"), will be voted in favor of the Merger.

THE COMPANY'S BOARD OF DIRECTORS
RECOMMENDS A VOTE "FOR" APPROVAL OF THE MERGER

BACKGROUND OF THE MERGER

Over the past several years, the Company has been engaged in a process of
repositioning its strategic direction from its oil and gas operations to
manufacturing operations, the first step of which was the acquisition of
Oneida, Rostone, QMP and DPL. While these operations are profitable and
generate cash flow for the Company, the Company's financial arrangements,
particularly ORC's credit facility with Congress, restrict the Company's
ability to take advantage of this cash flow. The Company also has sizable net
operating losses (NOLs) from its reorganization and its oil and gas operations
(See the Company's 10-K, "Item 1: Business" delivered herewith and
incorporated by reference herein).

In June 1995, Chatwins acquired approximately 38% of the Company's Common
Stock in the Chatwins Acquisition, and through other arrangements came to hold
voting control over approximately a further 8% of the Company's Common Stock,
which other arrangements have since expired. Because an Ownership Change, the
acquisition of 50% or more of the Company's Common Stock in a three year
period by 5% stockholders, might have had the effect of limiting the Company's
ability to utilize its NOLs, thereby adversely affecting the Company, the
Company took steps, including adoption of the Transfer Restrictions, to
prevent any person or group of persons from becoming a 5% stockholder or any
increase by any existing person or group of persons that would have had such
an effect. Absent extension, the Transfer Restrictions would expire in April
1999.

At the inception of its investment in the Company, Chatwins declared its
intention to strongly influence the management and affairs of the Company and
that it might consider a merger of itself into the Company after three years
had passed if the Transfer Restrictions would then permit it.

In May 1997, the Board of Directors began to explore whether the expiration
in June of 1998 of the three year period following the Chatwins Acquisition
afforded an opportunity for the Company to effect a series of transactions
that would strengthen its financial condition, allow a refinancing of its
existing indebtedness and broaden its strategic focus, without jeopardizing
the Company's ability to use its NOLs. A principal focus of this exploration
was a possible combination of Chatwins and the Company. Such a combination, if
consummated, would allow the Company to take advantage of the greater size and
financial resources of Chatwins, permit a refinancing, give the Company the
benefits of diversification into other industries and simplify its capital
structure without jeopardizing its ability to utilize its NOLs.

In June 1997 the Company hired Legg Mason to serve as a financial advisor in
connection with the Company's consideration of a merger with Chatwins. In
November 1997, Legg Mason reported to the Board on its initial valuations of
the Company and Chatwins. The Board judged these relative valuations to be in
ranges that made it feasible to consider a tax free transaction in which the
Company and Chatwins would merge, with the Company being the surviving
company. The Board authorized management to begin preparing a proposal for
such a transaction.

Thereafter management began preparing such a proposal. On May 19, 1998 the
Board met to consider the proposal. It heard presentations from management, an
updated analysis from Legg Mason and presentations from

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<PAGE>

Chatwins regarding terms of the transaction. In particular, Chatwins believed
it was reasonable for its stockholders to receive an aggregate of 10,052,434
shares in connection with the Merger. Legg Mason advised that its analysis
generally supported the issuance to Chatwins stockholders of up to 9.0 million
shares of Common Stock, without considering a possible King-Way Acquisition
(see "--King-Way Acquisition"). Chatwins then reported on its discussions with
respect to the possible acquisition of King-Way, and its expectation that the
King-Way Acquisition would increase the value of Chatwins (See "--King-Way
Acquisition"). Because certain of the directors of the Company are also
directors of Chatwins, Messrs. Amonett, Cassidy, Clerihue and Myers, the
directors who did not also serve on the Chatwins Board, met separately with
management, with Legg Mason and the Company's counsel, and Chatwins to develop
the proposal. These directors then reported to the full Board that they
believed it was appropriate to issue 9.0 million shares of the Company's
Common Stock if Chatwins concluded the King-Way Acquisition prior to the
Merger for an amount not in excess of the King-Way Price. The full Board
adopted this recommendation, subject to receiving an opinion from Legg Mason
that the payment of such consideration by the Company was fair from a
financial point of view to the Company's stockholders other than Chatwins and
subject to the negotiation of a definitive merger agreement.

Following this meeting, counsel to Chatwins advised that, based on its
review of the terms of Chatwins' credit facilities, it did not believe that
Chatwins could agree definitively to an acquisition of King-Way prior to
accomplishing the Refinancing, and thus the acquisition of King-Way could not
be assured. Representatives of Chatwins and the Company then discussed setting
alternative terms of the Merger, and agreed to bring to their respective
boards a proposal that contemplated the issuance of 9.0 million shares of the
Company's Common Stock to Chatwins stockholders, assuming that Chatwins
consummated, or had the unconditional right to consummate the contemplated
King-Way Acquisition at or prior to the Effective Time for an amount not in
excess of the King-Way Price, or 8.5 million shares if the contemplated
acquisition of King-Way was neither accomplished nor subject to such an
unconditional right at or prior to the Effective Time.

The Company's Board of Directors met by telephone on June 1, 1998 to
consider the revised proposal and a definitive Merger Agreement detailing it.
The Board heard further presentations from Legg Mason with respect to the
proposed transactions. Messrs. Amonett, Cassidy, Clerihue and Myers discussed
the transaction and, voting separately, unanimously resolved that the Merger
Agreement and the transactions contemplated thereby were in the best interests
of the stockholders of the Company and approved the Merger Agreement and the
transactions contemplated thereby, subject to the receipt of a definitive
opinion from Legg Mason to the effect that the consideration to be paid by the
Company in the Merger was fair to the stockholders of the Company other than
Chatwins from a financial point of view. A committee of Messrs. Amonett,
Cassidy, Clerihue and Myers was appointed to receive and evaluate the
definitive opinion of Legg Mason. The full Board then considered the proposal,
and after further discussion and upon further consideration of the factors
considered below, concluded that the Merger Agreement and the transactions
contemplated thereby were in the best interests of the stockholders of the
Company and approved the Merger Agreement and the transactions contemplated
thereby, subject to receipt of such opinion.

On June 3, 1998, the committee consisting of Messrs. Amonett, Cassidy,
Clerihue and Myers met to receive the definitive Legg Mason opinion. Voting
unanimously, such directors concluded that the definitive opinion was
satisfactory to support the determinations of the Board of Directors. At the
same time, because of the small Chatwins equity interest held by Mr. Cassidy
(see "Risk Factors--Possible Conflicts of Interest" and "Proposal III. The
Merger--Interests of Certain Persons"), Messrs. Amonett, Clerihue and Myers
voted separately to confirm the earlier conclusions reached on May 19, June 1,
1998 and earlier that day when Mr. Cassidy was present.

The Company and Chatwins executed the Merger Agreement on June 3, 1998. The
respective Boards of Directors of Chatwins and the Company subsequently
authorized the amendment of the Merger Agreement on June 25, 1998 pursuant to
Amendment No. 1 to provide that the Chatwins Preferred will be converted at
the Effective Time into Reunion Preferred rather than notes of Reunion. This
change was made to reduce the amount of debt on the Company's post merger
balance sheet to improve its ability to remain in compliance with the

37
<PAGE>

financial covenants of the New Facilities. See "--Refinancing". On June 25,
1998 Legg Mason issued to the Company's Board of Directors a letter stating
that its opinion contained in the Original Fairness Opinion is not changed by
virtue of the amendments to the Original Merger Agreement effected by
Amendment No. 1. A full and complete copy of Legg Mason's June 25, 1998
opinion letter is attached to this Proxy Statement/Prospectus as part of ANNEX
C.

REASONS FOR THE MERGER AND BOARD OF DIRECTORS' RECOMMENDATION

In reaching its decision to approve the Merger Agreement, as well as the
transactions contemplated thereby, and to recommend that the Company's
stockholders approve and adopt the Merger Agreement, the Board of Directors
considered a number of factors including, among others: (i) the percentage of
the combined company that would be owned by stockholders of the Company other
than Chatwins; (ii) the accretive nature of the Merger, assuming each company
achieved its projected results, as contrasted with the results that might be
achieved through the continued implementation of the Company's business plan,
other possible acquisitions or other business combinations; (iii) the
recommendation of the proposed Merger by the management of the Company; (iv)
the presentations made by Legg Mason at the meetings of the Board of Directors
held on November 5, 1997, May 19 and June 1, 1998 and in its June 3, 1998
opinion that the consideration to be paid by the Company in the Merger was
fair to the Company and the stockholders of the Company other than Chatwins
from a financial point of view (See "--Opinion of the Company's Financial
Advisor); (v) the difficulty the Company would have in obtaining additional
financing in the absence of the Merger; (vi) the terms and conditions of the
Merger Agreement, including the number of shares to be issued to Chatwins
stockholders, the parties' representations, warranties and covenants and the
conditions to their respective obligations; (vii) the relative financial
condition and earnings histories of Chatwins and the Company; (viii) the
expiration dates of the Company's NOLs, the small likelihood that the
Company's stand alone earnings would utilize them fully prior to their
expiration, the effect of the Merger on such expiration dates and the fact
that the consummation of the Merger would require the extension of the
Transfer Restrictions in order to better assure that the Company would be able
to continue to utilize its NOLs; (ix) the historical market prices of the
Company's Common Stock; and (x) the fact that the Merger would not be a
taxable transaction to the stockholders of the Company.

Following consideration of the information and factors described above
(including reliance on the opinion of Legg Mason that the consideration to be
paid by the Company in the Merger was fair to the Company and to the
stockholders of the Company other than Chatwins from a financial point of
view), the Company's Board of Directors concluded that the Merger was in the
best interests of the Company and its stockholders. In reaching this
conclusion, the Company's Board of Directors did not assign relative or
specific weights to the above information and factors or determine that any
particular information or factor was of unique importance. Instead, the
Company's Board of Directors based its recommendation upon the totality of the
information and factors presented to it or otherwise known to its members.

FOR THE REASONS DESCRIBED ABOVE, AND TAKING INTO CONSIDERATION THE
INFORMATION AND FACTORS SET FORTH ABOVE, THE COMPANY'S BOARD OF DIRECTORS, BY
THE UNANIMOUS VOTE OF ALL DIRECTORS, APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, AND RECOMMENDS THAT
THE STOCKHOLDERS OF THE COMPANY VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT.

OPINION OF THE COMPANY'S FINANCIAL ADVISOR

At the June 1, 1998 meeting of the Board of Directors of the Company, Legg
Mason delivered its oral opinion to the Company's Board, which opinion was
subsequently confirmed by the Original Fairness Opinion on June 3, 1998 that,
as of May 27, 1998, the amount of consideration to be paid by the Company
under the terms of the Original Merger Agreement is fair to the Company and
its stockholders, other than Chatwins, from a financial point of view.
Following the execution of Amendment No. 1, on June 25, 1998 Legg Mason issued
to the

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<PAGE>

Company's Board of Directors a letter stating that its opinion contained in
the Original Fairness Opinion is not changed by virtue of the amendments to
the Original Merger Agreement effected by Amendment No. 1. There is no current
intention to further update the Fairness Opinion. The full text of the
Fairness Opinion, which sets forth the assumptions made, matters considered,
scope and limitations of the review undertaken and procedures followed by Legg
Mason in rendering its opinion, is attached to this Proxy Statement/Prospectus
as ANNEX C and Legg Mason has consented to its attachment hereto. The
Company's stockholders are urged to read the opinion carefully and in its
entirety. The Fairness Opinion is directed only to the fairness from a
financial point of view to the Company and its stockholders, other than
Chatwins, of the consideration to be paid by the Company in the Merger and
does not constitute a recommendation to any of the Company's stockholders as
to how such stockholders should vote at the Meeting.

In arriving at its opinion, Legg Mason has, among other things: (i) reviewed
the Merger Agreement; (ii) reviewed certain publicly available audited and
unaudited financial statements of the Company and Chatwins and certain other
publicly available information of the Company and Chatwins; (iii) reviewed
certain internal information, primarily financial in nature, concerning the
Company and Chatwins, prepared by their respective managements; (iv) discussed
the past and current operations and financial condition and prospects of the
Company with the senior management of the Company; (v) discussed the past and
current operations and financial condition and prospects of Chatwins with the
senior management of Chatwins; (vi) reviewed forecast financial statements of
the Company prepared and furnished by the senior management of the Company;
(vii) reviewed forecast financial statements of Chatwins prepared and
furnished by the senior management of Chatwins; (viii) held meetings and
discussions with certain officers and employees of the Company and Chatwins,
concerning the operations, financial condition and future prospects of the
combined company; (ix) reviewed certain publicly available financial and stock
market data relating to selected public companies that Legg Mason considered
relevant to their inquiry; (x) considered the pro forma financial effects of
the Merger on the Company; and, (xi) conducted such other financial studies,
analyses and investigations and considered such other information as Legg
Mason deemed necessary or appropriate.

In connection with its review, Legg Mason assumed and relied upon the
accuracy and completeness of all financial and other information supplied to
it by the managements of the Company and Chatwins and all publicly available
information, and did not independently verify such information. Legg Mason
also relied upon the managements of the Company and Chatwins, as to the
reasonableness and achievability of the financial projections (and the
assumptions and bases therein) provided to Legg Mason for the Company and
Chatwins, respectively, and assumed that such projections were reasonably
prepared on bases reflecting the best currently available estimates and
judgments of management as to the future operating performance of each
respective entity, including, without limitation, the tax benefits available
to the combined company. In arriving at the Fairness Opinion, Legg Mason
relied upon the financial data for 1998, 1999, 2000, 2001 and 2002 presented
to the Company's Board at the June 1, 1998 meeting, which data were the latest
available projections for the Company, Chatwins and the combined company
provided to Legg Mason by the managements of the Company and Chatwins as of
the date of the Fairness Opinion. Neither the Company nor Chatwins customarily
discloses internal management projections of the type provided to Legg Mason
in connection with Legg Mason's review of the Merger. Such projections were
not prepared with the expectation of public disclosure. The projections were
based on numerous variables and assumptions that are inherently uncertain,
including, without limitation, factors related to general economic and
competitive conditions. Accordingly, actual results could vary significantly
from those set forth in such projections.

Legg Mason was not requested to make, and did not make, an independent
appraisal or evaluation of the assets, properties, facilities or liabilities
of either the Company or Chatwins and was not furnished with any such
appraisal or evaluation.

The Fairness Opinion is necessarily based on stock prices and economic and
other conditions and circumstances as existed or were in effect on, and the
information made available to it as of, the date it delivered its oral
opinion. Legg Mason expressed no opinion as to what the value of the Company's
Common Stock

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<PAGE>

actually will be when issued to Chatwins pursuant to the Merger Agreement or
as to the price or trading range at which the Company's Common Stock may trade
following the Merger.

In connection with rendering its opinion, Legg Mason performed a variety of
financial analyses. While all of the material analyses performed are
summarized below, the summary does not purport to be a complete description of
the analyses performed and factors considered by Legg Mason in arriving at its
opinion. Legg Mason believes that its analysis must be considered as a whole
and that selecting portions of its analyses and of the factors considered by
it, without considering all analyses and factors, would create a misleading
view of the processes underlying its opinion. The preparation of a fairness
opinion is a complex process and is not necessarily susceptible to a partial
analysis or summary description. Legg Mason was not authorized to solicit, and
did not solicit, indications of interest from any third party with respect to
an acquisition of the Company, its assets, or any part thereof. In this
regard, Legg Mason was advised by the Company's senior management that since
the first public announcement of the prospective Merger, no person contacted
the Company's senior management or the Company's Board regarding any potential
alternative transaction to the prospective Merger. Legg Mason assumed that the
Merger and related transactions described elsewhere in this Proxy
Statement/Prospectus will be consummated according to the terms and conditions
described in the forms of the agreements reviewed by Legg Mason, without any
waiver of material terms or conditions by the Company or Chatwins, and that
obtaining any necessary regulatory approvals or satisfying any other
conditions for consummation of the Merger would not have an adverse effect on
the Combined Company.

The following is a summary of the principal financial and valuation analyses
performed by Legg Mason in connection with the preparation of the Fairness
Opinion. These analyses were presented to the Company's Board at its meeting
on June 1, 1998 and were based on stock price information through the close of
the market on May 27, 1998.

Both the Company and Chatwins were valued utilizing the analyses described
below.

The Company.

Although the Company is publicly traded, it has severe restrictions on the
sale of its stock. These restrictions, combined with a small float (i.e., the
number of shares held by shareholders other than Chatwins and the Company's
management) result in a relatively illiquid market in the Company's shares.
Therefore, the trading price of the Company's shares in the public market was
not considered to be representative of the Company's underlying value.

The Company was valued on a fully taxed operating basis utilizing each of
the analyses described below. In addition, the Company's NOLs were valued
separately at the Company's expected ability to utilize it and was present
valued at the Company's weighted average cost of capital ("WACC"). This was
calculated using a pricing model known as the Capital Asset Pricing Model and
based on general and systemic risk factors reflected by the Company's
Comparable Companies (as defined below). The NOLs value was added, post-
valuation, to the Company's derived value.

Chatwins.

Chatwins was valued on a fully taxed operating basis, including and
excluding the King-Way acquisition, utilizing each of the analyses described
below. In addition, the value of Chatwins' 37.6% ownership in the Company, was
added, post-valuation, to the derived value of Chatwins. The value of the
Company was calculated utilizing a methodology consistent with each
methodology utilized to value Chatwins.

NOLs Analysis. Legg Mason applied management's earnings projections to
calculate the Company's after tax savings as a result of its NOLs. Each year's
saving was discounted back at the Company's WACC, calculated to be 13.3%, to
arrive at a present value of the NOLs. This analysis provided an implied
present value of the NOLs to the Company of $14.8 million.

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<PAGE>

COMPARABLE COMPANIES ANALYSIS.

Legg Mason compared the relevant historical, current and projected financial
and operating results of both the Company and Chatwins with the operating
results of selected publicly traded companies that in Legg Mason's judgment
are and would be comparable to the Company and Chatwins ( collectively the
"Comparable Companies"). The Comparable Companies were chosen by Legg Mason
based on general business, operating and financial characteristics
representative of companies in the industries in which the Company and
Chatwins do and would operate. No company or business used in the Comparable
Companies analysis is identical to the Company or Chatwins. Accordingly, an
analysis of the results of the following is not entirely mathematical; rather,
it involved complex considerations and judgments concerning differences in
financial and operating characteristics and other factors that could affect
the public trading value of either the Comparable Companies or the company to
which they are being compared; therefore, the resulting multiples relied upon
for this analysis are subject to interpretation. Legg Mason recognized that
each of the Comparable Companies is and would be distinguishable from both the
Company and Chatwins in certain respects.

In performing its analyses, Legg Mason examined both the aggregate equity
value of the outstanding common equity (defined as the number of outstanding
shares times the current price per share as of May 27, 1998, hereafter the
"Equity Value") and the Equity Value plus preferred equity (if any) at
liquidation value, minority interests (if any) and total debt net of cash and
cash equivalents (the "Enterprise Value") of the Comparable Companies. Using
each Comparable Company's Enterprise Value, Legg Mason calculated multiples
of, among other things, each Comparable Company's latest twelve month's
("LTM") earnings before interest and taxes ("EBIT"), and LTM earnings before
interest, taxes, depreciation and amortization ("EBITDA") (collectively, the
"Enterprise Value Multiples"). Using each Comparable Company's Equity Value,
and based on published security analysts' estimates, Legg Mason also
calculated multiples of, among other things, each company's LTM net income,
projected 1998 net income and projected 1999 net income.

The multiples that Legg Mason applied to the Company and Chatwins are
described in detail below.

Using the foregoing information, Legg Mason derived a range of estimated
values per share based upon implied Enterprise Values and Equity Values
derived by applying the aforementioned mean Enterprise Value Multiples and
Equity Value Multiples of the Comparable Companies to the appropriate
financial statistics of the Company and Chatwins. In cases where Legg Mason's
analysis indicated that the multiple for a particular Comparable Company was
not meaningful (e.g. because of recently depressed financial and operating
performance), Legg Mason excluded that multiple and relied upon the mean
multiples of the other Comparable Companies. Legg Mason has advised that such
exclusions did not affect the reliability of its analysis.

The Company. In using the Comparable Companies analysis to value the Company
on a stand-alone basis, Legg Mason analyzed financial information which
included, among other things: (i) operating performance; (ii) growth rates;
(iii) capitalization ratios; (iv) ratios of common stock share prices to 1998
and 1999 estimated earnings per share and book value per share; and (v) ratios
of Enterprise Value to LTM EBITDA and EBIT. On an LTM basis, the Company was
valued both before ("Actual") and after increasing earnings to remove the
estimated effects of the strike at its Rostone facility in 1997 ("Adjusted").

For the purposes of this analysis, the Comparable Companies selected by Legg
Mason for the Company were the following companies that operate in the
plastics manufacturing industry: Advanced Technical Products, Inc., Deswell
Industries, Inc., Furon Co., Triple S Plastics, Inc. and Worthington
Industries, Inc. Legg Mason noted that the mean multiples of Equity Value to
LTM, estimated 1998 and projected 1999 net income were 14.1x, 12.7x and 10.2x,
respectively. Applying these mean multiples to the Company's Actual LTM,
Adjusted LTM, estimated 1998 and projected 1999 net income yielded implied
equity values of the Company, excluding the value of its NOLs, of $6.3
million, $15.2 million, $31.7 million and $47.2 million, respectively.
Including the value of its NOLs resulted in implied equity values of the
Company of $21.0 million, $30.0 million, $46.4 million and $62.0 million,
respectively, representing the Company's per share values of $5.45, $7.75,
$12.02 and $16.05, respectively. Legg Mason noted that the mean multiples of
Enterprise Value to LTM EBIT and LTM

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EBITDA were 10.5x and 7.2x, respectively. Applying the mean multiples to the
Company's Actual and Adjusted LTM EBIT, and Actual and Adjusted LTM EBITDA
yielded implied equity values of the Company, excluding the value of its NOLs,
of $13.2 million and $23.8 million, and $28.5 million and $35.7 million,
respectively. Including the value of its NOLs resulted in implied equity
values of the Company of $28.0 million and $38.5 million, and $43.3 million
and $50.5 million, respectively, representing the Company per share values of
$7.25 and $9.97, and $11.21 and $13.07, respectively.

Chatwins. In using the Comparable Companies analysis to value Chatwins on a
stand-alone basis, including and excluding the King-Way acquisition, Legg
Mason analyzed financial information which included, among other things: (i)
operating performance; (ii) growth rates; (iii) capitalization ratios; (iv)
ratios of common stock share prices to 1998 and 1999 estimated earnings per
share and book value per share; and (v) ratios of Enterprise Value to LTM
EBITDA and EBIT.

For the purposes of this analysis, the Comparable Companies selected by Legg
Mason for Chatwins were the following companies that operate in the
diversified industrial manufacturing industry: A.M. Castle & Co., Commercial
Intertech Corporation, Harnischfeger Industries, Inc., Harsco Corporation,
Katy Industries, Inc., Keystone Consolidated Industries, Inc., Owosso
Corporation, SIFCO Industries, Inc., Synalloy Corporation, Trinity Industries,
Varlen Corporation and Worthington Industries, Inc.

Legg Mason noted that the mean multiples of Equity Value to LTM, 1998 and
1999 net income were 15.8x, 13.5x and 11.1x, respectively. In addition, Legg
Mason noted that the mean multiples of Enterprise Value to LTM EBIT and LTM
EBITDA were 10.4x and 7.3x, respectively.

Chatwins including King-Way. Applying the mean multiples to Chatwins' LTM,
1998 and 1999 estimated earnings yielded implied equity values of Chatwins,
excluding the value of its ownership in the Company, of $47.5 million, $56.9
million and $131.5 million, respectively. Including the value of its ownership
in the Company (valued at actual LTM earnings for the LTM earnings valuation)
resulted in implied equity values of Chatwins of $55.4 million, $74.4 million
and $154.8 million, respectively. Including the value of its ownership in the
Company (valued at adjusted LTM earnings) resulted in an implied equity value
of Chatwins, utilizing the LTM earnings multiple, of $58.7 million. Applying
the mean multiples to Chatwins' LTM EBIT and LTM EBITDA yielded implied equity
values of Chatwins, excluding the value of its ownership in the Company, of
$68.3 million and $51.2 million, respectively. Including the value of its
ownership in the Company (valued at actual LTM EBIT and EBITDA) resulted in
implied equity values of Chatwins of $78.8 million and $67.4 million,
respectively. Including the value of its ownership in the Company (valued at
adjusted LTM EBIT and EBITDA) resulted in implied equity values of Chatwins of
$82.8 million and $70.1 million, respectively.

Chatwins excluding King-Way. Applying the mean multiples to Chatwins' LTM,
1998 and 1999 estimated earnings yielded implied equity values of Chatwins,
excluding the value of its ownership in the Company, of $30.7 million, $43.7
million and $113.9 million, respectively. Including the value of its ownership
in the Company (valued at actual LTM earnings for the LTM earnings valuation)
resulted in implied equity values of Chatwins of $38.6 million, $61.2 million
and $137.1 million, respectively. Including the value of its ownership in the
Company (valued at adjusted LTM earnings) resulted in an implied equity value
of Chatwins, utilizing the LTM earnings multiple, of $42.0 million. Applying
the mean multiples to Chatwins' LTM EBIT and LTM EBITDA yielded implied equity
values of Chatwins, excluding the value of its ownership in the Company, of
$54.5 million and $47.1 million, respectively. Including the value of its
ownership in the Company (valued at actual LTM EBIT and EBITDA) resulted in
implied equity values of Chatwins of $65.0 million and $63.3 million,
respectively. Including the value of its ownership in the Company (valued at
adjusted LTM EBIT and EBITDA) resulted in implied equity values of Chatwins of
$68.9 million and $66.0 million, respectively.

Relative Valuation. The relative value of each entity was calculated
utilizing each of the Comparable Companies' multiples in turn, and including
the value of the Company's NOLs and Chatwins' ownership in the Company. These
relative valuations were calculated for four scenarios; (i) where the
Company's liability associated with the existing Bargo jury judgment of $5.0
million is assumed to be zero with Chatwins including

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King-Way, (ii) where the Company's liability associated with the existing
Bargo jury judgment of $5.0 million is assumed to be $5.0 million with
Chatwins including King-Way, (iii) where the Company's liability associated
with the existing Bargo jury judgment of $5.0 million is assumed to be zero
with Chatwins excluding King-Way, and (iv) where the Company's liability
associated with the existing Bargo jury judgment of $5.0 million is assumed to
be $5.0 million with Chatwins excluding King-Way.

When the Company's liability associated with the existing Bargo jury
judgment of $5.0 million was assumed to be zero with Chatwins including King-
Way, the relative value of Chatwins to the Company using Actual LTM, Adjusted
LTM, estimated 1998 and projected 1999 multiples of net income was calculated
to be 72%:28%, 66%:34%, 62%:38% and 71%:29%, respectively (shown as
Chatwins%:the Company%). The relative value of Chatwins to the Company using
Actual and Adjusted LTM EBIT, and Actual and Adjusted LTM EBITDA multiples was
calculated to be 74%:26% and 68%:32%, and 61%:39% and 58%:42%, respectively.

When the Company's liability associated with the existing Bargo jury
judgment of $5.0 million was assumed to be $5.0 million with Chatwins
including King-Way, the relative value of Chatwins to the Company using Actual
LTM, Adjusted LTM, estimated 1998 and projected 1999 multiples of net income
was calculated to be 77%:23%, 69%:31%, 64%:36% and 73%:27%, respectively. The
relative value of Chatwins to the Company using Actual and Adjusted LTM EBIT,
and Actual and Adjusted LTM EBITDA multiples was calculated to be 77%:23% and
71%:29%, and 63%:37% and 60%:40%, respectively.

When the Company's liability associated with the existing Bargo jury
judgment of $5.0 million was assumed to be zero with Chatwins excluding King-
Way, the relative value of Chatwins to the Company using Actual LTM, Adjusted
LTM, estimated 1998 and projected 1999 multiples of net income was calculated
to be 65%:35%, 58%:42%, 57%:43% and 69%:31%, respectively. The relative value
of Chatwins to the Company using Actual and Adjusted LTM EBIT, and Actual and
Adjusted LTM EBITDA multiples was calculated to be 70%:30% and 64%:36%, and
59%:41% and 57%:43%, respectively.

When the Company's liability associated with the existing Bargo jury
judgment of $5.0 million was assumed to be $5.0 million with Chatwins
excluding King-Way, the relative value of Chatwins to the Company using Actual
LTM, Adjusted LTM, estimated 1998 and projected 1999 multiples of net income
was calculated to be 70%:30%, 62%:38%, 59%:41% and 70%:30%, respectively. The
relative value of Chatwins to the Company using Actual and Adjusted LTM EBIT,
and Actual and Adjusted LTM EBITDA multiples was calculated to be 73%:27% and
67%:33%, and 62%:38% and 59%:41%, respectively.

DISCOUNTED CASH FLOW ANALYSIS

Legg Mason reviewed a discounted cash flow analysis of the Company and
Chatwins premised upon the assumptions summarized below. The discounted cash
flow analysis was based upon the financial and operating information relating
to the business, operations and prospects of the Company and Chatwins supplied
by the management of the Company and Chatwins and covering the period from
calendar year 1998 through the end of the calendar year 2002.

The Company. Using discount rates ranging from 10.8% to 15.8%, Legg Mason
calculated the present value of the projected stream of Net Unleveraged Cash
Flow (as defined below) for calendar years 1998 through 2002 and the present
cash value of the terminal value (the "Terminal Value") of the Company at
December 31, 2002. Legg Mason applied discount rates derived from the
Company's implied WACC (using a pricing model known as the Capital Asset
Pricing Model and based on general and systemic risk factors reflected by the
Comparable Companies) and developed a range of rates which reflected the risk
implied by the Company's recent and projected operating performance. "Net
Unleveraged Cash Flow," as used in the analysis, is defined, for each period,
as projected EBIT, less taxes at an estimated rate of 40.0%, plus projected
depreciation and amortization, less projected capital expenditures, plus or
minus projected changes in non-cash working capital. The Terminal Value was
computed by multiplying the Company's projected EBIT by terminal multiples of
4.0x to 8.0x. Legg

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Mason adjusted the calculated present value of the Net Unleveraged Cash Flow
and Terminal Value by subtracting the debt on the Company's balance sheet, and
adding cash and cash equivalents, to calculate a range of equity values for
the Company. Legg Mason believes the ranges of discount rates and terminal
multiples were appropriate in view of the Company's current performance,
projected performance and Legg Mason's estimate of the Company's weighted
average cost of capital of 13.3%.

Based on the range of discount rates and terminal multiples referred to
above, Legg Mason calculated a range of equity values for the Company,
excluding the value of its NOL, of $22.9 million to $69.3 million, with the
value using its estimated WACC as a discount rate and a 6x EBIT Terminal
Value, calculated at $43.9 million. Including the value of its NOL resulted in
implied equity values of the Company of $37.7 million, $84.1 million and $58.6
million, respectively.

Chatwins. Using discount rates ranging from 9.4% to 14.4%, Legg Mason
calculated the present value of the projected stream of Net Unleveraged Cash
Flow (as defined below) for calendar years 1998 through 2002 and the present
cash value of the terminal value (the "Terminal Value") of Chatwins at
December 31, 2002. Legg Mason applied discount rates derived from Chatwins'
implied WACC (using a pricing model known as the Capital Asset Pricing Model
and based on general and systemic risk factors reflected by the Comparable
Companies) and developed a range of rates which reflected the additional risk
implied by Chatwins' recent and projected operating performance. "Net
Unleveraged Cash Flow," as used in the analysis, is defined, for each period,
as projected EBIT, less taxes at an estimated rate of 40.0%, plus projected
depreciation and amortization, less projected capital expenditures, plus or
minus projected changes in non-cash working capital. The Terminal Value was
computed by multiplying Chatwins' projected EBIT by terminal multiples of 4.0x
to 8.0x. Legg Mason adjusted the calculated present value of the Net
Unleveraged Cash Flow and Terminal Value by subtracting the debt on Chatwins'
balance sheet, and adding cash and cash equivalents, to calculate a range of
equity values for Chatwins. Legg Mason believes the ranges of discount rates
and terminal multiples were appropriate in view of Chatwins' current
performance, projected performance and Legg Mason's estimate of Chatwins'
weighted average cost of capital of 11.9%.

Based on the range of discount rates and terminal multiples referred to
above, Legg Mason calculated a range of equity values for Chatwins including
King-Way, excluding the value of its ownership in the Company, of $80.6
million to $256.3 million, with the value using its estimated WACC as a
discount rate and a 6x EBIT Terminal Value, calculated at $159.9 million.
Including the value of its ownership in the Company resulted in implied equity
values of Chatwins of $102.6 million, $278.3 million and $181.9 million,
respectively.

Based on the range of discount rates and terminal multiples referred to
above, Legg Mason calculated a range of equity values for Chatwins including
King-Way, excluding the value of its ownership in the Company, of $ 62.0
million to $223.4 million, with the value using its estimated WACC as a
discount rate and a 6x EBIT Terminal Value, calculated at $134.9 million.
Including the value of its ownership in the Company resulted in implied equity
values of Chatwins of $84.0 million, $245.4 million and $156.9 million,
respectively.

Relative Valuation. The relative value of each entity was calculated
utilizing the Discounted Cash Flow values calculated using each entities'
estimated WACC as a discount rate and a 6x EBIT Terminal Value, and including
the value of the Company's NOL and Chatwins' ownership in the Company in the
Company's and Chatwins' valuations respectively. These relative valuations
were calculated for four scenarios; (i) where the Company's liability
associated with the existing Bargo jury judgment of $5.0 million is assumed to
be zero with Chatwins including King-Way, (ii) where the Company's liability
associated with the existing Bargo jury judgment of $5.0 million is assumed to
be $5.0 million with Chatwins including King-Way, (iii) where the Company's
liability associated with the existing Bargo jury judgment of $5.0 million is
assumed to be zero with Chatwins excluding King-Way, and (iv) where the
Company's liability associated with the existing Bargo jury judgment of $5.0
million is assumed to be $5.0 million with Chatwins excluding King-Way.

When the Company's liability associated with the existing Bargo jury
judgment of $5.0 million is assumed to be zero with Chatwins including King-
Way, the relative value of Chatwins to the Company was calculated to be
76%:24% (shown as Chatwins%:the Company%).

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When the Company's liability associated with the existing Bargo jury
judgment of $5.0 million is assumed to be $5.0 million with Chatwins including
King-Way, the relative value of Chatwins to the Company was calculated to be
77%:23% (shown as Chatwins%:the Company%).

When the Company's liability associated with the existing Bargo jury
judgment of $5.0 million is assumed to be zero with Chatwins excluding King-
Way, the relative value of Chatwins to the Company was calculated to be
73%:27% (shown as Chatwins%:the Company%).

When the Company's liability associated with the existing Bargo jury
judgment of $5.0 million is assumed to be $5.0 million with Chatwins excluding
King-Way, the relative value of Chatwins to the Company was calculated to be
74%:26% (shown as Chatwins%:the Company%).

LEVERAGED BUYOUT ANALYSIS

Legg Mason also reviewed a leveraged buyout analysis of the Company and
Chatwins as a means of establishing the value of each company assuming that it
was purchased by a financial buyer. A leveraged buyout ("LBO") involves the
acquisition or recapitalization of a company financed primarily by incurring
debt that is serviced by the post-LBO operating cash flow of the company.

The Company. Based on this analysis, Legg Mason calculated an equity value
for the Company, excluding the value of its NOL, of $26.7 million. Including
the value of its NOL resulted in an implied equity value of the Company of
$41.5 million.

Chatwins. Based on this analysis, Legg Mason calculated an equity value for
Chatwins including King-Way and excluding the value of its ownership in the
Company, of $62.8 million. Chatwins including King-Way and the value of its
ownership in the Company resulted in an implied equity value of Chatwins of
$78.3 million.

Chatwins excluding King-Way and excluding the value of its ownership in the
Company, of $52.6 million. Chatwins excluding King-Way and the value of its
ownership in the Company resulted in an implied equity value of Chatwins of
$68.2 million.

Relative Valuation. The relative value of each entity was calculated
utilizing the LBO analysis values calculated above, and including the value of
the Company's NOL and Chatwins' ownership in the Company in the Company's and
Chatwins' valuations respectively. These relative valuations were calculated
for four scenarios; (i) where the Company's liability associated with the
existing Bargo jury judgment of $5.0 million is assumed to be zero with
Chatwins including King-Way, (ii) where the Company's liability associated
with the existing Bargo jury judgment of $5.0 million is assumed to be $5.0
million with Chatwins including King-Way, (iii) where the Company's liability
associated with the existing Bargo jury judgment of $5.0 million is assumed to
be zero with Chatwins excluding King-Way, and (iv) where the Company's
liability associated with the existing Bargo jury judgment of $5.0 million is
assumed to be $5.0 million with Chatwins excluding King-Way.

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<PAGE>

COMPARABLE TRANSACTIONS ANALYSIS

Legg Mason also considered an analysis of comparable merger and acquisition
transactions as a method of valuing the Company and Chatwins. A comparable
merger and acquisition transactions analysis compares certain financial and
operating statistics of a company with certain financial and operating
statistics of selected similar companies immediately prior to their being
acquired (the "Acquired Companies"). In the course of considering this type of
analysis, Legg Mason determined that the available universe of similar
Acquired Companies was insufficient to provide a reliable measure of the value
of either the Company or Chatwins.

ASSET LIQUIDATION ANALYSIS

Legg Mason also considered an asset liquidation analysis as a method of
valuing the Company and Chatwins. An asset liquidation assumes that a company
is dissolved and its assets sold for cash proceeds equal to estimated fair
market values. Legg Mason advised the Company's Board that an asset
liquidation tends to yield a lower value than that derived from other analyses
because a liquidation does not attribute any value to the operation of the
liquidated entity as a going concern. In the course of considering this type
of analysis, Legg Mason determined that an asset liquidation analysis would
not provide a reliable measure of the value of either the Company or Chatwins,
as the liquidation values of the assets of operating companies in general
represent only a small portion of such entities' going concern value.

OTHER FACTORS

In rendering its opinion, Legg Mason considered certain other factors,
including a review of the business and operations of and the industries in
which the Company or Chatwins operate, a review of the Company's and Chatwins'
historical operating results and the financial and operating information with
respect to the business, operations and prospects of the Company and Chatwins,
a review of the current and historic stock price performance of the Company
and other factors it deemed relevant.

Legg Mason is a nationally recognized investment banking firm which has
substantial experience in, among other things, the valuation of businesses and
securities in connection with mergers, acquisitions, underwritings, sales and
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. In the ordinary course of
its business, Legg Mason may actively trade in the securities of the Company
for its own account and the accounts of its customers, and accordingly, may at
any time hold a long or short position in such securities.

Pursuant to the terms of an engagement letter, the Company agreed to pay
Legg Mason $200,000 for acting as financial advisor in connection with the
Company's analysis of the financial terms of the Merger. Of this amount
$50,000 was paid upon the engagement of Legg Mason and $150,000 on the
presentation of findings to the Company's Board of Directors in November 1997.
In addition, the Company paid Legg Mason a fee of $150,000 for rendering the
Fairness Opinion. The Company has agreed to reimburse Legg Mason for its out-
of-pocket expenses, and to indemnify Legg Mason and certain related parties
against certain liabilities, including liabilities under the federal
securities laws, arising out of or in connection with the services rendered by
Legg Mason under its engagement letter.

CHATWINS REASONS FOR MERGER

In reaching its decision to enter into the Merger Agreement, Chatwins'
management and Board of Directors considered a number of factors including,
among others: (i) the potential reduction in its overall effective

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borrowing rate as a result of the replacement of its existing credit
facilities with the New Facilities; (ii) the potential reduction in
restrictions on consummation of acquisitions and incurrence of indebtedness as
a result of the replacement of Chatwins' existing credit facilities with the
New Facilities; (iii) the ability for the Chatwins stockholders to achieve
greater liquidity through a merger into an already public company; (iv) the
possibility of sheltering some of Chatwins' future earnings through
utilization of Reunion's NOLs; (v) the opportunity for possible operating
synergies as a result of a combined Reunion/Chatwins entity; (vi) the terms
and conditions of the Merger Agreement, including the number of Reunion shares
to be issued to the Chatwins stockholders; (vii) the fact that the Chatwins
Preferred will be automatically converted at its redemption value into Reunion
Preferred (viii) the possibility that Reunion's non-manufacturing assets might
be sold for cash that could be reinvested in acquisitions consistent with the
manufacturing operations of Reunion/Chatwins; and (ix) the fact that the
Merger will not be a taxable transaction to the common stockholders of
Chatwins.

Following consideration of the information and factors described above,
Chatwins' Board of Directors concluded that the Merger was in the best
interests of Chatwins and its stockholders. In reaching this conclusion,
Chatwins' Board of Directors did not assign relative or specific weights to
the above factors or determine that any particular factor was of unique
importance. Instead, Chatwins' Board of Directors based its decision upon the
totality of the information and factors presented to it or otherwise known to
its members.

GENERAL MERGER TERMS

The Merger will be accomplished under the DGCL pursuant to the Merger
Agreement by and between Chatwins and the Company. Pursuant to the Merger
Agreement, Chatwins will be merged with and into the Company, with the Company
being the surviving corporation. From and after the Effective Time of the
Merger, the Company will possess all of the assets, rights, privileges, powers
and franchises of Chatwins and be subject to all of the liabilities,
restrictions, disabilities and duties of Chatwins. The Company's Certificate
of Incorporation (including the Transfer Restrictions) and By-Laws will be the
certificate of incorporation and by-laws of the combined company following the
Merger. The Company's Board of Directors immediately after the Merger will
consist of the persons serving on the Company's Board of Directors immediately
prior to the Merger, and the Company's executive officers immediately after
the Merger will consist of persons serving as the Company's executive officers
immediately prior to the Merger in their same respective positions, with the
additions of Mr. Poole and Mr. Lawyer. (See "Proposal I. The Election of
Directors--Directors" and "Management Information--Executive Officers.")

At the Effective Time, each share of common stock of Chatwins theretofore
issued and outstanding and held by the stockholders of Chatwins shall be
automatically converted into the right to receive a number of shares of Common
Stock determined in the manner set forth in the Merger Agreement, plus cash in
lieu of any fractional share interests. The aggregate number of shares of the
Company's Common Stock that will be issued to Chatwins stockholders in
connection with the Merger will be either 8,500,000 shares or 9,000,000
shares, depending upon whether Chatwins is able to consummate the King-Way
Acquisition at or prior to the Effective Time (See "-- King-Way Acquisition"
below). The shares of the Company's Common Stock currently owned by Chatwins,
aggregating approximately 38% of the issued and outstanding Common Stock, as
well as a warrant to purchase an additional 75,000 shares of the Company's
Common Stock owned by Chatwins will be retired in connection with the Merger.
This stock and warrant have been valued as assets of Chatwins in determining
the Merger consideration. In sum, following the Merger the Company will have
issued and outstanding, depending upon the consummation of the King-Way
Acquisition (See "--King-Way Acquisition" below), either approximately 10.9
million or approximately 11.4 million shares of Common Stock.

