SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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Only (as permitted by Rule 14a-6(3) (2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Reunion Industries, Inc.
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(Name of Registrant as Specified In Its Charter)
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Notes:
REUNION INDUSTRIES, INC.
11 Stanwix Street - Suite 1400
Pittsburgh, Pennsylvania 15222
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held _______, 2004
Notice is hereby given that the Annual Meeting of the Stockholders of
Reunion Industries, Inc., a Delaware corporation ("Reunion Industries",
"Reunion" or "the Company"), will be held at Reunion Industries' offices, 11
Stanwix Street, Pittsburgh, Pennsylvania 15222 on _______, 2004, at 10:00 A.M.
local time, for the following purposes:
1. To elect a board of seven directors to serve until the next Annual
Meeting of stockholders or until their successors are elected;
2. To amend the Certificate of Incorporation to increase by 10 million
the number of common shares authorized and eliminate preferred shares;
3. To adopt the 2004 Stock Option Plan; and
4. To consider and act upon such other business as may properly be
presented to the meeting.
Your Board of Directors recommends that you vote for all director
nominees and all proposals. The Board is not aware of any other proposals for
the _______, 2004 meeting.
A record of stockholders has been taken as of the close of business on
______, 2004, and only those stockholders of record on that date will be
entitled to notice of and to vote at the meeting. A stockholders' list will
be available at, and may be inspected during, the meeting.
If you do not expect to be present at the meeting, please sign and date
the enclosed proxy and return it promptly in the enclosed envelope which has
been provided for your convenience.
By Order of the Board of Directors
/s/ John M. Froehlich
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John M. Froehlich
Secretary
_______, 2004
REUNION INDUSTRIES, INC.
PROXY STATEMENT
General
This proxy statement is being mailed to stockholders commencing on or
about _______, 2004 in connection with the solicitation by the board of
directors of Reunion Industries, Inc., a Delaware corporation ("Reunion
Industries", "Reunion" or the "Company"), of proxies to be voted at the Annual
Meeting of Stockholders to be held at Reunion Industries' offices, 11 Stanwix
Street, Pittsburgh, Pennsylvania 15222 on _______, _______, 2004, and at any
adjournment thereof, for the purposes set forth in the accompanying Notice.
Proxies will be voted in accordance with the directions specified thereon and
otherwise in accordance with the judgment of the persons designated as
proxies. Any signed proxy on which no direction is specified will be voted
for the election of the nominees named herein to the board of directors. Any
proxy may be revoked at any time before its exercise by delivery to the
corporate secretary of a written revocation of the proxy or a duly executed
proxy bearing a later date.
Reunion Industries will pay the costs of soliciting proxies pursuant to
this Proxy Statement. Reunion Industries will also reimburse brokerage firms
and other custodians, nominees, and fiduciaries for their reasonable out-of-
pocket expenses for sending management's proxy materials to stockholders and
obtaining their proxies.
As of ______, 2004, the record date for the determination of stockholders
entitled to vote at the annual meeting, there were 16,278,579 outstanding
shares of common stock of Reunion Industries. Each share of common stock
entitles the holder to one vote on all matters presented at the annual
meeting.
Voting Procedures
As a stockholder of Reunion, you have a right to vote on certain business
matters affecting Reunion. The proposals that will be presented at the meeting
and upon which you are being asked to vote are discussed below under the
section entitled "Proposals." Each share of Reunion's common stock you own
entitles you to one vote on each proposal.
Methods of Voting
You may vote by mail or in person at the meeting.
Voting by Mail. By signing and returning the proxy card in the
enclosed prepaid and addressed envelope, you are authorizing the individuals
named on the proxy card (known as "proxies") to vote your shares at the
meeting in the manner you indicate. We encourage you to sign and return the
proxy card even if you plan to attend the meeting. In this way, your shares
will be voted if you are unable to attend the meeting. If you received more
than one proxy card, it is an indication that your shares are held in multiple
accounts. Please sign and return all proxy cards to ensure that all of your
shares are voted.
Voting in Person at the Meeting. If you plan to attend the meeting and
vote in person, we will provide you with a ballot at the meeting. If your
shares are registered directly in your name, you are considered the
stockholder of record and you have the right to vote in person at the meeting.
If your shares are held in the name of your broker or other nominee, you are
considered the beneficial owner of shares held in street name. As a beneficial
owner, if you wish to vote at the meeting, you will need to bring with you to
the meeting a legal proxy from your broker or other nominee authorizing you to
vote such shares.