In addition to its common stock, Chatwins' capital stock consists of three
classes of issued and outstanding preferred stock. At the Effective Time of
the Merger, the Chatwins Preferred will be automatically converted into the
Reunion Preferred. The Reunion Preferred will have the following material
preferences, privileges, restrictions and rights. The Reunion Preferred will
be redeemable (i) at any time at the option of the Company and (ii) after
three years at the option of the holders thereof, at the Total Redemption
Value. The Company

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<PAGE>

anticipates that the Initial Redemption Value will be approximately
$8,300,000. The holders of the Reunion Preferred will be entitled to the
Preferred Dividend--namely a cumulative dividend on the Reunion Preferred
equal to 10% of the Initial Redemption Value per annum, which will accrue from
the Effective Date. The Preferred Dividend will be payable as and when the
Board of Directors of the Company determines. The Reunion Preferred will not
be entitled to any voting rights (except as required by law) and will not have
any right of conversion into the Common Stock or any other securities of the
Company. Upon a liquidation of the Company, the holders of the Reunion
Preferred will be entitled to be paid, out of the assets of the Company
available for payment to the holders of the Company's capital stock, an amount
equal to the Total Redemption Value on the date of payment. In the event of a
liquidation of the Company no payments will be made and no assets will be
distributed to the holders of the Common Stock of the Company until the
holders of the Reunion Preferred shall have been paid the Total Redemption
Value.

The Reunion Preferred will be privately held and the Company has no plans or
obligations at this time to register the Reunion Preferred under the
Securities Act. Mr. Bradley and Mr. Poole are beneficial owners of all of the
Chatwins Preferred presently outstanding. As discussed above, if consummated
by Chatwins prior to the Effective Time, the King-Way Acquisition and the
payment of the King-Way Price may involve the payment of cash by Chatwins, the
issuance of notes or other debt obligations by Chatwins, the issuance of
Chatwins Preferred or other securities of Chatwins, or any combination of the
foregoing. If Chatwins should issue equity securities other than its common
stock or Chatwins Preferred in order to acquire King-Way prior to the
Effective Time, the Merger Agreement will be further amended to provide for
the conversion of such securities at the Effective Time consistent with the
terms of the Merger as presently agreed. In the event that the King-Way
Acquisition is not consummated by Chatwins prior to the Effective Time but at
the Effective Time Chatwins possess the unconditional right to do so, the
payment of the King-Way Price by the Company at or after the Effective Time
may involve the payment of cash by the Company, the issuance of notes or other
debt obligations of the Company, the issuance of Reunion Preferred, or any
combination of the foregoing. (See "--King-Way Acquisition").

All shares of Chatwins common stock held by Chatwins as treasury shares will
be cancelled and retired at the Effective Time and no shares of the Company's
Common Stock will be issuable in respect thereof.

In connection with the Merger the Company will also succeed to Chatwins'
rights with respect to certain indebtedness of Mr. Poole and Mr. Bradley to
Chatwins aggregating $1,000,745. This indebtedness will be amended and
restated at the Effective Time in the form of the Stockholder Notes--3-year
promissory notes made by Mr. Poole and Mr. Bradley in favor of the Company
bearing interest payable to the Company quarterly in arrears at a rate of 10%
per annum.

EFFECTIVE TIME OF MERGER

The Merger will be consummated on the earliest practicable date after all of
the conditions thereto have been waived or satisfied (See "--Conditions to the
Consummation of the Merger; Regulatory Requirements" below), including the
approval of the Company's stockholders at the Special Meeting. The Company and
Chatwins have designated August 5, 1998 as the Effective Date in the Merger
Agreement, although there can be no assurances that the Merger will be
consummated by that time. The Merger will become effective immediately upon
the filing of a Certificate of Merger in accordance with the DGCL.

KING-WAY ACQUISITION

As discussed above (See "--General Merger Terms"), the Merger Agreement
provides that the aggregate number of shares of the Company's Common Stock to
be issued to the stockholders of Chatwins in connection with the Merger will
be 8,500,000 unless, at or prior to the Effective Time, Chatwins shall have
acquired (or shall have acquired the unconditional right to acquire) all of
the rights, title and interests of SAC in and to King-Way (such an acquisition
being the "King-Way Acquisition"), for a purchase price substantially equal to
the King-Way Price--SAC's cost to acquire King-Way (including fees and
expenses) plus interest on such amounts

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at SAC's cost of capital, in which case the aggregate number of shares of the
Company's Common Stock to be issued to the stockholders of Chatwins in
connection with the Merger will be 9,000,000.

The Company estimates the King-Way Price will be approximately $19.1 million
on the Effective Date. If consummated by Chatwins prior to the Effective Time,
the King-Way Acquisition and the payment of the King-Way Price may involve the
payment of cash by Chatwins, the issuance of notes or other debt obligations
by Chatwins, the issuance of Chatwins Preferred or other securities of
Chatwins, or any combination of the foregoing. If Chatwins should issue equity
securities other than its common stock or Chatwins Preferred in order to
acquire King-Way prior to the Effective Time, the Merger Agreement will be
further amended to provide for the conversion of such securities at the
Effective Time consistent with the terms of the Merger as presently agreed. In
the event that the King-Way Acquisition is not consummated by Chatwins prior
to the Effective Time but at the Effective Time Chatwins possess the
unconditional right to do so, the payment of the King-Way Price by the Company
at or after the Effective Time may involve the payment of cash by the Company,
the issuance of notes or other debt obligations of the Company, the issuance
of Reunion Preferred, or any combination of the foregoing.

King-Way was acquired by SAC from The Kingston-Warren Corporation on
November 3, 1997 for a purchase price of $18,050,000, subject to certain
adjustments. SAC is a privately-held company whose common stock is owned 42.5%
by Mr. Bradley, 42.5% by a member of Mr. Bradley's family and 15% by Mr.
Evans. Mr. Bradley is the President and a director of SAC and Mr. Evans is the
Treasurer and a director of SAC. Stanwich Financial, which is owned 42.5% by
Mr. Bradley, 42.5% by Mr. Bradley Jr., 7.5% by Mr. Poole and 7.5% by a third
party, is the holder of approximately $13.5 million of debt and $5.6 million
of preferred stock issued by SAC. Furthermore, as of the date of this Proxy
Statement/Prospectus certain agreements, including a loan settlement
agreement, have been reached in principal whereby Stanwich Financial could
acquire an aggregate of 371,280 shares of Common Stock (See "Ownership
Information--Security Ownership by Certain Beneficial Owners and Management").

At the time King-Way was available for purchase, management of Chatwins was
desirous of acquiring King-Way as a strategic acquisition by its Auto-Lok
division. King-Way and Auto-Lok are both in the business of producing
industrial and commercial storage racks and materials handling systems. King-
Way's computerized systems were thought to be an important line extension to
Auto-Lok's more traditional storage and materials handling systems. Chatwins
was not, however, able to consummate the acquisition because of restrictions
under its financing agreements. Mr. Bradley therefore organized and
capitalized SAC to acquire and hold King-Way until such time as it could be
acquired by Chatwins.

Because King-Way had been operated as a division of The Kingston-Warren
Corporation, it was necessary to establish King-Way's business in new
facilities with appropriate overhead support. Meanwhile, Auto-Lok possessed
surplus floor space, production work force, administrative organization and
equipment ("Surplus Capacity") that could be utilized to continue King-Way's
operations. Accordingly, SAC and the Auto-Lok division of Chatwins entered
into a Service Agreement pursuant to which King-Way would utilize Auto-Lok's
Surplus Capacity in consideration for cash fees approximately equal to
Autolok's costs of providing the Surplus Capacity plus a right of first
negotiation to acquire King-Way from SAC.

Chatwins and King-Way are currently negotiating the terms of the acquisition
of King-Way by Chatwins.

There can be no assurance that Chatwins will consummate the King-Way
Acquisition or acquire the unconditional right to acquire King-Way at or prior
to the Effective Time.

CASH IN LIEU OF FRACTIONAL SHARES

No certificate or scrip representing fractional shares of Common Stock will
be issued in the Merger upon the surrender for exchange of Chatwins securities
and any fractional share interests will not entitle the owner to vote or to
any rights of a stockholder of Company. In lieu of any such fractional shares,
each person who would otherwise have been entitled to a fraction of a share of
Common Stock shall receive a cash payment from the Company. The cash payments
for fractional interests received in the conversion of Chatwins common stock
held

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at the Effective Time will be determined by multiplying (i) the market price
per share of the Company's Common Stock on the NASDAQ Small Cap. Market at
close of business on the Effective Date by (ii) the fractional share interest
to which such holder would otherwise be entitled.

REFINANCING

At the Effective Time, the Company intends to enter into the New Facilities-
- -a $127,000,000 senior secured credit facility underwritten by Bank of America
National Trust & Savings Association ("BOA") and arranged by its affiliate
BARS. It is anticipated that the New Facilities will be syndicated by BARS to
a group of banks and/or other financial institutions (such other banks and/or
financial institutions, together with BOA, are referred to herein as the
"Lenders").

The New Facilities will be divided into two separate components, (i) the
Revolver--a $50,000,000 seven year revolving credit facility and (ii) the Term
Loan--a $77,000,000 seven year amortizing term loan facility, both of which
will bear interest at IBOR plus 2.0%. Availability under the Revolver will be
limited to an 85% advance against eligible receivables of the Company plus a
50% advance against eligible inventories of the Company. The principal amount
of the Term Loan is required to be amortized in equal quarterly payments in
each year as follows: $7,750,000 in year one, $9,500,000 in year two,
$11,500,000 in year three, $11,500,000 in year four, $12,250,000 in year five,
$12,250,000 in year six, and $12,250,000 in year seven.

Interest on amounts outstanding under the New Facilities will be payable
quarterly in arrears by the Company. Beginning one year after the closing of
the New Facilities, the interest rate applicable to the New Facilities will be
subject to quarterly adjustment based in part upon the ratio of the Company's
senior debt to the Company's earnings before interest, taxes, depreciation and
amortization ("EBITDA").

The Company will be required to pay to BARS a closing fee equal to 1.50% of
the aggregate amount available under the New Facilities ($1,905,000), the
first $500,000 non-refundable installment of which was paid in May 1998, one-
half by the Company and one-half by Chatwins, in connection with the issuance
by BARS of a commitment letter to the Company with respect to the New
Facilities. The balance will be due upon the closing of the New Facilities.
Additional commitment fees are payable by the Company to the Lenders on
committed but unused amounts under the Revolver (the percentages of such fees
are based in part upon the ratio of the Company's senior debt to EBITDA). In
addition the Company is required to pay a $50,000 annual fee to BOA as agent
for the other Lenders under the New Facilities.

The amounts borrowed by the Company under the New Facilities will be secured
by a first priority lien on, and security interest in, substantially all of
the current and after-acquired assets of the Company and its subsidiaries
including, without limitation, all accounts receivable, inventory, machinery
and equipment, fixtures, contract rights, leasehold and fee interests in real
property, patents, trademarks, licenses, other general intangibles,
instruments, documents and all proceeds and products thereof. ORC will execute
a secured guarantee of all of the Company's obligations under the New
Facilities.

The New Facilities will subject the Company to compliance with financial
covenants and other covenants, including a minimum fixed charge coverage
ratio, limitations on the ratios of senior debt and total debt to

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EBITDA, and limitations on capital expenditures. In the event that the
Company's ratio of senior debt to EBITDA rises to a certain level, the Company
will be required to commit defined cash flow amounts to the permanent
reduction of the Term Loan. Under certain circumstances, consummation of an
Additional Debt Offering (See "--Possible Additional Debt Offering") could
cause this ratio to be triggered. In addition to the foregoing, the New
Facilities contain various affirmative and negative covenants customarily
found in credit agreements for similar transactions, including restrictions
(absent the consent of the Lenders) on the right to sell or dispose of
material assets, engage in certain acquisitions, merge or consolidate, incur
other debt or obligations, extend credit or make investments, make equity
distributions (including dividends on the Common Stock and Reunion Preferred),
or change businesses or accounting methods. The consummation of an Additional
Debt Offering would likely require the consent of the Lenders. The New
Facilities will require the Company to pay all costs and expenses incurred by
the Lenders in connection with the New Facilities and to indemnify the Lenders
against claims, damages and expenses arising out of the New Facilities.

The closing of the New Facilities is conditioned upon, among other things,
the consummation of the Merger, the preservation of the Company's NOL's
following the Merger, the satisfactory completion of appraisals and due
diligence by BOA, the satisfactory completion of documentation for the New
Facilities, and that there be no material adverse change in the operations,
business, properties and prospects of the Company and its subsidiaries. Absent
mutual agreement on an extension, the commitment for the New Facilities will
expire on August 31, 1998 if the New Facilities have not closed on or before
that date.

POSSIBLE ADDITIONAL DEBT OFFERING

The Company is currently exploring the possible consummation of an
Additional Debt Offering following the Merger to raise capital for
acquisitions, working capital and other purposes including the redemption of
all or a portion of the Reunion Preferred and/or the refinancing of all or a
portion of any other securities or notes or other debt obligations issued or
incurred by the Company in connection with the King-Way Acquisition (see
"Proposal III. The Merger--King-Way Acquisition") (an "Additional Debt
Offering"). The Company has engaged in preliminary discussions with at least
one investment bank in order to assess the feasibility of the Company pursuing
an Additional Debt Offering. There can be no assurance, however, that an
Additional Debt Offering will be pursued or consummated by the Company after
the Merger. The determination of whether to attempt to do so will be made by
the Company following the consummation of the Merger.

ACCOUNTING TREATMENT

The Merger will be accounted for as a purchase under APB Opinion No. 16
"Business Combinations" ("APB16"). Chatwins will be the "acquirer" for
purposes of applying purchase accounting to the Merger, and therefore
Chatwins' assets and liabilities will continue to be carried at their
historical book values after the Merger, and 62% of the Company's assets and
liabilities (representing the percentage of the Company's Common Stock not
currently owned by Chatwins) will be revalued at fair value at the time of the
Merger, with the excess of (i) the "purchase price" of the Merger over (ii)
the fair value of 62% of the Company's assets and liabilities designated as
goodwill to be amortized by the Company over fifteen years. The value of the
Company's Common Stock to be used for determining the "purchase price" of the
Company will be the quoted market value of the Common Stock owned by all
stockholders of the Company other than Chatwins immediately prior to the
Effective Time. The resulting amount is the APB16 purchase price for the
approximately 62% of the Company not currently owned by Chatwins. This amount
is compared to 62% of the fair value of the Company's assets and liabilities
to determine the amount of goodwill to be recognized.

REPRESENTATIONS AND COVENANTS

The Merger Agreement contains representations, warranties and covenants by
both the Company and Chatwins (See copy of Merger Agreement attached hereto as
ANNEX A). Chatwins has made certain representations and warranties to the
Company with respect to, among other things, its corporate organization,

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its power and authority to enter into and consummate the Merger, its
capitalization and voting rights, the accuracy of its publicly-filed financial
information, any changes undergone since the date of its last publicly-filed
financial statements, litigation and other disputes, the ownership of its
intellectual property, the existence of any conflicts, violations or breaches
that may occur or be caused by the Merger, certain contracts and agreements to
which it is a party, title to its property and assets, the compliance of its
business with applicable laws, and selected tax and labor matters. The Company
has made certain representations and warranties to Chatwins with respect to,
among other things, the Company's corporate organization, its power and
authority to enter into and consummate the Merger, its capitalization, the
existence of any conflicts, violations or breaches that may occur or be caused
by the Merger, the accuracy of its publicly-filed financial information, the
legality of the Merger Consideration, the compliance of its business with
applicable laws and certain legal proceedings involving the Company.

Chatwins has covenanted to the Company that, among other things, (i)
Chatwins will conduct its business in the regular course during the period
prior to the Effective Time (ii) Chatwins will not amend its corporate charter
documents or enter into certain types of transactions during the period prior
to the Effective Time, (iii) Chatwins will afford the Company and its
representatives access to information about Chatwins, and (iv) Chatwins will
use its best efforts to obtain all required approvals by regulatory and
governmental authorities as soon as possible (See "--Conditions to
Consummation of the Merger; Regulatory Requirements"). Chatwins also
covenanted to the Company that it would promptly solicit the approval of the
Merger by the stockholders of Chatwins. Chatwins obtained this approval by
unanimous written consent on May 31, 1998.

The Company has covenanted to Chatwins that, among other things, (i) the
Company will conduct its business in the regular course during the period
prior to the Effective Time (ii) the Company will not amend its corporate
charter documents, issue or sell any capital stock or stock options, or enter
into certain types of transactions during the period prior to the Effective
Time, (iii) the Company will afford Chatwins and its representatives access to
information about the Company, and (iv) the Company will use its best efforts
to obtain all required approvals by regulatory and governmental authorities as
soon as possible. The Company also covenanted to Chatwins that it would
promptly solicit the approval of the Merger by the stockholders of the
Company.

Except for the fees, costs and charges in connection with the New Facilities
(See "--Refinancing" above), which will be divided evenly between the Company
and Chatwins, the Company and Chatwins have agreed that each will bear its own
costs and expenses in connection with the Merger, with the Company being
responsible for the costs of soliciting the approval of the Company's
stockholders and for registering with the SEC (and any required state
authorities) the Common Stock to be issued in connection with the Merger. The
Company and Chatwins have also agreed to cooperate to complete the closing of
the New Facilities.

NO SOLICITATIONS

The Company and Chatwins have agreed in the Merger Agreement that so long as
the Merger Agreement is in effect, neither the Company nor Chatwins will, or
will permit its officers, directors or other agents to, take any action to
seek, initiate, negotiate, or encourage, or enter into or participate in any
discussions regarding, any offer from any third party to acquire any
securities of such party, or to sell securities of the Company or Chatwins to
such third party, to merge or consolidate with such third party, or to
otherwise acquire any significant portion of the assets of such third party or
to sell its assets to such third party.

CONDITIONS TO CONSUMMATION OF THE MERGER; REGULATORY REQUIREMENTS

The obligation of each of Chatwins and the Company to consummate the Merger
is subject, among other things, to the prior fulfillment of the following
conditions: the Company receiving the requisite stockholder approval under the
DGCL; the representations and warranties of the other party remaining true in
all material respects; the respective covenants of the other party having been
performed in all material respects; the expiration or early termination of the
waiting period under the H-S-R Act; the receipt of all other orders, consents
or approvals, governmental or otherwise, that may be required; there being an
enforceable agreement to

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<PAGE>

consummate the New Facilities upon the Effective Time; and no material changes
having occurred in the business, assets or financial condition of the other
party to the Merger.

In addition, the Company's obligation to consummate (which condition has
been satisfied) the Merger is further conditioned upon (i) the receipt by the
Company from Legg Mason of the Fairness Opinion (See "--Appraisal and Fairness
Opinion"), and (ii) Chatwins' having caused all of its outstanding Chatwins
warrants either to be converted into Chatwins common stock (which shall have
no effect on the number of shares of Common Stock to be issued in connection
with the Merger) or to expire.

Chatwins' obligation to consummate the Merger is further conditioned upon
(i) the registration statement on SEC Form S-4, of which this Proxy
Statement/Prospectus is a part, having been filed with the SEC and declared
"effective" in accordance with Section 8(a) of the Securities Act, (ii) the
Company having complied with all applicable "Blue Sky" state securities
regulatory obligations with respect to the Merger, and (iii) the Company
retaining its Pacific Stock Exchange and NASDAQ Small-Cap. Market listings
following the Merger and causing the shares of Common Stock to be issued in
connection with the Merger to be listed thereon.

Except for compliance with the H-S-R Act and with state and federal
securities laws, the Company and Chatwins believe that no material federal or
state regulatory approvals are necessary for the consummation of the Merger.
The Company and Chatwins intend to file the required pre-merger notification
form under the H-S-R Act on or about July 1, 1998. Unless further information
is requested to be filed, in such case the statutory waiting period under the
H-S-R Act would expire on or about August 1, 1998.

The Company's Board of Directors believes that all of the conditions
precedent to the Merger will be satisfied on or prior to the anticipated
August 5, 1998 Effective Date.

AMENDMENT, EXTENSION OR TERMINATION

The Merger Agreement provides that the Company and Chatwins may, by mutual
agreement, amend, modify, supplement, extend, terminate or abandon the Merger
Agreement at any time prior to the Effective Time even following stockholder
approval. In addition, either the Company or Chatwins can terminate the Merger
Agreement (i) if the Merger is not consummated within 90 days after the date
of the Merger Agreement, unless such failure to close was caused by a breach
of the Merger Agreement by the party seeking to terminate, (ii) if the other
party has breached certain representations, warranties and covenants contained
in the Merger Agreement and such breach has not been cured within 10 days, or
(iii) if a court or governmental or regulatory authority has issued a final
order restricting or prohibiting the Merger.

INDEMNIFICATION

The Company and Chatwins have agreed in the Merger Agreement to indemnify
and hold one another harmless against all losses, damages, or liabilities to
which the other may become subject by virtue of a breach of a representation,
warranty, covenant or agreement contained in the Merger Agreement, or certain
liabilities which may arise under the Securities Act. No actions for indemnity
may be brought or maintained after the Effective Time of the Merger.

APPRAISAL RIGHTS

All stockholders of Chatwins entitled to vote on the Merger have waived
their appraisal and dissenter rights under the DGCL in connection with the
Merger.

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RESALES BY CHATWINS AFFILIATES

The Common Stock to be received by Chatwins stockholders in connection with
the Merger will be freely transferable under the Securities Act, except that
the Affiliate Shares may be resold by Chatwins Affiliates only in transactions
permitted by the resale provisions of Rule 145(d) under the Securities Act or
as otherwise permitted under the Securities Act. Chatwins has identified to
the Company all persons who are deemed Chatwins Affiliates for purposes of
Rule 145 and Chatwins has agreed that each such Chatwins Affiliate is required
to deliver to the Company a written agreement (the "Resale Agreement")
pursuant to which each Chatwins Affiliate will agree to sell his Affiliate
Shares only pursuant to Rule 145 under the Securities Act, pursuant to an
effective registration statement under the Securities Act or pursuant to
another exemption from such registration.

EXTENSION OF TRANSFER RESTRICTIONS; PRESERVATION OF TAX BENEFITS

Under the Code, NOLs (net operating loss carryforwards) for federal tax
purposes offset taxable income in future years and eliminate income taxes
otherwise payable on such taxable income (except for purposes of calculating
alternative minimum tax liability). As of December 31, 1997, the Company's
NOLs were approximately $215.9 million. The Company's NOLs expire as follows:
$8.1 million in 1998, $43.2 million in 1999, $87.3 million in 2000 and $77.3
million during the years 2001 through 2012. Because the Merger will result in
the application of the reverse acquisition rules under the Code, if the Merger
is consummated the Company's NOLs will expire on an accelerated schedule as
follows: $8.1 million at the Effective Time of the Merger, $43.2 million on
December 31, 1998, $87.3 million in 1999, $27.9 million in 2000 and $49.4
million during the years 2001 through 2011.

On June 20, 1995 Chatwins acquired 1,450,000 shares of Common Stock,
approximately 38% of the Company's outstanding Common Stock, held by Parkdale.
As a result of the Chatwins Acquisition, the availability of the Company's
NOLs might have been limited by Section 382 of the Code and the Treasury
Regulations promulgated thereunder if an Ownership Change occurred in the
subsequent three year period ending June 19, 1998.

The Transfer Restrictions were established by the Company to prevent an
Ownership Change from occurring. In view of the fact that at least three years
have passed since the Chatwins Acquisition and during such period there has
been no material change in the percentage ownership of the Company by any
direct or indirect holder whose changes must be taken into account for
purposes of determining whether or not an Ownership Change has occurred, the
Board of Directors has determined, based upon an opinion of Finn Dixon &
Herling LLP, that the Merger itself will not result in an Ownership Change and
therefore will not jeopardize the Company's full utilization of its NOLs under
Section 382 of the Code. Accordingly, the Board's approval of the Merger
required by the Transfer Restrictions has been granted.

Several additional steps were taken in connection with the Chatwins
Acquisition to assist in the preservation of the Company's tax loss
carryforwards: the 271,280 remaining shares of Common Stock owned by Parkdale
as well as 66,210 shares of Common Stock (the "Myers Shares") and a warrant to
purchase 75,000 shares of Common Stock (the "Myers Warrant" and, collectively
with the Myers Shares, the "Myers Securities") owned by Franklin Myers were
delivered into a 3-year escrow arrangement. Each of Myers and Parkdale also
entered into 3-year standstill agreements with Chatwins regarding the
purchase, sale and transfer of Company securities and delivered to Chatwins
3-year proxies to vote all of their respectively-owned shares of Common Stock
(the "Chatwins Proxies"). The escrow arrangement, standstill agreements and
Chatwins Proxies have recently expired. Also in furtherance of the preservation
of the Company's tax loss carryforwards, Chatwins acquired from P. Dean
Gesterkamp, simultaneously with the Chatwins Acquisition, a warrant to purchase
75,000 shares of Common Stock (the "Gesterkamp Warrant"). In spite of these
steps, there remained a risk that, absent the Transfer Restrictions, an
Ownership Change could have resulted if other persons acquired 5% or more of the
Common Stock.

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<PAGE>

future. Accordingly, if the Merger is consummated, the Board of Directors of
the Company will extend the Transfer Restrictions until the day after the
third anniversary of the Effective Date of the Merger to reduce these risks.

Accordingly, the Common Stock outstanding immediately prior to the Merger,
the Common Stock to be issued by the Company to the stockholders of Chatwins
in connection with the Merger, and any Common Stock issuable upon exercise of
options granted under any of the Company's stock option plans, including the
New Option Plan, will be subject to the Transfer Restrictions, which are set
forth in Article Fifth of the Certificate of Incorporation of the Company, a
copy of which is included as ANNEX D to this Proxy Statement/Prospectus. All
Common Stock certificates will contain a legend informing holders and
transferees of the Transfer Restrictions.

Section 382 of the Code provides that, if a corporation undergoes an
Ownership Change, its ability to use its NOLs in the future may be limited. An
Ownership Change occurs when the aggregate cumulative increase in the
percentage ownership of a corporation's capital stock owned by persons holding
5% or more of the fair market value of such stock ("5-Percent Shareholders")
is more than 50 percentage points within a three-year testing period. For
purposes of determining percentage ownership, Section 382 generally defines
stock to include all issued and outstanding stock, except certain preferred
stock. In addition, recent Treasury Regulations provide that certain stock
that may be acquired pursuant to warrants, options, rights to purchase stock,
rights to convert other instruments into stock, and options or other rights to
acquire any such interest may under certain circumstances be deemed to have
been acquired for purposes of determining the existence of an Ownership Change
under Section 382 of the Code.

In determining whether the aggregate cumulative increase in the percentage
ownership of capital stock by 5-Percent Shareholders is more than 50
percentage points in any three-year testing period, certain special rules
apply. All stockholders who are not 5-Percent Shareholders individually are
aggregated into one or more public groups, each of which is considered to be a
5-Percent Shareholder. Ownership of stock is generally attributed to the
ultimate individual beneficial owner, and ownership by nominees, corporations,
partnerships, trusts or other entities generally is disregarded (except to the
extent used to identify different public groups or other 5-Percent
Shareholders). When 5% or more of a corporation's stock is owned by another
entity (such as a corporation, trust or partnership) at any time during the
testing period, the owners of the other entity may be treated as one or more
separate, segregated groups of stockholders that are 5-Percent Shareholders of
the corporation, depending on whether such owners indirectly own as much as 5%
of the corporation's stock. Similarly, the purchasers of any stock from the
entity may be treated as a separate, segregated group of stockholders that is
a 5-Percent Shareholder.

The applicable Treasury Regulations also provide that purchasers of stock
from the issuing corporation in a public offering may under certain
circumstances be considered a separate stockholder group that is treated as a
5-Percent Shareholder that previously owned no stock. The Transfer
Restrictions, accordingly, are generally designed to prohibit transfers to
persons holding or who thereafter hold sufficient Common Stock, either
directly or constructively, such that they would be treated as 5-Percent
Shareholders under the applicable Treasury Regulations and are intended to
prevent an Ownership Change and thereby preserve the Company's ability to
maximize use of the NOLs.

If an Ownership Change occurs within the meaning of Code Section 382, the
amount of NOLs that a company may use to offset income in any future taxable
year is limited, in general, to an amount determined by multiplying the fair
market value of such company's outstanding capital stock on the change date by
the "long-term tax-exempt rate", which is published monthly by the Internal
Revenue Service. For purposes of this calculation, the fair market value of a
company's outstanding capital stock is adjusted to exclude any capital
infusions occurring during the prior two years.

The following is a summary of the Transfer Restrictions, which are set forth
in Article V of the Company's Certificate of Incorporation. (See ANNEX D). The
Transfer Restrictions apply to transfers of Common Stock and any other
instrument that would be treated as "stock," as determined under applicable
Treasury Regulations (collectively, "Stock"). They are intended to prevent any
person or group of persons from becoming a 5-Percent

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<PAGE>

Shareholder of the Company and to prevent an increase in the percentage Stock
ownership of any existing person or group of persons that constitutes a 5-
Percent Shareholder. Under the Transfer Restrictions, if a stockholder
transfers or agrees to transfer Stock, the transfer will be prohibited and
void to the extent that it would cause the transferee to hold a prohibited
ownership percentage, which is defined under the Company's Certificate of
Incorporation by reference to complex federal tax laws and regulations, but
generally means direct and indirect ownership of 5% or more (based on value)
of Stock or any other percentage that would cause a transferee to be
considered a 5-Percent Shareholder under applicable Treasury Regulations (a
"Prohibited Ownership Percentage"). A transfer is also prohibited and void if
either it would result in the transferee's ownership percentage increasing if
the transferee had held a Prohibited Ownership Percentage within the three
prior years or the transferee's ownership percentage already exceeds the
Prohibited Ownership Percentage, unless otherwise agreed to by the Company.
The Transfer Restrictions do not prevent transfers of Stock between persons
who do not hold a Prohibited Ownership Percentage.

The acquisition of Stock from an individual or entity that owns directly 5%
of the Stock would be deemed to result in the identification of a separate,
segregated "public group" which is a new 5-Percent Shareholder. Consequently,
the Transfer Restrictions will prohibit certain transfers of equity interests
by, and other actions involving, persons having a Prohibited Ownership
Percentage, unless the transfer or other action is approved by the Company's
Board of Directors in advance or permitted by a resolution of such board.

The Transfer Restrictions do not apply to any transfer that has been
approved by the Company's Board of Directors if such approval is based upon a
determination by the Board that such proposed transfer will not jeopardize the
Company's full utilization of the NOLs. The Board may or may not grant any
such transfer requests based upon existing facts and circumstances at the
time. Board approval of any prohibited transfer transactions must be based
upon an opinion of counsel.

In addition to voiding prohibited transfers, the Transfer Restrictions
provide a method of nullifying the effect of certain prohibited transfers
after the transfers have purportedly occurred. If such a purported transfer is
made in violation of the Transfer Restrictions, the transferee (the "Purported
Acquiror") will not be recognized as the owner of the Stock. If the Company
determines that such a purported transfer has violated the Transfer
Restrictions, it shall require the Purported Acquiror to surrender the
relevant Stock and any dividends he or she has received on them to an agent
designated by the Company (the "Agent"). The Agent will sell the Stock in an
arm's length transaction. If the Purported Acquiror has resold the Stock
before receiving the Company's demand to surrender such Stock, the Purported
Acquiror generally will be required to transfer to the Agent the proceeds of
the sale and any distributions he or she has received on the Stock. After
repaying its own expenses and reimbursing the Purported Acquiror for the price
paid for the Stock (or the fair market value of the Stock at the time of the
attempted transfer to the Purported Acquiror by gift, inheritance or similar
transfer), the Agent will pay any remaining amounts to the person who sold
such Stock to the Purported Acquiror. If the identity of the person who sold
such Stock cannot be determined through inquiry of the Purported Acquiror, the
Agent or the Company shall hold such amounts pending the determination of such
identity and, if after 90 days, such identity cannot be determined, then such
amounts may be paid over to a court or governmental agency or to a tax-exempt
entity designated under Section 501(c)(3) of the Code.

The Transfer Restrictions (i) may have the effect of impeding the attempt of
a person or entity to acquire a significant or controlling interest in the
Company, (ii) may render it more difficult to effect a merger or similar
transaction even if such transaction is favored by a majority of the
independent stockholders and (iii) may serve to entrench management.
Management believes, however, that the tax benefits of the Transfer
Restrictions outweigh any other effects they may have on the Company or its
stockholders. See "Risk Factors".

TERMINATION OF TRANSFER RESTRICTIONS

The Transfer Restrictions, as extended by the Board in connection with the
Merger, will terminate upon the earliest to occur of: (i) the day after the
third anniversary of the Effective Date; (ii) the repeal of Section 382 of the
Code if the Company's Board of Directors determines that the Transfer
Restrictions are no longer necessary;

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<PAGE>

or (iii) the beginning of a taxable year of the Company as to which the
Company's Board of Directors determines prior to the beginning of such taxable
year that no NOLs or other tax benefits otherwise available to the Company may
be carried forward (the "Expiration Date"). In addition, the Board of
Directors of the Company is authorized to accelerate or extend the Expiration
Date if the Board determines, based on an opinion of counsel, that such
acceleration or extension is reasonably necessary or desirable to preserve the
NOLs or other tax benefits or that the Transfer Restrictions are no longer
necessary for the preservation thereof.

ANTI-TAKEOVER EFFECTS

The consummation of the Merger, which would result in the extension of the
Transfer Restrictions and the issuance of either 8.5 million or 9.0 million
shares of Common Stock and the cancellation of the 1.4 million shares of
Common Stock currently held by Chatwins, may have the effect of preventing or
discouraging an attempt by another person or entity to acquire control of the
Company. In addition to impeding the acquisition of a significant or
controlling interest in the Company, the Transfer Restrictions and new Common
Stock issuance resulting in control of the Company by the beneficial owners of
Chatwins of up to approximately 80% of the outstanding Common Stock of the
Company (See "Ownership Information--Security Ownership of Certain Beneficial
Owners and Management") may render it more difficult for a third party to
effect a merger or similar transaction, even if such transaction is favored by
a majority of the independent stockholders. The Transfer Restrictions and the
consolidation of control may have the effect of discouraging or defeating
mergers, proxy contests, or management changes that stockholders may deem in
the best interests of the Company. The Transfer Restrictions may also have the
effect of preventing a party from acquiring an interest in the Company that
would be large enough to enable such party to effect a change in management of
the Company. See "Risk Factors Anti-Takeover Effects". The Company has
proposed the Merger, however, for reasons set forth in this Proxy
Statement/Prospectus and have extended the Transfer Restrictions in order to
protect the availability of the Company's significant NOLs (see "--Extension
of Transfer Restrictions; Preservation of Tax Benefits"), and not as part of
an anti-takeover plan or strategy.

No employment, credit or other agreements to which the Company is party,
individually or in the aggregate, are likely to have any anti-takeover
effects. Other than (i) the Transfer Restrictions, (ii) Article VI of the
Certificate of Incorporation and Section 3.1 of the By-laws of the Company,
which establish a maximum number of directors (12), and (iii) Article IX of
the Certificate of Incorporation and Section 2.10 of the By-laws, which
abolish cumulative voting by stockholders in director elections, no provisions
of the Company's Certificate of Incorporation or By-laws can be considered to
have an anti-takeover effect.

The Merger has not been proposed to forestall or hinder any specific effort
to accumulate the Company's securities or to obtain control of the Company by
means of a merger, tender offer, solicitation in opposition to management or
otherwise. At the present time, the Board of Directors does not have any plan
or intention to propose any anti-takeover measures in future proxy
solicitations.

DESCRIPTION OF CAPITAL STOCK; DIVIDENDS; TRANSFER AGENT

The Company is authorized to issue 20,000,000 shares of Common Stock, $.01
par value, of which 3,862,565 were issued and outstanding as of June 25, 1998.
Each share of Common Stock has one vote on all matters presented to the
stockholders. Since the Common Stock does not have cumulative voting rights,
the holders of more than 50% of the shares may, if they choose to do so, elect
all of the directors and, in that event, the holders of the remaining shares
will not be able to elect any directors. Subject to the rights and preferences
of any preferred stock which may be designated and issued (including the
Reunion Preferred (see"--General Merger Terms")), the holders of Common Stock
are entitled to dividends when and as declared by the Board of Directors and
are entitled on liquidation to all assets remaining after payment of
liabilities. The Common Stock has no preemptive or other subscription rights.
There are no conversion rights or sinking fund provisions with respect to the
Common Stock. The Common Stock to be issued in connection with the Merger will
have the same relative powers, designations, preferences, rights and
qualifications as the Common Stock outstanding immediately prior to the
Merger, and, like all of the Common Stock, will be subject to the Transfer
Restrictions.

57
<PAGE>

The effects of the issuance of additional Common Stock, and in some cases
the Reunion Preferred, upon the post-Merger rights of the existing
stockholders of the Company will include (i) dilution of the per share equity
interest of the stockholders, (ii) dilution of the aggregate voting power of
the stockholders, (iii) a reduction of existing stockholders' interests in the
assets of the Company in the event of liquidation, (iv) the prevention or
discouraging of an attempt by another person or entity to acquire control of
the Company following effectiveness of the Merger without the approval of its
Board of Directors, and (v) a possible resulting loss of liquidity to
stockholders and/or the entrenchment of management. The Merger and the
issuance of additional Common Stock and Reunion Preferred in connection
therewith is not being done in response to any specific effort to accumulate
the Company's securities or to obtain control of the Company by means of a
merger, tender offer, solicitation and opposition to management or otherwise.

For many years, the Company has reinvested any earnings in its business and,
accordingly, has not paid any dividends on the Common Stock. Although the
Company intends to continue to invest any future earnings in its business, it
may determine at such future date that the payment of cash dividends on Common
Stock would be desirable. The payment of any such dividends would depend,
among other things, upon the earnings and financial condition of the Company.

Registrar and Transfer Company, Cranford, New Jersey, is the transfer agent
and registrar for the Common Stock.

The Company is also authorized to issue 10,000,000 shares of "blank check"
preferred stock, par value $.01 per share. The term "blank check" preferred
stock refers to stock for which the designations, preferences, conversion
rights, cumulative, relative, participating, optional or other rights,
including voting rights, qualifications, limitations or restrictions thereof
are determined by a corporation's board of directors. Accordingly, the Board
of Directors of the Company is able to authorize the creation and issuance of
up to 10,000,000 shares of preferred stock in one or more series, with such
rights, qualifications, limitations and restrictions as may be determined in
the Board's sole discretion, with no further authorization required of the
stockholders. The existence of the authorized and unissued preferred stock may
enable the Board of Directors of the Company to render more difficult or to
discourage an attempt to obtain control of the Company by means of a merger,
tender offer, proxy contest or otherwise.

The Reunion Preferred to be issued in exchange for the Chatwins Preferred
will have the following material preferences, privileges, restrictions and
rights. The Reunion Preferred will be redeemable (i) at any time at the option
of the Company and (ii) after three years at the options of the holders
thereof, at the Total Redemption Value. The Company anticipates that the
Initial Redemption Value will be approximately $8,300,000. The holders of the
Reunion Preferred will be entitled to the Preferred Dividend--namely, a
cumulative dividend which will accrue from the Effective Date. The Preferred
Dividend will be payable as and when the Board of Directors of the Company
determines. The Reunion Preferred will not be entitled to any voting rights
(except as required by law) and will not have any right of conversion into the
Common Stock or any other securities of the Company. Upon a liquidation of the
Company, the holders of the Reunion Preferred will be entitled to be paid, out
of the assets of the Company available for payment to the holders of the
Company's capital stock, an amount equal to the Total Redemption Value on the
date of payment. In the event of a liquidation of the Company no payments will
be made an no assets will be distributed to the holders of the Common Stock of
the Company until the holders of the Reunion Preferred shall have been paid
the Total Redemption Value.

The Reunion Preferred will be privately held and the Company has no plans or
obligations at this time to register the Reunion Preferred with the Securities
and Exchange Commission. The Reunion Preferred will be subject to the Transfer
Restrictions. Mr. Bradley and Mr. Poole are beneficial owners of all of the
Chatwins Preferred presently outstanding. As discussed above, if consummated
by Chatwins prior to the Effective Time, the King-Way Acquisition and the
payment of the King-Way Price may involve the payment of cash by Chatwins, the
issuance of notes or other debt obligations by Chatwins, the issuance of
Chatwins Preferred or other securities of Chatwins, or any combination of the
foregoing. If Chatwins should issue equity securities other than its common
stock or Chatwins Preferred in order to acquire King-Way prior to the
Effective Time,

58
<PAGE>

the Merger Agreement will be further amended to provide for the conversion of
such securities at the Effective Time consistent with the terms of the Merger
as presently agreed. In the event that the King-Way Acquisition is not
consummated by Chatwins prior to the Effective Time but at the Effective Time
Chatwins possess the unconditional right to do so, the payment of the King-Way
Price by the Company at or after the Effective Time may involve the payment of
cash by the Company, the issuance of notes or other debt obligations of the
Company, the issuance of Reunion Preferred, or any combination of the
foregoing (See "--King-Way Acquisition").

The Board of Directors of the Company cannot yet determine the number of
shares of Reunion Preferred that will be issued in connection with the Merger
and the King-Way Acquisition.

MARKET FOR COMMON STOCK

COMPARATIVE RIGHTS OF SECURITY HOLDERS

General. At the Effective Time, the stockholders of Chatwins will become
stockholders of the Company. As stockholders of the Company, their rights will
be governed by the DGCL and the Company's Certificate of Incorporation (a copy
of which is attached hereto as ANNEX D) and the Company's Bylaws (a copy of
which is attached hereto as ANNEX E), rather than by Chatwins' Restated
Certificate of Incorporation (the "CHATWINS CHARTER") and Chatwins' bylaws.
Following are summaries of the material differences between the rights of the
Company's stockholders and the rights of Chatwins' stockholders. For
additional information regarding the rights of the Company's stockholders, see
"Description of the Capital Stock; Dividends; Transfer Agent". The following
summaries of provisions of the Company's Certificate of Incorporation and
Bylaws are qualified in their entirety by reference to the complete copies of
those documents attached as annexes to this Proxy Statement/Prospectus and
incorporated by reference herein.

Both the Company and Chatwins are organized under the laws of the State of
Delaware. Any differences, therefore, in the rights of holders of the
Company's capital stock and Chatwins' capital stock arise solely from
differences in their respective certificates of incorporation and bylaws. The
identification of specific differences is not meant to indicate that other
equally or more significant differences do not exist.

Authorized Capital. The Company's authorized capital stock consists of
20,000,000 shares of Common Stock, par value $0.01 per share, and 10,000,000
shares of preferred stock, par value $0.01 per share. Chatwins' authorized
capital stock consists of 400,000 shares of common stock, par value $0.01 per
share, 3,000 shares of Class D, Series A preferred stock, par value $0.01 per
share, 800 shares of Class D, Series B preferred stock, par value $0.01 per
share, 2,500 shares of Class D, Series C preferred stock, par value $0.01 per
share and 1,500 shares of Class E preferred stock, par value $0.01 per share
(which Class E has been retired by Chatwins).

59
<PAGE>

The Company's and Chatwins Preferred Stock. The DGCL permits a corporation's
certificate of incorporation to allow its board of directors to issue, without
stockholder approval, one or more series of preferred stock and to designate
their rights, preferences, privileges and restrictions. The Company's
Certificate of Incorporation authorizes the issuance of preferred stock in one
or more series. The Company's Board is authorized to fix the voting rights,
designations, powers and preferences and the relative, participating, optional
or other rights, if any, and the qualifications, limitations or restrictions
of any series. The Chatwins Charter does not grant such "blank check" power to
the Chatwins Board; rather, all of the rights, designations, powers and
preferences of the Chatwins preferred stock are specifically set forth in the
Chatwins Charter.

Payment of Dividends. The DGCL permits the payment of dividends out of a
corporation's surplus. Dividends may, in certain cases, also be paid out of
net profits for the fiscal year in which declared or out of net profits for
the preceding fiscal year. The Company's Certificate of Incorporation and
Bylaws do not contain any provisions limiting the payment of dividends within
the parameters of the DGCL. The Chatwins Charter places certain limitations on
the amount of dividends that may be paid in respect of its preferred stock,
but not its common stock (so long as such dividends on its common stock are
paid ratably).

Directors. The DGCL permits the certificate of incorporation or bylaws of a
corporation to contain provisions governing the number and qualification of
directors. The Company's Certificate of Incorporation provides for a board of
directors of at least three and no more than twelve directors, elected
annually for a term of one year, or until their respective successors shall be
elected and qualify. The Chatwins bylaws provide for the number of directors
to be fixed from time to time by resolution passed by a majority of the
Chatwins Board or by its stockholders. Chatwins currently has four directors.

Special Stockholder Meetings. The DGCL provides that a special meeting of
stockholders may be called by the board of directors or by such person or
persons as may be authorized by a corporation's certificate of incorporation
or bylaws. The Company's Certificate of Incorporation provides that special
meetings of stockholders may be called at any time by (i) the Company's Board
of Directors, (ii) the Chairman of the Board, (iii) the President of the
Company, or (iv) the holders of at least 30% of the Common Stock entitled to
vote for the election of directors. The Chatwins bylaws provide that a special
meeting of stockholders may be called by (i) any two directors of the Board of
Directors, (ii) the President, (iii) any Vice President or (iv) any
stockholder owning a majority of the capital stock of Chatwins entitled to
vote.

Indemnification of Officers and Directors. Under the DGCL, a corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil or criminal, administrative or investigative (other than an action by or
in the right of the corporation) by reason of the fact that such person is or
was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding if such person acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
DGCL permits similar indemnification in the case of derivative actions, except
that no indemnification may be made in respect to any claim, issue or matter
as to which such person shall have been adjudicated to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all of
the circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.

The Company's Certificate of Incorporation provides that the corporation
shall, to the fullest extent permitted by law, indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or

60
<PAGE>

investigative (including a derivative action) by reason of the fact that he is
or was a director or officer of the Company, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had not
reasonable cause to believe his conduct was unlawful. The Company's
Certificate of Incorporation also authorizes the advancement of expenses in
certain circumstances.

The Chatwins Charter also provides that directors and officers of Chatwins
shall be indemnified by the corporation to the fullest extent permitted by the
DGCL, but does not address the issue of advancement of expenses.

Business Combinations with Interested Stockholder. Section 203 of the DGCL
prohibits a corporation that does not opt out of its provisions from entering
into certain business combination transactions with "interested stockholders"
(generally defined to include persons beneficially owning 15% or more of the
corporation's outstanding capital stock) for a period of three years following
the date such person became an interested stockholder unless prior to that
date, the board of directors approved either the business combination or the
transaction that resulted in the stockholder becoming an interested
stockholder or unless certain super-majority votes are obtained from the
stockholders. The Company has opted in its Certificate of Incorporation not to
be governed by Section 203, whereas Chatwins has not opted out of Section 203.

Transfer Restrictions. The Certificate of Incorporation of the Company
contains the Transfer Restrictions (see "Proposal III. The Merger--Extension
of Transfer Restrictions; Preservation of Tax Benefits"), whereas the Chatwins
Charter does not contain any similar provisions restricting the
transferability of its capital stock.

MATERIAL DEVELOPMENTS

The Company

On January 16, 1996 the Company filed suit in the 125th Judicial District
Court of Harris County, Texas against Bargo Energy Company ("Bargo") and its
general partners, Chisos Corporation, Austin Resources Corporation, Shearwave,
Inc., Brazos Oil & Gas Corporation, and Schroder Oil Financing & Investment
Company, for damages and relief arising out of Bargo's repudiation of its
agreement to purchase all outstanding shares of the capital stock of REC.
Bargo had agreed to pay the Company $15.1 million for REC's capital stock,
subject to certain potential adjustments in the purchase price as set forth in
the Stock Purchase Agreement between the Company and Bargo and had deposited
$0.5 million with a contractual escrow agent in accordance with the terms of
the Stock Purchase Agreement. The Company alleged in its complaint that Bargo
tortiously interfered with a prospective stock purchase agreement with another
purchaser of REC's stock, and then wrongfully repudiated its agreement to
purchase REC's stock. The Company also asserted claims against Bargo for
breach of contract and breach of duty of good faith and fair dealing, and
sought damages under these theories of liability. Bargo also filed suit
against the Company claiming that the Company, its investment bankers, and
certain individuals fraudulently misrepresented information and fraudulently
induced Bargo into signing the Stock Purchase Agreement. Bargo also asserted
claims for breach of contract and warranty, return of its escrow, and seeks
unspecified damages under these theories of liability. The cases were
consolidated in the 334th Judicial District Court of Harris County, Texas.

On April 24, 1998, a jury returned verdict findings that Bargo had a right
to terminate its contract with the Company and that the Company had committed
fraud against Bargo. The jury recommended that an award of $5,000,000 in
punitive damages be assessed against the Company. The Company maintained at
trial and continues to maintain that Bargo was required to close the
transaction at issue and that no evidence sufficient to support a jury finding
of fraud or the related punitive damages finding was presented at trial. A
judgment has yet to be entered in this case.

61
<PAGE>

The Company intends to appeal any judgment entered in this matter. No
accrual has been recorded for any amount that may be due if the Company is
unsuccessful in its appeal. Management of the Company believes, based on
consultation with counsel, that it is more likely than not that any judgment
based on a finding of fraud, any award of attorneys' fees based on a finding
of fraud and punitive damages would be overturned on appeal.

Chatwins

In May of 1998, Chatwins executed a joint venture agreement pursuant to
which it has contributed $100,000 to Suzhou Grating, Ltd., a fiberglass
reinforced plastic grating manufacturer in China. The investment constitutes a
default under the Chatwins Indenture.

In May of 1998, Mr. Bradley transferred all of his shares of Chatwins Common
Stock to the Bradley FLP. Because the Bradley FLP has granted voting control
over the shares of Chatwins common stock to Stanwich Partners, Inc. which in
turn has granted voting control over the shares to Mr. Poole, Mr. Bradley does
not have sole voting control over the shares of Chatwins common stock thereby
causing a breach of his May 1, 1993 Securities Pledge Agreement (as defined in
the Chatwins Indenture) for which there is no remedy provided under the
Securities Pledge Agreement but which creates a default under the Chatwins
Indenture.

The Chatwins Indenture provides that neither of the aforementioned defaults
will mature into an Event of Default subject to the remedies, including
acceleration of the Chatwins Senior Notes, therein provided until the Trustee
under the Chatwins Indenture or the holders of at least twenty-five percent
(25%) of the Chatwins Senior Notes notify Chatwins of the default and the
default remains unremedied for thirty (30) days after said notice. Although
Chatwins has informed the Company that it does not expect either of these two
defaults to mature into an Event of Default, there can be no assurance that an
Event of Default will not occur prior to the Effective Time.

On June 2, 1998, the Chatwins Warrants (see "Ownership Information--
Chatwins") became exercisable. Chatwins has sent the Chatwins Warrant holders
a Bring Along Notice under and as defined in its Warrant Agreement, dated as
of May 1, 1993, with State Street Bank and Trust Company (as successor warrant
agent to The First National Bank of Boston) (the "Warrant Agreement").
Pursuant to the Warrant Agreement the Warrant holders have 30 days to exercise
their Chatwins Warrants or they will expire. Pursuant to the Warrant
Agreement, Warrant holders who exercise their Chatwins Warrants will
automatically be deemed to consent to the Merger.

62
<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 the Securities
and Exchange Commission (the "Commission") rules and regulations to show the
pro forma effects of the Merger of (i) all of the assets and business of the
Company by and into (ii) all of the assets and business of Chatwins with the
Company remaining as the surviving legal entity. See "Proposal III. The
Merger". For purposes of this presentation, the purchase price in the
transaction is deemed to be approximately $15.7 million, consisting of
2,412,562 shares of the Company Common Stock valued at an assumed price of
$6.50 per share. In June, 1995 Chatwins had previously acquired 1,450,000
shares or 38% of the Company's then outstanding common stock. The
consideration paid above reflects the 62% of the Company Common Stock
outstanding not previously owned by Chatwins.

Contemporaneously with the closing of the Merger and related Refinancing,
Chatwins is planning to acquire King-Way (See "Proposal III. The Merger--King-
Way Acquisition"). The pro forma consolidated condensed financial statements
assume that the consideration for the purchase of King-Way will include the
assumption of $19.1 million of King-Way's debt and preferred stock, some
portion of which may be retired in the Refinancing. Adjustments related to
King-Way are segregated in the following pro forma financial statements
because King-Way's results are not included in either the Company's or
Chatwins' historical results. The King-Way adjustments are derived from
unaudited financial statements.

The Merger will be accounted for as a purchase under APB Opinion No. 16
"Business Combinations" with Chatwins as the acquirer for purposes of applying
purchase accounting. Accordingly, the Chatwins assets and liabilities will be
accounted for at historical book values and the Company's assets and
liabilities will be revalued at their estimated fair value subject to
adjustment upon completion of a closing date balance sheet. The excess of
purchase price over fair value of assets acquired and liabilities assumed
(goodwill) for the 62% not previously owned by Chatwins will be capitalized
and amortized over 15 years.

In conjunction with the Merger, the Company and Chatwins will close on the
New Facilities, a $127 million loan facility used to refinance existing debt,
possibly acquire King-Way and pay transaction and certain other costs as
described herein. The loan facility provides for a $77 million Term Loan and
allows for up to a $50 million Revolver. The interest on borrowings is indexed
to the European Interbank Offering Rate ("IBOR") plus two percentage points.

The unaudited pro forma consolidated condensed balance sheet is based on the
assumption that the Merger (with and without the King-Way Acquisition) and the
Refinancing were completed on March 31, 1998. The unaudited pro forma
consolidated condensed statements of operations for the year ended December
31, 1997 and for the three months ended March 31, 1998 are presented as if the
Merger (with and without the King-Way Acquisition) and the Refinancing had
occurred on January 1, 1997.

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, 1997 and as of March 31, 1998, 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 and Chatwins' Annual Reports on
Form 10-K for the year ended December 31, 1997 and Quarterly Reports on Form
10-Q for the three months ended March 31, 1998 which have been previously
filed with the Commission and are incorporated herein by reference.

63
<PAGE>

REUNION INDUSTRIES, INC.

UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET

MARCH 31, 1998

(IN THOUSANDS)

<TABLE>
<CAPTION>
PRO FORMA KING-WAY PRO FORMA
REUNION CHATWINS PRO FORMA EXCLUDING PRO FORMA INCLUDING
HISTORICAL HISTORICAL ADJUSTMENTS KING-WAY ADJUSTMENTS KING-WAY
---------- ---------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
------
Current Assets
Cash and Cash
Equivalents........... $ 880 $ 379 $ -- $ 1,259 $ 1,417(7) $ 2,676
Receivables............ 14,012 32,145 -- 46,157 3,772(7) 49,929
Inventories............ 8,361 20,444 -- 28,805 1,244(7) 30,049
Other Current Assets... 2,613 5,394 -- 8,007 6(7) 8,013
------- -------- -------- -------- ------- --------
Total Current Assets. 25,866 58,362 0 84,228 6,439 90,667
Property, Plant and
Equipment, Net......... 35,241 31,858 -- 67,099 1,522(7) 68,621
Goodwill................ 8,883 4,695 (1,277)(3)(4)(5) 12,301 13,668(7) 25,969
Investment in Reunion... 0 11,517 (11,517)(4) 0 -- 0
Other................... 3,273 7,106 656 (6) 11,035 -- 11,035
------- -------- -------- -------- ------- --------
$73,263 $113,538 ($12,138) $174,663 $21,629 $196,292
======= ======== ======== ======== ======= ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
Current Liabilities
Current Portion of
Long-term Debt........ $12,034 $ 25,065 $ -- $ 37,099 $ -- $ 37,099
Accounts Payable....... 11,581 18,360 -- 29,941 1,512(7) 31,453
Other Current
Liabilities........... 7,396 12,298 -- 19,694 1,017(7) 20,711
------- -------- -------- -------- ------- --------
Total Current
Liabilities......... 31,011 55,723 0 86,734 2,529 89,263
Long-term Debt.......... 9,249 50,681 7,567 (6) 67,497 19,100(7) 86,597
Long-term Debt-Related
Parties................ 1,518 0 (1,017)(6) 501 -- 501
Other Liabilities....... 2,827 4,904 -- 7,731 -- 7,731
------- -------- -------- -------- ------- --------
Total Liabilities.... 44,605 111,308 6,550 162,463 21,629 184,092
------- -------- -------- -------- ------- --------
Minority Interests...... 182 1,034 1,216 -- 1,216
Redeemable Preferred
Stock.................. 0 8,140 -- 8,140 -- 8,140
Warrant Value........... 0 423 (423)(1) 0 -- --
Stockholders' Equity
Common Stock........... 38 3 106 (3) -- -- --
-- -- (38)(5) 109 5(8) 114
Additional Paid-in
Capital............... 29,275 663 423 (1) -- -- --
-- -- (500)(2) -- -- --
-- -- 15,576 (3) -- -- --
-- -- (29,275)(5) 16,162 (5)(8) 16,157
Accumulated Deficit.... (305) (6,845) 305 (5) -- -- --
-- -- (5,894)(6) (12,739) -- (12,739)
Treasury Stock......... 0 (500) 500 (2) 0 -- --
Cumulative Translation
Adjustment............ (532) (688) 532 (5) (688) -- (688)
------- -------- -------- -------- ------- --------
Total Stockholders'
Equity.............. 28,476 (7,367) (18,265) 2,844 0 2,844
------- -------- -------- -------- ------- --------
$73,263 $113,538 ($12,138) $174,663 $21,629 $196,292
======= ======== ======== ======== ======= ========
</TABLE>

<PAGE>

REUNION INDUSTRIES, INC.

UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 1997

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PRO FORMA KING-WAY PRO FORMA
REUNION CHATWINS PRO FORMA EXCLUDING PRO FORMA INCLUDING
HISTORICAL HISTORICAL ADJUSTMENTS KING-WAY ADJUSTMENTS KING-WAY
---------- ---------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Operating Revenue
Net Sales............. $93,378 $188,920 $ -- $282,298 $16,577 (f) $298,875
------- -------- ----- -------- ------- --------
Operating Costs and
Expenses
Plastic Products--Cost
of Sales............. 79,829 153,394 -- 233,223 11,718 (f) 244,941
Selling, General and
Administrative....... 11,036 22,719 (199)(a) 33,556 2,651 (f) 36,207
------- -------- ----- -------- ------- --------
90,865 176,113 (199) 266,779 14,369 281,148
Operating Income........ 2,513 12,807 199 15,519 2,208 17,727
Other Income and
(Expense)
Interest Expense...... (3,267) (9,776) 4,303 (b) (8,740) (1,910)(f) (10,650)
Equity in Reunion--
continuing ops....... (224) 224 (d) 0 -- 0
Other, Including
Interest Income...... (141) 141 -- 0 -- 0
------- -------- ----- -------- ------- --------
(3,408) (9,859) 4,527 (8,740) (1,910) (10,650)
Income (Loss) Before
Taxes.................. (895) 2,948 4,726 6,779 298 7,077
Provision for Income
Taxes.................. (86) (851) 670 (c) (267) (11)(f) (278)
------- -------- ----- -------- ------- --------
Income (Loss) from
Continuing Operations.. (981) 2,097 5,396 6,512 287 6,799
Preferred Stock
Dividends.............. -- (803)(e) (803) (803)
------- -------- --------
Income Available to
Common Shareholders.... $ (981) $ 5,709 $ 5,996
======= ======== ========
Income (loss) per Common
Share
Basic................. ($ 0.25) -- -- $ 0.52 -- $ 0.53
======= ======== ========
Diluted............... ($ 0.25) -- -- $ 0.52 -- $ 0.52
======= ======== ========
Weighted Average Number
of Common Shares
Basic................. 3,855 -- 7,050 10,905 500 11,405
======= ===== ======== ======= ========
Diluted............... 3,855 -- 7,163 11,018 500 11,518
======= ===== ======== ======= ========
</TABLE>

65
<PAGE>

REUNION INDUSTRIES, INC.

UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 1998

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

66
<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, Chatwins' and King-Way's unaudited balance sheets at March 31, 1998
and upon the adjustments described below. The unaudited pro forma consolidated
condensed statements of operations for the year ended December 31, 1997 and
for the three months ended March 31, 1998 are based on the Company's and
Chatwins' audited financial statements for the fiscal year ended December 31,
1997, King-Way's unaudited financial statements for its fiscal year ended
September 30, 1997 and unaudited financial statements for the three months
ended March 31, 1998 and upon the adjustments described below.

NOTE 2. PRO FORMA ADJUSTMENTS

The unaudited pro forma consolidated condensed balance sheet reflects the
following adjustments as though the Merger (with and without the King-Way
Acquisition) and the Refinancing occurred as of March 31, 1998:

(1) To record assumed exercise of Chatwins Warrants prior to the merger.

(2) To retire Chatwins treasury stock.

(3) To record issuance of 8.5 million shares of the Company's Common
Stock to Chatwins stockholders. Purchase price determined based on
2.4 million shares times $6.50 assumed market price of the Company's
Common Stock.

(4) To eliminate Chatwins investment in the Company.

(5) To eliminate the Company equity accounts, and to record goodwill.

(6) To record effects of refinancing including: write off of $2.3
million of debt issue costs on refinanced debt; prepayment premiums
of $3.5 million on retired debt; repayment of $0.1 million
unamortized debt discount; additional borrowing to pay $3.0 million
of refinancing debt issue costs and paydown of $1.0 million related
party debt.

(7) To record the purchase of King-Way including revaluation of assets
at fair value, assumption of $19.1 million of debt and to record
goodwill.

(8) To record issuance of an additional 0.5 million shares of the
Company's Common Stock to Chatwins stockholders in consideration for
the added value of King-Way.

The unaudited pro forma consolidated condensed statements of operations
reflect the following adjustments as though the Merger (with and without the
King-Way Acquisition) and the Refinancing had occurred as of January 1, 1997.

(a) To record reduction in amortization resulting from remeasurement of
goodwill.

(b) i) Year ended December 31, 1997. To record decreased interest expense
resulting from $102.0 million actual weighted average debt times
an actual weighted average interest rate of 12.8% compared to pro
forma weighted average debt of $108.6 million times weighted
average pro forma interest rate of 8.04%. A .125% change in the
assumed interest rate would result in a change of interest expense
of $0.1 million for the year.

ii) Three months ended March 31, 1998. To record decreased interest
expense resulting from $100.1 million actual weighted average
interest debt times an actual 12.7% weighted average

67
<PAGE>

REUNION INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED

CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
interest rate compared to $106.7 million pro forma weighted average
debt times weighted average pro forma interest rate of 8.08%. A
.125% change in the assumed interest rate would result in a change
of interest expense of $0.03 million for the three months.

(d) To eliminate Chatwins' equity in the Company's results of continuing
operations.

(e) To record dividends on Reunion Preferred issued in exchange for
Chatwins Preferred, at 10% per annum.

(f) To record the historical results of King-Way based on unaudited
financial statements for its fiscal year ended September 30, 1997
and for the three months ended March 31, 1998. These historical
results have been adjusted for amortization of $13.7 million of
goodwill over 15 years and interest expense on $19.1 million at an
assumed interest rate of 10% and for the pro forma utilization of
the Company's NOLs.

EXCHANGE OF CERTIFICATES

As soon as practicable after the Effective Date, the Company will furnish a
letter of transmittal to stockholders of Chatwins for use in exchanging their
stock certificates (each a "Letter of Transmittal"), which will contain
instructions with respect to the surrender of Chatwins stock certificates and
the distribution of Common Stock certificates and Reunion Preferred
certificates. THE COMPANY'S EXISTING STOCKHOLDERS DO NOT NEED TO EXCHANGE ANY
STOCK CERTIFICATES AT ANY TIME BEFORE OR AFTER THE MERGER.

Chatwins stockholders who fail to exchange their Chatwins stock certificates
on or after the Effective Date by surrendering such certificates, together
with a properly completed Letter of Transmittal, to the agent designated by
the Company (the "Exchange Agent") will not receive their Common Stock
certificates or Reunion Preferred certificates until such time as their
Chatwins stock certificates are later surrendered to the Exchange Agent for
transfer, accompanied by such instruments of transfer and supporting evidence
as the Company may reasonably require. Any dividends declared or distributions
made on shares of Common Stock or Reunion Preferred which such holders have a
right to receive will be retained by the Company until such holders surrender
their Chatwins stock certificates in exchange for Common Stock certificates or
Reunion Preferred certificates or until paid to a public official pursuant to
applicable abandoned property, escheat or similar laws. No interest will
accrue or be payable with respect to any dividends or distributions retained
on unissued Common Stock certificates or Reunion Preferred certificates.

On the Effective Date, holders of certificates representing Chatwins capital
stock will cease to have any rights with respect to such shares and each such
certificate will be deemed for all corporate purposes to evidence only the
right to receive shares of Common Stock (plus cash for any fractional shares)
or Reunion Preferred for which such shares may be exchanged. The stock
transfer books of the Chatwins will be closed at the close of business on the
business day immediately preceding the Effective Date, and the holders of
record of Chatwins capital stock as of the Effective Date will be the
stockholders entitled to exchange their shares of Chatwins capital stock for
shares of Common Stock or Reunion Preferred as provided in the Merger
Agreement. No transfer or assignment of any shares of Chatwins capital stock
will take place after the Effective Date until the certificates for such
shares are exchanged pursuant to the Merger Agreement. In the event of a
transfer of ownership of any such shares which is not registered in the stock
transfer records of Chatwins, no shares of Common Stock or Reunion Preferred
exchangeable for such shares will be issued to the transferee until the
certificate or certificates representing such transferred shares are delivered
to the Exchange Agent together with all documents required to evidence and
effect such transfer. In addition, it will be a condition to the issuance of
any certificate for any shares of Common Stock or Reunion Preferred in a name
other than the name in which the surrendered Chatwins capital stock is
registered

68
<PAGE>

that the person requesting the issuance of such certificate or note either pay
to the Exchange Agent any transfer or other taxes required by reason of the
issuance of a certificate of Common Stock or Reunion Preferred in a name other
than the registered holder of the certificate surrendered, or establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable.

In no event will the Exchange Agent or the Company be liable to any holder
of Chatwins capital stock for shares of Common Stock or Reunion Preferred, or
dividends or distributions thereon, delivered in good faith to a public
official pursuant to any applicable abandoned property, escheat or similar
law. All shares of Common Stock or Reunion Preferred issued upon the surrender
of shares of Chatwins capital stock shall be deemed to have been issued in
full satisfaction of all rights pertaining to such shares of Chatwins capital
stock, subject, however, to the Company's obligation to pay any dividends or
make any other distributions with a record date prior to the Effective Date
which may have been declared or made by Chatwins on such shares of Chatwins
capital stock prior to the Effective Date and that remain unpaid as of the
Effective Date.

FEDERAL INCOME TAX CONSEQUENCES

THE FOLLOWING DISCUSSION DOES NOT INCLUDE ANY STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES, AND DOES NOT SPECIFICALLY ADDRESS THE CONSEQUENCES TO COMMON
STOCKHOLDERS OF CHATWINS OR THE COMPANY OTHER THAN INDIVIDUAL UNITED STATES
CITIZENS WHO HOLD THEIR SECURITIES AS A CAPITAL ASSET. THIS DISCUSSION IS FOR
GENERAL INFORMATION ONLY AND EACH STOCKHOLDER OF CHATWINS OR THE COMPANY IS
URGED TO CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE CONSEQUENCES OF THE
MERGER.

Federal Income Tax Consequences to Chatwins Common Stockholders

Consummation of the Merger is not conditioned upon the receipt of a ruling
from the Internal Revenue Service as to the tax consequences of the
transactions, and no such ruling has been requested. The Board of Directors of
the Company believes that, and has received an opinion of Finn Dixon & Herling
LLP, to the effect that,

(i) the Merger will be treated as a tax-free reorganization under Section
368(a)(1)(A) of the Code;

(ii) no gain or loss will be recognized by Chatwins' common stockholders on
the receipt of shares of Common Stock in exchange for shares of Chatwins
common stock;

(iii) the tax basis of shares of Common Stock received pursuant to the
Merger will equal the tax basis of the shares of Chatwins common stock
exchanged therefor;

(iv) provided that the shares of Chatwins common stock are held as capital
assets at the time of the Merger, the holding period of the shares of Common
Stock received in the Merger will include the holding period of the shares of
Chatwins common stock exchanged therefor; and

(v) no gain or loss will be recognized by the stockholders of the Company
solely as a result of the consummation of the Merger.

In rendering its opinion, Finn Dixon & Herling LLP, considered the
applicable provisions of the Code, Treasury Regulations, pertinent judicial
authorities, interpretive rulings of the Internal Revenue Service, and such
other authorities as they considered relevant.

Finn Dixon & Herling LLP, has not rendered an opinion on the prospective
effectiveness of the Transfer Restrictions in preserving the NOLs, and has not
been requested to do so by the Company. Although the Company believes that the
Transfer Restrictions, as designed, can effectively preserve the NOLs, future
transactions cannot be predicted or addressed with the degree of certainty
necessary to support a legal opinion. Accordingly, no assurances of counsel
are or can be given to the Company and its stockholders that the NOLs will
not, in spite of the Transfer Restrictions, be severely limited under Section
382 of the Code by reason of any such future transactions. See "Risk Factors
- --Continuation of Net Operating Loss Carryforwards".

69
<PAGE>

Federal Income Tax Consequences to the Company and Current Stockholders

No gain or loss should be recognized by the Company or its stockholders on
the transfer of Chatwins assets to the Company or the Company's accession to
Chatwins' liabilities as a result of the Merger. The basis of Chatwins' assets
acquired by the Company in the Merger should be the same as the basis of those
assets in Chatwins' hands immediately prior to the Merger, and the Company's
holding period should include the Chatwins' holding period with respect to the
assets. The tax basis of the Company's Common Stock held by existing
stockholders of the Company prior to the Merger will remain the same after the
Merger.

Chatwins' tax attributes generally will carry over to the Company. The
Company also should succeed to Chatwins' earnings and profits. The Company
should be treated as a continuation of Chatwins for purposes of computing
depreciation and for other specified purposes.

INTERESTS OF CERTAIN PERSONS

Except as provided below, the Company believes that the interest of the
Company's management and principal stockholders in the consummation of the
Merger arises solely from their respective positions as fiduciaries of the
Company and/or their ownership of securities of the Company, and that such
parties are to receive no extra or special benefit from the Merger that is not
shared on a pro rata basis by all other stockholders. See "--Anti Takeover
Effects".

Nevertheless, as of the date of this Proxy Statement/Prospectus, Chatwins is
the record owner of approximately 38% of the outstanding Common Stock of the
Company, owns a currently exercisable warrant to purchase an additional 1% of
the Company's Common Stock. Accordingly, the beneficial owners of the common
stock of Chatwins currently have the right to vote up to approximately 38% of
the Company's Common Stock and upon exercise of the warrant would have the
right to vote approximately 39% of the Company's Common Stock. (See "Ownership
Information--Security Ownership of Certain Beneficial Owners and Management").

At the Effective Time of the Merger, pursuant to the Merger Agreement, the
Company will retire the shares of the Common Stock of the Company and warrant
to purchase Common Stock of the Company owned by Chatwins. This stock and
warrant have been valued as assets of Chatwins in determining the Merger
consideration. Subsequently, in connection with Merger, the stockholders of
Chatwins will be issued Common Stock of the Company representing approximately
80% of the Common Stock of the Company. Included in this ownership following
the Merger is the ownership by the Bradley FLP (of which Mr. Bradley is the
sole general partner) of approximately 38% of the Common Stock of the Company
(the voting rights in respect of which will be controlled after the Effective
Time by Mr. Bradley's son, Kimball Bradley) and the ownership by Mr. Poole of
approximately 12% of the Common Stock of the Company (assuming in both cases
that all of the Chatwins Warrants are exercised into common stock of Chatwins
prior to the Effective Time). (See "Ownership Information--Security Ownership
of Certain Beneficial Owners and Management") In addition, on May 19, 1998,
Mr. Bradley was granted options to acquire an additional 75,000 shares of
Common Stock by the Board of Directors of the Company and, if the New Option
Plan is adopted, Mr. Poole will acquire options to purchase an additional
15,000 shares of the Common Stock of the Company. Both Mr. Bradley and Mr.
Poole will also be eligible under the New Option Plan for option grants in the
future. Mr. Bradley and Mr. Poole are also beneficial owners of all of the
Chatwins Preferred which will be converted into the Reunion Preferred at the
Effective Time. (See "Ownership Information--Security Ownership of Certain
Beneficial Owners and Management").

70
<PAGE>

relative values of the Company and Chatwins. In addition, one-half of the
directors on the Board of Directors of the Company, which is unanimously
recommending approval of the Merger Agreement and the Merger by the
stockholders of the Company at the Special Meeting, have no affiliation,
whether by security ownership or otherwise, with Chatwins. Nevertheless,
certain relationships between the directors, officers and stockholders of the
Company and Chatwins could raise the question of conflicts of interest in the
negotiation of the terms and conditions of the Merger, including, without
limitation, (i) Mr. Bradley, a director of the Company since June 20, 1995 and
the President and Chief Executive Officer of the Company since October 26,
1995, is the Chairman and a director of Chatwins and a beneficial owner of
approximately 57% of the outstanding (and 48% of the fully diluted) common
stock of Chatwins owned of record by the Bradley FLP, (ii) Mr. Poole, a
director of the Company since April 19, 1996, is a director of Chatwins and a
beneficial owner of approximately 80% of the outstanding (and 66% of the fully
diluted) common stock of Chatwins (approximately 57% of the outstanding shares
and 47% of the fully diluted shares being by virtue of the right to vote the
Chatwins common stock held of record by the Bradley FLP), (iii) Thomas L.
Cassidy, a director of the Company since June 20, 1995, was a director of
Chatwins until June 1997 and currently owns Chatwins' Warrants which will be
converted prior to the Effective Time into less than 1% of the outstanding and
fully diluted common stock of Chatwins (see "Ownership Information--Security
Ownership of Certain Beneficial Owners and Management"). Mr. Bradley, Mr.
Poole and Mr. Cassidy are also holders of an aggregate $4.35 million principal
amount of Chatwins Senior Notes and Mr. Bradley and Mr. Poole are beneficial
owners of all of the Chatwins Preferred. Mr. Bradley and Mr. Evans (Executive
Vice President, Chief Financial Officer and Secretary of the Company) are the
owners of 42.5% and 15% of the common stock of SAC and Mr. Bradley and Mr.
Poole are the owners of 42.5% and 7.5%, respectively, of Stanwich Financial,
which in turn is the holder of $13.5 million of debt and $5.6 million of
preferred stock issued by SAC. As of the date of this Proxy
Statement/Prospectus certain agreements, including a loan settlement
agreement, have been reached in principal whereby Stanwich Financial could
acquire an aggregate of 371,280 shares of Common Stock. Additionally, Chatwins
is currently the owner of approximately 38% of the Common Stock of the
Company. See "Proposal III. The Merger--Refinancing", "Material Contacts with
the Company Being Acquired and Certain Relationships and Related
Transactions". (See "Ownership Information--Security Ownership of Certain
Beneficial Owners and Management" and "Certain Relationships and Related
Transactions").

LEGAL MATTERS

The validity of the shares of Common Stock to be issued in connection with
the Merger and the federal income tax consequences of the Merger to the
Company's and Chatwins' common stockholders have been passed upon for the
Company by Finn Dixon & Herling LLP.

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<PAGE>

OWNERSHIP INFORMATION

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

THE COMPANY

As of June 25, 1998, the Company had outstanding 3,862,565 shares of Common
Stock. The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock at June 1, 1998, by (i) each
stockholder known to the Company to own 5% or more of the Company's Common
Stock, (ii) each director of the Company, (iii) each of the chief executive
officer and the other named executive officers and (iv) all current directors
and executive officers as a group. Except as set forth in the footnotes to the
following table, each stockholder has sole dispositive and voting power with
respect to the shares of the Company's Common Stock shown as owned by him.

<TABLE>
<CAPTION>
AMOUNT AND PERCENT
NATURE OF
NAME (AND ADDRESS OF 5% OF BENEFICIAL OWNERS) OF OWNERSHIP CLASS
--------------------------------------------- ------------ -------
<S> <C> <C>
Chatwins Group, Inc................................... 1,525,000(1) 38.7%
300 Weyman Plaza, Suite 340
Pittsburgh, PA 15236
Parkdale Holdings Corporation N.V..................... 271,280(7) 7.0%
Nieuwestraat 4-6, P.O. Box 210
Curacao, Netherlands Antilles
Thomas N. Amonett..................................... 34,000(2) 0.9%
Charles E. Bradley, Sr................................ 1,525,000(3) 38.7%
c/o Stanwich Partners
(see below for address)
Thomas L. Cassidy..................................... 15,000(2) 0.4%
W. R. Clerihue........................................ 5,000(2) 0.1%
Franklin Myers........................................ 141,210(2)(4) 3.6%
John G. Poole......................................... 1,525,000(2)(5) 38.7%
c/o Stanwich Partners
(see below for address)
Richard L. Evans...................................... 55,000(6) 1.4%
David N. Harrington................................... 0 0.0%
Charles E. Bradley, Jr................................ 271,280(7) 7.0%
c/o Stanwich Partners
(see below for address)
Stanwich Partners, Inc................................ 1,525,000(3) 38.7%
One Stamford Landing
62 Southfield Avenue
Stamford, CT 06902
Charles E. Bradley Sr. Family Limited Partnership..... 1,525,000(3) 38.7%
One Stamford Landing
62 Southfield Avenue
Stamford, CT 06902
Stanwich Financial Services Corp...................... 371,280(7) 9.6%
c/o Stanwich Partners
(see above for address)
All Current Directors and Executive Officers as a
group (8 individuals)................................ 1,775,210(8) 43.7%
</TABLE>
- --------
(1) Includes 75,000 shares that may be purchased pursuant to currently
exercisable warrants, with respect to which Chatwins has dispositive power
only.

(2) Excludes options to purchase 15,000 shares of Common Stock which were
granted February 12, 1998 but which grant is subject to approval by the
stockholders of the New Option Plan at the Special Meeting.
(continued)

72
<PAGE>

(3) Includes all shares of Common Stock shown as beneficially owned by
Chatwins. Mr. Bradley is Chairman of the Board of Chatwins as well as the
beneficial owner of more than 50% of the issued and outstanding shares of
Chatwins. Accordingly, under Rule 13d-3, Mr. Bradley may be deemed
beneficial owner of all shares of the Company's Common Stock beneficially
owned by Chatwins. Mr. Bradley disclaims such beneficial ownership. (See
Note (2) to the ownership table under "--Chatwins" for certain further
information relating to Mr. Bradley's ownership and the Bradley FLP).

(4) Includes a currently exercisable warrant to purchase 75,000 shares of
Common Stock.

(5) Includes all shares of Common Stock shown as beneficially owned by
Chatwins. As described in Note (2) to the table of Chatwins ownership (see
"--Chatwins", in this section), Mr. Poole and SPI may, pursuant to Rule
13d-3, be deemed a beneficial owner of more than 50% of the issued and
outstanding shares of Chatwins and may, under Rule 13d-3, be deemed
beneficial owners of all shares of the Company's Common Stock beneficially
owned by Chatwins. Mr. Poole and SPI disclaim such beneficial ownership.

(6) Includes options to purchase 46,535 shares of Common Stock exerciseable
within 60 days.

(7) Pursuant to a Stock Pledge Agreement, dated as of June 17, 1997, by
Parkdale in favor of Mr. Bradley Jr., Mr. Bradley Jr. is a pledgee of the
271,280 shares of Common Stock owned of record by Parkdale. As of the date
of this Proxy Statement/Prospectus Parkdale has defaulted on a 1997 loan
that is secured through this Stock Pledge Agreement, giving Mr. Bradley
Jr. certain rights to vote and dispose of these 271,280 shares.
Accordingly, Mr. Bradley Jr. may, under Rule 13d-3, be deemed a beneficial
owner of such shares. Mr. Bradley Jr. expressly disclaims such beneficial
ownership as of the date of this Proxy Statement/Prospectus.

As of the date of this Proxy Statement/Prospectus, Mr. Bradley Jr. and
Parkdale have agreed in principal on a settlement arrangement with respect
to the defaulted loan. If approved by the Board of Directors of the Company
as a transaction that may implicate the Transfer Restrictions (see
"Proposal III. The Merger--Extension of Transfer Restrictions; Preservation
of Tax Benefits"), Mr. Bradley Jr. will agree to immediately waive
Parkdale's current default until August 10, 1998, when all amounts of
principal and interest outstanding under the loan would become due and
payable. Mr. Bradley Jr. will also agree to immediately arrange a further
$400,000 loan to Parkdale by Stanwich Financial. Stanwich Financial is
owned 42.5% by Mr. Bradley, 42.5% by Mr. Bradley Jr., 7.5% by Mr. Poole and
7.5% by a third party. Stanwich Financial is the holder of approximately
$13.5 million of debt and $5.6 million of preferred stock issued by SAC
(see "Proposal III. The Merger--King-Way Acquisition"). Parkdale will agree
to immediately execute a proxy in favor of Mr. Bradley Jr. in respect of
all 271,280 shares of Common Stock securing the two loans. Parkdale will
further agree that, following the Merger and on or prior to August 10,
1998, (i) Parkdale will pay all amounts of principal and interest
outstanding under the original $600,000 loan by conveying to Mr. Bradley
Jr. approximately 123,000 shares Common Stock owned of record by Parkdale
(at a valuation of $5.25 per share), (ii) Parkdale will pay all amounts of
principal and interest outstanding under the subsequent $400,000 loan by
conveying to Stanwich Financial approximately 74,000 shares Common Stock
owned of record by Parkdale (at a valuation of $5.50 per share), and (iii)
Parkdale will sell its remaining shares of Common Stock (approximately
74,000 shares) to Stanwich Financial for $5.50 per share. Following the
consummation of these transactions, Mr. Bradley Jr. intends to convey his
approximately 123,000 shares of Common Stock to Stanwich Financial in
repayment of certain amounts owed by Mr. Bradley Jr. to Stanwich Financial.

Also as of the date of this Proxy Statement/Prospectus, Stanwich Financial
has reached an agreement in principal to purchase 100,000 shares of Common
Stock, at market value, from an unaffiliated third party investor.

Although there can be no assurances that any or all of the above
transactions will actually be consummated or be consummated in accordance
with the terms described above, Stanwich Financial may, under Rule 13d-3,
be deemed a beneficial owner of all of the shares that it may acquire
pursuant to these transactions. Stanwich Financial expressly disclaims such
beneficial ownership as of the date of this Proxy Statement/Prospectus.

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<PAGE>

(8) Includes warrants and options to purchase an aggregate of 196,535 shares
of Common Stock exercisable within 60 days. Excludes options to purchase
an aggregate of 75,000 shares of Common Stock which were granted February
12, 1998, but which grant is subject to approval by the stockholders of
the New Option Plan at the Special Meeting.

OUTSTANDING OPTIONS, WARRANTS AND OTHER RIGHTS

Other than rights to exchange shares of predecessors to the Company (which
are included in the current calculation of the Company's issued and
outstanding Common Stock), as of June 22, 1998, the following categories of
rights exist with respect to the Common Stock: (i) warrants to purchase up to
150,000 shares of authorized Common Stock issued under the Warrant Agreements
dated as of July 1, 1992, as amended June 28, 1995, by and among the Company
and the other parties named therein; and (ii) options to purchase up to
153,285 shares of Common Stock under the 1993 Plan (36,285 of which are
presently exercisable). The shares covered by the above-described rights equal
303,285 shares in the aggregate.

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<PAGE>

CHATWINS

As of June 2, 1998, Chatwins had (i) 242,887.4 shares of Common Stock
outstanding, (ii) 2,249.0 shares of Class D Series A Preferred Stock, par
value $.01 per share outstanding, (iii) 800.0 shares of Class D Series B
Preferred Stock, par value $.01 per share outstanding and (iv) 1,510.0 shares
of Class D Series C Preferred Stock, par value $.01 per share outstanding. In
addition, on May 3, 1993 Chatwins issued 50,000 Chatwins Warrants each
exercisable into one share of Chatwins' common stock at $0.01 per share. These
warrants became exercisable on June 2, 1998. The following table sets forth
information, as of June 2, 1998, as to the beneficial and percentage of
ownership of each class of Chatwins' capital stock by (A) each person owning
beneficially more than five percent of the outstanding shares of each class of
Chatwins' outstanding capital stock, (B) each director and Named Executive
Officer of Chatwins and (C) all directors and officers of Chatwins as a group.
Except as otherwise indicated in the notes to the following table, each
stockholder has sole voting and investment power with respect to the shares
shown to be beneficially owned by such stockholder.

<TABLE>
<CAPTION>
PREFERRED STOCK--CLASS D
-----------------------------
SERIES SERIES
COMMON STOCK A SERIES B C
------------ ------- -------- -------
<S> <C> <C> <C> <C>
Charles E. Bradley...... 140,946.6(1)(2)(6) 2,249.0(3) 800.0(3) 1,510.0(4)
c/o Stanwich Partners,
Inc. -- -- --
(see below for address) 57.6% 100.0% 100.0% 100.0%
-- -- --
John G. Poole........... 195,353.6(1)(2)(5)(6) 2,249.0(3) 800.0(3) 1,510.0(4)
c/o Stanwich Partners,
Inc. 79.7% 100.0% 100.0% 100.0%
(see below for address)
-- -- --
Stanwich Partners, Inc. 138,946.6(2) -- -- --
One Stamford Landing -- -- --
62 South Field Avenue 57.2% -- -- --
Stamford, CT 06902 -- -- --
Kimball J. Bradley...... 24,000.0 -- -- --
c/o Stanwich Partners,
Inc. 9.9% -- -- --
(see above for address)
Joseph C. Lawyer........ 18,094.0(6) -- -- --
c/o Chatwins Group,
Inc.
300 Weyman Plaza,
Suite 340 7.4% -- -- --
Pittsburgh PA 15236
Jack T. Croushore....... 4,065.4(6) -- -- --
c/o Chatwins Group,
Inc. 1.7% -- -- --
(see above for address)
All directors and
officers as a group.... 243,163.0 2,249.0 800.0 1,510.0
98.6% 100.0% 100.0% 100.0%
</TABLE>
- --------
(1) Pursuant to the Securities Pledge Agreement, dated as of May 1, 1993 (the
"Securities Pledge Agreement"), Mr. Bradley pledged 127,799 shares of
Chatwins common stock to the Collateral Agent (as defined therein) for the
benefit of the holders of the Senior Notes and Mr. Poole pledged 17,040
shares of Chatwins' common stock to secure the Chatwins' obligations under
the Indenture and the Senior Notes.
(continued)

75
<PAGE>

(2) Includes 138,946.6 shares held of record by the Bradley FLP established by
Mr. Bradley in May 1998 for estate planning purposes and of which Mr.
Bradley owns 1% as general partner and 55% as a limited partner. The
Bradley FLP has designated Stanwich Partners, Inc. to vote these shares,
and Stanwich Partners, Inc. in turn has designated John G. Poole, who is
one of its officers, as the person to vote these shares on its behalf.
Pursuant to Rule 13d-3, Mr. Bradley and the Bradley FLP may be deemed to
be the beneficial owner of these shares with shared dispositive power with
respect thereto, and Stanwich Partners, Inc. and Mr. Poole each may be
deemed to be the beneficial owner of these shares with voting power with
respect thereto.

(3) Held of record by KSB Acquisition Corp., the former owner of the corporate
predecessor-in-interest to the Klemp and Steelcraft divisions of Chatwins,
of which Messrs. Bradley and Poole are the sole executive officers and
directors. Pursuant to Rule 13d-3, Messrs. Bradley and Poole would be
deemed to be the beneficial owners of these shares, with shared voting and
dispositive power with respect thereto.

(4) Held of record by Hanna Investment Corp., the former owner of the
corporate predecessor-in-interest to the Hanna division of Chatwins, of
which Messrs. Bradley and Poole are the sole executive officers and Mr.
Poole is the sole director. Pursuant to Rule 13d-3, Messrs. Bradley and
Poole would be deemed to be the beneficial owners of these shares, with
shared voting and dispositive power with respect thereto.

(5) Includes 42,949.2 shares held of record by John Grier Poole Family Limited
Partnership, established by Mr. Poole in 1995 for estate planning
purposes, and of which Mr. Poole owns 1% and is the sole general partner.
Pursuant to Rule 13d-3, Mr. Poole may be deemed to be the beneficial owner
of these shares, with sole voting and dispositive power with respect
thereto. Also includes 11,457.8 shares as to which Mr. Poole has voting
rights, but not dispositive rights. Pursuant to Rule 13d-3, Mr. Poole may
be deemed to be the beneficial owner of these shares, with sole voting
power with respect thereto.

(6) Includes Chatwins Warrants as follows: Mr. Bradley, 2,000; Mr. Poole,
1,650; Mr. Lawyer, 110; and Mr. Croushore, 20. As a result of Chatwins
signing the Merger Agreement, the Chatwins warrantholders were notified
that if they failed to exercise their warrants within 30 days their
warrants would lapse in accordance with their terms.

76
<PAGE>

MANAGEMENT INFORMATION

EXECUTIVE OFFICERS

The officers of the Company immediately prior to the Merger will be the
officers of the Company immediately following the Merger, except for the
additions of Mr. Lawyer and Mr. Poole (See "Additional Executive Officers"
below). The following individuals currently serve as executive officers of the
Company (or its principal subsidiary) at the pleasure of the Board of
Directors and are subject to annual appointment by the Board at its first
meeting following the annual meeting of stockholders:

<TABLE>
<CAPTION>
NAME POSITION AGE
---- -------- ---
<S> <C> <C>

Charles E. Bradley,
Sr.(1)................... Director, President and Chief Executive 68
Officer of the Company
Richard L. Evans(2)....... Executive Vice President, Chief Financial 46
Officer, and Secretary of the Company
David N. Harrington(3).... President and Chief Operating Officer, ORC 57
</TABLE>
- --------
(1) See "Proposal I. The Election of Directors--Directors" for certain
biographical information.

(2) Mr. Evans joined the Company as Executive Vice President and Chief
Financial Officer in October 1995. He was appointed Secretary of the
Company in December 1995. From May 1993 to September 1995, he was
Controller of Terex Corporation, a capital goods manufacturer. From
October 1989 to May 1993, Mr. Evans was Controller of SPI.

(3) Mr. Harrington has served as Chief Operating Officer of Oneida Molded
Plastics Corp. ("OMPC") (now known as Oneida Rostone Corp., a wholly-owned
subsidiary of the Company) since December 1989 and as its President since
October 1990. From March 1986 through December 1989, Mr. Harrington served
as Vice President and General Manager of OMPC.

ADDITIONAL EXECUTIVE OFFICERS

If the Merger is consummated, Mr. Poole will become the Vice Chairman of the
Company (for information about Mr. Poole, See "Proposal I. Elections of
Directors").

Joseph C. Lawyer, age 52, has been the President, Chief Executive Officer
and a director of Chatwins since 1988, and after the Merger will be the
President and Chief Executive Officer of the Company's Chatwins division.
Prior to purchasing CP Industries, Inc., the corporate predecessor of the
Chatwins' CPI division, Mr. Lawyer was General Manager of USX's Specialty
Steel Products division, where he was employed for over 17 years. Mr. Lawyer
has been a director of Respironics, Inc., a company engaged in design,
manufacture and sale of home and hospital respiratory medical products, since
November 16, 1994.

In the event that the Merger is consummated (i) Mr. Poole will be
compensated as an officer of the Company at a base rate of $60,000 per annum,
and will no longer be compensated as a non-employee director of the Company,
and (ii) Mr. Bradley's base annual compensation as an officer of the Company
($150,000) and of Chatwins ($100,000) will be combined, for a post-Merger base
annual compensation of $250,000.

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<PAGE>

COMMON STOCK PERFORMANCE GRAPH

The following graph illustrates the yearly percentage change in the
cumulative total shareholder return on the Company's common stock, compared
with the cumulative total return on (i) the Standard & Poor's 500 Stock Index,
and (ii) a "Peer Group" Index (the "Peer Group") for the five years ended
December 31, 1997./1/:

FIVE YEAR TOTAL RETURN

[GRAPH APPEARS HERE]

<TABLE>
<CAPTION>
FISCAL YEAR ENDING
---------------------------------------
COMPANY 1992 1993 1994 1995 1996 1997
------- ---- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Reunion Industries, Inc................. 100 274.29 228.57 228.57 182.86 237.26
Peer Group.............................. 100 106.03 99.49 103.84 107.79 141.15
Broad Index............................. 100 110.08 111.54 153.45 188.69 251.64
</TABLE>
- --------
1 Tabular data assumes that the value of the investment in the Company's
Common Stock and each index was $100 at January 1, 1993 and that all
dividends, if any, were reinvested.

2 Standard & Poor's 500 Total Return Index provided by Media General Financial
Services, Inc.

3 Total Return Index provided by Media General Financial Services, Inc. for
the Peer Group of nine companies selected by the Company. American Filtrona
Corp., used previously in this Peer Group by the Company, has since been
acquired, is no longer publicly traded, and hence has been omitted. The Peer
Group is made up of the following:

Advanced Technical Myers Industries Inc.
Products Rotonics Manufacturing
Calnetics Corp. Summa Industries
Essef Corp. Glassmaster Co.
Triple S Plastics Sun Coast Industries Inc.
Inc.

78
<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AND
MATERIAL CONTACTS WITH THE COMPANY BEING ACQUIRED

In addition to the transactions set forth below, the discussion of the
Merger to be voted upon at the Special Meeting (See "Proposal III. The
Merger") is incorporated below by reference. The consummation of the Merger
will impact in some way most of the transactions and relationships discussed
below (See, e.g. "Proposal III. The Merger--Refinancing"). Stockholders are
strongly encouraged to read the discussion below in conjunction with the
discussion of the Merger in this Proxy Statement/Prospectus.

CHATWINS ACQUISITION

On June 20, 1995, Chatwins acquired 1,450,000 shares, or approximately 38%,
of the Company's Common Stock (the "Purchased Shares") from Parkdale (the
"Chatwins Acquisition"). In connection with the Chatwins Acquisition, the
271,280 remaining shares of the Company's common stock owned by Parkdale as
well as 66,210 shares of common stock (the "Myers Shares") and a warrant to
purchase 75,000 shares of common stock owned by Franklin Myers (the "Myers
Warrant" and, collectively with the Myers Shares, the "Myers Securities") were
delivered into a 3-year escrow arrangement. Each of Myers and Parkdale also
entered into 3-year standstill agreements with Chatwins regarding the
purchase, sale and transfer of Company securities and delivered to Chatwins 3-
year proxies expiring June 15, 1998 to vote all of their respectively-owned
shares of common stock (the "Chatwins Proxies"). These escrow arrangements,
standstill agreements and Chatwins Proxies have recently expired. At the time
of the Chatwins Acquisition, Chatwins acquired from P. Dean Gesterkamp a
warrant to purchase 75,000 shares of the Company's common stock (the
"Gesterkamp Warrant"). As a result of the Chatwins Acquisition and related
transactions, Chatwins obtained voting control over approximately 45% of the
Company's Common Stock until June 15, 1998.

Charles E. Bradley, Sr., a Director of the Company since June 20, 1995 and
the President and Chief Executive officer of the Company since October 26,
1995, is the Chairman and a Director of Chatwins and a beneficial owner of
approximately 57% of the outstanding (and 48% of the fully diluted) common
stock of Chatwins. John G. Poole, a Director of the Company since April 19,
1996, is a Director of Chatwins and a beneficial owner of approximately 80% of
the outstanding (and 66% of the fully diluted) common stock of Chatwins
(approximately 57% of the outstanding shares and 47% of the fully diluted
shares being by virtue of the right to vote the Chatwins common stock held of
record by the Bradley FLP). Thomas L. Cassidy, a Director of the Company since
June 20, 1995, was a director of Chatwins until June 1997 and currently owns
Chatwins Warrants which will be converted prior to the Effective Time into
less than 1% of the outstanding and fully diluted common stock of Chatwins
(see "Proposal I. The Election of Directors" and "Ownership Information--
Security Ownership of Certain Beneficial Owners and Management"). Mr. Bradley,
Mr. Poole and Mr. Cassidy are also holders of an aggregate $4.35 million
principal amount of Chatwins Senior Notes and Mr. Bradley and Mr. Poole are
currently beneficial owners of all of the Chatwins Preferred.

ONEIDA ACQUISITION

On September 14, 1995 the Company purchased from Chatwins Holdings, Inc.
("CHI"), a Delaware corporation and wholly-owned subsidiary of Chatwins, all
of the issued and outstanding common stock and preferred stock of Oneida (the
"Oneida Acquisition"). The aggregate purchase price for the shares totaled

79
<PAGE>

$3,107,484, which was funded entirely from internal cash reserves of the
Company. Oneida's liabilities at the time of acquisition included $4,932,940
payable to Chatwins on account of Chatwins' advances to Oneida between March
31, 1994 (when Chatwins acquired Oneida) and August 31, 1995. The stock
purchase agreement between the Company and Chatwins required the Company to
cause Oneida to repay this indebtedness to Chatwins (the "Oneida-Chatwins
Debt") plus interest thereon at 10% per annum from September 1, 1995 on or
before September 14, 1997, or earlier from the net proceeds, if any, of the
sale of the Company's other material assets. The Oneida/Chatwins Debt was
subsequently memorialized by a Subordinated Promissory Note issued by Oneida
to Chatwins. Interest on this note was payable monthly. As a condition
precedent to the consummation of the merger of Rostone Corporation ("Rostone")
and Oneida on February 2, 1996, Congress, a lender to both Chatwins and
Oneida, required Chatwins to subordinate its right to repayment of the
Oneida/Chatwins Debt to the prior payment of Oneida's indebtedness to
Congress, except to the extent provided in the subordination agreement
executed by the Company on February 2, 1996. The Company made cash payments,
funded from the proceeds of the sale of the Company's oil and gas assets, to
Chatwins of $1,550,000 in 1995 and $3,664,063 in 1996, each including interest
at 10% per annum, in full repayment of the Oneida/Chatwins Debt.

The financial terms of the Oneida Acquisition were determined based on
Oneida's financial position and results of operations at and for the six
months ended June 30, 1995. The terms of the transaction were approved by the
unanimous vote of the directors of the Company at the time with Messrs.
Bradley and Cassidy abstaining. Both the Company and Chatwins received a
fairness opinion in connection with the Oneida Acquisition.

One hundred percent of the $3,107,484 cash proceeds received by Chatwins in
the Oneida Acquisition were applied to repay a portion of Chatwins's
obligations under the Parkdale Note, then held by Mr. Bradley, as required by
the terms thereof. See "--The Parkdale and Gesterkamp Notes".

On March 31, 1994, Chatwins had purchased (i) the then issued and
outstanding common stock of Oneida (the "Oneida Common Stock") for $1.00 from
Oneida Products Corp. ("OPC"), a wholly-owned subsidiary of Oneida Products
Acquisition Corp. ("OPAC"), (ii) 16,016 shares of Oneida preferred stock for
$160.16 from SPI, and (iii) 8,984 shares of Oneida preferred stock for $89.84
from Stanwich Oil & Gas, Inc. ("SOG") (together the "Oneida Preferred Stock").
Messrs. Bradley and Poole are officers, directors and controlling stockholders
of SPI and SOG. Mr. Bradley is the President, acting Chief Financial Officer,
a director and a stockholder of Texon Energy Corporation ("Texon"), the sole
stockholder of OPAC and beneficial owner of approximately 14% of Texon's
outstanding common stock.

Immediately prior to the Chatwins acquisition of Oneida, Oneida had assumed
$2,500,000 of liabilities (the "Assumed Liabilities") of OPAC, as
consideration for OPAC's authorizing the acquisition. The Assumed Liabilities
included (i) $1,993,367 of liabilities of OPAC to SPI ("SPI Assumed
Liabilities"), (ii) $40,166 outstanding under two Promissory Notes, each
issued on June 17, 1988 by OPAC to David N. Harrington and each in the
original principal amount of $30,000 and bearing interest at 9% per annum and
(iii) $466,467 outstanding under three Subordinated Promissory Notes, each
issued on January 25, 1991 by OPAC to a former owner of Oneida, in the
respective original principal amounts of $270,000, $350,000 and $515,000 and
each bearing no interest. At all relevant times, Mr. Harrington was an
executive officer and director of Oneida and is currently the President and
Chief Executive Officer of ORC. In connection with the assumption of the
Assumed Liabilities, (a) SPI exchanged $1,601,600 of the SPI Assumed
Liabilities for 16,016 shares of Oneida Preferred Stock, which SPI then sold
to Chatwins for $160.16 as described in the preceding paragraph, and (b) SOG
exchanged $898,400 of indebtedness outstanding under a Subordinated Promissory
Note issued by Oneida to SOG on May 31, 1990 in the original principal amount
of $750,000 bearing interest at 12% per annum and a Subordinated Promissory
Note issued by Oneida to SOG on May 10, 1991 in the original principal amount
of $9,000 bearing interest at 12% per annum for 8,984 shares of Oneida
Preferred Stock, which SOG then sold to Chatwins for $89.84 as described in
the preceding paragraph. As further consideration for OPAC's approval of the
acquisition, Oneida cancelled intercompany receivables relating to the payment
of legal and accounting fees and taxes from Texon and its subsidiaries of
approximately $865,000.

80
<PAGE>

The portion of SPI Assumed Liabilities that was not exchanged for shares of
Oneida Preferred Stock consisted of (i) $273,400 outstanding under a
Subordinated Promissory Note (the "SPI Subordinated Note") issued by OPAC to
SPI on June 17, 1988 in the original principal amount of $500,000 bearing
interest at 10% per annum and (ii) a $118,367 transaction fee (the "SPI
Transaction Fee") owed by OPAC to SPI for investment banking services rendered
by SPI in connection with OPAC's acquisition of OPC in June 1988. Oneida did
not assume OPAC's obligation to pay interest on the SPI Subordinated Note.
With the consent of Congress, Oneida paid SPI $45,000 in October 1994 as
partial payment of the SPI Transaction Fee, leaving a balance of $73,367 at
December 31, 1994 which was paid in 1995.

Prior to the acquisition of Oneida by Chatwins, OPC had pledged all of its
shares of Oneida capital stock to Signal Capital Corporation ("Signal") to
secure OPC's indebtedness to Signal of approximately $28.7 million (the "OPC
Signal Debt"). As consideration for its consent to the acquisition and the
release of the pledge, Signal entered into the Deferred Payments Agreement on
March 30, 1994 with Oneida and Chatwins which provided that Oneida would pay
Signal (i) 50% of Oneida's EBT (as defined in the Deferred Payments Agreement)
in excess of $750,000 per year for the five fiscal years ending December 31,
1994 through December 31, 1998, subject to certain conditions, and (ii) 20% of
the net proceeds which Oneida received from any sale of shares of its capital
stock in any underwritten public offering of such shares prior to December 31,
1998. Signal was obligated to apply these payments by Oneida to the reduction
of the OPC Signal Debt. As of August 18, 1995, Oneida had incurred no payment
obligations to Signal under the Deferred Payments Agreement. Mr. Bradley had
guaranteed the payment of the OPC Signal Debt. On August 18, 1995, Mr. Bradley
settled in full all claims of Signal against him. The Deferred Payments
Agreement was terminated as part of that settlement.

ROSTONE/ONEIDA MERGER

On February 2, 1996, Rostone was merged with and into Oneida, by then a
wholly-owned subsidiary of the Company (the "Rostone/Oneida Merger"), pursuant
to a Merger Agreement (the "Rostone/Oneida Agreement") dated as of December
22, 1995. Pursuant to the Rostone/Oneida Agreement, Oneida, as the surviving
corporation, changed its name to, Oneida Rostone Corp. ("ORC"). The purchase
price payable by ORC under the Rostone/Oneida Agreement to the stockholders of
Rostone was an amount up to $4,000,503 as follows: (i) $503 in 1996, (ii) up
to $2,000,000 in 1997 if Rostone achieved specified levels of earnings before
interest and taxes (as provided in the Rostone/Oneida Agreement) for the
calendar year 1996 and (iii) up to $2,000,000 in 1998 if Rostone achieved
specified levels of earnings before interest and taxes (as provided in the
Rostone/Oneida Agreement) for the calendar year 1997. Under the terms of ORC's
Loan Facility (described below), all such payments could only be made from
equity contributions the Company may provide to ORC. The financial terms of
the transaction were determined based on Rostone's financial position and
results of operations for the fiscal year ended December 31, 1994 and for the
eleven months ended November 30, 1995. The terms of the Rostone/Oneida Merger
were approved by the unanimous vote of the directors of the Company, including
by all disinterested directors.

In the Rostone/Oneida Merger, ORC acquired 100% of the preferred and common
stock of Rostone from CGI Investment Corp. ("CGII") a company owned 51% by SPI
and 49% by Chatwins. Mr. Bradley, Mr. Poole and Mr. Evans are officers,
directors and/or shareholders of SPI. Prior to the Rostone/Oneida Merger
certain officers of Oneida were also serving as officers of Rostone and CGII.

Rostone did not achieve the level of earnings before interest and taxes in
either 1996 or 1997 as specified in the Oneida/Rostone Agreement for the
payment of deferred merger proceeds in 1997 or 1998. Accordingly, CGII will
not receive any deferred merger proceeds pursuant to the Rostone/Oneida
Agreement. Prior to the Rostone/Oneida Merger, Rostone's preferred stock was
pledged by CGII to Chatwins to secure the Chatwins' December 1993 loan to CGII
of $1,350,000 (as discussed below, Chatwins had made three loans to CGII), and
hence any merger proceeds were to be paid to Chatwins until the debt and
related interest was paid in full. Over time, Chatwins has provided reserves
for a substantial portion of the principal on its notes receivable from CGII.
At December 31, 1997, the net carrying value of Chatwins' investment in CGII
common stock and net notes receivable was $600,010.

81
<PAGE>

CGII's primary assets remaining after the sale of Rostone are two notes
receivable from affiliates of Chatwins and a minimal amount of cash, the sum
of which total $691,469 at December 31, 1997. Upon liquidation, these assets
would be allocated among CGII's remaining creditors, one of which is Chatwins.

Prior to the Rostone/Oneida Merger, Rostone was indebted to CGII pursuant to
a $250,000 promissory note dated May 21, 1993. The note had an outstanding
balance of $448,725 (principal and accrued interest) on December 31, 1997, and
is subordinated to the prior payment of indebtedness owing by ORC to Congress,
except that if certain conditions are met, regularly scheduled monthly
interest payments may be paid when due. ORC is also permitted to recover
certain environmental remediation costs relating to soil and ground water
contamination at Rostone's Lafayette, Indiana site by offset against this
note. As of December 31, 1997 the recoverable costs incurred totaled $118,830,
and the estimated remaining costs were approximately $280,000.

Prior to the Rostone/Oneida Merger, Rostone was the lessee of certain
equipment beneficially owned by Chatwins and Mr. Bradley. Chatwins and Mr.
Bradley shared the risks and benefits under the lease pro rata in proportion
to the purchase price of the equipment paid to the equipment manufacturer by
each (57% for Chatwins and 43% for Mr. Bradley). In May 1996, this equipment
was purchased by a third-party lessor, which continues to lease the equipment
to ORC.

ORC FACILITY WITH CONGRESS

Contemporaneous with the Rostone/Oneida Merger, ORC and its wholly-owned
subsidiary at the time, Oneida Molded Plastics Corp. of North Carolina ("OMPC-
NC"), amended and restated the terms of their secured credit facility (the
"Loan Facility") with Congress to provide for term loans in an aggregate
principal amount of $6,600,000 and revolving loans initially in an aggregate
principal amount of up to $9,400,000. The loan proceeds borrowed on February
2, 1996 were primarily used to refinance Rostone's bank and institutional
debt.

To facilitate the closing of the Rostone/Oneida Merger and the Loan
Facility, Mr. Bradley entered into several financial arrangements with
Congress and an existing creditor of Rostone. To induce Congress to consummate
the Loan Facility Mr. Bradley guaranteed the obligations of ORC and OMPC-NC
under the Loan Facility subject to a cap of $4 million, which cap declines
over time to $2 million. Mr. Bradley will receive a credit support fee from
ORC and OMPC-NC in an aggregate amount equal to one percent (1%) per annum of
the amount guaranteed, payable monthly. Mr. Bradley's rights to payment of the
monthly installments of the credit support fee are subordinated to the prior
payment of indebtedness owing by ORC to Congress, except that if certain
conditions are met, the monthly installments may be paid when due. As a
further inducement to Congress, Mr. Bradley entered into an environmental
indemnity agreement pursuant to which Mr. Bradley agreed to indemnify Congress
against liabilities that may arise from environmental problems that may be
associated with ORC's existing properties and to reimburse Congress for
certain investigatory and cleanup costs that Congress may incur should
Congress request that those activities be performed by ORC and should ORC fail
to perform them.

To induce an existing creditor of Rostone to permit the Rostone/Oneida
Merger and Loan Facility to be consummated, Mr. Bradley agreed to purchase
from this creditor 50% of the $2,034,225 owing to him by Rostone on February
2, 1996 if this indebtedness were restated to provide for quarterly
amortization over a two year period with interest at 10% per annum payable
quarterly subject, however, to a subordination agreement with Congress. As a
result of this transaction, Mr. Bradley and the creditor each hold a note from
ORC in the amount of $1,017,112.50 bearing interest at 10% per annum which is
subordinated to the prior payment of indebtedness owing by ORC to Congress,
except that if certain conditions are met, regularly scheduled payments of
interest may be paid when due. (See "Proposal III. The Merger--Refinancing")

In connection with ORC's acquisition of the assets and business of Quality
Molded Products, Inc. ("QMP") on November 18, 1996, Congress extended to ORC a
$1,000,000 temporary overformula line as part of the amendment of the Loan
Facility to increase the maximum amount to $20,000,000. Mr. Bradley guaranteed
the

82
<PAGE>

amounts, if any, borrowed under this overformula line, and received a credit
support fee from ORC of $833 per month. The overformula line expired February
14, 1997, and the fee terminated as of that date.

DPL ACQUISITION

On November 18, 1996, ORC completed the acquisition (the "DPL Acquisition")
of Data Packaging Limited ("DPL") by acquiring 68% of the outstanding stock of
DPL, pursuant to a Stock Purchase Agreement with a creditor of Texon and its
subsidiaries. The DPL stock had been pledged by such subsidiaries as
collateral for debt obligations, and had been acquired by the creditor through
foreclosure.

Prior to the DPL acquisition, DPL was indebted to SOG pursuant to a $250,000
loan agreement dated June 14, 1995. Mr. Bradley and Mr. Poole are officers,
directors and the principal shareholders of SOG. On December 16, 1996, the
Company purchased the indebtedness from SOG for $249,430, representing the
outstanding balance of principal and interest at that date.

OTHER COMPANY AND ORC AFFILIATE AGREEMENTS

In November 1995, Mr. Bradley loaned the Company $1,350,000 under the terms
of two notes, each bearing interest from November 1, 1995 at a rate of 10% per
annum and each due and payable on September 14, 1997. These notes were repaid
in May 1996 from the proceeds of the sale of the Company's oil and gas assets.

Beginning in 1997, ORC has entered into leases for machinery and equipment
with CPS Leasing, Inc. ("CPSL"), a subsidiary of Consumer Portfolio Services,
Inc. ("CPS"). Mr. Bradley and Mr. Poole are Directors and stockholders of CPS.
The leases are for terms of five to seven years, with aggregate future minimum
rental commitments of $706,000 as of December 31, 1997. The Company believes
that the terms of these leases are comparable to those available from third
parties.

The Company obtains its property, casualty and product and general liability
insurance coverage through a joint arrangement with Chatwins. The Company and
Chatwins share the costs in proportion to the coverages.

The Company subleases from SPI approximately 1,500 square feet of office
space in Stamford, Connecticut for its corporate offices. The terms of this
sublease are at least as favorable to the Company as would be in the case in
an arm's length transaction. Rent expense for 1997 totaled $32,000.

In May 1997, the Company loaned $1,500,000 to SST Acquisition Corp., a
company in which Mr. Bradley and Mr. Poole are stockholders. The loan was
repaid after three days with interest at 9% plus a $15,000 transaction fee.

Under the arrangements described above, the Company's consolidated statement
of operations for the year ended December 31, 1997 includes interest expense
of $112,000 to Mr. Bradley and $38,000 to CGII; guarantee fees of $41,000 to
Mr. Bradley; and rent expense of $64,000 to CPS Leasing. At December 31, 1997,
the Company's consolidated balance sheet includes interest and fees payable to
Mr. Bradley of $28,000 and CGII of $72,000 classified as Current Liabilities;
principal payable to Mr. Bradley of $1,017,112.50 and payable to CGII of
$368,000 classified as Long Term Debt-Related Parties; and interest and fees
payable to Mr. Bradley under prior arrangements of $123,000 classified as
Other Liabilities. At December 31, 1997, future minimum rental commitments to
CPS Leasing under operating leases totaled $706,000.

Beginning February 1998, both the Company and Chatwins have entered into
arrangements for flying services with Butler Air, Inc. ("Butler"). Mr. Bradley
is a director and principal beneficial owner of Butler. Butler provides
charter flight services for certain business travel by Company and Chatwins
officers and employees at rates which the Company believes are comparable to
those available from third parties. The Company and Chatwins pay monthly
minimums of $5,000 each, which are credited against services as used.

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<PAGE>

PARKDALE DEFAULTED LOAN

On June 17, 1997 Charles E. Bradley Jr. ("Mr. Bradley Jr."), Mr. Bradley's
son, loaned $600,000 to Parkdale. The loan is secured by a pledge of the
271,280 shares of the Company's Common Stock owned of record by Parkdale. As
of the date of this Proxy Statement/Prospectus, Parkdale has defaulted on this
loan by failing to make certain required payments, giving Mr. Bradley Jr.
certain rights to vote and dispose of these 271,280 shares. See "Ownership
Information--Security Ownership of Certain Beneficial Owners and Management"
for a summary of an agreement in principal with respect to this loan.

CHATWINS SENIOR NOTES

As of March 31, 1998, the following persons who will serve as directors or
executive officers of the Company after the Merger own the principal amount of
Chatwins Senior Notes set forth opposite their names, all of which were
purchased in open market transactions. (See also "Ownership Information--
Chatwins" and "Proposal III. The Merger--Interests of Certain Persons").

<TABLE>
<CAPTION>
PRINCIPAL
NAME AMOUNT
---- ----------
<S> <C>
Charles E. Bradley............................................. $2,000,000
Joseph C. Lawyer............................................... 60,000
John G. Poole.................................................. 2,000,000
Thomas L. Cassidy.............................................. 350,000
</TABLE>

CHATWINS/SPI CONSULTING AGREEMENT

Chatwins entered into a consulting agreement with SPI, dated and effective
as of March 31, 1993, as amended (as amended, the "Consulting Agreement").
Under the Consulting Agreement, Chatwins retains SPI to render consulting
services within the field of financial planning and reporting. The original
Consulting Agreement was scheduled to expire on March 31, 1998, but was
extended for an additional five-year period to expire on March 31, 2003 unless
terminated earlier by SPI on 30 days' notice. The Consulting Agreement
provides for the payment of an annual consulting fee to SPI of $300,000, and
the reimbursement of any reasonable and necessary out-of-pocket expenses
incurred by SPI in connection with its performance under the Consulting
Agreement. The Consulting Agreement provides that SPI's right to receive
consulting fees is subordinated to the right of the holders of the Chatwins
Senior Notes to receive payments of principal and interest on the Chatwins
Senior Notes.

Consulting fees expensed by Chatwins to SPI were $300,000 in 1997 in
accordance with the Consulting Agreement. All consulting fees owed to SPI by
Chatwins under the Consulting Agreement were paid in full at December 31,
1997.

THE PARKDALE AND GESTERKAMP NOTES

As part of the aggregate purchase price paid by Chatwins to Parkdale in the
Chatwins Acquisition, Chatwins issued a promissory note to Parkdale, bearing
interest at 10% per annum and originally due on September 18, 1995 in the
original principal amount of $5,800,000 (the "Parkdale Note"). The Parkdale
Note was guaranteed by Mr. Bradley and secured by a pledge of 100% of the
stock of CHI (the "Pledge"). In a letter agreement dated September 14, 1995
(the "Letter Agreement"), Parkdale informed Chatwins of its desire to sell the
Parkdale Note to Mr. Bradley. In connection with this proposed sale and as
part of the Letter Agreement, Chatwins and Parkdale amended the terms of the
Parkdale Note to extend its maturity date to December 31, 1995. Also as part
of the Letter Agreement, Chatwins and Parkdale terminated the Pledge. On
September 14,

84
<PAGE>

1995, Mr. Bradley purchased the Parkdale Note from Parkdale for $5,946,192,
being the principal thereof and accrued interest thereon through September 14,
1995, less the portion of said interest Mr. Bradley was required to withhold
and remit to the Internal Revenue Service under U.S. tax laws.
Contemporaneously with Mr. Bradley's purchase of the Parkdale Note and as
required by the terms thereof, Chatwins made a partial repayment of the
Parkdale Note totalling $3,107,484, being 100% of the proceeds to Chatwins
from the Oneida Acquisition described above. During 1996, Chatwins made
further payments of the Parkdale Note totalling $2,619,609, including
interest, and Chatwins and Mr. Bradley agreed to further amendments of the
Parkdale Note, extending its maturity date until December 31, 1996. At
December 31, 1996, the amount still owed by Chatwins under the Parkdale Note
was $473,196 and in January 1997, which was within the 45-day grace period
from the maturity date as stipulated in the original note agreement, Chatwins
paid Mr. Bradley $475,306, including interest, in final repayment of the
Parkdale Note.

In connection with the Chatwins Acquisition, Chatwins purchased the
Gesterkamp Warrant. The purchase price for the Gesterkamp Warrant totalled
$483,000 and consisted of $283,000 paid in cash and a promissory note in the
original principal amount of $200,000 (the "Gesterkamp Note"). Subsequent to
its issuance, the Gesterkamp Note was purchased by Mr. Myers, a Director of
the Company. The Gesterkamp Note bore interest at 10% per annum. On each of
January 6 and June 6, in each of 1996 and 1997, Chatwins made principal
repayments of $50,000 each, plus interest, to Mr. Myers in repayment of the
Gesterkamp Note. At December 31, 1997, the Chatwins' liability to Mr. Myers
under the Gesterkamp Note was fully repaid. The Gesterkamp Note was secured by
the Gesterkamp Warrant.

CERTAIN CHATWINS LOANS

Robinson

Chatwins had outstanding loans to Robinson Incorporated ("Robinson"), a
corporation controlled by Mr. Bradley, Mr. Poole, Mr. Lawyer and Jack T.
Croushore, Vice President of Chatwins. Robinson is an oil and gas company
operating in Oklahoma. The aggregate amount of such loans and the largest
principal amount ever outstanding under such loans was $800,000. Chatwins
advanced $500,000 of these funds to Robinson on April 19, 1990 and an
additional $300,000 on August 15, 1990, in connection with Robinson's
acquisition of the assets of the Chapter 11 bankruptcy estates of Robinson
Brothers Drilling Inc. and Robinson Brothers Drilling Company. The loans were
evidenced by two notes bearing interest at the prime rate of Chemical Bank
plus 2%. The entire principal and accrued interest on the notes was payable on
demand at any time between March 31 and April 19 of each year. In 1992 and
1993, Chatwins demanded and received $59,700 and $51,200, respectively, in
payment of interest due for all of 1990 and a portion of 1991. In December
1995, Chatwins agreed to settle in full the two notes receivable from Robinson
for the cash payment of $58,000 plus a warrant to purchase up to 50% of the
common stock of Robinson at any time in the future. As a result of this
agreement, Chatwins recognized a $701,000 loss on the settlement of these
notes which is included in other expense in the 1995 income statement. On
December 29, 1997, the Company purchased the Robinson warrant from Chatwins
for $22,676 in cash.

Rostone and CGII

In April 1990, Chatwins had purchased from CGII 490 shares (49%) of the
common stock of CGII for $490 and SPI had acquired from CGII 510 shares (51%)
for $510. CGII in turn borrowed $3.0 million (the "CGII-TCW Loan") from TCW
Placements Fund III (together with certain other Trust Company of the West
investment funds, "TCW"), which was used by CGII to acquire 100% of the
outstanding preferred stock and approximately 80% of the fully diluted common
stock of Rostone for an aggregate purchase price of approximately $2.9
million. On February 2, 1996, CGII acquired the minority equity interest in
Rostone's common stock it did not already own. Rostone compounds and molds
thermoplastic polyester resin (bulk and sheet molding compound) primarily for
the electrical distribution market and business machine market.

To induce TCW to lend $3,000,000 to CGII (i) Chatwins issued warrants of
Chatwins to TCW with respect to 4,707 shares of common stock of Chatwins, (ii)
TCW was given the right to acquire all the outstanding CGII

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equity from Chatwins and SPI at a price of $1.00 per share, (iii) Messrs.
Bradley and Poole and another of their affiliated companies guaranteed CGII's
obligations to TCW and secured these obligations with pledges of certain of
their assets, including all of the Class E Preferred Stock of Chatwins, (iv)
Chatwins executed a subordinated guaranty of CGII's $3,000,000 debt obligation
to TCW and (v) Chatwins and SPI granted each other cross-call options on their
shares of CGII's equity.

As part of Chatwins' 1990 refinancing of its indebtedness and repayment of
its outstanding obligations to TCW, Chatwins' participation in the April 1990
CGII transaction was restructured as follows: (i) Chatwins loaned CGII
$1,500,000 evidenced by a note bearing interest, payable monthly, at the prime
rate of the First National Bank of Chicago plus 1.5% (9.75% at December 31,
1996) (the "CGII-Chatwins Note One"); (ii) CGII used the $1,500,000 loan from
Chatwins to repay a portion of its indebtedness to TCW; (iii) Chatwins'
warrants were returned by TCW and cancelled and were replaced by warrants
issued by CGII to purchase 112 shares of CGII's common stock; (iv) Chatwins'
subordinated guaranty in favor of TCW was terminated; and (v) the cross-call
option was amended to provide that (a) Chatwins has the right to acquire (the
"Chatwins Call") SPI's 510 shares in CGII for $510 until such time as the
CGII-Chatwins Note One is paid in full, subject to TCW's prior right to
acquire such equity for $1.00 per share until such time as CGII's remaining
obligations to TCW are paid in full, and (b) if the CGII-Chatwins Note One
shall be paid in full prior to Chatwins' exercise of its right to acquire
SPI's fifty-one percent (51%) interest in CGII, then SPI shall have the right
for five years to acquire (for $440) 440 of the Chatwins' 490 shares in CGII
commencing after the Chatwins Call has terminated and expired (without having
been exercised). As of the date hereof, the cross-call option is still in
effect.

On May 3, 1993, Messrs. Bradley and Poole applied $76,480 and $505,140,
respectively, of the proceeds they received for the redemption of Chatwins
Preferred, receiving notes from CGII in exchange, to reduce the CGII-TCW Loan
in accordance with the guarantees made by Messrs. Bradley and Poole for the
benefit of TCW, thus reducing TCW's exposure under the CGII-TCW Loan. In
connection with this payment, TCW agreed to subordinate its rights to
repayment by CGII with respect to the remaining amounts outstanding under the
CGII-TCW Loan to the Chatwins' right to repayment of the CGII-Chatwins Note
One.

In December 1993, Chatwins loaned an additional $1,350,000 to CGII evidenced
by a note having a maturity of two years and bearing interest, payable
annually, at a rate of 10% (the "CGII-Chatwins Note Two"). The proceeds of the
CGII-Chatwins Note Two were used to pay TCW $1.2 million in full and final
satisfaction of the CGII-TCW Loan and prepay to Chatwins' interest of $150,000
on the CGII-Chatwins Note Two. Rostone's preferred stock was previously
pledged by CGII to Chatwins to secure the CGII-Chatwins Note Two. However, as
discussed above, on December 22, 1995, Rostone and Oneida entered into a
merger agreement whereby Rostone was subsequently merged into Oneida and
Oneida's name was changed to ORC, which acquired from CGII all of the issued
and outstanding preferred and common stock of Rostone.

The largest principal amount ever outstanding under the CGII-Chatwins Note
One was $1,500,000. The CGII-Chatwins Note One is in default both as to the
payment of interest and the repayment of principal. Under the terms of the
CGII-Chatwins Note One, from April 16, 1991 CGII became obligated to pay, in
addition to said interest and principal, an amount which when combined
therewith would yield Chatwins a 25% internal rate of return on the $1,500,000
loan. As of December 31, 1997, an aggregate of $7,876,839 was due to Chatwins
under the CGII-Chatwins Note One and $1,741,500 under the CGII-Chatwins Note
Two.

In February 1994, Chatwins loaned $299,000 to CGII evidenced by a demand
promissory note bearing interest at an annual rate of 7.5% payable with the
repayment of principal. As of December 31, 1997, an aggregate of $386,365
principal and interest was outstanding under this loan from Chatwins to CGII.

On May 19, 1995, Chatwins became obligated to Krause Maffei Corporation for
$1,022,944 for the production of three plastic injection molding machines
which Chatwins intended to purchase and lease to Rostone for $19,500 per month
for 60 months. The equipment was delivered to Rostone in June 1995. In
November 1995, Mr. Bradley agreed to become a co-venturer in the purchase and
lease of the equipment to Rostone by paying to the equipment manufacturer the
$439,684 balance due thereon. In April 1996, a third-party

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lessor purchased the equipment and Chatwins received $602,702 which
represented the amount paid by Chatwins to the manufacturer plus interest
thereon at 13.5% per annum.

CHATWINS STOCKHOLDER NOTES

In January 1988, Mr. Bradley, Mr. Poole and two former stockholders of
Chatwins subscribed for Chatwins Preferred in consideration of their payment
of an aggregate of $57,500 in cash and their personal interest free demand
notes, dated January 15, 1988, payable to Chatwins in the aggregate principal
amount of $1,092,500 (the "Chatwins Stockholder Notes"). The class of
preferred stock acquired by them was converted into common stock of Chatwins
in connection with the May 1988 merger that combined most of Chatwins'
business lines as divisions of Chatwins. At the time the Chatwins Stockholder
Notes were executed, Chatwins and Messrs. Bradley and Poole and such other
former stockholders had an unwritten understanding that payment on the
Chatwins Stockholder Notes would not be demanded until such time as Chatwins
was sold or funds for the repayment of the Chatwins Stockholder Notes were
distributed to them as dividends on their shares of Chatwins common stock.

At the time of the May 1988 merger, Messrs. Bradley, Poole and one of the
former stockholders granted Chatwins the option to acquire from them an
aggregate of 9,175.5 shares of Chatwins common stock at their original cost of
$10 per share, as follows: Mr. Bradley granted Chatwins an option to purchase
6,422.85 shares; Mr. Poole granted Chatwins an option to purchase 2,064.49
shares; and the former stockholder granted Chatwins an option to purchase
688.16 shares. As part of the December 1990 refinancing, Chatwins exercised
its option in full and paid for said shares by reducing the amounts due under
the respective Stockholder Notes to the amounts currently outstanding as set
forth below.

In September 1993, Chatwins purchased all the shares of Chatwins common
stock owned by the obligors of the Stockholders Notes other than Messrs.
Bradley and Poole. In connection with Chatwins' purchase of such shares,
Messrs. Bradley and Poole assumed the obligations of such former stockholders
under their respective Chatwins Stockholder Notes. The amount outstanding at
December 31, 1997 under (i) Mr. Bradley's Chatwins Stockholder Note was
$643,166, (ii) Mr. Poole's Chatwins Stockholder Note was $206,704, and (iii)
the two other Stockholder Notes assumed by Messrs. Bradley and Poole was
$150,874. (See "Proposal III. The Merger--General Merger Terms").

BRADLEY GUARANTEES OF CHATWINS' CREDIT FACILITY

The Availability C Component of the Chatwins' revolving credit facility with
Congress is guaranteed by Mr. Bradley. Mr. Poole has agreed with Mr. Bradley
to assume one third of this guarantee. In consideration of this guarantee,
Chatwins agreed to pay Mr. Bradley and Mr. Poole a total guarantee fee equal
to 5% per annum on the outstanding principal amount of the Advances (as
defined in Chatwins' loan agreement with Congress) under the Availability C
Component. During 1997, Chatwins paid guarantee fees to Mr. Bradley and Mr.
Poole of $14,275 and $7,137, respectively. In addition, Mr. Bradley guaranteed
$4,000,000 of borrowings under Chatwins' loan agreement with Congress that
Chatwins incurred in connection with Chatwins' investment in the Company. The
guarantee was amended on October 18, 1995, to provide, among other things,
that the amount of this supplemental guarantee be reduced to $1,500,000. No
fees were payable by Chatwins to Mr. Bradley in connection with this
guarantee. As of December 31, 1995, the balance of Chatwins' borrowings under
this revolving credit facility related to the investment in the Company had
been repaid and the other conditions to Mr. Bradley's supplemental guarantee
were satisfied, thereby releasing Mr. Bradley from any obligations thereunder.

On August 12, 1991, Mr. Bradley agreed to guarantee up to $2,000,000 under
Oneida's credit facility. In connection with this guarantee, Oneida entered
into a Subordinated Guaranty Fee Agreement (the "Subordinated Guaranty Fee
Agreement") with Mr. Bradley. Pursuant to the Subordinated Guaranty Fee
Agreement, Oneida agreed to pay Mr. Bradley a guarantee fee equal to 5% of the
lesser of $2,000,000 or the actual outstanding principal balance under the
Oneida credit facility from time to time. Forty percent of the guarantee fee
was

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payable in equal monthly installments commencing on August 31, 1991 and 60% of
the guarantee fee was payable on the date that both the Oneida credit facility
and the OPC Signal Debt were fully paid. Mr. Bradley agreed to subordinate
payment of the guarantee fee to the payment of the obligations under the
Oneida credit facility. With the consent of Congress, Oneida paid Mr. Bradley
$240,533 of accrued guarantee fees during 1994. During the 1995 period ended
on September 14, 1995, Oneida paid $10,510 under the Subordinated Guaranty Fee
Agreement and the remaining amounts owing thereunder were part of the
liabilities of Oneida upon its sale to the Company. No further payments have
been made subsequent to September 14, 1995.

On March 31, 1994, in connection with the Chatwins' acquisition of Oneida,
Mr. Bradley and SPI agreed to guarantee the obligations of Oneida pursuant to
the promissory note issued by Oneida on March 31, 1994 to GE in the original
principal amount of $687,500 (the "GE Note"). The GE Note bore interest at 7%
and matured on June 30, 1995. Oneida repaid the note through monthly principal
and interest payments. Oneida agreed to pay Mr. Bradley a guarantee fee of
2.5% per annum on the outstanding balance of the GE Note. With the consent of
Congress, Oneida paid Mr. Bradley $5,000 of these accrued guarantee fees in
1994. During the 1995 period ended on September 14, 1995, ORC paid $4,737
under this guaranty agreement and the remaining amounts owing thereunder were
part of the liabilities of Oneida upon its sale to the Company. No further
payments have been made subsequent to September 14, 1995.

CPS LEASING, INC.

In February 1997, Chatwins entered into an operating lease agreement with
CPSL, a subsidiary of CPS, to lease a machining center for Alliance with a
cost of $143,600. The terms of the lease include sixty monthly payments
aggregating $161,006 and an option to purchase the equipment at fair market
value at the end of the lease term. In June 1997, Chatwins entered into an
operating lease with CPSL of a computer system for Hanna with a cost of
$61,667. The terms of the lease include thirty-six monthly payments
aggregating $62,830 and an option to purchase the system at fair market value
at the end of the lease term. In January 1998, Chatwins entered into an
operating lease with CPSL of two vehicles for Alliance with a cost of $69,494.
The terms of the lease include sixty monthly payments aggregating $77,400 and
an option to purchase at fair market value at the end of the lease term. In
March 1998, Chatwins entered into an operating lease with CPSL of an
ultrasonic testing system for CPI with a cost of $115,300. The terms of the
lease include ninety-six monthly payments aggregating $164,448 and an option
to purchase the system at fair market value at the end of the lease term.
Chatwins has entered and intends to continue to enter into various operating
leases in the course of its normal operations. Such future leases may involve
CPSL.

SAC SERVICES AGREEMENT

The Auto-Lok division of Chatwins and SAC entered into a Services Agreement
as of April 1, 1998 pursuant to which King-Way would utilize Auto-Lok's
Surplus Capacity in consideration for cash fees approximately equal to Auto-
Lok's costs of providing the Surplus Capacity plus a right of first
negotiation to acquire King-Way from SAC. The Services Agreement is effective
for a period of one (1) year and may be renewed annually upon the mutual
consent of Chatwins and SAC no later than sixty (60) days prior to the end of
the original term or any renewal thereof. SAC is owned 42.5% by Mr. Bradley,
15% by Mr. Evans and 42.5% by a member of Mr. Bradley's family. Stanwich
Financial, which is owned 42.5% by Bradley, 42.5% by Mr. Bradley Jr. and 7.5%
by Mr. Poole, is the holder of approximately $13.5 million of debt and $5.6
million of preferred stock issued by SAC.

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DEADLINE FOR STOCKHOLDER PROPOSALS

Proposals of stockholders of the Company intended to be presented at the
1999 annual meeting of stockholders must be received by Richard L. Evans,
Secretary of the Company, by January 31, 1999 for inclusion in the proxy
statement and form of proxy relating to the 1999 annual meeting to be held by
the Company.

By Order of the Board of Directors,

/S/ RICHARD L. EVANS

Richard L. Evans
CORPORATE SECRETARY

Stamford, Connecticut
July 1, 1998

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ANNEX A

MERGER AGREEMENT

MERGER AGREEMENT, dated as of May 31, 1998, by and between Reunion
Industries, Inc., a Delaware corporation ("REUNION") and Chatwins Group, Inc.
a Delaware corporation ("CHATWINS").

WHEREAS, Reunion desires to acquire Chatwins, and Chatwins desires that
Reunion acquire Chatwins, all on the terms and conditions set forth in this
Agreement;

WHEREAS, it is the intention of the parties that the Merger (as defined
below) shall: (i) be accounted for by the "purchase method" under generally
accepted accounting principles ("GAAP"); (ii) qualify as a tax free
reorganization under Section 368 of the Internal Revenue Code of 1986, as
amended (the "CODE"), and that this Agreement shall qualify as a "plan of
reorganization" within the meaning of Section 368 of the Code; and (iii)
qualify as a tax free exchange of stock under Section 354 of the Code; and

WHEREAS, the Boards of Directors of Chatwins and Reunion, at meetings of
each of such Boards of Directors, have approved and adopted this Agreement and
have authorized the execution hereof; and

WHEREAS, the shareholders of Chatwins and the shareholders of Reunion shall
vote for or against the adoption of this Agreement at special meetings thereof
to be called as promptly as possible following the execution of this
Agreement.

NOW, THEREFORE, in consideration of the mutual benefits to be derived from
this Agreement and the representations, warranties, conditions and promises
hereinafter contained, the parties to this Agreement hereby agree as follows:

ARTICLE I

The Merger

1.1. The Merger.

(a) At the Effective Time (as defined in Section 1.1(b)), Chatwins shall be
merged with and into Reunion (the "MERGER"), in accordance with the General
Corporation Law of the State of Delaware (the "DELAWARE GCL"), whereupon the
separate existence of Chatwins shall cease and Reunion shall be the surviving
corporation.

(b) As soon as practicable after satisfaction or waiver of all conditions to
the Merger, Chatwins and Reunion will file a certificate of merger (which
shall be in form and substance reasonably satisfactory to the parties hereto)
with the Secretary of State of the State of Delaware (the "SECRETARY OF
STATE") in accordance with Section 251(c) of the Delaware GCL and make all
other filings or recordings required by the Delaware GCL in connection with
the Merger. The Merger shall become effective on such date as the certificate
of merger is duly filed with the Secretary of State or at such later date as
is specified in the certificate of merger (the "EFFECTIVE TIME").

(c) From and after the Effective Time, Reunion shall possess all the rights,
privileges, powers and franchises and be subject to all of the restrictions,
disabilities, liabilities and duties of Chatwins as provided in the Delaware
GCL.

1.2. Conversion of Shares. At the Effective Time, by virtue of the Merger
and without any action on the part of Reunion or Chatwins:

(a) Subject to Section 1.3(c) below, the aggregate number of shares of
the common stock of Chatwins, par value $.01 per share, issued and
outstanding immediately prior to the Effective Time (the "CHATWINS COMMON
STOCK") shall be automatically converted into the right to receive
8,500,000 fully paid and

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nonassessable shares of common stock of Reunion, par value $.01 per share
(the "REUNION COMMON STOCK"); such Reunion Common Stock to be allocated
among the holders of the Chatwins Common Stock pro rata based upon their
percentage ownership of the Chatwins Common Stock at the Effective Time;
provided, however, that if on the Closing Date (as defined in Section 1.4)
Chatwins shall have acquired, or shall have the unconditional right to
acquire, all of the rights, title and interests of Stanwich Acquisition
Corp. ("SAC") in and to SAC's King-Way material handling/order selection
systems business ("KING-WAY") for a purchase price substantially equal to
SAC's cost (including fees and expenses) of acquiring King-Way plus
interest on such amounts at SAC's cost of capital, then the number of
shares of Reunion Common Stock to be used in the above formula shall be
increased to 9,000,000 shares.

(b) The aggregate number of shares of Class D, Series A Preferred Stock
of Chatwins, par value $.01 per share (the "SERIES A PREFERRED"), Class D,
Series B Preferred Stock of Chatwins, par value $.01 per share, (the
"SERIES B PREFERRED"), and Class D, Series C Preferred Stock of Chatwins,
par value $.01 per share, (the "SERIES C PREFERRED"), issued and
outstanding immediately prior to the Effective Time shall be automatically
converted into the right to receive notes of Reunion with an aggregate
principal amount equal to the aggregate redemption price of such preferred
stock on the Closing Date determined as provided in Chatwins' Restated
Certificate of Incorporation, said principal to be payable in one
installment on the third anniversary of the Closing Date and to bear
interest (payable quarterly in arrears) at a rate of 10% per annum (the
"PREFERRED NOTES"), and the aggregate principal amount of such Preferred
Notes to be allocated among the holders of the Series A Preferred, Series B
Preferred and Series C Preferred in accordance with such holders'
applicable Redemption Percentages at the Effective Time. For these
purposes, a particular holder's "REDEMPTION PERCENTAGE" shall mean the
fraction (expressed as a percentage) obtained by dividing (y) the aggregate
redemption price (determined in accordance with Chatwins' Restated
Certificate of Incorporation) of the Series A Preferred, Series B Preferred
and Series C Preferred held by such holder immediately prior to the
Effective Time by (z) the aggregate redemption price of all shares of
Series A Preferred, Series B Preferred and Series C Preferred issued and
outstanding immediately prior to the Effective Time.

(c) All shares of Chatwins Common Stock, Series A Preferred, Series B
Preferred, and Series C Preferred (collectively, the "CHATWINS CAPITAL
STOCK") shall automatically be cancelled and retired and shall cease to
exist and each holder of a certificate representing any such Chatwins
Capital Stock (a "CERTIFICATE") shall cease to have any rights with respect
thereto, except the right to receive consideration (the "MERGER
CONSIDERATION") consisting of the number of shares of Reunion Common Stock
or the principal amount of Preferred Notes specified herein, together with
any cash in lieu of fractional shares of Reunion Common Stock to be paid
pursuant to Section 1.3(c), upon the surrender of such Certificate in
accordance with Section 1.3(a), without interest.

(d) All shares of Chatwins Capital Stock held by Chatwins as treasury
shares shall be cancelled and retired and shall cease to exist and no
shares of Reunion Common Stock shall be issuable in respect thereof.

(e) Chatwins agrees that the 1,450,000 shares of Reunion Common Stock and
the warrant to purchase an additional 75,000 shares of Reunion Common Stock
owned by Chatwins as of the date hereof shall be retired by Reunion, and
Chatwins shall thereupon cease to have any rights with respect thereto,
including any right of exchange in connection with the Merger.

1.3. Surrender of Certificates; Payment of Merger Consideration.

(a) Surrender of Certificates. At or after the Closing (as defined in
Section 1.4), upon presentation by the holder thereof, duly endorsed, each
Certificate shall be cancelled and exchanged and, simultaneously with such
cancellation and exchange, (i) in respect of Chatwins Common Stock a new
certificate shall be issued representing the number of shares of Reunion
Common Stock into which the Chatwins Common Stock formerly held by such
shareholder shall have been converted in the Merger in accordance with Section
1.2 hereof, together with a check payable to such shareholder representing any
payment of cash in lieu of fractional shares determined in accordance with
Section 1.3(c) hereof, and (ii) in respect of Series A Preferred, Series B
Preferred and Series

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C Preferred, Preferred Notes shall be issued by Reunion in accordance with the
applicable Redemption Percentages. All of the shares of Reunion Common Stock
issued in the Merger shall be duly authorized, validly issued, fully paid and
nonassessable and, at the time of issuance, shall be free and clear of all
liens, claims, encumbrances, security interests and rights of redemption
(together, "LIENS"). All Preferred Notes issued in the Merger shall be duly
authorized and validly issued and, at the time of issuance, free and clear of
all Liens.

(b) No Further Ownership Rights in Chatwins Capital Stock. The Merger
Consideration issued upon the surrender for exchange of Certificates in
accordance with the terms of this Agreement (including any cash paid pursuant
to Section 1.3(c)) shall be deemed to have been issued (or paid, as the case
may be) at the Closing in full satisfaction of all rights pertaining to the
Chatwins Capital Stock represented thereby. From and after the Closing, the
stock transfer books of Chatwins shall be closed and there shall be no further
registration of transfers on the stock transfer books of Chatwins or Reunion
of the Chatwins Capital Stock which was outstanding immediately prior to the
Effective Time. If, after the Closing, Certificates are presented to Reunion
for any reason, they shall be cancelled and exchanged as provided in this
Agreement.

(c) No Fractional Shares. No certificate or scrip representing fractional
shares of Reunion Common Stock will be issued in the Merger upon the surrender
for exchange of Certificates, and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a stockholder of
Reunion. In lieu of any such fractional shares, each holder of Chatwins Common
Stock, who would otherwise have been entitled to a fraction of a share of
Reunion Common Stock in exchange for Certificates pursuant to this Agreement
shall receive from Reunion a cash payment in lieu of such fractional share
equal to the product of the market price of Reunion Common Stock at the close
of business on the Closing Date and the fractional share interest to which
such holder would otherwise be entitled.

1.4. Closing. The closing of the transactions contemplated by this Agreement
(the "CLOSING") will take place at the offices of Richards & O'Neil, LLP, 885
Third Avenue, New York, New York 10022 at 10:00 a.m. on July 30, 1998, or at
such other place or time as the parties may mutually agree (the "CLOSING
DATE").

1.5. Further Assurances. At the Closing and thereafter, each party hereto
will execute such further documents and instruments and take such further
actions as may reasonably be requested by one or more of the others to
consummate the Merger, to vest Reunion with full title to all assets,
properties, rights, approvals, immunities and franchises of Chatwins and to
effect the other purposes of this Agreement.

ARTICLE II

The Surviving Corporation

2.1. Certificate of Incorporation. The Certificate of Incorporation of
Reunion in effect at the Effective Time shall be the Certificate of
Incorporation of the surviving corporation until amended in accordance with
applicable law.

2.2. By-Laws. The By-laws of Reunion in effect at the Effective Time shall
be the By-laws of the surviving corporation until amended in accordance with
applicable law.

2.3. Officers. The officers of Reunion in office at the Effective Time shall
continue in the same offices on behalf of the surviving corporation until
their resignation or removal in accordance with the By-laws.

ARTICLE III

Representations and Warranties of Chatwins

Chatwins hereby represents and warrants to Reunion on the date hereof and as
of the Effective Time as follows (it being understood that for purposes of
this Section 3, Chatwins shall include each of its subsidiaries):

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3.1. Chatwins' Organization and Good Standing. Chatwins is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has all corporate power and authority to own, lease and
operate its properties and to carry on its business as now conducted. Chatwins
is duly qualified to do business and in good standing in each jurisdiction
where the character of property owned or leased by it or the nature of its
activities makes such qualification necessary except for those jurisdictions
where the failure to be so qualified would not, individually or in the
aggregate, have a Chatwins Material Adverse Effect. As used herein, a
"CHATWINS MATERIAL ADVERSE EFFECT" means a material adverse effect on the
condition (financial or otherwise), business, assets or results of operations
of Chatwins or on the ability of Chatwins to consummate the transactions
contemplated by this Agreement.

3.2. Power and Authority; Execution and Delivery. Chatwins has all requisite
corporate power and authority to execute, deliver and perform its obligations
under this Agreement. Except for shareholder approval as required by the
Delaware GCL, the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby have been duly
approved and authorized by all requisite corporate action of Chatwins. Except
for such shareholder approval and the filing of a certificate of merger in
accordance with Section 1.1(b), no further corporate actions or approvals on
the part of Chatwins are required under applicable law for the consummation of
the Merger. This Agreement has been duly executed and delivered by Chatwins
and, subject only to the approval of its shareholders in accordance with the
Delaware GCL, constitutes the legal, valid and binding obligation of Chatwins,
enforceable against it in accordance with its terms except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws affecting the enforcement of creditors' rights generally and subject to
general principles of equity (regardless of whether enforcement is sought in a
court of law or equity).

3.3. Capitalization and Voting Rights. The authorized capital of Chatwins
consists entirely of the following, the rights, privileges and preferences of
which are as stated in the Certificate of Incorporation of Chatwins:

(i) 3,000 shares of Series A Preferred, of which 2,249 shares are issued
and outstanding as of the date hereof;

(ii) 800 shares of Series B Preferred, of which 800 shares are issued and
outstanding as of the date hereof;

(iii) 2,500 shares of Series C Preferred, of which 1,510 shares are
issued and outstanding as of the date hereof; and

(iv) 400,000 shares of Chatwins Common Stock, of which 242,887.4 shares
are issued and outstanding and 41,109 shares are held by Chatwins as
treasury shares.

(v) Except as set forth on SCHEDULE 3.3, Chatwins has no outstanding
subscriptions, options, warrants, calls or other agreements or commitments
by which Chatwins is bound in respect of the capital stock of Chatwins,
whether issued or unissued, and no outstanding rights or securities
convertible into or exchangeable for any such capital stock, and Chatwins
is not a party or subject to any agreement or understanding, and to
Chatwins's knowledge, there is no agreement or understanding between any
persons and/or entities, which affects or relates to the voting or giving
of written consents with respect to any security of Chatwins. All shares of
Class A, B, C and E Preferred Stock authorized to be issued by the Restated
Certificate of Incorporation of Chatwins have been retired, and no shares
thereof or rights with respect thereto are outstanding.

3.4. Subsidiaries. Except as set forth in SCHEDULE 3.4 or as contemplated by
Section 5.2(d), Chatwins does not own or control, directly or indirectly, any
interest in any other corporation, association or other business entity.

3.5. Valid Issuance of Preferred and Common Stock. Except as set forth on
SCHEDULE 3.5, the outstanding shares of Chatwins Capital Stock are duly and
validly authorized and issued, fully paid and nonassessable.

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3.6. Reports and Financial Statements. Chatwins has previously furnished to
Reunion true and complete copies of its (i) Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 as filed with the Securities and Exchange
Commission ("SEC"); (ii) Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998 as filed with the SEC; and (iii) Current Reports on Forms 8-K
as filed with the SEC since March 31, 1998. As of their respective dates,
Chatwins' Annual Report on Form 10-K for the fiscal year referred to in clause
(i) above, Quarterly Report on Form 10-Q referred to in clause (ii) above, and
Current Reports on Forms 8-K referred to in clause (iii) above did not, when
filed, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The audited consolidated financial statements and unaudited
interim financial statements included in such reports or other filings have
been prepared in accordance with GAAP applied on a consistent basis (except as
may be indicated therein or in the notes thereto) and fairly present the
consolidated financial position of Chatwins and its subsidiaries as of the
dates thereof and the consolidated results of operations and changes in cash
flow of Chatwins and its subsidiaries for the periods then ended, subject in
the case of unaudited interim financial statements, to normal year-end
adjustments which are neither individually nor in the aggregate expected to be
material.

3.7. Changes. Except as set forth on SCHEDULE 3.7 or in the reports listed
in Section 3.6 or in the Registration Statement (as defined in Section 9.8),
since March 31, 1998, there has not been:

(a) any adverse change in the assets, condition (financial or otherwise),
affairs, business, operations, properties, or liabilities of Chatwins from
that reflected in the balance sheet as at March 31, 1998, referred to in
Section 3.6 above, except for changes in the ordinary course of business
which do not constitute, either individually or in the aggregate, a
Chatwins Material Adverse Effect;

(b) any material change in the liabilities or obligations of Chatwins,
contingent or otherwise, whether due or to become due, whether by way of
guaranty, endorsement, indemnity, warranty or otherwise, except for the
incurrence of current liabilities in the ordinary course of business, none
of which has had a Chatwins Material Adverse Effect;

(c) any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting the properties, operations or business
of Chatwins;

(d) any waiver by Chatwins of a valuable right or of a material debt owed
to it;

(e) any loans made by Chatwins other than advances of expenses made in
the ordinary course of business;

(f) any declaration or payment of any dividend or other distribution of
the assets of Chatwins or any direct or indirect redemption, purchase or
acquisition of any securities of Chatwins;

(g) any incurrence of indebtedness for money borrowed or any other
liabilities individually in excess of $50,000 or, in the case of
indebtedness and/or liabilities individually less than $50,000, in excess
of $100,000 in the aggregate;

(h) any sale, exchange or other disposition of any of Chatwins's assets,
other than in the ordinary course of business;

(i) to the best of Chatwins's knowledge, any other event or condition of
any character which could reasonably be expected to result in a Chatwins
Material Adverse Effect;

(j) any increase in compensation of any of its existing officers, or the
rate of pay of its employees as a group, except as part of regular
compensation increases in the ordinary course of business;

(k) any resignation or termination of employment of any officer or key
employee of Chatwins; or

(l) any agreements to do or enter into any of the foregoing.

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3.8. Governmental Approvals and Filings. Except as set forth in SCHEDULE 3.8
and for the filing of a certificate of merger in accordance with the Delaware
GCL, no approval, authorization, consent, license, clearance or order of,
declaration or notification to, or filing, registration or compliance with,
any governmental or regulatory authority, is required in order to permit
Chatwins to enter into this Agreement or to consummate the transactions
contemplated herein.

3.9. Litigation. Except as listed on SCHEDULE 3.9 or in the Registration
Statement, (i) there is no action, suit, proceeding or investigation pending
or, to Chatwins's knowledge, currently threatened in writing against Chatwins
or its property, assets or business which might reasonably be expected to
result, either individually or in the aggregate, in a Chatwins Material
Adverse Effect, including without limitation, actions pending or threatened
involving the prior employment of any of Chatwins's employees, their use in
connection with Chatwins's business of any information or techniques allegedly
proprietary to any of their former employers, or their obligations under any
agreements with prior employers; and (ii) Chatwins is not a party or subject
to the provisions of any order, writ, injunction, award, judgment or decree of
any court, arbitration panel or government agency or instrumentality.

3.10. Patents and Trademarks. Chatwins has sufficient title and ownership of
all patents, trademarks, service marks, trade names, copyrights, trade
secrets, information, proprietary rights and processes necessary for its
business as now conducted and without any conflict with or infringement of the
rights of others which could reasonably be expected to result in a Chatwins
Material Adverse Effect. SCHEDULE 3.10 contains a complete list of patents and
patent applications owned by Chatwins. Except as set forth in SCHEDULE 3.10,
there are no outstanding options, licenses or agreements of any kind relating
to the foregoing, nor is Chatwins bound by or a party to any options, licenses
or agreements of any kind with respect to the patents, trademarks, service
marks, trade names, copyrights, trade secrets, licenses, information,
proprietary rights and processes owned by any other person or entity. Chatwins
has not received any communications or claims alleging that Chatwins has
violated or, by conducting its business as currently conducted, would violate
any of the patents, trademarks, service marks, trade names, copyrights, trade
secrets, licenses, information, proprietary rights and processes of any other
person or entity. Chatwins is not aware that any of its employees is obligated
under any contract (including licenses, covenants or commitments of any
nature) or other agreement, or subject to any judgment, decree or order of any
court of administrative agency, that would interfere with the use of such
employee's best efforts to promote the interests of Chatwins or that would
conflict with Chatwins's business as proposed to be conducted. Neither the
execution and delivery of this Agreement nor the carrying on of Chatwins's
business by the employees of Chatwins will, to Chatwins's knowledge, conflict
with or result in a breach of the terms, conditions or provisions of or
constitute a default under any contract, covenant or instrument under which
any of such employees is now obligated.

3.11. No Conflict. Except as set forth on SCHEDULE 3.11, neither the
execution, delivery and performance of this Agreement by Chatwins, nor the
consummation by Chatwins of the transactions contemplated hereby will (i)
conflict with, or result in a breach of any of the terms, conditions or
provisions of the Certificate of Incorporation or By-laws of Chatwins, (ii)
conflict with, result in a breach or violation of, give rise to a default
under or result in the acceleration of performance under any mortgage, lease,
agreement, note, bond, indenture, guarantee or any statute, regulation,
ordinance, writ, injunction, order, judgment or decree to which Chatwins may
be subject, which conflict, breach, default, violation or acceleration could
reasonably be expected to have a Chatwins Material Adverse Effect, or (iii)
give rise to an imposition of any Lien of any nature whatsoever upon any of
the assets of Chatwins.

3.12. Agreements.

(a) Except as set forth in SCHEDULE 3.12 or in the Registration Statement,
there are no agreements, understandings or transactions between Chatwins and
any of its officers or directors or any affiliate thereof.

(b) Except as set forth in SCHEDULE 3.12, there are no agreements,
understanding or transactions to which Chatwins is a party or by which it is
bound which (i) involve obligations (contingent or otherwise) of, or

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payments to, Chatwins in excess of $500,000 other than in the ordinary course
of business, (ii) are material to the conduct and operations of Chatwins's
business or properties (including, without limitation, the license of any
patent, copyright, trade secret or other proprietary rights to or from
Chatwins), (iii) restrict or adversely affect the development, manufacture or
distribution of Chatwins's products or services, (iv) involve any written
employment or consulting arrangement between Chatwins and any person, or (v)
involve any material oral employment or consulting arrangement between
Chatwins and any person.

3.13. Title to Property and Assets. Except as set forth on SCHEDULE 3.13,
Chatwins has good title to its property and assets free and clear of all
Liens, except such Liens which do not materially impair Chatwins's ownership
or use of such property or assets. With respect to the property and assets it
leases, Chatwins is in substantial compliance with such leases and, to its
knowledge, holds a valid leasehold interest free of any Liens. All of
Chatwins's properties and assets are, in all material respects, in good
operating condition, subject to normal wear and tear.

3.14. Labor Agreements and Actions; Employee Benefits. Except as set forth
on SCHEDULE 3.14, Chatwins is not bound by or subject to (and none of its
assets or properties is bound by or subject to) any written or oral, express
or implied, contract, commitment or arrangement with any labor union, and
within the last two (2) years no labor union has requested or, to the
knowledge of Chatwins, has sought to represent any of the employees,
representatives, or agents of Chatwins; there is no strike or other labor
dispute involving Chatwins pending or, to the knowledge of Chatwins,
threatened, which could reasonably be expected to have a Chatwins Material
Adverse Effect, nor is Chatwins aware of any labor organization activity
involving its employees. Except as noted in SCHEDULE 3.14 hereto, Chatwins
does not have any employee benefit plans presently in force with respect to
profit-sharing or pensions.

3.15. Tax Matters. Chatwins (i) has timely filed all tax returns that are
required to have been filed by it with all appropriate governmental agencies
(and all such returns are true and correct and fairly reflect in all material
respects its operations for tax purposes); and (ii) has timely paid all taxes
owed or assessed against it (other than taxes the validity of which are being
contested in good faith by appropriate proceedings). The assessment of any
additional taxes for periods for which returns have been filed is not expected
to exceed the reserves therefor reflected in the Chatwins's publicly-filed
financial statements and, to Chatwins's knowledge, there are no material
unresolved questions or claims concerning Chatwins's tax liability. Chatwins
1995 federal corporate income tax return was audited by the Internal Revenue
Service and all additional tax and interest assessed as a result of such audit
has been paid and all required state tax filings as a result thereof have been
made. Except as provided in the preceding sentence, Chatwins's federal income
tax returns have not been reviewed or audited by any taxing authority. There
is no pending dispute with any taxing authority relating to any of said
returns which, if determined adversely to Chatwins, would result in the
assertion by any taxing authority of any valid material tax deficiency.

3.16. Minute Books. The minutes books of Chatwins contain a complete and
accurate record of all meetings of directors and stockholders since the date
of incorporation and all actions by written consent.

3.17. Purchase Method. To the best knowledge of Chatwins, neither Chatwins
nor any of its affiliates has taken or agreed to take any action inconsistent
with Reunion's accounting for the Merger under the "purchase method".

3.18. Disclosure. Neither this Agreement nor any document or information
furnished to Reunion by Chatwins pursuant to this Agreement contains any
untrue statement of a material fact or omits to state a material fact
necessary to make the statements of Chatwins contained herein or therein not
misleading.

3.19. S-4 Registration Statement. At the time the Registration Statement (as
defined in Section 9.8) becomes effective and at the Effective Time, the
Registration Statement and the Proxy Statement/Prospectus included therein, to
the extent that material is prepared or furnished by Chatwins for inclusion
therein, and the Chatwins SEC filings incorporated by reference therein, will
not contain any statement which, at the time and in light of

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the circumstances under which it is made, is false or misleading with respect
to any material fact, or shall omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, or necessary to correct any statement which has become false or
misleading with respect to the transactions contemplated hereby and will
comply in all material respects with the requirements of the Securities Act of
1933 (the "SECURITIES ACT") and the rules and regulations thereunder (provided
that no representation or warranty is made with respect to the information not
prepared or furnished by Chatwins specifically for use therein or not
contained in Chatwins SEC filings incorporated by reference therein).

3.20. Broker's or Finder's Fees. Except as set forth in SCHEDULE 3.20,
neither Chatwins nor any of its affiliates has authorized any person to act as
broker, finder, banker, consultant, intermediary or in any other similar
capacity which would entitle such person to any investment banking, brokerage,
finder's or similar fee from Chatwins in connection with the transactions
contemplated by this Agreement.

3.21. Permits, Licenses, Authorizations; Compliance with Laws. Chatwins has
all licenses, franchises, certificates of occupancy, permits and other
governmental authorizations which are material and necessary to conduct its
business, and Chatwins is not in violation in any material respect of any such
license, franchise, certificate of occupancy, permit or other governmental
authorization, or any statute, law, ordinance, rule regulation, judgment,
order or decree applicable to it or any of its properties.

ARTICLE IV

Representations and Warranties of Reunion

Reunion represents and warrants to Chatwins as of the date hereof and as at
the Effective Time as follows (it being understood that for purposes of this
Section 4, Reunion shall include each of its subsidiaries):

4.1. Organization and Good Standing. Reunion is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware and has all corporate power and authority to own, lease
and operate its properties and to carry on its business as now being
conducted. Reunion is duly qualified to do business and in good standing in
each jurisdiction where the character of property owned or leased by it or
the nature of its activities makes such qualification necessary, except for
those jurisdictions where the failure to be so qualified would not,
individually or in the aggregate, have a Reunion Material Adverse Effect.
As used herein, the term "REUNION MATERIAL ADVERSE EFFECT" means a material
adverse effect on the condition (financial or otherwise), business, assets
or results of operations of Reunion and its subsidiaries, taken as a whole,
or on the ability of Reunion to consummate the transactions contemplated by
this Agreement.

4.2. Power and Authority; Execution and Delivery. Reunion has all
requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement. Except for shareholder approval as
required by the Delaware GCL, the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby
have been duly approved and authorized by all requisite corporate action of
Reunion. Except for such shareholder approval and the filing of a
certificate of merger in accordance with Section 1.1(b), no further
corporate actions or approvals on the part of Reunion are required under
applicable law for the consummation of the Merger. This Agreement has been
duly executed and delivered by Reunion and, subject only to the approval of
its shareholders in accordance with the Delaware GCL, constitutes the
legal, valid and binding obligation of Reunion, enforceable against Reunion
in accordance with its terms except to the extent that enforceability may
be limited by applicable bankruptcy, insolvency, or similar laws affecting
the enforcement of creditors' rights generally and subject to general
principles of equity (regardless of whether enforcement is sought in a
court of law or equity).

4.3. Governmental Approvals and Filings. Except as set forth in SCHEDULE
4.3, and for the filing of a certificate of merger in accordance with the
Delaware GCL, no approval, authorization, consent, license, clearance or
order of, declaration or notification to, or filing, registration or
compliance with, any governmental or regulatory authority, is required in
order to permit Reunion to enter into this Agreement or to consummate the
transactions contemplated herein.

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4.4. No Conflict. Except as set forth in SCHEDULE 4.4, neither the
execution, delivery and performance of this Agreement by Reunion, nor the
consummation by Reunion of the transactions contemplated hereby will (i)
conflict with, or result in a breach of any of the terms, conditions or
provisions of the Certificate of Incorporation or By-laws of Reunion, (ii)
conflict with, result in a breach or violation of, give rise to a default
under or result in the acceleration of performance under any mortgage,
lease, agreement, note, bond, indenture, guarantees or any statute,
regulation, ordinance, writ, injunction, order, judgment or decree to which
Reunion may be subject, which conflict, breach, default, violation or
acceleration would have a Reunion Material Adverse Effect, or (iii) give
rise to an imposition of any Lien, charge, security interest or encumbrance
of any nature whatsoever upon any of the assets of Reunion.

4.5. Merger Consideration. When issued, (i) the shares of Reunion Common
Stock to be issued in the Merger will be duly authorized, validly issued,
fully-paid and nonassessable and free and clear of all Liens and preemptive
rights, and (ii) the Preferred Notes will be duly authorized, validly
issued, fully-paid and free and clear of all Liens. The certificates or
instruments representing such shares or notes will be in due and proper
form.

4.6. Reports and Financial Statements. Reunion has previously furnished
to Chatwins true and complete copies of its (i) Annual Report on Form 10-K
for the fiscal year ended December 31, 1997 as filed with the SEC; (ii)
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 as filed
with the SEC; and (iii) Current Reports on Forms 8-K as filed with the SEC
since March 31, 1998. As of their respective dates, Reunion's Annual Report
on Form 10-K for the fiscal year referred to in clause (i) above, Quarterly
Report on Form 10-Q referred to in clause (ii) above, and Current Reports
on Forms 8-K referred to in clause (iii) above did not, when filed, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
The audited consolidated financial statements and unaudited interim
financial statements included in such reports or other filings have been
prepared in accordance with GAAP applied on a consistent basis (except as
may be indicated therein or in the notes thereto) and fairly present the
consolidated financial position of Reunion and its subsidiaries as of the
dates thereof and the consolidated results of operations and changes in
cash flow of Reunion and its subsidiaries for the periods then ended,
subject in the case of unaudited interim financial statements, to normal
year-end adjustments which are neither individually nor in the aggregate
expected to be material.

4.7. Absence of Material Adverse Change. Except as set forth on SCHEDULE
4.7 or the reports listed in Section 4.6 or in the Registration Statement,
since March 31, 1998 there has not been any Reunion Material Adverse
Effect.

4.8. Capitalization of Reunion. Reunion's authorized capital stock
consists of (i) 20,000,000 shares of Reunion Common Stock of which
3,862,565 are outstanding on the date hereof, and (ii) 10,000,000 shares of
preferred stock, par value $.01 per share, none of which are outstanding on
the date hereof. All of the issued and outstanding shares of capital stock
of Reunion are duly authorized and validly issued, fully-paid and
nonassessable.

4.9. Certificates of Incorporation and By-laws.

(a) Reunion has delivered to Chatwins copies of its Certificate of
Incorporation and all amendments thereto, which copies are complete and
correct. Reunion is not in default under, or in violation of, any
provisions of its Certificate of Incorporation. Reunion's Certificate of
Incorporation has not been amended since the date of certification thereof
and no action has been taken for the purpose of effecting any amendment
thereto.

(b) Reunion has delivered to Chatwins copies of its By-laws and all
amendments thereto, which copies are complete and correct. Reunion is not
in default under, or in violation of, any provision of its By-Laws.
Reunion's By-laws have not been amended since the date of certification
thereof and no action has been taken for the purpose of effecting any
amendment thereto.

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4.10. Legal Proceedings. Except as set forth in the reports referred in
Section 4.6 or in the Registration Statement, (i) there are no suits,
actions, claims, proceedings (including, without limitation, arbitration or
administrative proceedings) or investigations pending or to the knowledge
of Reunion threatened in writing against Reunion or its property, assets or
business which could reasonably be expected, individually or in the
aggregate, to have a Reunion Material Adverse Effect; and (ii) Reunion is
not a party or subject to the provisions of any judgment, order,
injunction, decree or award of any court, arbitration panel or government
agency or instrumentality.

4.11. Purchase Method. To the best knowledge of Reunion, neither Reunion
nor any of its affiliates has taken or agreed to take any action
inconsistent with the accounting treatment of the Merger under the
"purchase method".

4.12. Disclosure. Neither this Agreement nor any document or information
furnished to Chatwins by Reunion pursuant to this Agreement contains any
untrue statement of a material fact or omits to state a material fact
necessary to make the statements of Reunion contained herein or therein not
misleading.

4.13. S-4 Registration Statement. At the time the Registration Statement
becomes effective and at the Effective Time, the Registration Statement and
the Proxy Statement/Prospectus included therein and the Reunion SEC filings
incorporated by reference therein, will not contain any statement which, at
the time and in light of the circumstances under which it is made, is false
or misleading with respect to any material fact, or shall omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein not misleading, or necessary to correct any
statement which has become false or misleading with respect to the
transactions contemplated hereby and will comply in all material respects
with the requirements of the Securities Act and the rules and regulations
thereunder (provided that no representation or warranty is made with
respect to the information prepared or furnished by Chatwins to Reunion
specifically for use therein or contained in Chatwins SEC filings
incorporated by reference therein).

4.14. Broker's or Finder's Fees. Except for Legg Mason Wood Walker, Inc.
and Robert Gray, neither Reunion nor any of its affiliates has authorized
any person to act as broker, finder, banker, consultant, intermediary or in
any other similar capacity which would entitle such person to any
investment banking, brokerage, finder's or similar fee from Reunion in
connection with the transactions contemplated by this Agreement.

4.15. Permits, Licenses, Authorizations; Compliance with Laws. Reunion
has all licenses, franchises, certificates of occupancy, permits and other
governmental authorizations which are material and necessary to conduct its
business, and Reunion is not in violation in any material respect of any
such license, franchise, certificate of occupancy, permit or other
governmental authorization, or any statute, law, ordinance, rule
regulation, judgment, order or decree applicable to it or any of its
properties.

ARTICLE V

Covenants of Chatwins

Chatwins covenants and agrees that:

5.1. Regular Course of Business. Except as otherwise consented to in
writing by Reunion, prior to the Closing Chatwins will carry on its
businesses only in the ordinary course and substantially in accordance with
past practices, and Chatwins will use commercially reasonable efforts to
preserve its present business organization intact and keep available the
services of its present executive officers.

5.2. Restricted Activities and Transactions. Except as otherwise
consented to in writing by Reunion or contemplated by this Agreement or as
resulting from the consummation of the transactions contemplated by this
Agreement, prior to the Closing Chatwins will not:

(a) amend its Certificate of Incorporation or By-laws;

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(b) except in the ordinary course of business and substantially in
accordance with past practices, (i) borrow or agree to borrow any funds
or mortgage or pledge any of its assets, tangible or intangible, (ii)
voluntarily incur, assume or become subject to, whether directly or by
way of guarantee or otherwise, any material obligation or liability
(absolute or contingent), (iii) cancel or agree to cancel any material
debts or claims, or (iv) lease, sell, transfer or encumber, agree to
lease, sell, transfer or encumber, or grant or agree to grant any
preferential rights to lease or acquire, any of its assets, property or
rights;

(c) except as set forth on the Schedules hereto, (i) grant any
increase in compensation or benefits, or (ii) make, pay or accrue any
bonuses, pension, profit sharing or similar payment to any director,
officer or employee of Chatwins other than payment of 1997 performance
bonuses accrued as of December 31, 1997;

(d) except for King-Way and the Chinese joint venture with Suzhou
Grating, Ltd. described in the Registration Statement, acquire control
or ownership of any other corporation, association, joint venture,
partnership, business trust or other business entity, or acquire
control or ownership of all or a substantial portion of the assets of
any of the foregoing, or merge, consolidate or otherwise combine with
any other corporation or enter into any agreement providing for any of
the foregoing;

(e) except as set forth on the Schedules hereto or in the ordinary
course of business consistent with past practice, hire any additional
professional personnel or make any change in the responsibilities or
office of any officer of Chatwins;

(f) except as set forth on the Schedules hereto or in the ordinary
course of business consistent with past practice, enter into any
material contract or agreement or materially modify any existing
material agreement;

(g) declare, set aside, make or pay any dividend or other
distribution with respect to its capital stock, or retire or redeem any
of such capital stock, or take any action which would have an effect
equivalent to any of the foregoing; or

(h) agree or commit to do any of the foregoing.

5.3. Approval of Shareholders.

(a) Chatwins shall through its Board of Directors duly call, give notice
of, convene and hold a meeting of its shareholders (or solicit the
unanimous written consent thereof) for the purpose of voting on (i) the
adoption and approval of this Agreement and (ii) the waiver of all rights
available to such shareholders to demand appraisal of their shares of
Chatwins Common Stock under the Delaware GCL, as soon as reasonably
practicable after the date hereof.

(b) Chatwins will provide its shareholders with, or give its shareholders
access to, all material information about the transactions contemplated by
this Agreement. The written information provided to the Chatwins
shareholders will be, when so provided, true and accurate in all material
respects, and such information will not, when so provided, contain any
untrue statement of a material fact or omit to state a material fact with
respect to such written information. Copies of all written information
delivered or to be delivered to the shareholders shall be offered for
review and approval to Reunion prior to its delivery to the Chatwins
shareholders.

5.4. Consents, Approvals and Filings. Chatwins will use its best efforts
to obtain on or before the Closing all necessary approvals, authorizations,
registrations, consents, licenses, clearances or orders of governmental and
regulatory authorities referred to in Section 3.8.

5.5. Access to Books, Records and Other Information. Chatwins will afford
to Reunion and its accountants, attorneys and agents such information as
Reunion may reasonably request (including such copies of documents as
Reunion may reasonably request) and reasonable access to the books and
records of Chatwins.

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<PAGE>

ARTICLE VI

Covenants of Reunion

Reunion covenants and agrees that:

6.1. Regular Course of Business. Except as otherwise consented to in
writing by Chatwins, prior to the Closing Reunion will carry on its
businesses only in the ordinary course and substantially in accordance with
past practices, and Reunion will use commercially reasonable efforts to
preserve its present business organization intact and keep available the
services of its present executive officers.

6.2. Restricted Activities and Transactions. Except as otherwise
consented to in writing by Chatwins or contemplated by this Agreement or as
resulting from the consummation of the transactions contemplated by this
Agreement, prior to the Closing Reunion will not:

(a) amend its Certificate of Incorporation or By-laws;

(c) acquire control or ownership of any other corporation,
association, joint venture, partnership, business trust or other
business entity, or acquire control or ownership of all or a
substantial portion of the assets of any of the foregoing, or merge,
consolidate or otherwise combine with any other corporation or enter
into any agreement providing for any of the foregoing;

(d) issue or sell any shares of its capital stock or issue or award
any options, warrants or other rights with respect to its capital
stock; or

(e) agree or commit to do any of the foregoing.

6.3. Approval of Shareholders.

(a) Reunion shall through its Board of Directors duly call, give notice
of, convene and hold a meeting of its shareholders for the purpose of
voting on the adoption and approval of this Agreement as soon as reasonably
practicable after the date hereof.

(b) Reunion will provide its shareholders with, or give its shareholders
access to, all material information about the transactions contemplated by
this Agreement. The written information provided to the Reunion
shareholders will be, when so provided, true and accurate in all material
respects, and such information will not, when so provided, contain any
untrue statement of a material fact or omit to state a material fact with
respect to such written information.

6.4. Consents, Approvals and Filings. Reunion will use its best efforts
to obtain on or before the Closing all necessary approvals, authorizations,
registrations, consents, licenses, clearances or orders of governmental and
regulatory authorities referred to in Section 4.3.

6.5. Access to Books, Records and Other Information. Reunion will afford
to Chatwins and its accountants, attorneys and agents such information as
Chatwins may reasonably request (including such copies of documents as
Chatwins may reasonably request) and reasonable access to the books and
records of Reunion.

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<PAGE>

ARTICLE VII

Mutual Covenants

7.1. Payment of Expenses. Except for the fees, costs and expenses charged in
connection with any refinancing of Reunion to be consummated in connection
with the Merger (including the contemplated refinancing with Bank of America
NT & SA), which shall be paid one-half by Reunion and one-half by Chatwins,
and except as otherwise specifically provided elsewhere herein, each party to
this Agreement shall be responsible for its own costs and expenses incurred in
connection with the transactions contemplated by this Agreement, and in
particular, Reunion shall be responsible for the fees and expenses of Legg
Mason Wood Walker, Incorporated. All expenses incurred in connection with the
Registration Statement shall be borne by Reunion.

7.2. Public Announcements. Reunion and Chatwins shall to the maximum extent
feasible advise and confer with each other prior to the issuance of any
reports, public statements or releases pertaining to this Agreement or any
transaction contemplated hereby.

7.3. Public Disclosure. None of the information supplied by Reunion and
Chatwins for inclusion or incorporation by reference in the Registration
Statement (as defined below) at the time the Registration Statement is filed
with the SEC and the time such document becomes effective under the Securities
Act, will contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading.

7.4. Refinancing. Reunion and Chatwins shall, and shall cause their
respective affiliates, agents and employees to, cooperate and expend all
efforts reasonably necessary to consummate on the Closing Date the currently
contemplated refinancing of the outstanding indebtedness of Reunion and
Chatwins through Bank of America NT & SA, and any refinancing in lieu or
supplemental thereof.

7.5. No Shop. From the date hereof until the Effective Time, except as
contemplated by Section 5.2(d) and as otherwise required to comply with
applicable law, Reunion and Chatwins shall not and shall not permit any
officer, director or other agent of Reunion or Chatwins, directly or
indirectly, to take any action to seek, initiate, negotiate or encourage or
enter into or participate in any discussions regarding, any offer from any
third party to acquire any shares of capital stock of such third party, or to
sell to such third party any shares of capital stock of either Reunion or
Chatwins, to merge or consolidate with Reunion or Chatwins, or to otherwise
acquire any significant portion of the assets of Reunion or Chatwins or to
acquire any significant portion of the assets of such third party.

ARTICLE VIII

Conditions to Obligations of Reunion

The obligation of Reunion to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment, on or prior to the
Closing, of the following conditions:

8.1. Representations and Warranties True at the Closing. The
representations and warranties of Chatwins contained in this Agreement
shall be true and correct in all material respects, except to the extent
such representations were made as of a specific date other than the date
hereof.

8.2. Performance of Covenants. Chatwins shall have performed in all
material respects all covenants required to be performed by it under this
Agreement prior to the Closing.

8.3. Opinion of Counsel. Chatwins shall have delivered to Reunion an
opinion, dated the Closing Date and addressed to Reunion, of Richards &
O'Neil, LLP in form and substance reasonably satisfactory to Reunion and
its counsel.

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<PAGE>

8.4. Shareholder Approvals. This Agreement shall have been adopted by the
requisite vote of the shareholders of Reunion and of Chatwins under the
Delaware GCL and the shareholders of Chatwins shall have waived all rights
of appraisal under the Delaware GCL.

8.5. Other Approvals and Consents. All required approvals and
authorizations of governmental and regulatory authorities, including those
listed on SCHEDULE 3.8 and SCHEDULE 4.3, shall have been obtained.

8.6. No Governmental or other Proceeding or Litigation. No order of any
court or administrative agency shall be in effect which restrains or
prohibits any transaction contemplated hereby or which would limit or
otherwise affect in any material respect the Merger; and no suit, action,
or proceeding by any governmental body or other person or entity shall be
pending against Reunion or Chatwins, which challenges the validity or
legality, or seeks to restrain the consummation, of any transaction
contemplated hereby or which seeks to limit or otherwise affect the Merger.

8.7. No Material Adverse Change. There shall not have been since the date
hereof any occurrence which could reasonably be expected to have a Chatwins
Material Adverse Effect.

8.8. Certificate of Chatwins. Chatwins shall have furnished Reunion with
a Certificate of Chatwins signed by its principal executive officer to the
effect that the representations and warranties of Chatwins contained in
this Agreement are true and correct in all material respects at and as of
the Closing Date as though such representations and warranties were made on
such date (except as to representations and warranties which are expressly
limited to a state of facts existing at a time prior to the Closing Date)
and that Chatwins has performed or complied in all material respects with
all terms, covenants and provisions of this Agreement required to be
performed or complied with by it prior to or at the Closing.

8.9. Certificate of Merger. Chatwins shall have executed and delivered to
Reunion the certificate of merger to be filed with the Secretary of State
of Delaware in connection with the Merger.

8.10. Fairness Opinion. Reunion's Board of Directors shall have received
the opinion of Legg Mason Wood Walker, Inc., in a form reasonably
satisfactory to the Board, that the consideration to be paid for Chatwins
pursuant to this Agreement is fair to Reunion and its stockholders, other
than Chatwins, from a financial point of view.

8.11. Refinancing; Chatwins Warrants. Reunion shall have an enforceable
agreement with Bank of America NT & SA, as agent for a group of lenders, to
consummate with Reunion one or more new credit facilities, the proceeds of
which will be sufficient, at a minimum, to redeem Chatwins's outstanding
senior notes including the early payment premium payable thereon, to repay
all amounts due under Chatwins's and Oneida Rostone Corp.'s ("ORC")
existing credit facilities with Congress Financial Corporation, to repay
certain other indebtedness of ORC, and to provide adequate working capital
resources to Reunion, and all conditions precedent to the funding of such
new credit facilities shall have been satisfied other than the consummation
of the Merger. Chatwins shall have issued the requisite "bring along
notice" to its warrantholders and all Chatwins warrants shall have been
exercised or terminated.

ARTICLE IX

Conditions to Obligations of Chatwins

The obligations of Chatwins to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment, on or prior to the
Closing, of the following conditions:

9.1. Representations and Warranties True at the Closing Date. The
representations and warranties of Reunion contained in this Agreement shall
be true and correct in all material respects, except for representations
and warranties which were made as of a specified date other than the date
hereof.

9.2. Performance of Covenants. Reunion shall have performed in all
material respects all covenants required to be performed by it under this
Agreement prior to the Closing.

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<PAGE>

9.3. Opinion of Counsel. Reunion shall have delivered to Chatwins an
opinion, dated the Closing Date and addressed to Chatwins, of Finn, Dixon &
Herling LLP, in form and substance reasonably satisfactory to Chatwins and
its counsel.

9.4. Shareholder Approvals. This Agreement shall have been adopted by the
requisite vote of the shareholders of Reunion and of Chatwins under the
Delaware GCL.

9.5. Other Approvals and Consents. All required approvals and
authorizations of governmental and regulatory authorities, including those
listed on SCHEDULE 3.8 and SCHEDULE 4.3, shall have been obtained.

9.6. No Governmental or Other Proceeding or Litigation. No order of any
court or administrative agency shall be in effect which restrains or
prohibits any transaction contemplated hereby or which would limit or
otherwise affect in any material respect the Merger; and no suit, action,
or proceeding by any governmental body or other person or entity, shall be
pending against Reunion or Chatwins which challenges the validity or
legality, or seeks to restrain the consummation, of any transaction
contemplated hereby or which seeks to limit or otherwise affect the Merger.

9.7. Certificate of Reunion. Reunion shall have furnished Chatwins with a
Certificate of Reunion signed by its respective President or any Vice
President to the effect that, except for changes thereto agreed to in
writing by Chatwins, the representations and warranties of Reunion
contained in this Agreement are true and correct in all material respects
at and as of the Closing Date as though such representations and warranties
were made on such date (except as to representations and warranties which
are expressly limited to a state of facts existing at a time prior to the
Closing) and that Reunion has performed or complied in all material
respects with all terms, covenants and provisions of this Agreement
required to be performed or complied with by it prior to or at the Closing.

9.8. Registration. Reunion shall have filed with the SEC the Registration
Statement and the Registration Statement shall be effective in accordance
with Section 8(a) of the Securities Act of 1933, as amended (the
"SECURITIES ACT"). For the purposes of this Agreement, "REGISTRATION
STATEMENT" shall mean the registration statement on Form S-4 of Reunion
covering the shares of Reunion Common Stock to be issued to the Chatwins's
shareholders upon conversion of the Chatwins Common Stock in connection
with the Merger, including a proxy statement/prospectus, amendments and
supplements to such Registration Statement, including post-effective
amendments, all exhibits and all material incorporated by reference in such
Registration Statement. Reunion shall have complied in all material
respects with all "Blue Sky" obligations applicable to the transactions
contemplated by this Agreement and by the Registration Statement.

9.9. Listing. Reunion shall have taken such actions as are necessary to
cause the shares registered by the Registration Statement to be listed on
the Pacific Stock Exchange and the NASDAQ Small-Cap Market.

9.10. Certificate of Merger. Reunion shall have executed and delivered to
Chatwins the certificate of merger to be filed with the Secretary of State
of the State of Delaware in connection with the Merger.

9.11. No Material Adverse Change. There shall not have been since the
date hereof any occurrence which could reasonably be expected to have a
Reunion Material Adverse Effect.

9.12. Refinancing; Chatwins Warrants. Reunion shall have an enforceable
agreement with Bank of America NT & SA, as agent for a group of lenders, to
consummate with Reunion one or more new credit facilities, the proceeds of
which will be sufficient, at a minimum, to redeem Chatwins' outstanding
senior notes including the early payment premium payable thereon, to repay
all amounts due under Chatwins' and ORC's existing credit facilities with
Congress Financial Corporation, to repay certain other indebtedness of ORC,
to acquire King-Way, and to provide adequate working capital resources to
Reunion, and all conditions precedent to the funding of such new credit
facilities shall have been satisfied other than the consummation of the
Merger.

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<PAGE>

ARTICLE X

Termination

10.1. Termination. This Agreement may be terminated (i) by the mutual
consent of Reunion and Chatwins; (ii) by Reunion or Chatwins at any time after
90 days after the date hereof if for any reason the Merger shall not by such
date have been consummated and such failure to consummate the Merger is not
caused by a breach of this Agreement by the terminating party; (iii) by
Reunion if there has been a misrepresentation or breach on the part of
Chatwins in the representations, warranties and covenants of Chatwins set
forth herein which, if curable, has not been cured within 10 days of notice
thereof by Reunion and which breach, if not cured, would cause a failure of
the conditions set forth in Section 8.1 or 8.2; (iv) by Chatwins if there has
been a misrepresentation or breach on the part of Reunion in the
representations, warranties and covenants of Reunion set forth herein which,
if curable, has not been cured within 10 days of notice thereof by Chatwins
and which breach, if not cured, would cause a failure of the conditions set
forth in Section 9.1 or 9.2; and (v) by Reunion or Chatwins if any court of
competent jurisdiction or other competent governmental or regulatory authority
shall have issued an order making illegal or otherwise restricting, preventing
or prohibiting the Merger and such order shall have become final and
nonappealable.

10.2. Effect of Termination. If this Agreement is validly terminated by
Reunion or Chatwins pursuant to Section 10.1, this Agreement will forthwith
become null and void and there will be no liability or obligation on the part
of Reunion or Chatwins (or any of their respective representatives or
affiliates), except (i) that the provisions of Sections 7.1 and 7.2 will
continue to apply following any such termination and (ii) that nothing
contained herein shall relieve any party hereto from liability for breach of
its representations, warranties, covenants or agreements contained in this
Agreement.

ARTICLE XI

Indemnification

11.1. Indemnification.

(a) Reunion shall indemnify and hold harmless Chatwins, each of its
directors and officers, and each person or entity, if any, who controls
Chatwins within the meaning of the Securities Act against all losses, claims,
damages or liabilities, joint or several, to which Chatwins or any such
director, officer or controlling person may become subject (i) which arise out
of or are caused by any breach by Reunion of any representation or warranty of
Reunion contained in this Agreement or any related agreement, (ii) which arise
out of or are caused by any breach or other failure to perform any covenant,
agreement or other obligation of Reunion contained in this Agreement or any
related agreement, or (iii) under the Securities Act insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; and Reunion shall reimburse Chatwins or any such director, officer
or controlling person for any reasonable legal or other expenses in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that Reunion shall not be required to indemnify and
hold harmless or reimburse Chatwins to the extent that any such loss, claim,
damage, liability or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission in any
document made in reliance upon and in conformity with written information
furnished to Reunion by or on behalf of Chatwins for use in the preparation of
such documents.

(b) Chatwins shall indemnify and hold harmless Reunion, each of its
directors and officers, and each person or entity, if any, who controls
Reunion within the meaning of the Securities Act, against all losses, claims,
damages or liabilities to which Reunion or any such director or officer or
controlling person may become subject (i) which arise out of or are caused by
any breach by Chatwins of any representation or warranty of Chatwins

A-16
<PAGE>

contained in this Agreement or any related agreement, (ii) which arise out of
or are caused by any breach or other failure to perform any covenant,
agreement or other obligation of Chatwins contained in this Agreement or any
related agreement, or (iii) under the Securities Act insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case only to the extent that such untrue statement or
alleged untrue statement or omission was made in reliance upon and in
conformity with written information furnished to Reunion by or on behalf of
Chatwins; and Chatwins shall reimburse Reunion for any reasonable legal or
other expenses reasonably incurred by Reunion or any such director or officer
or controlling person in connection with investigating or defending any such
loss, claim, damage, liability or action.

(c) Promptly after receipt by a party who is, under paragraphs (a) or (b) of
this Section 11.1 an indemnified party, of notice of the commencement of any
action with respect to which indemnification may be sought under this Section
11.1, such indemnified party shall notify the indemnifying party. Such notice
shall be a condition precedent to any liability of the indemnifying party for
indemnification contained in this Section 11.1; provided, however, that the
rights of the indemnified party to indemnification or compensation hereunder
will only be affected by its failure to give prompt notice to the indemnifying
party of the commencement of such action if and to the extent that such
failure prejudices the indemnifying party in the defense of such action. In
case any such action is being brought against any indemnified party and it
notifies an indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to assume and control the defense of the action at its
expense and if the indemnifying party gives notice to such indemnified party
of its election to assume and control the defense, the indemnifying party will
not be liable to such indemnified party for any legal expenses subsequently
incurred by the indemnified party in connection with the defense or
investigation of the action, so long as and to the extent that the
indemnifying party continues to diligently defend the indemnified party.

(d) No action for indemnity under this Article XI may be brought or
maintained by either party after the Effective Time.

ARTICLE XII

Miscellaneous Provisions

12.1. Notices, Etc. All notices, requests, demands, and other communications
hereunder shall be in writing and shall be deemed to have been duly given,
when delivered in person, telegraphed, or when mailed by certified or
registered mail, postage prepaid, or when given by telex or facsimile
transmission (promptly confirmed in writing), as follows:

(a) If to Chatwins:

Chatwins Group, Inc.
300 Weyman Plaza, Suite 340
Pittsburgh, Pennsylvania 15236
Attention: President

with copies to:

Richards & O'Neil, LLP
885 Third Avenue
New York, New York 10022-4873
Attention: Brian D. Beglin, Esq.

A-17
<PAGE>

(b) If to Reunion:

Reunion Industries, Inc.
One Stamford Landing, 62 Southfield Avenue
Stamford, Connecticut 06902
Attention: President

with copies to:

Finn, Dixon and Herling LLP
One Landmark Square, Suite 1400
Stamford, Connecticut 06901-2689
Attention: Harold B. Finn III

or such other person as the person entitled to notice shall designate in
writing, such writing to be delivered to the other parties hereto in the
manner provided in this Section 12.1.

12.2. Survival of Representations and Warranties. The representations and
warranties contained herein and in any certificate delivered pursuant hereto
shall not survive the Closing Date and the consummation of any or all of the
transactions contemplated hereby.

12.3. Entire Agreement; Amendment. This Agreement (including the various
Schedules hereto) sets forth the entire agreement and understanding of the
parties in respect of the transactions contemplated hereby and supersedes all
prior agreements, arrangements and understandings relating to the subject
matter hereof. This Agreement may be amended or modified only by a written
instrument executed by Reunion and Chatwins.

12.4. Individual Provisions. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future law, and if
the rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid and unenforceable provision had never comprised a part
hereof, (iii) the remaining provisions of this Agreement will remain in full
force and effect and will not be affected by the legal, invalid or
unenforceable provision, and (iv) there will be added automatically as a part
of this Agreement a legal, valid and enforceable provision as similar in terms
to such illegal, invalid or unenforceable provision as may be possible.

12.5. General. This Agreement: (i) shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware, without giving
effect to the choice of law principles thereof; (ii) shall inure to the
benefit of the parties hereto and their heirs, personal representatives,
successors and permitted assigns, nothing in this Agreement, expressed or
implied, being intended to confer upon any other person any rights or remedies
hereunder; (iii) may not be assigned by a party without the prior written
consent of the other parties; and (iv) may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The Section, Schedule
and other headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this
Agreement.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement the
day and year first above written.

REUNION INDUSTRIES, INC.

/s/ Richard L. Evans
By: _________________________________
Name: Richard L. Evans
Title:

CHATWINS GROUP, INC.

/s/ Russell S. Carolus
By: _________________________________
Name: Russell S. Carolus
Title:

A-18
<PAGE>

EXECUTION VERSION

AMENDMENT NO. 1
TO
MERGER AGREEMENT

AMENDMENT NO. 1 TO MERGER AGREEMENT, dated as of June 25, 1998, by and
between Reunion Industries, Inc., a Delaware corporation ("REUNION") and
Chatwins Group, Inc., a Delaware corporation ("CHATWINS").

WHEREAS, as of May 31, 1998 Reunion and Chatwins entered into that certain
Merger Agreement (the "MERGER AGREEMENT") pursuant which Chatwins is to merge
with and into Reunion; and

WHEREAS, the parties to the Merger Agreement now desire to amend the Merger
Agreement as set forth below; and

WHEREAS, all terms used but not defined herein shall have the meanings
ascribed to them in the Merger Agreement.

NOW, THEREFORE, in consideration of the mutual benefits to be derived from
this Amendment, the sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:

1. Amendment to Merger Agreement. The Merger Agreement is hereby amended as
follows:

1.1. Section 1.2(b) is amended and restated in its entirety to read as
follows:

"(b)(i) The aggregate number of shares of Class D, Series A Preferred
Stock of Chatwins, par value $.01 per share (the "SERIES A PREFERRED"),
Class D, Series B Preferred Stock of Chatwins, par value $.01 per
share, (the "SERIES B PREFERRED"), and Class D, Series C Preferred
Stock of Chatwins, par value $.01 per share, (the "SERIES C
PREFERRED"), issued and outstanding immediately prior to the Effective
Time shall be automatically converted into the right to receive
preferred stock of Reunion (the "REUNION PREFERRED") with an aggregate
initial redemption value (the "INITIAL REDEMPTION VALUE") equal to the
aggregate redemption price of such Chatwins preferred stock on the
Closing Date determined as provided in Chatwins' Restated Certificate
of Incorporation. The Reunion Preferred will be redeemable (i) at any
time at the option of Reunion and (ii) after three years at the option
of the holders thereof at a redemption value (the "TOTAL REDEMPTION
VALUE") equal to the Initial Redemption Value plus all accrued but
unpaid preferred dividends. The Reunion Preferred will accrue a
cumulative dividend equal to 10% of the Initial Redemption Value per
annum, which will accrue from the Effective Date (the "PREFERRED
DIVIDEND"). The Preferred Dividend will be payable as and when the
Board of Directors of Reunion determines. The Reunion Preferred will
not be entitled to any voting rights (except as required by law) and
will not have any right of conversion into the Reunion Common Stock or
any other securities of Reunion. Upon a liquidation of Reunion, the
holders of the Reunion Preferred will be entitled to be paid, out of
the assets of Reunion available for payment to the holders of Reunion's
capital stock, an amount equal to the Total Redemption Value on the
date of payment. In the event of a liquidation of Reunion no payments
will be made and no assets will be distributed to the holders of the
Reunion Common Stock until the holders of the Reunion Preferred shall
have been paid the Total Redemption Value. The Reunion Preferred will
have such other preferences, privileges, restrictions and rights as are
determined by the Board of Directors of Reunion prior to the Effective
Time.

(ii) The Reunion Preferred shall be allocated among the holders of
the Series A Preferred, Series B Preferred and Series C Preferred in
accordance with such holders' applicable Redemption Percentages at the
Effective Time. For these purposes, a particular holder's "REDEMPTION
PERCENTAGE" shall mean the fraction (expressed as a percentage)
obtained by dividing (y) the aggregate
<PAGE>

redemption price (determined in accordance with Chatwins' Restated
Certificate of Incorporation) of the Series A Preferred, Series B
Preferred and Series C Preferred held by such holder immediately prior
to the Effective Time by (z) the aggregate redemption price of all
shares of Series A Preferred, Series B Preferred and Series C Preferred
issued and outstanding immediately prior to the Effective Time."

1.2. Section 1.2(c) is hereby amended by deleting the phrase "the
principal amount of Preferred Notes" and replacing it with "Reunion
Preferred".

1.3. Section 1.3(a) is hereby amended by (i) deleting the words
"Preferred Notes" the first time they appear and replacing them with
"shares of Reunion Preferred", (ii) inserting the phrase "and Reunion
Preferred" after the phrase "All of the shares of Reunion Common Stock" at
the beginning of the second sentence, and (iii) deleting the third sentence
in its entirety.

1.4. Section 1.4 is hereby amended by deleting the words "July 30, 1998"
and replacing them with "August 5, 1998."

1.5. Section 4.5 is hereby amended and restated in its entirety as follows:

"4.5 Merger Consideration. When issued, the shares of Reunion Common
Stock and Reunion Preferred to be issued in the Merger will be duly
authorized, validly issued, fully-paid and nonassessable and free and
clear of all Liens and preemptive rights, and the certificates
representing such shares will be in due and proper form."

2. No Other Modifications; Counterparts. Except as expressly amended hereby,
all of the terms and provisions of the Merger Agreement remain in full force
and effect. This Amendment may be executed in original or facsimile
counterparts, each of which shall be deemed an original but both of which
together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement the
day and year first above written.

REUNION INDUSTRIES, INC.

By: /s/ Richard L. Evans
----------------------------------
Name: Richard L. Evans
Title: Vice President

CHATWINS GROUP, INC.

By /s/ Russell S. Carolus
----------------------------------
Name: Russell S. Carolus
Title: Vice President
<PAGE>

ANNEX B

THE 1998 STOCK OPTION PLAN
OF
REUNION INDUSTRIES, INC.

Reunion Industries, Inc., a Delaware corporation (the "COMPANY"), has
adopted The 1998 Stock Option Plan of Reunion Industries, Inc. (the "PLAN"),
effective , 1998, for the benefit of its eligible employees, consultants
and directors.

The purposes of this Plan are as follows:

(1) To provide an additional incentive for directors, key Employees and
consultants to further the growth, development and financial success of the
Company by personally benefiting through the ownership of Company stock
which recognizes such growth, development and financial success.

(2) To enable the Company to obtain and retain the services of directors,
key Employees and consultants considered essential to the long range
success of the Company by offering them an opportunity to own stock in the
Company which will reflect the growth, development and financial success of
the Company.

ARTICLE 1

Definitions

1.1 General. Wherever the following terms are used in this Plan they shall
have the meanings specified below, unless the context clearly indicates
otherwise.

1.2 "AFFILIATE" shall mean, with respect to any Person, any Person or
Persons that, directly or indirectly, controls, or is controlled by or is
under common control with such Person. For the purpose of this definition,
"CONTROL" (including the terms "CONTROLLING", "CONTROLLED BY" and "UNDER
COMMON CONTROL WITH"), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities or by contract or agency or otherwise.

1.3 "AWARD LIMIT" shall mean 100,000 shares of Common Stock, as adjusted
pursuant to Section 8.3.

1.4 "BOARD" shall mean the Board of Directors of the Company.

1.5 "CODE" shall mean the Internal Revenue Code of 1986, as amended.

1.6 "COMMITTEE" shall mean the Compensation Committee of the Board, or
another committee of the Board, appointed as provided in Section 7.1.

1.7 "COMMON STOCK" shall mean the common stock of the Company, $.01 par
value per share.

1.8 "COMPANY" shall mean Reunion Industries, Inc., a Delaware corporation.

1.9 "CORPORATE TRANSACTION" shall mean any of the following shareholder-
approved transactions to which the Company is a party, in no event to include
the merger of Chatwins Group, Inc. with and into the Company:

(a) a merger or consolidation in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is to
change the State in which the Company is incorporated, to form a holding
company or to effect a similar reorganization as to form whereupon this
Plan and all Options are assumed by the successor entity;

(b) the sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, in complete liquidation or
dissolution of the Company in a transaction not covered by the exceptions
to clause (a), above; or

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(c) any reverse merger in which the Company is the surviving entity but
in which securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities are
transferred or issued to a person or persons different from those who held
such securities immediately prior to such merger.

1.10 "DIRECTOR" shall mean a member of the Board.

1.11 "DISABILITY" shall mean any complete and permanent disability as
defined in Section 22(e)(3) of the Code and determined by the Committee (or
the Board in the case of Options granted to Non-Employee Directors) in
accordance with the procedures set forth in the regulations, thereunder.

1.12 "EMPLOYEE" shall mean any officer or other employee (as defined in
accordance with Section 3401(c) of the Code) of the Company, or of any
corporation which is a Subsidiary.

1.13 "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.

1.14 "FAIR MARKET VALUE" of a share of Common Stock as of a given date shall
be (i) the closing price of a share of Common Stock on the principal exchange
on which shares of Common Stock are then trading, if any (or as reported on
any composite index which includes such principal exchange), on the trading
day previous to such date, or if shares were not traded on the trading day
previous to such date, then on the next preceding date on which a trade
occurred; or (ii) if Common Stock is not traded on an exchange but is quoted
on NASDAQ or a successor quotation system, the closing price for the Common
Stock on the trading day previous to such date as reported by NASDAQ or such
successor quotation system, or if shares were not traded on the trading day
previous to such date, then on the next preceding date on which a trade
occurred; or (iii) if Common Stock is not publicly traded on an exchange and
not quoted on NASDAQ or a successor quotation system, the Fair Market Value of
a share of Common Stock shall be established by the Committee (or the Board in
the case of Options granted to Non-Employee Directors) acting in good faith,
giving predominate weight to the earnings history, book value and prospects of
the Company in light of market conditions generally.

1.15 "INCENTIVE STOCK OPTION" shall mean an option which conforms to the
applicable provisions of Section 422 of the Code and which is designated as an
Incentive Stock Option by the Committee.

1.16 "NON-EMPLOYEE DIRECTOR" shall mean a member of the Board who qualifies
as a "Non-Employee Director" as defined in Rule 16b-3 under the Exchange Act,
or any successor definition.

1.17 "NON-QUALIFIED STOCK OPTION" shall mean an Option which is not
designated as an Incentive Stock Option by the Committee.

1.18 "OPTION" shall mean a stock option granted under Article 3 of this
Plan. An Option granted under this Plan shall, as determined by the Committee,
be either a Non-Qualified Stock Option or an Incentive Stock Option; provided,
however, that Options granted to Non-Employee Directors and consultants shall
be Non-Qualified Stock Options.

1.19 "OPTION SHARES" shall mean shares of Common Stock acquired by Optionees
through the exercise of options under this Plan.

1.20 "OPTIONEE" shall mean an Employee, consultant or Non-Employee Director
granted an Option under this Plan.

1.21 "PERSON" shall mean a corporation, an association, a partnership, a
trust, a limited liability company, an organization, a business or an
individual.

1.22 "PLAN" shall mean The 1998 Stock Option Plan of Reunion Industries,
Inc.

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1.23 "PUBLIC OFFERING" shall mean the registration of an offering of shares
of Common Stock under the Securities Act which becomes effective (other than
by a registration on Form S-8 or any successor or similar forms).

1.24 "QDRO" shall mean a qualified domestic relations order as defined by
the Code or Title I of the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder.

1.25 "RELATED PERSON" shall mean (a) in the event of a Person's death, such
Person's executors, administrators, testamentary trustees, legatees or
beneficiaries or the executors, administrators, testamentary trustees,
legatees or beneficiaries of a Person who has become a holder of Options or
Option Shares in accordance with the terms of this Plan; or (b) a revocable
trust or custodianship the beneficiaries of which may include only such
Person, spouse or lineal descendants by blood or adoption.

1.26 "RULE 16B-3" shall mean that certain Rule 16b-3 under the Exchange Act,
as such Rule may be amended from time to time.

1.27 "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.

1.28 "SUBSIDIARY" shall mean any corporation, whether now or hereafter
existing, which constitutes a "subsidiary" of the Company, as defined in
Section 424(f) of the Code.

1.29 "TERMINATION OF CONSULTANCY" shall mean the time when the engagement of
an Optionee as a consultant to the Company or a Subsidiary is terminated for
any reason, with or without cause, including, but not by way of limitation, by
resignation, discharge, death, Disability or retirement; but excluding
terminations where there is a simultaneous commencement of employment with the
Company or any Subsidiary. The Committee, in its absolute discretion, shall
determine the effect of all matters and questions relating to Termination of
Consultancy, including, but not by way of limitation, the question of whether
a Termination of Consultancy resulted from a discharge for good cause, and all
questions of whether particular leaves of absence constitute Terminations of
Consultancy. Notwithstanding any other provision of this Plan, the Company or
any Subsidiary has an absolute and unrestricted right to terminate a
consultant's service at any time for any reason whatsoever, with or without
cause, except to the extent expressly provided otherwise in writing.

1.30 "TERMINATION OF DIRECTORSHIP" shall mean the time when an Optionee who
is an Non-Employee Director ceases to be a Director for any reason, including,
but not by way of limitation, a termination by resignation, failure to be
elected, death, Disability or retirement. The Board, in its sole and absolute
discretion, shall determine the effect of all matters and questions relating
to Termination of Directorship with respect to Non-Employee Directors.

1.31 "TERMINATION OF EMPLOYMENT" shall mean the time when the employee-
employer relationship between an Optionee and the Company or any Subsidiary is
terminated for any reason, with or without cause, including, but not by way of
limitation, a termination by resignation, discharge, death, Disability or
retirement; but excluding (i) terminations where there is a simultaneous
reemployment or continuing employment of an Optionee by the Company or any
Subsidiary, (ii) at the discretion of the Committee, terminations which result
in a temporary severance of the employee-employer relationship, and (iii) at
the discretion of the Committee, terminations which are followed by the
simultaneous establishment of a consulting relationship by the Company or a
Subsidiary with the former employee. The Committee, in its absolute
discretion, shall determine the effect of all matters and questions relating
to Termination of Employment, including, but not by way of limitation, the
question of whether a Termination of Employment resulted from a discharge for
good cause, and all questions of whether particular leaves of absence
constitute Terminations of Employment; provided, however, that, unless
otherwise determined by the Committee in its discretion, a leave of absence,
change in status from an employee to an independent contractor or other change
in the employee-employer relationship shall constitute a Termination of
Employment if, and to the extent that, such leave of absence, change in status
or other change interrupts employment for the purposes of Section 422(a)(2) of
the Code and the then applicable regulations and

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revenue rulings under said Section. Notwithstanding any other provision of
this Plan, the Company or any Subsidiary has an absolute and unrestricted
right to terminate an Employee's employment at any time for any reason
whatsoever, with or without cause, except to the extent expressly provided
otherwise in writing.

1.32 "TERMINATION FOR CAUSE" shall mean the time when the Non-Employee
Director-employer, employee-employer or consultant-employer relationship
between an Optionee and the Company or any Subsidiary is terminated for cause,
as termination for cause is defined in the Optionee's directorial, employment
or consultancy agreement; provided, however, that if termination for cause is
not therein defined, it shall have such meaning, in conformance with
applicable law, as the Committee (or the Board in the case of termination for
cause of an Non-Employee Director) shall determine is appropriate.

ARTICLE 2

Shares Subject to Plan

2.1 Shares Subject to Plan.

(a) The shares of stock subject to Options shall be Common Stock. The
aggregate number of such shares which may be issued upon exercise of such
options under the Plan shall be 600,000. The shares of Common Stock of the
Company issuable upon exercise of such options may be either previously
authorized but unissued shares or treasury shares.

(b) The maximum number of shares which may be subject to Options granted
under the Plan to any individual in any fiscal year of the Company shall not
exceed the Award Limit. To the extent required by Section 162(m) of the Code,
shares subject to Options which are canceled continue to be counted against
the Award Limit and if, after grant of an Option, the price of shares subject
to such Option is reduced, the transaction is treated as a cancellation of the
Option and a grant of a new Option and both the Option deemed to be canceled
and the Option deemed to be granted are counted against the Award Limit.

2.2 Add-Back of Options. If any option to acquire shares of Common Stock
under this Plan expires or is canceled without having been fully exercised,
the number of shares subject to such Option but as to which such Option was
not exercised prior to its expiration, cancellation or exercise may again be
available for the granting of Options hereunder, subject to the limitations of
Section 2.1. Furthermore, any shares subject to Options which are adjusted
pursuant to Section 8.3 and become exercisable with respect to shares of stock
of another corporation shall be considered cancelled and may again be
available for the granting of Options hereunder, subject to the limitations of
Section 2.1. Shares of Common Stock which are delivered by the Optionee or
withheld by the Company upon the exercise of any Option under this Plan, in
payment of the exercise price thereof, may again be available for the granting
of Options hereunder, subject to the limitations of Section 2.1.
Notwithstanding the provisions of this Section 2.2, no shares of Common Stock
may again be available for the granting of Options if such action would cause
an Incentive Stock Option to fail to qualify as an incentive stock option
under Section 422 of the Code.

ARTICLE 3

Granting of Options

3.1 Eligibility. Any Non-Employee Director, Employee or consultant selected
by the Committee (or the Board in the case of Options granted to Non-Employee
Directors) pursuant to Section 3.4(a)(i) shall be eligible to be granted an
Option.

3.2 Disqualification for Stock Ownership.

(a) No person may be granted an Incentive Stock Option under this Plan if
such person, at the time the Incentive Stock Option is granted, owns stock
possessing more than ten percent (10%) of the total combined

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voting power of all classes of stock of the Company or any then existing
Subsidiary unless such Incentive Stock Option conforms to the applicable
provisions of Section 422 of the Code.

(b) Notwithstanding any provision of the Plan or any Option, all Option
Shares shall in all respects be subject to Article V of the Company's
Certificate of Incorporation ("RESTRICTIONS ON TRANSFERS OF STOCK") for so
long as such Article V remains in effect.

3.3 Qualification of Incentive Stock Options. No Incentive Stock Option
shall be granted to any person who is not an Employee.

3.4 Granting of Options.

(a) The Committee (or the Board in the case of Options granted to Non-
Employee Directors) shall from time to time, in its absolute discretion, and
subject to applicable limitations of this Plan:

(i) Determine which Employees are key Employees and select from among the
Non-Employee Directors, key Employees and consultants (including Non-
Employee Directors, Employees and consultants who have previously received
Options or other awards under this Plan) such of them as in its opinion
should be granted Options;

(ii) Determine the number of shares to be subject to such Options granted
to the selected Non-Employee Directors, key Employees and consultants;

(iii) Subject to Section 3.2(a), determine whether such Options are to be
Incentive Stock Options or Non-Qualified Stock Options and whether such
Options are to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code; and

(iv) Determine the terms and conditions of such Options, consistent with
this Plan; provided, however, that the terms and conditions of Options
intended to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code shall include, but not be limited to, such
terms and conditions as may be necessary to meet the applicable provisions
of Section 162(m) of the Code.

(b) Upon the selection of a Non-Employee Director, key Employee or
consultant to be granted an Option, the Committee (or the Board in the case of
Options granted to Non-Employee Directors) shall instruct the Secretary of the
Company to issue the Option and may impose such conditions on the grant of the
Option as it deems appropriate. Without limiting the generality of the
preceding sentence, the Committee (or the Board in the case of Options granted
to Non-Employee Directors) may, in its discretion and on such terms as it
deems appropriate, require as a condition on the grant of an Option to an Non-
Employee Director, Employee or consultant that such Non-Employee Director,
Employee or consultant surrender for cancellation some or all of the
unexercised Options or other rights which have been previously granted to such
Non-Employee Director, Employee or consultant under this Plan or otherwise. An
Option, the grant of which is conditioned upon such surrender, may have an
option price lower (or higher) than the exercise price of such surrendered
Option or other award, may cover the same (or a lesser or greater) number of
shares as such surrendered Option or other award, may contain such other terms
as the Committee (or the Board in the case of Options granted to Non-Employee
Directors) deems appropriate, and shall be exercisable in accordance with its
terms, without regard to the number of shares, price, exercise period or any
other term or condition of such surrendered Option or other award.

ARTICLE 4

Terms of Options

4.1 Option Agreement. Each Option shall be evidenced by a written Stock
Option Agreement, which shall be executed by the Optionee and an authorized
officer of the Company and which shall contain such terms and conditions as
the Committee (or the Board in the case of Options granted to Non-Employee
Directors) shall determine, consistent with this Plan. Stock Option Agreements
evidencing Options intended to qualify as

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performance-based compensation as described in Section 162(m)(4)(C) of the
Code shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 162(m) of the Code. Stock Option Agreements
evidencing Incentive Stock Options shall contain such terms and conditions as
may be necessary to meet the applicable provisions of Section 422 of the Code.

4.2 Option Price. The price per share of the shares subject to each Option
shall be set by the Committee (or the Board in the case of Options granted to
Non-Employee Directors); provided, however, that:

(a) Unless otherwise permitted by applicable securities laws, such price
shall be not less than eighty-five percent (85%) of the Fair Market Value
of the stock at the time the option is granted, except that the price shall
be one hundred and ten percent (110%) of the Fair Market Value of the stock
in the case of any person possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or its
Subsidiary;

(b) In the case of Incentive Stock Options and Options intended to
qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code, such price shall not be less than one hundred
percent (100%) of the Fair Market Value of a share of Common Stock on the
date the Option is granted; and

(c) In the case of Incentive Stock Options granted to an individual then
owning (within the meaning of Section 424(d) of the Code) more than ten
percent (10%) of the total combined voting power of all classes of stock of
the Company or any Subsidiary, such price shall not be less than one
hundred and ten percent (110%) of the Fair Market Value of a share of
Common Stock on the date the Option is granted.

4.3 Option Term. The term of an Option shall be set by the Committee (or the
Board in the case of Options granted to Non-Employee Directors) in its
discretion; provided, however, that:

(a) No Option may have a term that extends beyond the expiration of ten
(10) years from the date the Option was granted;

(b) In the case of Incentive Stock Options, the term shall not be more
than ten (10) years from the date the Incentive Stock Option is granted, or
five (5) years from such date if the Incentive Stock Option is granted to
an individual then owning (within the meaning of Section 424(d) of the
Code) more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or any Subsidiary;

(c) Except as limited by requirements of Section 422 of the Code and
regulations and rulings thereunder applicable to Incentive Stock Options,
the Committee (or the Board in the case of Options granted to Non-Employee
Directors) may extend the term of any outstanding option in connection with
any Termination of Directorship, Termination of Employment or Termination
of Consultancy of the Optionee, or amend any other term or condition of
such Option relating to such a termination; and

(d) Unless otherwise permitted by applicable securities laws, in the
event of an Optionee's Termination of Directorship, Termination of
Employment or Termination of Consultancy for any reason except death,
Disability or Termination for Cause, the Optionee shall have a period of
time, as is determined by the Committee (or the Board in the case of
Options granted to Non-Employee Directors), not to exceed three (3) months
in the case of Incentive Stock Options, from the date of such Termination
of Directorship, Termination of Employment or Termination of Consultancy to
exercise the Option, and in the event of an Optionee's Termination of
Directorship, Termination of Employment or Termination of Consultancy due
to the Optionee's death or Disability, the Optionee, the Optionee's estate
or a person who acquired the right to exercise the Option by bequest or
inheritance shall have a period of time, as is determined by the Committee
(or the Board in the case of Options granted to Non-Employee Directors),
not to exceed twelve (12) months in the case of Incentive Stock Options,
from the date of such Termination of Directorship, Termination of
Employment or Termination of Consultancy to exercise the Option.
Notwithstanding the foregoing, if an Optionee's Termination of
Directorship, Termination of Employment or Termination of Consultancy also
qualifies as a Termination for Cause, the Company, in its discretion, may
terminate the Optionee's right to exercise his or her Options on the date
of such termination or such other time as the Committee (or the

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Board in the case of Options granted to Non-Employee Directors), in its
sole discretion, shall deem appropriate.

4.4 Option Vesting.

(a) The period during which the right to exercise an Option in whole or in
part vests in the Optionee shall be set by the Committee (or the Board in the
case of Options granted to Non-Employee Directors) and the Committee (or the
Board in the case of Options granted to Non-Employee Directors) may determine
that an Option may not be exercised in whole or in part for a specified period
after it is granted; provided, however, that, subject to section 4.4(b), (i)
each option shall become exercisable as determined by the Committee (or the
Board in the case of Options granted to Non-Employee Directors) in its sole
discretion; (ii) unless the Committee (or the Board in the case of Options
granted to Non-Employee Directors) otherwise provides in the terms of the
Stock Option Agreement or this Plan otherwise so dictates, no Option shall be
exercisable by any Optionee who is then subject to Section 16 of the Exchange
Act within the period ending six months and one day after the date the Option
is granted; and (iii) upon the transfer of more than fifty percent (50%) of
Common Stock to a Person who is not an Affiliate of the Company during the
term of the option the Committee (or the Board in the case of Options granted
to Non-Employee Directors) may determine in its sole discretion, that each
outstanding option shall become fully exercisable for all of the shares of
Common Stock at the time subject to such option; provided, that options may
become fully exercisable, subject to reasonable conditions such as continued
directorship, employment or consultancy, at any time or during any period
established by the Committee (or the Board in the case of options granted to
Non-Employee Directors).

(b) No portion of an Option which is unexercisable at Termination of
Directorship, Termination of Employment or Termination of Consultancy shall
thereafter become exercisable, except as may be otherwise provided by the
Committee (or the Board in the case of Options granted to Non-Employee
Directors), in its sole discretion, either in the Stock Option Agreement or by
action of the Committee (or the Board in the case of Options granted to Non-
Employee Directors) following the grant of the Option.

(c) To the extent that the aggregate Fair Market Value of stock with respect
to which "incentive stock options" (within the meaning of Section 422 of the
Code, but without regard to Section 422(d) of the Code) are exercisable for
the first time by an Optionee during any calendar year (under the Plan and all
other incentive stock option plans of the Company and any Subsidiary) exceeds
$100,000, such Options shall be treated as Non-Qualified Stock Options to the
extent required by Section 422 of the Code. The rule set forth in the
preceding sentence shall be applied by taking Options into account in the
order in which they were granted. For purposes of this Section 4.4(c), the
Fair Market Value of stock shall be determined as of the time the Option with
respect to such stock is granted.

4.5 No Right of Employment. Nothing in this Plan or in any Stock Option
Agreement hereunder shall confer upon any Optionee any right to continue in
the employ (or to consult for or serve as a Non-Employee Director, as
applicable) of the Company or any Subsidiary or shall interfere with or
restrict in any way the rights of the Company or any Subsidiary, which are
hereby expressly reserved, to discharge any Optionee at any time for any
reason whatsoever, with or without good cause.

4.6 Financial Statements. To the extent required by applicable securities
laws, each Optionee shall receive financial statements of the Company at least
annually.

ARTICLE 5

Exercise of Options

5.1 Partial Exercise. An exercisable Option may be exercised in whole or in
part. However, an Option shall not be exercisable with respect to fractional
shares and the Committee (or the Board in the case of Options granted to Non-
Employee Directors) may require that, by the terms of the Option, a partial
exercise be with respect to a minimum number of shares.

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5.2 Manner of Exercise. All or a portion of an exercisable Option shall be
deemed exercised upon delivery of all of the following to the Secretary of the
Company or such Secretary's office:

(a) A written notice complying with the applicable rules established by
the Committee (or the Board in the case of Options granted to Non-Employee
Directors) stating that the Option, or a portion thereof, is exercised. The
notice shall be signed by the Optionee or other person then entitled to
exercise the Option or such portion;

(b) Such representations and documents as the Committee (or the Board in
the case of Options granted to Non-Employee Directors), in its absolute
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act and any other federal or state
securities laws or regulations. The Committee (or the Board in the case of
Options granted to Non-Employee Directors) may, in its absolute discretion,
also take whatever additional actions it deems appropriate to effect such
compliance including, without limitation, placing legends on share
certificates and issuing stop-transfer notices to agents and registrars;

(c) In the event that the Option shall be exercised pursuant to Section
8.1 by any person or persons other than the Optionee, appropriate proof of
the right of such person or persons to exercise the Option; and

(d) Full cash payment to the Secretary of the Company for the shares and
for payment of any applicable withholding or other applicable employment
taxes with respect to which the Option, or portion thereof, is exercised.
However, the Committee (or the Board in the case of Options granted to Non-
Employee Directors), may in its discretion (i) allow a delay in payment up
to thirty (30) days from the date the Option, or portion thereof, is
exercised; (ii) allow payment, in whole or in part, through the delivery of
shares of Common Stock owned by the Optionee, duly endorsed for transfer to
the Company with a Fair Market Value on the date of delivery equal to the
aggregate exercise price of the Option or exercised portion thereof; (iii)
allow payment, in whole or in part, through a cashless exercise program
implemented by the Committee (or the Board in the case of Options granted
to Non-Employee Directors); (iv) allow payment, in whole or in part,
through the delivery of property of any kind which constitutes good and
valuable consideration; (v) allow payment, in whole or in part, through the
delivery of a full recourse promissory note bearing interest (at no less
than such rate as shall then preclude the imputation of interest under the
Code) and payable upon such terms as may be prescribed by the Committee (or
the Board in the case of Options granted to Non-Employee Directors); (vi)
allow payment, in whole or in part, through the delivery of a notice that
the Optionee has placed a market sell order with a broker with respect to
shares of Common Stock then issuable upon exercise of the Option, and that
the broker has been directed to pay a sufficient portion of the net
proceeds of the sale to the Company in satisfaction of the Option exercise
price and any applicable withholding or other employment taxes; or (vii)
allow payment through any combination of the consideration provided in the
foregoing subparagraphs (ii), (iii), (iv), (v) and (vi). In the case of a
promissory note, the Committee (or the Board in the case of Options granted
to Non-Employee Directors) may also prescribe the form of such note and the
security to be given for such note. The Option may not be exercised,
however, by delivery of a promissory note or by a loan from the Company
when or where such loan or other extension of credit is prohibited by law.

5.3 Conditions to Issuance of Stock Certificates. The Company shall not be
required to issue or deliver any certificate or certificates for shares of
stock purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:

(a) The admission of such shares to listing on all stock exchanges, if
any, on which such class of stock is then listed;

(b) The completion of any registration or other qualification of such
shares under any state or federal law, or under the rulings or regulations
of the Securities and Exchange Commission or any other government
regulatory body which the Committee or the Board shall, in its absolute
discretion, deem necessary or advisable;

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(c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee or the Board shall, in its
absolute discretion, determine to be necessary or advisable;

(d) The lapse of such reasonable period of time following the exercise of
the Option as the Committee or the Board may establish from time to time
for reasons of administrative convenience; and

(e) The receipt by the Company of full payment for such shares, including
payment of any applicable withholding tax.

5.4 Rights as Shareholders. The holders of Options shall not be, nor have
any of the rights or privileges of, shareholders of the Company in respect of
any shares purchasable upon the exercise of any part of an Option unless and
until certificates representing such shares have been issued by the Company to
such holders.

ARTICLE 6

Notices with Respect to Option Shares

6.1 Disposition of Shares. Notwithstanding any provision in the Plan or any
Option, each Optionee shall be required to give the Company advance notice of
any intention to dispose of shares of Common Stock acquired by exercise of an
Option and prompt notice of any disposition of shares of Common Stock,
acquired by exercise of an Incentive Stock Option, within (i) two (2) years
from the date of granting such Option to such Optionee or (ii) one (1) year
after the transfer of such shares to such Optionee. Each Optionee shall be
required to give the Company such notice regardless of whether the
certificates evidencing shares acquired by exercise of an Option refer to such
requirement to give notice.

6.2 Ownership and Transfer Restrictions. The Committee (or the Board in the
case of Options granted to Non-Employee Directors), in its absolute
discretion, may impose additional restrictions on the ownership and
transferability of the shares purchasable upon the exercise of an Option as it
deems appropriate, which shall include the restrictions set forth in Article V
of the Company's Certificate of Incorporation. Any such restriction shall be
set forth in the respective Stock Option Agreement and may be referred to on
the certificates evidencing such shares.

6.3 Legend. Each certificate representing Option Shares shall be endorsed
with the following legend, which legend shall be removed upon termination of
the stock restrictions set forth in this Article 6.

THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN 1998 STOCK OPTION PLAN OF
REUNION INDUSTRIES, INC. COPIES OF SUCH STOCK OPTION PLAN MAY BE OBTAINED
UPON WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION.

ARTICLE 7

Administration

7.1 Compensation Committee. The Compensation Committee (or another committee
of the Board assigning the functions of the Committee under this Plan) shall
consist solely of two or more Non-Employee Directors appointed by and holding
office at the pleasure of the Board, each of whom is both a "NON-EMPLOYEE
DIRECTOR" as defined by Rule 16(b)-3 and an "OUTSIDE DIRECTOR" for purposes of
Section 162(m) of the Code. Appointment of Committee members shall be
effective upon acceptance of appointment. Committee members may resign at any
time by delivering written notice to the Board. Vacancies in the Committee may
be filled by the Board.

7.2 Duties and Powers of Committee. It shall be the duty of the Committee to
conduct the general administration of this Plan in accordance with its
provisions. The Committee shall have the power to interpret this Plan and the
agreements pursuant to which Options are granted or awarded, and to adopt such
rules for the

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<PAGE>

administration, interpretation, and application of this Plan as are consistent
therewith and to interpret, amend or revoke any such rules. Notwithstanding
the foregoing, the full Board, acting by a majority of its members in office,
shall conduct the general administration of the Plan with respect to Options
granted to Non-Employee Directors. Any such grant or award under this Plan
need not be the same with respect to each Optionee. Any such interpretations
and rules with respect to Incentive Stock Options shall be consistent with the
provisions of Section 422 of the Code. In its absolute discretion, the Board
may at any time and from time to time exercise any and all rights and duties
of the Committee under this Plan except with respect to matters which under
Rule 16b-3 or Section 162(m) of the Code, or any regulations or rules issued
thereunder, are required to be determined in the sole discretion of the
Committee. All designations, determinations, interpretations and other
decisions with respect to the Plan or any Option shall be within the sole
discretion of the Committee (or the Board in the case of Options granted to
Non-Employee Directors) and shall be final, conclusive and binding upon all
persons, including, but not limited to, the Company, any Subsidiary, any
Optionee, any holder or beneficiary of any Option, any owner of an equity
interest in the Company and any Employee or consultant.

7.3 Majority Rule; Unanimous Written Consent. The Committee shall act by an
affirmative vote, taken with or without a meeting, of a majority of its
members.

7.4 Compensation; Professional Assistance; Good Faith Actions. Members of
the Committee shall receive such compensation for their services as members as
may be determined by the Board. All expenses and liabilities which members of
the Committee incur in connection with the administration of this Plan shall
be borne by the Company. The Committee may, with the approval of the Board,
employ attorneys, consultants, accountants, appraisers, brokers, or other
persons. The Committee, the Company and the Company's officers and Directors
shall be entitled to rely upon the advice, opinions or valuations of any such
persons. All actions taken and all interpretations and determinations made by
the Committee or the Board in good faith shall be final and binding upon all
Optionees, the Company and all other interested persons. No members of the
Committee or Board shall be personally liable for any action, determination or
interpretation made in good faith with respect to this Plan or Options, and
the Company shall indemnify the members of the Committee against all costs and
expenses reasonably incurred by them in connection with any action, suit or
proceeding to which they or any of them may be party by reason of any action
taken or failure to act under or in connection with the Plan or any award made
under the Plan, and against all amounts paid by them in satisfaction of a
judgment in any such action, suit or proceeding, except a judgment based upon
a finding of bad faith. Upon the institution of any such action, suit or
proceedings, a Committee member shall notify the Company in writing, giving
the Company an opportunity, at its own expense, to handle and defend the same
before such Committee member undertakes to handle it on his own behalf.

ARTICLE 8

Miscellaneous Provisions

8.1 Not Transferable. Options under this Plan may not be sold, pledged,
assigned, or transferred in any manner other than by will or the laws of
descent and distribution or pursuant to a QDRO. No Option or interest or right
therein shall be liable for the debts, contracts or engagements of the
Optionee or the Optionee's successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect, except
to the extent that such disposition is permitted by the preceding sentence.

During the lifetime of the Optionee, only such Optionee or a transferee of
an Option pursuant to a QDRO may exercise an Option (or any portion thereof)
granted to such Optionee under the Plan.

8.2 Amendment, Suspension or Termination of this Plan. Except as otherwise
provided in this Section 8.2, this Plan may be wholly or partially amended or
otherwise modified, suspended or terminated at any time or

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<PAGE>

from time to time by the Board or the Committee. However, without approval of
the Company's shareholders given within twelve months before or after the
action by the Board or the Committee, no action of the Board or the Committee
may, except as provided in Section 8.3, increase the limits imposed in Section
2.1 on the maximum number of shares which may be issued under this Plan, and
no action of the Board or the Committee may be taken that would otherwise
require shareholder approval as a matter of applicable law, regulation or
rule. No amendment, suspension or termination of this Plan shall, without the
consent of the holder of Options, alter or impair any rights or obligations
under any Options theretofore granted or awarded, unless the award itself
otherwise expressly so provides. No Options may be granted or awarded during
any period of suspension or after termination of this Plan, and in no event
may any Incentive Stock Option be granted under this Plan after the first to
occur of the following events:

(a) The expiration of ten (10) years from the date the Plan is adopted by
the Board; or

(b) The expiration of ten (10) years from the date the Plan is approved
by the Company's shareholders under Section 8.4.

8.3 Changes in Common Stock or Assets of the Company, Acquisition or
Liquidation of the Company and Other Corporate Events.

(a) Subject to Section 8.3(d), (A) in the event that the Committee (or the
Board in the case of Options granted to Non-Employee Directors) determines
that any dividend or other distribution (whether in the form of cash, Common
Stock, other securities, or other property), recapitalization,
reclassification, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, liquidation, dissolution, or sale, transfer, exchange
or other disposition of all or substantially all of the assets of the Company
(including, but not limited to, a Corporate Transaction), or exchange of
Common Stock or other securities of the Company, issuance of warrants or other
rights to purchase Common Stock or other securities of the Company, or other
similar corporate transaction or event, in the Committee's sole discretion
(or, in the case of Options granted to Non-Employee Directors, the Board's
sole discretion), affects the Common Stock such that an adjustment is
determined by the Committee (or the Board in the case of Options granted to
Non-Employee Directors) to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made
available under the Plan or with respect to an Option, or (B) in the event of
any stock split or reverse stock split, then the Committee (or the Board in
the case of Options granted to Non-Employee Directors) shall, in such manner
as it may deem equitable, adjust any or all of

(i) the number and kind of shares of Common Stock (or other securities or
property) with respect to which Options may be granted under the Plan,
(including, but not limited to, adjustments of the limitations in Section
2.1 on the maximum number and kind of shares which may be issued),

(ii) the number and kind of shares of Common Stock (or other securities
or property) subject to outstanding Options, and

(iii) the grant or exercise price with respect to any Option.

(b) Subject to Sections 8.3(b)(vi) and 8.3(d), in the event of any Corporate
Transaction or other transaction or event described in Section 8.3(a) or any
unusual or nonrecurring transactions or events affecting the Company, any
Affiliate of the Company, or the financial statements of the Company or any
Affiliate, or of changes in applicable laws, regulations, or accounting
principles, the Committee (or the Board in the case of Options granted to Non-
Employee Directors) in its discretion is hereby authorized to take any one (1)
or more of the following actions whenever the Committee (or the Board in the
case of Options granted to Non-Employee Directors) determines that such action
is appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan or with
respect to any option under this Plan, to facilitate such transactions or
events or to give effect to such changes in laws, regulations or principles:

(i) In its sole and absolute discretion, and on such terms and conditions
as it deems appropriate, the Committee (or the Board in the case of Options
granted to Non-Employee Directors) may provide, either

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<PAGE>

by the terms of the agreement or by action taken prior to the occurrence of
such transaction or event and either automatically or upon the Optionee's
request, for either the purchase of any such Option for an amount of cash
equal to the amount that could have been attained upon the exercise of such
Option, or realization of the Optionee's rights had such Option been
currently exercisable or payable or fully vested or the replacement of such
Option with other rights or property selected by the Committee (or the
Board in the case of Options granted to Non-Employee Directors) in its sole
discretion;

(ii) In its sole and absolute discretion, the Committee (or the Board in
the case of Options granted to Non-Employee Directors) may provide, either
by the terms of such Option or by action taken prior to the occurrence of
such transaction or event that such Option cannot be exercised after such
event;

(iii) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board in the case
of Options granted to Non-Employee Directors) may provide, either by the
terms of such Option or by action taken prior to the occurrence of such
transaction or event, that for a specified period of time prior to such
transaction or event, such Option shall be exercisable as to all shares
covered thereby, notwithstanding anything to the contrary in (i) Section
4.4 or (ii) the provisions of such Option;

(iv) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board in the case
of Options granted to Non-Employee Directors) may provide, either by the
terms of such option or by action taken prior to the occurrence of such
transaction or event, that upon such event, such Option be assumed by the
successor or survivor corporation, or a parent or subsidiary thereof, or
shall be substituted for by similar Options covering the stock of the
successor or survivor corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and prices;

(v) In its sole and absolute discretion, and on such terms and conditions
as it deems appropriate, the Committee (or the Board in the case of Options
granted to Non-Employee Directors) may make adjustments in the number and
type of shares of Common Stock (or other securities or property) subject to
outstanding Options and/or in the terms and conditions of (including the
grant or exercise price), and the criteria included in, outstanding Options
and Options which may be granted in the future; and

(vi) None of the foregoing discretionary actions taken under this Section
8.3(b) shall be permitted with respect to Options granted to Non-Employee
Directors to the extent that such discretion would be inconsistent with the
applicable exemptive conditions of Rule 16b-3. In the event of a Corporate
Transaction, to the extent that the Board does not have the ability under
Rule 16b-3 to take or to refrain from taking the discretionary actions set
forth in Section 8.3(b)(iii) above, each Option granted to an Non-Employee
Director shall be exercisable as to all shares covered thereby during the
five days immediately preceding the consummation of such Corporate
Transaction and subject to such consummation, notwithstanding anything to
the contrary in Section 4.4 or the vesting schedule of such Options. In the
event of a Corporate Transaction, to the extent that the Board does not
have the ability under Rule 16b-3 to take or to refrain from taking the
discretionary actions set forth in Section 8.3(b)(ii) above, no Option
granted to an Non-Employee Director may be exercised following such
Corporate Transaction unless such Option is, in connection with such
Corporate Transaction, either assumed by the successor or survivor
corporation (or parent or subsidiary thereof) or replaced with a comparable
right with respect to shares of the capital stock of the successor or
survivor corporation (or parent or subsidiary thereof).

(c) Subject to Section 8.3(d) and 8.8, the Committee (or the Board in the
case of Options granted to Non-Employee Directors) may, in its discretion,
include such further provisions and limitations in any Option as it may deem
equitable and in the best interests of the Company.

(d) With respect to Incentive Stock Options and Options intended to qualify
as performance-based compensation under Section 162(m), no adjustment or
action described in this Section 8.3 or in any other provision of the Plan
shall be authorized to the extent that such adjustment or action would cause
the Plan to

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<PAGE>

violate Section 422(b)(1) of the Code or would cause such option to fail to so
qualify under Section 162(m), as the case may be, or any successor provisions
thereto. Furthermore, no such adjustment or action shall be authorized to the
extent such adjustment or action would result in short-swing profits liability
under Section 16 or violate the exemptive conditions of Rule 16b-3 unless the
Committee (or the Board in the case of Options granted to Non-Employee
Directors) determines that the Option is not to comply with such exemptive
conditions. The number of shares of Common Stock subject to any Option shall
always be rounded to the next whole number.

8.4 Approval of Plan by Shareholders. This Plan will be submitted for the
approval of the Company's shareholders within twelve months after the date of
the Board's initial adoption of this Plan. Options may be granted prior to
such shareholder approval, provided that such Options shall not be exercisable
prior to the time when this Plan is approved by the shareholders, and provided
further that if such approval has not been obtained at the end of said twelve-
month period, all Options previously granted under this Plan shall thereupon
be canceled and become null and void.

8.5 Tax Withholding. The Company shall be entitled to require payment in
cash or deduction from other compensation payable to each Optionee of any sums
required by federal, state or local tax law to be withheld with respect to the
issuance, vesting or exercise of any Option. The Committee (or the Board in
the case of Options granted to Non-Employee Directors) may in its discretion
and in satisfaction of the foregoing requirement allow such Optionee to elect
to have the Company withhold shares of Common Stock otherwise issuable under
such Option (or allow the return of shares of Common Stock) having a Fair
Market Value equal to the sums required to be withheld.

8.6 Loans. The Committee may, in its discretion, extend one (1) or more
loans to key Employees in connection with the exercise or receipt of an Option
granted under this Plan. The terms and conditions of any such loan shall be
set by the Committee.

8.7 Forfeiture Provisions. Pursuant to its general authority to determine
the terms and conditions applicable to awards under the Plan, the Committee
(or the Board in the case of Options granted to Non-Employee Directors) shall
have the right (to the extent consistent with the applicable exemptive
conditions of Rule 16b-3 and to the extent permitted under applicable state
law) to provide, in the terms of Options made under the Plan, or to require
the recipient to agree by separate written instrument, that (i) any proceeds,
gains or other economic benefit actually or constructively received by the
recipient upon any receipt or exercise of an Option, or upon the receipt or
resale of any Common Stock underlying such Option, must be paid to the
Company, and (ii) the Option shall terminate and any unexercised portion of
such Option (whether or not vested) shall be forfeited, if (a) a Termination
of Directorship, Termination of Employment or Termination of Consultancy
occurs prior to a specified date, or within a specified time period following
receipt or exercise of the Option, or (b) the recipient at any time, or during
a specified time period, engages in any activity in competition with the
Company, or which is inimical, contrary or harmful to the interests of the
Company, as further defined by the Committee (or the Board, as applicable).

8.8 Limitations Applicable to Section 16 Persons and Performance-Based
Compensation. Notwithstanding any other provision of this Plan, this Plan, and
any Option granted to any individual who is then subject to Section 16 of the
Exchange Act, shall be subject to any additional limitations set forth in any
applicable exemptive rule under Section 16 of the Exchange Act (including any
amendment to Rule 16b-3 of the Exchange Act) that are requirements for the
application of such exemptive rule. To the extent permitted by applicable law,
the Plan and Options granted or awarded hereunder shall be deemed amended to
the extent necessary to conform to such applicable exemptive rule.
Furthermore, notwithstanding any other provision of this Plan, any Option
intended to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code shall be subject to any additional limitations set
forth in Section 162(m) of the Code (including any amendment to Section 162(m)
of the Code) or any regulations or rulings issued thereunder that are
requirements for qualification as performance-based compensation as described
in Section 162(m)(4)(C) of the Code, and this Plan shall be deemed amended to
the extent necessary to conform to such requirements.

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<PAGE>

8.9 Effect of Plan Upon Options and Compensation Plans. The adoption of this
Plan shall not affect any other compensation or incentive plans in effect for
the Company or any Subsidiary. Nothing in this Plan shall be construed to
limit the right of the Company (i) to establish any other forms of incentives
or compensation for Employees, Directors or consultants of the Company or any
Subsidiary or (ii) to grant or assume options or other rights otherwise than
under this Plan in connection with any proper corporate purpose including but
not by way of limitation, the grant or assumption of options in connection
with the acquisition by purchase, lease, merger, consolidation or otherwise,
of the business, stock or assets of any corporation, partnership, limited
liability company, firm or association.

8.10 Compliance with Laws. This Plan, the granting and vesting of Options
under this Plan and the issuance and delivery of shares of Common Stock and
the payment of money under this Plan or under Options granted hereunder are
subject to compliance with all applicable federal and state laws, rules and
regulations (including but not limited to state and federal securities law and
federal margin requirements) and to such approvals by any listing, regulatory
or governmental authority as may, in the opinion of counsel for the Company,
be necessary or advisable in connection therewith. Any securities delivered
under this Plan shall be subject to such restrictions, and the person
acquiring such securities shall, if requested by the Company, provide such
assurances and representations to the Company as the Company may deem
necessary or desirable to assure compliance with all applicable legal
requirements. To the extent permitted by applicable law, the Plan and Options
granted or awarded hereunder shall be deemed amended to the extent necessary
to conform to such Laws, rules and regulations.

8.11 Titles. Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Plan.

8.12 Governing Law. This Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State of
Delaware without regard to conflicts of laws thereof.

* * *

I hereby certify that the foregoing Plan was duly adopted by the Board of
Directors of Reunion Industries, Inc. on , 1998.

Executed on this day of , 1998.

-------------------------------------
Richard L. Evans, Secretary

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<PAGE>

ANNEX C

June 3, 1998

The Board of Directors
Reunion Industries, Inc.
62 Southfield Avenue
One Stamford Landing
Stamford, CT 06902

Members of the Board:

Reunion Industries, Inc. ("Reunion") and Chatwins Group, Inc. ("Chatwins")
have entered into a Merger Agreement dated as of May 31, 1998, which provides,
among other things, for the merger of Chatwins with and into Reunion (the
"Merger").

Pursuant to the Agreement, Chatwins would receive either (i) 9,000,000 newly
issued shares of Reunion Common Stock if Chatwins has acquired King-Way
Material Handling Company ("King-Way") or (ii) 8,500,000 newly issued shares
of Reunion Common Stock if Chatwins has not acquired King-Way. The 9,000,000
shares would represent approximately 70% of Reunion outstanding shares. The
8,500,000 shares would represent approximately 69% of the outstanding shares
of Reunion. Simultaneous with the Merger shares of Reunion currently owned by
Chatwins would be retired, resulting in the present shareholders of Chatwins
owning approximately 79% of Reunion in the case of the 9,000,000 share
acquisition (78% in the case of the 8,500,000 share acquisition). Under either
option, the outstanding $8.3 million Preferred Stock of Chatwins would be
converted into three year notes of Reunion, bearing interest at 10% per annum.
The terms and conditions of the Merger are more fully set forth in the
Agreement.

Legg Mason has acted as the financial advisor to the Board of Directors of
Reunion in connection with the Board's analysis of the financial terms of the
Merger and has received a fee for these services. In addition Legg Mason will
receive a separate fee for providing this opinion (the "Opinion").

In arriving at our Opinion set forth below, we have, among other things: (i)
reviewed the Merger Agreement; (ii) reviewed certain publicly available
audited and unaudited financial statements of Reunion and Chatwins and certain
other publicly available information of Reunion and Chatwins; (iii) reviewed
certain internal information, primarily financial in nature, concerning
Reunion and Chatwins, prepared by their respective managements; (iv) discussed
the past and current operations and financial condition and prospects of
Reunion with the senior management of Reunion; (v) discussed the past and
current operations and financial condition and prospects of Chatwins with the
senior management of Chatwins; (vi) reviewed forecast financial statements of
Reunion prepared and furnished to us by the senior management of Reunion;
(vii) reviewed forecast financial statements of Chatwins prepared and
furnished to us by the senior management of Chatwins; (viii) held meetings and
discussions with certain officers and employees of Reunion and Chatwins,
concerning the operations, financial condition and future prospects of the
combined company; (ix) reviewed certain publicly available financial and stock
market data relating to selected public companies that we considered relevant
to our inquiry; (x) considered the pro forma financial effects of the Merger
on Reunion; and, (xi) conducted such other financial studies, analyses and
investigations and considered such other information as we deemed necessary or
appropriate.

We are not expressing an opinion as to the price or trading range at which
shares of Reunion Common Stock may trade following the Merger.

In connection with our review, we have assumed and relied upon the accuracy
and completeness of all financial and other information supplied to us by
Reunion and Chatwins, and all publicly available information, and we have not
independently verified such information. We also have relied upon the
managements of Reunion

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<PAGE>

and Chatwins as to the reasonableness and achievability of the financial
projections (and the assumptions and bases therein) provided to us for Reunion
and Chatwins, respectively, and we have assumed that such projections have
been reasonably prepared on bases reflecting the best currently available
estimates and judgments of management as to the future operating performance
of each respective entity, including without limitation, the tax benefits
available to the combined company. Neither Reunion nor Chatwins publicly
discloses internal management projections of the type provided to Legg Mason
in connection with Legg Mason's review of the Merger. Such projections were
not prepared with the expectation of public disclosure. The projections were
based on numerous variables and assumptions that are inherently uncertain,
including without limitation, factors related to general economic and
competitive conditions. Accordingly, actual results could vary significantly
from those set forth in such projections.

We have not been requested to make, and we have not made, an independent
appraisal or evaluation of the assets, properties, facilities or liabilities
of either Reunion or Chatwins and we have not been furnished with any such
appraisals or evaluations. Estimates of values of companies and assets do not
purport to be appraisals or necessarily reflect the prices at which companies
and assets may actually be sold. Because such estimates are inherently subject
to uncertainty, Legg Mason assumes no responsibility for their accuracy.

Our Opinion is necessarily based on share prices and economic and other
conditions and circumstances as in effect on, and the information made
available to us as of May 27, 1998. In arriving at our Opinion, we were not
authorized to solicit, and did not solicit, third party indications of
interest from any party with respect to an acquisition of Reunion, its assets,
or any part thereof. In this regard, we have been advised by Reunion's senior
management that since the first public announcement of the prospective Merger,
no person has contacted either Reunion's senior management or Board of
Directors regarding any potential alternative transaction to the Merger. We
have assumed that the Merger and related transactions described above will be
consummated on the terms and conditions described in the forms of the
agreements reviewed by us, without any waiver of material terms or conditions
by Reunion or Chatwins, and that obtaining any necessary regulatory approvals
or satisfying any other conditions for consummation of the Merger will not
have an adverse effect on the combined company.

It is understood that this letter is directed solely to Reunion's Board of
Directors and does not constitute a recommendation to any stockholder of
Reunion as to how such stockholder should vote on the Merger. This letter is
not to be quoted or referred to, in whole or in part, in any registration
statement, prospectus or proxy statement, or in any other document used in
connection with the offering or sale of securities, nor shall this letter be
used for any other purposes, without the prior written consent of Legg Mason
Wood Walker, Incorporated, provided that this Opinion may be included in its
entirety in any filing made by Reunion with the Securities and Exchange
Commission with respect to the Merger and the transactions related thereto.

Based upon and subject to the foregoing, we are of the opinion that, as of
May 27, 1998, the consideration to be paid for Chatwins pursuant to the
Agreement is fair to Reunion and its stockholders, other than Chatwins, from a
financial point of view.

Very truly yours,

/s/ Legg Mason Wood Walker
-------------------------------------
LEGG MASON WOOD WALKER, INCORPORATED

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<PAGE>

CORPORATE FINANCE

Legg Mason Wood Walker, Incorporated
Suite 1100, 1735 Market Street, Philadelphia, PA 19103
215-495-8300 Fax: 215-568-2031

June 25, 1998

The Board of Directors
Reunion Industries, Inc.
One Stamford Landing
62 Southfield Avenue
Stamford, Connecticut 06902

Members of the Board:

We have reviewed Amendment No. 1 to Merger Agreement ("Amendment No. 1"),
dated as of June 25, 1998, between Reunion Industries, Inc. ("Reunion") and
Chatwins Group, Inc. ("Chatwins") amending the Merger Agreement between the
same parties, dated May 31, 1998 (the "Original Merger Agreement" and as so
amended, the "Merger Agreement").

We are of the opinion that the amendments to the Original Merger Agreement
effected by Amendment No. 1 do not change our opinion as expressed in our June
3, 1998 letter, that, as of May 27, 1998 and subject to the assumptions and
qualifications set forth in our June 3, 1998 letter, the consideration to be
paid for Chatwins pursuant to the Merger Agreement is fair to Reunion and its
stockholders, other than Chatwins, from a financial point of view.

We hereby consent to the use of our name and to the inclusion of this
letter, dated June 25, 1998 as part of Annex C to the Proxy
Statement/Prospectus of Reunion Industries, Inc. By giving such consent we do
not thereby admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder.

LEGG MASON WOOD WALKER, INCORPORATED

/s/ B. Andrew Schmucker
By:__________________________________
Managing Director
<PAGE>

ANNEX D

CERTIFICATE OF INCORPORATION
OF
REUNION INDUSTRIES, INC.

ARTICLE I

Name

The name of the Corporation is Reunion Industries, Inc.

ARTICLE II

Registered office/agent

The registered office of the Corporation in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington,
County of New Castle, Delaware 19801. The name of its registered agent at such
address is The Corporation Trust Company.

ARTICLE III

Purposes

The purposes of the Corporation are to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
the State of Delaware.

ARTICLE IV

Capital Stock

Section 4.1 Authorized Stock. The total number of shares of all classes of
stock which the Corporation shall have authority to issue is Thirty Million
(30,000,000), of which 20,000,000 shares shall be of a class designated
"common stock", having a par value of $.01 per share (the "Common Stock"), and
Ten Million (10,000,000) shares shall be of a class designated "preferred
stock", par value $.01 per share (the "Preferred Stock"). Any and all stock
issued by the Corporation shall be deemed issued after the adoption of the
transfer restrictions set forth in Article Fifth hereof.

Section 4.2 Common Stock. Except as otherwise provided in this Certificate
of Incorporation or by law, each holder of Common Stock shall be entitled to
one vote for each share held. The holders of the Common Stock shall be
entitled to receive, when and as declared by the Board of Directors, out of
funds legally available therefor, dividends payable in cash, stock or
otherwise. On any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, the remaining net assets of the Corporation
shall be distributed pro rata to the holders of the Common Stock in accordance
with their respective rights and interest.

Section 4.3 Preferred Stock. Preferred Stock may be issued in one or more
series as may be determined from time to time by the Board of Directors. All
shares of any one series of Preferred Stock will be identical except as to the
date of issue and the dates from which dividends on shares of the series
issued on different dates will cumulate, if cumulative. Authority is hereby
expressly granted to the Board of Directors to authorize the issuance of one
or more series of Preferred Stock, and to fix by resolution or resolutions
providing for the issue of each such series the powers, including the voting
powers (but no greater than one vote per share), designations,

D-1
<PAGE>

preferences, and relative, participating, optional, redemption, conversion,
exchange or other special rights, and qualifications, limitations or
restrictions of such series, and the number of shares in each series, to the
full extent now or hereafter permitted by law.

ARTICLE V

Restrictions on Transfers of Stock

Section 5.1 Prohibited Transfers. In order to preserve the net operating
loss carryovers (including any "net unrealized built-in loss," as defined
under applicable law), capital loss carryovers, general business credit
carryovers, alternative minimum tax credit carryovers and foreign tax credit
carryovers (the "Tax Benefits") to which the Corporation is entitled pursuant
to the Internal Revenue Code of 1986, as amended, or any successor statute
(collectively, the "Code") and the Treasury Regulations promulgated thereunder
(the "Treasury Regulations"), the following restrictions shall apply until the
date which is the earlier of (x) the day after the third (3rd) anniversary of
the effectiveness of the merger of Reunion Resources Company, a Delaware
corporation, with and into the Corporation (the "Merger"), (y) the repeal of
Section 382 of the Code if the Board of Directors determines that the
restrictions are no longer necessary, and (z) the beginning of a taxable year
of the Corporation as to which the Board of Directors determined prior to the
beginning of such taxable year that no Tax Benefits may be carried forward,
unless the Board of Directors shall fix an earlier or later date in accordance
with Section 5.7 of this Article Fifth (such date is sometimes referred to
herein as the "Expiration Date"):

(1) For purposes of this Article Fifth, (a) a "Prohibited Ownership
Percentage" shall mean any ownership of the Corporation's stock that would
cause a Person or Public Group to be a "5-percent shareholder" of the
Corporation within the meaning of Treasury Regulation Section 1.382-
2T(g)(1); (b) a "Public Group" shall have the meaning contained in Treasury
Regulation Section 1.383- 2T(f)(13); (c) a "Person" shall mean any
individual, corporation, estate, trust, association, company, partnership,
limited liability company, joint venture, or similar organization
(including the Corporation); (d) "Transfer" refers to any means of
conveying legal or beneficial ownership of shares of stock of the
Corporation, whether such means are direct or indirect, voluntary or
involuntary, including, without limitation, the issuance by the Corporation
of shares of stock of the Corporation (without regard to whether such
shares are treasury shares or new shares) and the transfer of ownership of
any entity that owns shares of stock of the Corporation; and "Transferee"
means any Person to whom stock of the Corporation is Transferred.

(2) From and after the effectiveness of the Merger, no Person shall
Transfer any shares of stock of the Corporation (other than stock described
in Section 1504(a)(4) of the Code, or stock that is not so described solely
because it is entitled to vote as a result of dividend arrearages) to any
other Person to the extent that such Transfer, if effective, (i) would
cause the Transferee or any Person or Public Group to have a Prohibited
Ownership Percentage; (ii) would increase the ownership percentage of any
Transferee or any Person or Public Group having a Prohibited Ownership
Percentage; or (iii) would create a new Public Group under Treasury
Regulation Section 1.382-2T(j)(3)(i).

(3) Any Transfer of shares of stock of the Corporation that would
otherwise be prohibited pursuant to the preceding subsection, including but
not limited to the issuance of stock by the Corporation pursuant to the
exercise of any warrants, options or other rights to acquire stock in the
Corporation, shall nonetheless be permitted if information relating to a
specific proposed transaction is presented to the Board of Directors and
the Board determines that, based on the facts in existence at the time of
such determination, such transaction will not jeopardize the Corporation's
full utilization of the Tax Benefits, based upon an opinion of legal
counsel selected by the Board to that effect. Nothing in this subsection
will be construed to limit or restrict the Board of Directors in the
exercise of its fiduciary duties under applicable law.

(4) Within 10 days after the Expiration Date, the Board of Directors
shall cause a written notice to be mailed to the Stockholders of the
Corporation informing said Stockholders of the expiration of the
restrictions contained in this Article Fifth.

D-2
<PAGE>

Section 5.2 Attempted Transfer in Violation of Transfer Restrictions. Unless
approval of the Board of Directors is obtained as provided in subsection (3)
of Section 5.1 of this Article Fifth, any attempted Transfer of shares of
stock of the Corporation in excess of the shares that could be Transferred to
the Transferee without restriction under subsection (2) of Section 5.1 of this
Article Fifth is not effective to Transfer ownership of such excess shares
(the "Prohibited Shares") to the purported acquiror thereof (the "Purported
Acquiror"), who shall not be entitled to any rights as a Stockholder of the
Corporation with respect to the Prohibited Shares (including, without
limitation, the right to vote or to receive dividends with respect thereto).
All rights with respect to the Prohibited Shares shall remain the property of
the Person who initially purported to Transfer the Prohibited Shares to the
Purported Acquiror (the "Initial Transferor") until such time as the
Prohibited Shares are resold as set forth below in subsection (1) or
subsection (2) of this Section 5.2. The Purported Acquiror, by acquiring
ownership of shares of stock of the Corporation that are not Prohibited
Shares, shall be deemed to have consented to all the provisions of this
Article Fifth and to have agreed to act as provided in the following
subsection (1). The Corporation and the Board of Directors shall be fully
protected in relying in good faith upon the information, opinions, reports or
statements of the chief executive officer, the chief financial officer, or the
chief accounting officer of the Corporation or of the Corporation's legal
counsel, independent auditors, transfer agent, investment bankers, and other
employees and agents in making the determinations and findings contemplated by
this Section 5.2, and neither the Corporation nor the Board of Directors shall
be responsible for any good faith errors made in connection therewith.

(1) Upon demand by the Corporation, the Purported Acquiror shall transfer
any certificate or other evidence of the Purported Acquiror's possession or
control of the Prohibited Shares, along with any dividends and other
distributions paid by the Corporation with respect to the Prohibited Shares
that were received by the Purported Acquiror (the "Prohibited
Distributions"), to an agent designated by the Corporation (the "Agent").
If the Purported Acquiror has sold the Prohibited Shares to an unrelated
party in an arms-length transaction after purportedly acquiring them, the
Purported Acquiror shall be deemed to have sold the Prohibited Shares as
agent for the Initial Transferor, and in lieu of transferring the
Prohibited Shares and Prohibited Distributions to the Agent shall transfer
to the Agent the Prohibited Distributions and the proceeds of such sale
(the "Resale Proceeds"), except to the extent that the Agent grants written
permission to the Purported Acquiror to retain a portion of the Resale
Proceeds not exceeding the amount that would have been payable by the Agent
to the Purported Acquiror pursuant to the following subsection (2) if the
Prohibited Shares had been sold by the Agent rather than by the Purported
Acquiror. Any purported transfer of the Prohibited Shares by the Purported
Acquiror other than a transfer described in one of the two preceding
sentences shall not be effective to transfer any ownership of the
Prohibited Shares.

(2) The Agent shall sell in an arms-length transaction (through the
NASDAQ Small Cap. Market or the Pacific Stock Exchange, if possible) any
Prohibited Shares transferred to the Agent by the Purported Acquiror, and
the proceeds of such sale (the "Sale Proceeds"), or the Resale Proceeds, if
applicable, shall be allocated, after reimbursement to the Agent of its
expenses, to the Purported Acquiror up to the following amount: (i) where
applicable, the purported purchase price paid or value of consideration
surrendered by the Purported Acquiror for the Prohibited Shares, or (ii)
where the purported Transfer of the Prohibited Shares to the Purported
Acquiror was by gift, inheritance, or any similar purported Transfer, the
fair market value of the Prohibited Shares at the time of such purported
Transfer. Subject to the succeeding provisions of this subsection, any
Resale Proceeds or Sales Proceeds in excess of the Agent's expenses and the
amount allocable to the Purported Acquiror pursuant to the preceding
sentence, together with any Prohibited Distributions, shall be the property
of the Initial Transferor. If the identity of the Initial Transferor cannot
be determined by the Agent through inquiry made to the Purported Acquiror,
the Agent or the Corporation shall hold such amounts pending the
determination of the identity of the Initial Transferor. The Agent may also
take, but is not required to take, any reasonable actions to attempt to
identify the Initial Transferor. If after ninety (90) days following the
date the Prohibited Shares were transferred to the Agent the Initial
Transferor has not been identified, any amounts due to the Initial
Transferor pursuant to this subsection may

D-3
<PAGE>

be paid over to a court or governmental agency, if applicable law permits,
or otherwise shall be transferred to an entity designated by the
Corporation that is described in Section 501(c)(3) of the Code. In no event
shall any such amounts due to the Initial Transferor inure to the benefit
of the Corporation or the Agent, but such amounts may be used to cover
expenses incurred by the Agent in attempting to identify the Initial
Transferor.

Section 5.3 Prompt Enforcement Against Purported Acquiror. Within thirty
(30) business days of learning of the purported Transfer of Prohibited Shares
to a Purported Acquiror, the Corporation through its Secretary shall demand
that the Purported Acquiror surrender to the Agent the certificates
representing the Prohibited Shares, or any Resale Proceeds, and any Prohibited
Distributions, and if such surrender is not made by the Purported Acquiror
within thirty (30) business days from the date of such demand, the Corporation
shall institute legal proceedings to compel such transfer; provided, however,
that nothing in this Section 5.3 shall preclude the Corporation in its
discretion from immediately bringing legal proceedings without a prior demand,
and provided further that failure of the Corporation to act within the time
periods set out in this Section 5.3 shall not constitute a waiver of any right
of the Corporation to compel any transfer required by subsection (1) of
Section 5.2.

Section 5.4 Additional Actions to Prevent Violation or Attempted Violation.
Upon a determination by the Board of Directors that there has been or is
threatened a purported Transfer of Prohibited Shares to a Purported Acquiror,
the Board of Directors may take such action in addition to any action required
by the preceding paragraph as it deems advisable to give effect to the
provisions of this Article Fifth, including, without limitation, refusing to
give effect on the books of this Corporation to such purported Transfer or
instituting proceedings to enjoin such purported Transfer. Notwithstanding the
foregoing sentence, the Board of Directors shall take no action which would
prohibit the settlement of transactions entered into through the NASDAQ Small
Cap. Market, the Pacific Stock Exchange, or other market or exchange on which
the Corporation has listed its securities.

Section 5.5 Obligation to Provide Information. The Corporation may require
as a condition to the registration of the Transfer of any shares of its stock
that the proposed Transferee furnish to the Corporation all information
reasonably requested by the Corporation with respect to all the proposed
Transferee's direct or indirect ownership interest in, or options to acquire,
stock of the Corporation.

Section 5.6 Legends. All certificates evidencing ownership of shares of
stock of this Corporation that are subject to the restrictions on Transfer
contained in this Article Fifth shall bear a conspicuous legend referencing
the restrictions set forth in this Article Fifth.

Section 5.7 Further Actions. Nothing contained in this Article Fifth shall
limit the authority of the Board of Directors to take such other action to the
extent permitted by law as it deems necessary or advisable to protect the
Corporation and the interests of the holders of its securities in preserving
the Tax Benefits. Without limiting the generality of the foregoing, in the
event of a change in law making one or more of the following actions necessary
or desirable or in the event that the Board of Directors believes that such
actions are in the best interest of the Corporation and its Stockholders, the
Board of Directors may accelerate or extend the Expiration Date; provided that
the Board of Directors shall determine in writing that any such acceleration
or extension is reasonably necessary or desirable to preserve the Tax Benefits
under the Code and the regulations thereunder or that the continuation of
these restrictions is no longer reasonably necessary for the preservation of
the Tax Benefits, which determination shall be based upon an opinion of legal
counsel to the Corporation and which determination shall be filed with the
Secretary of the Corporation and mailed by the Secretary to the Stockholders
of this Corporation within ten days after the date of any such determination.
In addition, the Board of Directors may, to the extent permitted by law, from
time to time establish, modify, amend or rescind Bylaws, regulations and
procedures of the Corporation not inconsistent with the express provisions of
this Article Fifth for purposes of determining whether any acquisition of
stock of the Corporation would jeopardize the Corporation's ability to
preserve and use the Tax Benefits, and for the orderly application,
administration and implementation of the

D-4
<PAGE>

provisions of this Article Fifth. Such procedures and regulations shall be
kept on file with the Secretary of the Corporation and with its transfer agent
and shall be made available for inspection by the public and, upon request,
shall be mailed to any holder of stock of the Corporation.

ARTICLE VI

Board of Directors

Except as otherwise provided by law, the business and affairs of the
Corporation shall be managed by, or under the direction of, its Board of
Directors. The number of directors of the Corporation shall be fixed by, and
in the manner provided in, the Corporation's Bylaws, but shall not be fewer
than three nor more than 12. None of the directors need be a stockholder of
the Corporation or a resident of the State of Delaware. Elections of directors
need not be by written ballot unless the Corporation's Bylaws provide
otherwise. Without limiting the rights, powers, privileges and discretionary
authority conferred by the Delaware General Corporation Law (the "DGCL") or
other applicable law, the Board of Directors is expressly authorized to adopt,
amend or repeal the Bylaws of the Corporation.

ARTICLE VII

Stockholders

Stockholder action that must or may be taken at an annual or special meeting
of the stockholders, with prior notice and a vote, may instead be taken
without a meeting, without prior notice and without a vote if a written
consent or consents, setting forth the action taken, shall be signed by the
holders of no less than the number of shares of capital stock required to
authorize or take such action at an annual or special meeting of the
stockholders. Meetings of stockholders may be held within or without the State
of Delaware as the Bylaws may provide. In addition to such special meetings as
are provided by law or this Certificate of Incorporation, special meetings of
the stockholders may be called only by (a) the Board of Directors pursuant to
a resolution adopted by a majority of the Board of Directors then in office,
(b) the Chairman of the Board, (c) the President of the Corporation or (d) the
holders of not less than 30% of the total voting power of all shares of stock
of the Corporation entitled to vote in the election of directors. The books of
the Corporation may be kept (subject to any provision contained in the DGCL)
outside the State of Delaware at such place(s) as may be designated from time
to time by the Board of Directors or in the Bylaws of the Corporation.

ARTICLE VIII

No Preemptive Rights

No stockholder shall be entitled, as a matter of right, to subscribe for or
acquire additional, unissued or treasury shares of any class of capital stock
of the Corporation whether now or hereafter authorized, or any bonds,
debentures or other securities convertible into, or carrying a right to
subscribe to or acquire such shares, but any shares or other securities
convertible into, or carrying a right to subscribe to or acquire such shares
may be issued or disposed of by the Board of Directors to such persons and on
such terms as in its discretion it shall deem advisable.

ARTICLE IX

No Cumulative Voting

At each election of directors, every stockholder entitled to vote at such
election shall have the right to vote, in person or by proxy, the number of
shares owned by him for as many persons as there are directors to be elected
and for whose election he is entitled to cast a vote. No stockholder shall
have the right to cumulate his votes in any election of directors.

D-5
<PAGE>

ARTICLE X

Business Combinations with Affiliates

The Corporation hereby elects not to be governed by Section 203 of the DGCL
which restricts business combination transactions with Interested Stockholders
(as defined therein).

ARTICLE XI

Limited Director Liability

A director of the corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involved intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL for unlawful
payment of dividends or improper redemption of stock, or (iv) for any
transaction from which the director derived an improper personal benefit. If
the DGCL is hereafter amended to authorize the further elimination or
limitation of the liability of directors, then the liability of a director of
the Corporation, in addition to the limitation on personal liability provided
herein, shall be limited to the fullest extent permitted by the DGCL, as
amended. Any repeal or modification of this paragraph by the stockholders of
the Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
at the time of such repeal or modification.

ARTICLE XII

Indemnification

Section 12.1 Mandatory Indemnification. Each person who at any time is or
was a director of the Corporation, and is threatened to be or is made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative, arbitrative or investigative (a
"Proceeding"), by reason of the fact that such person is or was a director of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, partner, venturer, proprietor, member, employee, trustee,
agent or similar functionary of another domestic or foreign corporation,
partnership, joint venture, sole proprietorship, trust, employee benefit plan
or other for-profit or non-profit enterprise, whether the basis of a
Proceeding is alleged action in such person's official capacity or in another
capacity while holding such office, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the DGCL, or any other
applicable law as may from time to time be in effect (but, in the case of any
such amendment or enactment, only to the extent that such amendment or law
permits the Corporation to provide broader indemnification rights than such
law prior to such amendment or enactment permitted the Corporation to
provide), against all expense, liability and loss (including, without
limitation, court costs and attorneys' fees, judgments, fines, excise taxes or
penalties, and amounts paid or to be paid in settlement) actually and
reasonably incurred or suffered by such person in connection with a
Proceeding, and such indemnification shall continue as to a person who has
ceased to be a director of the Corporation or a director, officer, partner,
venturer, proprietor, member, employee, trustee, agent or similar functionary
of another domestic or foreign corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other for-profit or non-profit
enterprise, and shall inure to the benefit of such person's heirs, executors
and administrators. The Corporation's obligations under this Section 12.1
include, but are not limited to, the convening of any meeting, and the
consideration of any matter thereby, required by statute in order to determine
the eligibility of any person for indemnification.

Section 12.2 Prepayment of Expenses. Expenses incurred by a director of the
Corporation in defending a Proceeding shall be paid by the Corporation in
advance of the final disposition of such Proceeding to the fullest extent
permitted by, and only in compliance with, the DGCL or any other applicable
laws as may from time to time be in effect, including, without limitation, any
provision of the DGCL which requires, as a condition

D-6
<PAGE>

precedent to such expense advancement, the delivery to the Corporation of an
undertaking, by or on behalf of such director, to repay all amounts so
advanced if it shall ultimately be determined that such director is not
entitled to be indemnified under Section 12.1 or otherwise. Repayments of all
amounts so advanced shall be upon such terms and conditions, if any, as the
Corporation's Board of Directors deems appropriate.

Section 12.3 Vesting. The Corporation's obligation to indemnify and to
prepay expenses under Sections 12.1 and 12.2 shall arise, and all rights
granted to the Corporation's directors hereunder shall vest at the time of the
occurrence of the transaction or event to which a Proceeding relates, or at
the time that the action or conduct to which such Proceeding relates was first
taken or engaged in (or omitted to be taken or engaged in), regardless of when
such Proceeding is first threatened, commenced or completed. Notwithstanding
any other provision of this Certificate of Incorporation or the Bylaws of the
Corporation, no action taken by the Corporation, either by amendment of this
Certificate of Incorporation or the Bylaws of the Corporation or otherwise,
shall diminish or adversely affect any rights to indemnification or prepayment
of expenses granted under Sections 12.1 and 12.2 which shall have become
vested as aforesaid prior to the date that such amendment or other corporate
action is effective or taken, whichever is later.

Section 12.4 Enforcement. If a claim under Section 12.1 or Section 12.2 or
both Sections 12.1 and 12.2 is not paid in full by the Corporation within 30
days after a written claim has been received by the Corporation, the claimant
may at any time thereafter bring suit in a court of competent jurisdiction
against the Corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall also be entitled to be paid
the expense of prosecuting such claim. It shall be a defense to any such suit
(other than a suit brought to enforce a claim for expenses incurred in
defending any Proceeding in advance of its final disposition where the
required undertaking, if any is required, has been tendered to the
Corporation) that the claimant has not met the standards of conduct that make
it permissible under the DGCL or other applicable law to indemnity the
claimant for the amount claimed, but the burden of proving such defense shall
be on the Corporation. The failure of the Corporation (including its Board of
Directors, independent legal counsel or stockholders) to have made a
determination prior to the commencement of such suit as to whether
indemnification is proper in the circumstances based on the applicable
standard of conduct set forth in the DGCL or other applicable law shall
neither be a defense to the action nor create a presumption that the claimant
has not met the applicable standard of conduct. The termination of any
Proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which such person
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal Proceeding, had reasonable
cause to believe that his conduct was unlawful.

Section 12.5 Nonexclusive. The indemnification provided by this Article XII
shall not be deemed exclusive of any other rights to which a person seeking
indemnification may be entitled under any statute, bylaw, other provisions of
this Certificate of Incorporation, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office.

Section 12.6 Permissive Indemnification. The rights to indemnification and
prepayment of expenses which are conferred on the Corporation's directors by
Sections 12.1 and 12.2 may also be conferred on any officer, employee or agent
of the Corporation if, and to the extent, authorized by the Board of
Directors.

Section 12.7 Insurance. The Corporation shall have power to purchase and
maintain insurance, at its expense, on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, partner, venturer,
proprietor, member, employee, trustee, agent or similar functionary of another
domestic or foreign corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other for-profit or non-profit
enterprise against any expense, liability or loss asserted against such person
and incurred by such person in any such capacity,

D-7
<PAGE>

or arising out of such person's status as such, whether or not the Corporation
would have the power to indemnity such person against such expense, liability
or loss under the Corporation's Bylaws, the provisions of this Article XII,
the DGCL or other applicable law.

Section 12.8 Condition to Mandatory Indemnification. Subject to the first
sentence of Section 12.4 hereof, the Corporation shall be required to
indemnify a director of the Corporation pursuant to Section 12.1 hereof in
connection with a Proceeding (or part thereof) initiated by such director only
if the initiation of such Proceeding (or part thereof) by the director was
authorized in writing by the Board of Directors of the Corporation.

ARTICLE XIII

Compromise

Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them and/or between this Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this Corporation under the provisions
of section 291 of Title 8 of the Delaware Code or on the application of
trustees in dissolution or of any receiver or receivers appointed for this
Corporation under the provisions of section 279 of Title 8 of the Delaware
Code order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in
number representing three- fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all
stockholders or class of stockholders, of this Corporation, as the case may
be, and also on this Corporation.

ARTICLE XIV

Incorporator

The name and mailing address of the incorporator is:

Charles R. Umpleby
Richards & O'Neil, LLP
885 Third Avenue
New York, New York 10022-4873

I, the undersigned, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of
the State of Delaware, do make this certificate, hereby declaring under the
penalties of perjury that this is my act and deed and that the facts stated
herein are true, and accordingly have hereunto set my hand this 8th day of
November 1995.

/s/ Charles R. Umpleby
-------------------------------------
Charles R. Umpleby

D-8
<PAGE>

ANNEX E

BYLAWS

REUNION INDUSTRIES, INC.
<PAGE>

TABLE OF CONTENTS

<TABLE>
<C> <S> <C>
1.1 Registered Office.................................................... 1
1.2 Other Offices........................................................ 1

ARTICLE II

STOCKHOLDERS MEETINGS

2.1 Place of Meetings.................................................... 1
2.2 Annual Meetings...................................................... 1
2.3 Special Meetings..................................................... 1
2.4 Notice of Meetings................................................... 2
2.5 Waiver of Notice..................................................... 2
2.6 Notice of Adjournments............................................... 2
2.7 Quorum............................................................... 2
2.8 Stockholders Entitled to Vote........................................ 3
2.9 Stockholders May Vote in Person or by Proxy.......................... 3
2.10 Elections of Directors; No Cumulative Voting......................... 3
2.11 Voting............................................................... 4
2.12 Voting List.......................................................... 4
2.13 Inspectors of Election............................................... 4
2.14 Informal Action by Stockholders...................................... 4

ARTICLE III

DIRECTORS

3.1 Number and Term of Office............................................ 5
3.2 Vacancies............................................................ 5
3.3 Place of Meetings.................................................... 5
3.4 First Meeting........................................................ 5
3.5 Regular Meetings..................................................... 6
3.6 Special Meetings..................................................... 6
3.7 Notice of Meetings................................................... 6
3.8 Waiver of Notice..................................................... 6
3.9 Quorum............................................................... 6
3.10 Adjournment.......................................................... 7
3.11 Informal Action...................................................... 7
3.12 General Powers....................................................... 7
3.13 Committees........................................................... 7
3.14 Compensation of Directors............................................ 8
3.15 Removal of Directors................................................. 8
3.16 Directors' Liability................................................. 8

ARTICLE IV

OFFICERS

4.1 Executive Officers................................................... 8
4.2 Agents or Employees.................................................. 9
4.3 Salaries............................................................. 9
4.4 Removal of Officers, Agents or Employees............................. 9
4.5 Chairman of the Board and President; Powers and Duties............... 9
4.6 Vice President: Powers and Duties.................................... 10
</TABLE>

(i)
<PAGE>

<TABLE>
<C> <S> <C>
4.7 Secretary: Powers and Duties......................................... 10
4.8 Treasurer; Powers and Duties......................................... 10
4.9 Delegation of Officer's Duties....................................... 10

ARTICLE V

SHARES OF CAPITAL STOCK

5.1 Certificates of Shares............................................... 11
5.2 Registered Stockholders.............................................. 11
5.3 Transfer of Shares................................................... 11
5.4 Restriction on Transfer.............................................. 11
5.5 Replacement of Certificates.......................................... 12

ARTICLE VI

RECORD DATE

6.1 Directors May Fix Record Date........................................ 12

ARTICLE VII

DIVIDENDS AND WORKING CAPITAL

7.1 Dividends............................................................ 12
7.2 Reserve Fund......................................................... 12

ARTICLE VIII

MISCELLANEOUS PROVISIONS

8.1 Corporate Records.................................................... 13
8.2 Execution of Written Instruments..................................... 13
8.3 Telecommunications................................................... 13
8.4 Corporate Seal....................................................... 13

ARTICLE IX

INDEMNIFICATION

9.1 Indemnification: Actions by Third Parties............................ 14
9.2 Indemnification: Actions by or in the Right of the Corporation....... 14
9.3 Advances............................................................. 14
9.4 Non-exclusivity...................................................... 14
9.5 Insurance............................................................ 15

ARTICLE X

AMENDMENTS OF BY-LAWS

10.1 Amendments........................................................... 15
</TABLE>

(ii)
<PAGE>

BYLAWS
OF
REUNION INDUSTRIES, INC.,
A DELAWARE CORPORATION

ARTICLE I

OFFICES

Section 1.1 Registered Office. The registered office of Reunion Industries,
Inc., a Delaware corporation (the "Corporation"), in Delaware shall be
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name of the Corporation's registered agent at such
address is The Corporation Trust Company.

Section 1.2 Other Offices. The Corporation may also have offices at such
other places, both within or without the State of Delaware, as the Board of
Directors may from time to time appoint or as the business of the Corporation
may require.

ARTICLE II

STOCKHOLDERS MEETINGS

Section 2.1 Place of Meetings. All meetings of the Stockholders shall be
held at the registered office of the Corporation or at such other place,
within or without the State of Delaware, as the Board of Directors may from
time to time determine.

Section 2.2 Annual Meetings. An annual meeting of the Stockholders shall be
held each year at such time and on such date as shall be designated by
resolution of the Board of Directors for the election of Directors and the
transaction of such other business as may properly be brought before the
meeting; provided, however, that each successive annual meeting shall be held
on a date within thirteen months after the date of the preceding annual
meeting.

Section 2.3 Special Meetings. Special meetings of the Stockholders may be
called at any time by the President, or a majority of the Board of Directors,
or the holder or holders of not less than one-fifth of all the shares of
capital stock of the Corporation outstanding and entitled to vote at the
particular meeting. If called by the Stockholders, such request shall be in
writing delivered to the Secretary of the Corporation and shall state the
time, place and purpose or purposes of the meeting. On the written request of
any person or persons who have duly called a special meeting, it shall be the
duty of the Secretary to call such meeting to be held not less than ten days
nor more than sixty days after receipt of such notice. If the Secretary shall
neglect or refuse to issue such call, the person or persons making the request
may do so.

Section 2.4 Notice of Meetings. Written notice of every meeting of the
Stockholders shall be given by or at the direction of the person or persons
authorized to call the meeting, to each stockholder of record entitled to vote
at the meeting, at least ten days prior to the date named for the meeting,
unless a greater period of notice is required by law in a particular case.
Such notice need not be given to Stockholders not entitled to vote at the
meeting unless such stockholders are entitled by law to such notice in a
particular case. Notice shall be deemed to have been properly given to a
stockholder when delivered to him personally, or when deposited in the United
States mail with first class postage prepaid, and directed to his address
appearing on the books of the Corporation or supplied by him to the
Corporation for the purpose of notice; and a certificate or affidavit by the
Secretary or an Assistant Secretary or a transfer agent shall be prima facie
evidence of the giving of any notice required by these Bylaws. Such notice
shall specify the place, day and hour of the meeting, and shall state the
nature of the business to be transacted if required by law and to the extent
required by law.

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Section 2.5 Waiver of Notice. Whenever any written notice is required to be
given to a stockholder under the provisions of applicable law, by the
Certificate of Incorporation, or by these Bylaws, a waiver thereof in writing,
signed by him either before or after the time stated herein, and whether
before or after the meeting, shall be deemed equivalent of due notice. Unless
otherwise required by the Certificate of Incorporation or these Bylaws and
except in the case of a special meeting, neither the business to be transacted
at the meeting, nor the purpose of the meeting, need be specified in the
waiver of notice of such meeting. Attendance of any person, either in person
or by proxy, at any meeting shall constitute a waiver of notice of such
meeting, except when a person entitled to notice attends the meeting for the
express purpose of objecting to the transaction of any business because the
meeting was not lawfully called or convened.

Section 2.6 Notice of Adjournments. On adjournment of an annual or special
meeting of Stockholders, it shall not be necessary to give any notice of the
adjourned meeting or of the business to be transacted thereat, other than by
announcement at the meeting at which such adjournment is taken. At any
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting
originally called.

Section 2.7 Quorum. The presence, in person (including participation by
telephone or similar communication as provided in Section 8.3) or by proxy, of
the Stockholders entitled to cast at least a majority of the votes which all
Stockholders are entitled to cast on the particular matter shall constitute a
quorum for the purpose of considering such matter at any meeting of the
Stockholders for the election of Directors or for the transaction of other
business, except as otherwise provided by law or these Bylaws. The
Stockholders present at a duly-organized meeting can continue to do business
until adjournment, notwithstanding the withdrawal of enough Stockholders to
leave less than a quorum. If, however, any meeting of Stockholders cannot be
organized because a quorum has not attended, the Stockholders entitled to vote
thereat, present in person or by proxy, shall have the power to adjourn the
meeting to such time and place as they may determine, until such time as a
quorum shall be present in person or by proxy.

Section 2.8 Stockholders Entitled to Vote. Subject to the provision of this
section and except as may be otherwise provided by law or by the Certificate
of Incorporation, every shareholder shall have the right at every
Stockholders' meeting to cast one vote for every share having voting power
standing in his name on the books of the Corporation; and if, by law or by
Certificate of Incorporation, holders of shares not having the right to vote
shall be entitled to vote at a particular meeting by reason of the particular
business involved, every such holder of shares without voting power shall,
subject to the Certificate of Incorporation, be entitled to one vote for every
share standing in his name on the books of the Corporation. In the event the
Board of Directors shall fix a time, not less than ten or more than sixty days
prior to the date of any meeting of Stockholders, as a record date for the
determination of the Stockholders entitled to notice of and to vote at any
such meeting, only such Stockholders as shall be Stockholders of record on the
date so fixed shall be entitled to notice of, or to vote at, such meeting
notwithstanding any transfer of shares on the books of the Corporation after
such record date. If a record date shall not be fixed by the Board of
Directors for a particular Stockholders' meeting, transferees of shares which
are transferred on the books of the Corporation within ten days next preceding
the date of such meeting shall not be entitled to notice of or to vote at such
meeting.

Section 2.9 Stockholders May Vote in Person or by Proxy. Every stockholder
entitled to vote may vote either in person or by proxy. Every proxy shall be
executed in writing by a stockholder, or by his duly-authorized attorney-in-
fact and filed with the Secretary of the Corporation before or at time of
meeting. A proxy, unless coupled with an interest, shall be revocable at will,
notwithstanding any other agreement or any provision in the proxy to the
contrary, but the revocation of a proxy shall not be effective until notice
thereof has been given to the Secretary of the Corporation. No unrevoked proxy
shall be valid after eleven months from the date of its execution, unless a
longer time is expressly provided therein, but in no event shall a proxy,
unless coupled with an interest, be voted on after three years from the date
of its execution. A proxy shall not be revoked by the death or incapacity of
the maker unless, before the vote is counted or the authority is exercised,
written notice of such death or incapacity is given to the Secretary of the
Corporation.

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Section 2.10 Elections of Directors; No Cumulative Voting. Elections for
Directors need not be by ballot except on demand made by a stockholder at the
election and before the voting begins there shall be no cumulative voting and
Directors shall be elected by a plurality of the votes cast, in person or by
proxy, at a meeting of Stockholders by the holders of shares entitled to vote
therein.

Section 2.11 Voting. When a quorum exists at any meeting, and unless
otherwise provided by law, the Certificate of Incorporation or these Bylaws,
the acts of the Stockholders present, in person or by proxy, entitled to cast
at least a majority of the votes which all Stockholders present are entitled
to cast shall be the acts of the Stockholders.

Section 2.12 Voting List. The officer or agent having charge of the transfer
books for shares of the Corporation shall make, at least ten days before each
meeting of Stockholders, a complete list of the Stockholders entitled to vote
at the meeting arranged in alphabetical order, with the address of and the
number of shares held by each, which list shall be kept on file at the
registered office of the Corporation, and shall be subject to inspection by
any stockholder at any time during usual business hours. Such list shall also
be produced and kept open at the time and place of the meeting, and shall be
subject to the inspection of any stockholder during the whole time of the
meeting.

Section 2.13 Inspectors of Election. In advance of any meeting of
Stockholders, the Board of Directors shall appoint Inspectors of Election, who
may, but need not be, Stockholders to act at such meeting or any adjournment
thereof. If Inspectors of Election are not so appointed, the Chairman of any
such meeting shall make such appointment at the meeting. The number of
Inspectors shall be one or three. No person who is a candidate for office
shall act as an Inspector. In case any person appointed as an Inspector fails
to appear or fails or refuses to act, the vacancy may be filled by appointment
made by the Board of Directors in advance of the convening of the meeting, or
at the meeting by the person acting as Chairman. The Inspectors of Election
determine (i) the number of shares outstanding and the voting power of each,
(ii) the shares represented at the meeting and the validity of proxies and
ballots, (iii) the count of all votes and ballots and (iv) a record of the
disposition to any challenges to any determination made by the Inspectors. The
Inspectors shall also certify their determination of the number of shares
represented at the meeting and their count of all votes and ballots cast. They
shall make a written report of any matter determined by them and execute a
certificate of any fact found by them. If there be three Inspectors of
Election, the decision, act or certificate of a majority shall be effective in
all respects as the decision, act, or certificate of all.

Section 2.14 Informal Action by Stockholders. Except as may be otherwise
provided by law or by the Certificate of Incorporation, notwithstanding
anything to the contrary contained in these Bylaws, any action which may be
taken at a meeting of the Stockholders may be taken without a meeting, if a
consent in writing, setting forth the action so taken, shall (A) be signed by
Stockholders with a number of outstanding shares having not less than the
minimum number of votes necessary to authorize or take the action at a meeting
at which all shares entitled to vote thereon were present and voted and (B) be
filed with the Secretary of the Corporation.

ARTICLE III

DIRECTORS

Section 3.1 Number and Term of Office. The business and affairs of the
Corporation shall be managed by a Board of not less than three nor more than
twelve Directors who shall be natural persons of full age. Initially, the
number of Directors shall be four, and thereafter, it shall be such number as
shall have been last specified by resolution (if any) of the Board of
Directors. Directors need not be residents of Delaware or Stockholders of the
Corporation. At each annual meeting, the Directors shall be elected by the
Stockholders to serve for the term of one year until their respective
successors shall be elected and shall qualify.

Section 3.2 Vacancies. Vacancies in the Board of Directors, whether or not
caused by an increase in the number of Directors, may be filled by a majority
of the remaining members of the Board though less than a

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quorum or by a sole remaining director. In the event one or more Directors
shall resign, effective at a future date, such vacancy or vacancies shall be
filled by a majority of the remaining Directors though less than a quorum or
by a sole remaining director. Each person so elected shall be a director until
his successor is elected by the Stockholders, who may make such election at
the next annual meeting of the Stockholders or at any special meeting duly
called for that purpose and held prior thereto.

Section 3.3 Place of Meetings. The meetings of the Board of Directors may be
held at such places, within or without the State of Delaware, as a majority of
the Directors may from time to time by resolution determine, or as may be
designated in the notice or waiver of notice of a particular meeting; in the
absence of specification, such meetings shall be held at the registered office
of the Corporation.

Section 3.4 First Meeting. The first meeting of each newly elected Board of
Directors shall be held immediately after the annual meeting of the
Stockholders at the same location as the Stockholders' meeting for the purpose
of organization, the election of officers and the transaction of other
business, or such meeting may convene at such other time and place as may be
fixed by resolution of the Stockholders adopted at the meeting at which the
Directors were elected or by the written consent of all the Directors. If such
meeting is held immediately after the Stockholders' meeting at which the
Directors were elected, each director shall have received at least two days'
written notice of the proposed meeting or shall have signed a written waiver
of such notice.

Section 3.5 Regular Meetings. Regular meetings of the Board of Directors may
be held at such times as the Board may by resolution determine. If any day
fixed for a regular meeting shall be a legal holiday, then the meeting shall
be held at the same hour and place on the next succeeding secular day.

Section 3.6 Special Meetings. Special meetings of the Board of Directors may
be called at any time by the Chairman of the Board or the President, and shall
be called on the written request of any two or more Directors delivered to the
Secretary. Any such request by Directors shall state the time and place of the
proposed meeting, and on receipt of such request, it shall be the duty of the
Secretary to promptly call such meeting. If the Secretary shall neglect to
issue such call, the Directors making the request may issue the call.

Section 3.7 Notice of Meetings. Regular meetings of the Board of Directors
may be held without notice. If such meeting is to be held at other than the
usual time and place, written notice of such meeting shall be given in the
manner described herein. Notice of all special meetings shall be given by
mailing the same by overnight mail at least forty-eight hours, or by
telegraphing or telephoning the same, or by giving personal notice thereof at
least forty-eight hours before the time named for such meeting. Any written
notice herein required may be given to a director either personally, or by
sending a copy thereof through the mail, or by telegram, charges prepaid, to
his address appearing on the books of the Corporation or supplied by him to
the Corporation for the purpose of notice. If the notice is sent by mail or by
telegraph, it shall be deemed to have been given to the person entitled
thereto when deposited in the United States mail or the telegraph office for
transmission to such person. Such notice shall specify the place, date and
hour of the meeting, and shall also state the nature of the business to be
transacted at the meeting if and to the extent required by law.

Section 3.8 Waiver of Notice. Whenever any written notice is required by law
or the Certificate of Incorporation or these Bylaws to be given to a director,
a waiver thereof in writing, signed by him either before or after the time
stated therein, and whether before or after the meeting, shall be deemed
equivalent to notice. Attendance of any director at any meeting shall
constitute a waiver of notice of such meeting, except when such director
attends the meeting for the express purpose of objecting to the transaction of
any business because the meeting was not lawfully called or convened.

Section 3.9 Quorum. At all meetings of the Board, a majority of the total
Directors in office shall constitute a quorum for the transaction of business,
and the acts of a majority of the Directors present (including participants by
telephone or similar communication as provided in Section 8.3) at a meeting at
which a quorum

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is present shall be the acts of the Board of Directors, except as may
otherwise be specifically provided by law, by the Certificate of Incorporation
or by these Bylaws.

Section 3.10 Adjournment. Adjournment or adjournments of any regular or
special meetings may be taken, and it shall not be necessary to give any
notice of the adjourned meeting or of the business to be transacted thereat
other than by announcement at the meeting at which such adjournment is taken.
At any adjourned meeting at which a quorum shall be present, any business may
be transacted which might have been transacted at the original meeting.

Section 3.11 Informal Action. Notwithstanding anything to the contrary
contained in these Bylaws, any action which may be taken at a meeting of the
Directors or by the members of a committee duly appointed by the Board of
Directors may be taken without a meeting, if a written consent setting forth
the action so taken shall be signed by all of the Directors or the members of
the committee, as the case may be, and shall be filed with the Secretary of
the Corporation.

Section 3.12 General Powers. The Board of Directors may exercise all such
powers of the Corporation and do all such lawful acts and things as are not by
statute, by the Certificate of Incorporation or by these Bylaws, directed or
required to be exercised and done by the Stockholders. Without limiting the
generality of the foregoing, the powers of the Board shall include the power
to authorize increases in the Corporation's indebtedness and to mortgage and
pledge its assets.

Section 3.13 Committees. The Board of Directors may, by resolution adopted
by a majority of the whole Board, designate one or more of its members to
constitute an executive committee which to the extent provided in such
resolution, shall have and exercise the authority of the Board of Directors in
the management of the business of the Corporation and may authorize the seal
of the Corporation to be affixed to all papers that may require it; provided,
however, that no such committee shall have the power to amend the Certificate
of Incorporation (except that a committee may, to the extent authorized by the
resolutions providing for the issuance of shares of stock adopted by the Board
of Directors as provided by the Delaware General Corporation Law (the "DGCL"),
fix any of the preferences or rights of the shares), adopt an agreement of
merger or consolidation, recommend the sale of all or substantially all the
Corporation's assets or property to the Stockholders, recommend a dissolution
of the Corporation or a revocation of dissolution to the Stockholders, or
amend these Bylaws and provided further that, unless the resolution expressly
so provides, no such committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock. Each committee shall keep
regular minutes of its proceedings and report the same to the Board at each
regular meeting of the Board.

The Board of Directors may designate one or more Directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of such committee. Unless an alternate has been designated and is
present at the meeting, in the absence or disqualification of a member of the
committee, the members thereof present at any meeting and not disqualified
from voting, whether or not they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in place of any
such absent or disqualified member. Vacancies in the membership of the
committees shall be filled by the Board of Directors at a regular or special
meeting of the Board.

Section 3.14 Compensation of Directors. Directors may receive such
reasonable compensation for their services as shall be provided by a
resolution adopted by a majority of the Board of Directors.

Section 3.15 Removal of Directors. A director or the entire Board of
Directors may be removed, with or without cause, by the affirmative vote of
the holders of a majority of the shares of the Corporation entitled to vote in
the election of Directors. At the meeting at which such director(s) are
removed, the Stockholders may elect new director(s), in accordance with the
provisions of these Bylaws to fill a vacancy or vacancies caused by the
removal of such director(s). In case any vacancy so created shall not be
filled by the Stockholders at such meeting, such vacancy may be filled by the
Directors so provided in Section 3.2.

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Section 3.16 Directors' Liability. To the fullest extent permitted by the
DGCL, now in effect and as amended from time to time, a director of the
Corporation shall not be personally liable to the Corporation or its
Stockholders for monetary damages for breach of a fiduciary duty as a
director, provided that this section shall not eliminate or limit the
liability of a director for (a) any breach of the director's duty of loyalty
to the Corporation or its Stockholders, (b) acts or omissions not in good
faith, (c) unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the DGCL or (d) any transaction from
which the director derived an improper personal benefit.

ARTICLE IV

OFFICERS

Section 4.1 Executive Officers. The executive officers of the Corporation
shall be elected annually by the Board of Directors and shall be a Chairman of
the Board, a President, a Secretary and a Treasurer. One or more additional
Vice Presidents, and such other officers and assistant officers also may be
elected or appointed as the Board of Directors may authorize from time to
time. Any number of offices may held by the same person, except that the
President shall not also hold the office of Secretary. In addition to the
powers and duties prescribed by these Bylaws, the officers and assistant
officers shall have such authority and shall perform such duties as from time
to time shall be prescribed by the Board. The officers and assistant officers
of the Corporation shall hold office until their successors are chosen and
have qualified, unless they are sooner removed from office as provided by
these Bylaws. The Board of Directors may add to the title of any officer or
assistant officer a word or words descriptive of his powers or the general
character of his duties. If the office of any officer or assistant officer
becomes vacant for any reason, the vacancy shall be filled by the Board of
Directors.

Section 4.2 Agents or Employees. The Board of Directors may by resolution
designate the officer or officers who shall have authority to appoint such
agents or employees as the needs of the Corporation require. In the absence of
such designation, this function may be performed by the Chairman of the Board
or the President and may be delegated by him to others in whole or in part.

Section 4.3 Salaries. The salaries of all officers of the Corporation shall
be fixed by the Board of Directors or by authority conferred by resolution of
the Board. The Board may fix the salaries or other compensation of assistant
officers, agents and employees of the Corporation, but in the absence of such
action, this function shall be performed by the Chairman of the Board or the
President or by others under their supervision.

Section 4.4 Removal of Officers, Agents or Employees. Any officer, agent or
employee of the Corporation may be removed or his authority revoked by
resolution of the Board of Directors whenever, in its judgment, the best
interests of the Corporation will be served thereby, if such removal or
revocation shall be without prejudice to the rights, if any, of the person so
removed to receive compensation or other benefits in accordance with the terms
of existing contracts. Any agent or employee of the Corporation likewise may
be removed by the Chairman of the Board or the President or, subject to their
supervision, by the person having authority with respect to the appointment of
such agent or employee.

Section 4.5 Chairman of the Board and President; Powers and Duties.

(a) The Chairman of the Board shall, if present, preside at all meetings
of the Board of Directors and exercise and perform such other powers and
duties as may from time to time be assigned to him by the Board of
Directors or prescribed by these Bylaws.

(b) Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the Chairman of the Board, if there be such an
officer, the President shall be the Chief Executive Officer of the
Corporation and shall, subject to the control of the Board of Directors,
have general supervision, direction and control of the business and
officers of the Corporation. He shall preside at all meetings of the
Stockholders and in the absence of the Chairman of the Board, or if there
be none, at all meetings of the Board of Directors. He shall be ex officio
member of all the standing committees, including the executive

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committee, if any, and shall have the general powers and duties of
management usually vested in the office of president of a corporation, and
shall have such other powers and duties as may be prescribed by the Board
of Directors or these Bylaws.

Section 4.6 Vice President: Powers and Duties. The Vice President shall, in
the absence or disability of the President, perform the duties and exercise
the powers of the President; and if there be more than one Vice President,
their seniority in performing such duties and exercising such powers shall be
determined by the Board of Directors or, in default of such determination, by
the order in which they were first elected. Each Vice President also shall
have such powers and perform such duties as may be assigned to him by the
Board.

Section 4.7 Secretary: Powers and Duties. The Secretary shall attend all
meetings of the Board and all meetings of the Stockholders and act as clerk
thereof and record all the votes and minutes thereof in books to be kept for
that purpose; and shall perform like duties for the executive committee of the
Board of Directors when required. He shall give, or cause to be given notice
of all meetings of the Stockholders and of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board, the Chairman or
the President. He shall keep in custody the corporate seal of the Corporation,
and may affix the same to any instrument requiring it and attest the same. The
Secretary shall enforce the restriction on the transfer of the Corporation's
capital stock set forth in Article 5 of these Bylaws. In connection therewith,
the Secretary shall supervise the Corporation's transfer agent and/or
registrar:

Section 4.8 Treasurer; Powers and Duties. The Treasurer shall be the chief
financial officer and shall cause full and accurate accounts of receipts and
disbursements to be kept in books belonging to the Corporation. He shall see
to the deposit of all monies and other valuable effects in the name and to the
credit of the Corporation in such depository or depositories as may be
designated by the Board of Directors, subject to the disbursement or
deposition on orders signed in such manner as the Board of Directors shall
prescribe. He shall render to the Chairman of the Board and to the Directors,
at the regular meetings of the Board or whenever the Chairman of the Board or
the Board may require it, an account of all his transactions as Treasurer and
of the results of operations and financial condition of the Corporation. If
required by the Board, the Treasurer shall give the Corporation a bond in such
sum and with such surety or sureties as may be satisfactory to the Board for
the faithful discharge of the duties of his office and for the restoration to
the Corporation, in case of his death, resignation, retirement or removal from
office, of all books, records, money and other property of whatever kind in
his possession or under his control belonging to the Corporation.

Section 4.9 Delegation of Officer's Duties. Any officer may delegate duties
to his assist (if any) appointed by the Board; and in case of the absence of
any officer or assistant officer of the Corporation, or for any other reason
that the Board of Directors may deem sufficient, the Board may delegate or
authorize the delegation of his powers or duties, for the time being, to any
person.

ARTICLE V

SHARES OF CAPITAL STOCK

Section 5.1 Certificates of Shares. Subject to requirements prescribed by
law and the Certificate of Incorporation of the Corporation, the share
certificates of the Corporation shall be in such form as shall be approved by
the Board of Directors. All certificates representing shares shall be
registered in the share register as they are issued, and those of the same
class or series shall be consecutively numbered. Every share certificate shall
bear the signature of the Chairman of the Board or the President or Vice
President and of the Secretary or an Assistant Secretary or the Treasurer, and
shall be sealed with the corporate seal. Whenever a certificate is
countersigned by a transfer agent, one or both of the officers' or assistant
officers' signatures and the seal may be in facsimile engraved or printed. In
case any officer or assistant officer whose signature appears on any share
certificate shall have ceased to be such because of death, resignation or
otherwise, before the certificate is issued, it may be issued by the
Corporation with the same effect as if he had not ceased to be such at the
date of its issue.

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Section 5.2 Registered Stockholders. The Corporation shall be entitled to
treat the registered holder of any share or shares as the holder thereof in
fact and law and shall not be bound to recognize any equitable or other claim
to, or interest in, such shares on the part of any other person, whether or
not it shall have express or other notice thereof, save as otherwise expressly
provided by law.

Section 5.3 Transfer of Shares. Shares of the Corporation shall be
transferred only on the books of the Corporation upon the surrender to the
Corporation or its transfer agent of the share certificate or certificates
therefor, duly endorsed by the person named therein or accompanied by proper
evidence of succession, assignment or authority to transfer such shares;
provided no transfers of shares shall be made while the books of the
Corporation are closed against transfers as hereinafter provided in these
ByLaws. On transfer, the surrendered certificate or certificates shall be
cancelled, a new certificate or certificates shall be issued to the person
entitled thereto, and the transaction shall be recorded on the books of the
Corporation.

Section 5.4 Restriction on Transfer. Transfers of shares may be restricted
in any lawful manner by law, by the Certificate of Incorporation or by
contract if a copy of the contract is filed with the Corporation, provided
that notice of the restrictions shall be typed or printed conspicuously on the
share certificate.

Section 5.5 Replacement of Certificates. The Board of Directors may direct a
new share certificate to be issued in place of any share certificate
theretofore issued by the Corporation and claimed to have been lost, destroyed
or mutilated, on the claimant's furnishing an affidavit of the facts and, if
required by the Board of Directors, a bond of indemnity in such amount or in
open penalty and in such form, with such surety thereon, as the Board may
approve for the protection of the Corporation and its officers and agents.

ARTICLE VI

RECORD DATE

Section 6.1 Directors May Fix Record Date. The Board of Directors may fix a
time not less than ten nor more than sixty days prior to (a) the date of any
meeting of the Stockholders, or (b) the date fixed for payment of any dividend
or distribution or for the allotment of rights, or (c) the date when any
change or conversion or exchange of shares will be made or go into effect, as
a record date for the determination of the Stockholders entitled to notice of,
or to vote at, any such meeting, entitled to receive any such dividend,
distribution or allotment of rights or to exercise the rights in respect to
any such change, conversion or exchange of shares. In any such case, only the
Stockholders who are Stockholders of record on the date so fixed shall be
entitled to notice of and to vote at such meeting, to receive such dividend,
distribution or allotment of rights or to exercise such rights, as the case
may be, notwithstanding any transfer of shares on the books of the Corporation
after the record date so fixed. The Board of Directors may close the books of
the Corporation against the transfer of shares during the whole or any part of
such period; and in any such case, appropriate notice of such closing shall be
given to each Stockholder of record at the latest address appearing on the
stock records of the Corporation or supplied by such Stockholder to the
Corporation for the purpose of such notice.

ARTICLE VII

DIVIDENDS AND WORKING CAPITAL

Section 7.1 Dividends. Subject to the limitations prescribed by law and the
provisions of the Certificate of Incorporation relating thereto, the Board of
Directors, at any regular or special meeting, may declare dividends on the
outstanding shares of the Corporation out of assets legally available for such
dividends to such extent as the Board may deem advisable. Dividends may be
paid in cash, in property, or in shares of capital stock of the Corporation.

Section 7.2 Reserve Fund. Before payment of any dividend, there may be set
aside out of earned surplus of the Corporation such sum or sums as the Board
of Directors may, from time to time, in its absolute discretion,

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deem proper as a reserve fund to meet contingencies or for such other purposes
as the Board shall deem conducive to the interests of the Corporation, and the
Board may vary or abolish any such reserve fund in its absolute discretion.

ARTICLE VIII

MISCELLANEOUS PROVISIONS

Section 8.1 Corporate Records. The Corporation shall keep at its registered
office or principal place of business an original or duplicate record of the
proceedings of the Stockholders and of the Directors and the original or copy
of its Bylaws, including all amendments and alterations thereto to date,
certified by the Secretary of the Corporation, and shall keep at its
registered office or principal place of business or at the office of a
transfer agent within the State of Delaware an original or duplicate share
register giving the names of the Stockholders and showing their respective
addresses, the number and classes of shares held by each, the numbers and
dates of the certificates issued thereto, and the numbers and dates of
cancellation of all certificates surrendered for cancellation. The Corporation
shall keep at its registered office or at its principal place of business
complete and accurate books or records of account.

Section 8.2 Execution of Written Instruments. All contracts, deeds,
mortgages, obligations, documents and instruments, whether or not required by
seal, may be executed by the Chairman of the Board or the President or a Vice
President and attested by the Secretary or the Treasurer or an Assistant
Secretary or Assistant Treasurer, or may be executed or attested, or both, by
such other person or persons as may be specifically designated by resolution
of the Board of Directors. All checks, notes, drafts and orders for the
payment of money shall be signed by such one or more officers or agents as the
Board of Directors may from time to time designate.

Section 8.3 Telecommunications. One or more Directors or Stockholders may
participate in a meeting of the Board, a committee of the Board or the
Stockholders by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other.

Section 8.4 Corporate Seal. The corporate seal shall have inscribed thereon
the name of the Corporation, the year of its incorporation and the words
"Corporate Seal of Delaware." Such seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any manner reproduced.

ARTICLE IX

INDEMNIFICATION

Section 9.1 Indemnification: Actions by Third Parties. The Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil or criminal, administrative or investigative (other than an action by or
in the right of the Corporation) because he is or was a director, officer,
employee or agent of the Corporation or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit, or proceeding, except when the act or failure to act giving rise
to the claim for indemnification is determined by a court to have constituted
willful misconduct or recklessness.

Section 9.2 Indemnification: Actions by or in the Right of the Corporation.
The Corporation shall indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed action
or suit by or in the right of the Corporation to procure judgment in its favor
because he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or

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other enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him
in connection with the defense or settlement of such action or suit, except
when the act or failure to act giving rise to the claim for indemnification is
determined by a court to have constituted willful misconduct or recklessness.

Section 9.3 Advances. Expenses incurred by a director, employee, or agent of
the Corporation or a person who is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise in defending a civil or
criminal action, suit or proceeding shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding on receipt
of an undertaking by or on behalf of such person to repay such amount, if it
is ultimately determined that the person is not entitled to indemnification by
the Corporation.

Section 9.4 Non-exclusivity. The indemnification and advancement of expenses
provided hereunder shall not be deemed exclusive of any rights to which a
person seeking indemnification or advancement of expenses may be entitled
under the DGCL, the Certificate of Incorporation, any agreement or vote of the
Stockholders or disinterested Directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office. The indemnification and advancement of expenses provided hereunder
shall continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such person; provided, however, that the right to
indemnification which any such person may have under any provision of the
Certificate of Incorporation or these Bylaws shall be limited to the
provisions thereof and hereof in effect at the time such person was acting as
a director, officer, employee or agent.

Section 9.5 Insurance. The Corporation may purchase and maintain insurance
at its expense for the benefit of any person who is or was a director,
officer, employee or agent of the Corporation against any expenses, liability
or loss asserted against or incurred by him, whether or not the Corporation
would have the power to indemnity such director, officer, employee or agent
under the DGCL or other applicable law.

In addition, the Corporation may operate a fund of any nature to secure its
indemnification obligations.

ARTICLE X

AMENDMENTS OF BY-LAWS

Section 10.1 Amendments. Except as otherwise provided by law, these Bylaws
may be altered, amended, supplemented or repealed by the affirmative vote of a
majority of the Board of Directors or by the affirmative vote of the
Stockholders holding at least a majority of the shares of capital stock
entitled to vote in the election of directors, at any regular or special
meeting of the Board or of the Stockholders, as the case may be, convened
after notice of that purpose. Further, these Bylaws may be altered, amended,
supplemented or repealed by unanimous written consent of all of the Directors
or written consent of the Stockholders holding at least a majority of the
shares entitled to vote thereon, without a meeting.

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