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Your shares will be voted in accordance with the instructions you
provide. If you sign and return your proxy card without providing your voting
instructions, your shares will be voted "for" the seven named nominees for
directors, "for" the proposal to amend the Certificate of Incorporation to
increase the number of common shares authorized and eliminate the preferred
shares and "for" the proposal to adopt the 2004 Stock Option Plan, and in the
discretion of the proxies as to other matters that may properly come before
the meeting.
Revoking Your Proxy
You may revoke your proxy at any time before it is voted at the meeting.
To do this, you must:
- enter a new vote by signing, dating and returning another proxy card at a
later date;
- provide written notice of the revocation to Reunion's Secretary;
- or attend the meeting and vote in person.
Quorum Requirement
A quorum, which is a majority of the outstanding shares entitled to vote
as of the record date, ______, 2004, must be present in order to hold the
meeting and to conduct business. Shares are counted as being present at the
meeting if you appear in person at the meeting or if you vote your shares by
submitting a properly executed proxy card. Both abstentions and broker non-
votes are counted as present for the purpose of determining a quorum.
Votes Required for the Proposals
The votes required and the method of calculation for the proposals to be
considered at the meeting are as follows:
PROPOSAL 1 - ELECTION OF DIRECTORS. The seven nominees receiving the
highest number of votes, in person or by proxy, will be elected as directors.
You may vote "for" the nominees for election as directors or you may
"withhold" your vote with respect to one or more nominees. There is no
cumulative voting with respect to the election of directors. If you return a
proxy card that withholds your vote from the election of all directors, your
shares will be counted as present for the purpose of determining a quorum but
will not be counted in the vote on the proposal.
PROPOSAL 2 - AMEND THE CERTIFICATE OF INCORPORATION TO INCREASE BY 10
MILLION THE NUMBER OF COMMON SHARES AUTHORIZED AND ELIMINATE THE PREFERRED
SHARES. Approval requires the affirmative vote of a majority of the
outstanding shares entitled to vote at the meeting. You may vote "for,"
"against," or "abstain" from the proposal to approve the increase in
authorized common shares and the elimination of the preferred shares.
PROPOSAL 3 - ADOPTION OF THE 2004 STOCK OPTION PLAN. Approval requires
the affirmative vote of a majority of the shares present in person or by proxy
and entitled to vote on the proposal at the meeting. You may vote "for,"
"against," or "abstain" from the proposal to approve the adoption of the 2004
Stock option Plan.
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Broker Non-Votes
For the proposal to elect seven directors, if your shares are held in
street name and you do not instruct your broker on how to vote your shares,
your brokerage firm may either leave your shares unvoted or vote your shares
on this matter. To the extent your brokerage firm votes your shares on your
behalf on this proposal, your shares will be counted as present for the
purpose of determining a quorum.
For the proposals to approve the increase the authorized common shares
and eliminate the preferred shares and to adopt the 2004 Stock Option Plan, if
your shares are held in street name and you do not instruct your broker on how
to vote your shares, your brokerage firm will not have the authority to vote
your shares, and your shares will constitute "broker non-votes." Shares
represented by "broker non-votes" will not be considered as present and
entitled to vote on this proposal but will be counted as present for the
purpose of determining a quorum.
Voting Confidentiality
Proxies, ballots and voting tabulations are handled on a confidential
basis to protect your voting privacy. This information will not be disclosed
except as required by law.
Voting Results
Votes will be tabulated by Registrar and Transfer Company, the transfer
agent and registrar for Reunion Industries' common stock, and the results will
be certified by an election inspector who is required to resolve impartially
any interpretive questions as to the conduct of the vote. Results will be
published in Reunion's Quarterly Report on Form 10-Q for the period ended
_______, 2004. You also may request the voting results by written request to
Reunion's Secretary.
PROPOSAL 1. ELECTION OF DIRECTORS
At the annual meeting, the stockholders of Reunion Industries will be
asked to vote for the election of seven directors to its board of directors.
The candidates proposed for election at the annual meeting are Thomas N.
Amonett, Charles E. Bradley, Sr., Kimball J. Bradley, Thomas L. Cassidy, David
E. Jackson, Joseph C. Lawyer, and John G. Poole. If elected, the proposed
candidates would comprise the entire board of directors of Reunion Industries,
and would hold office until their successors are duly elected and qualified at
the next annual meeting of stockholders of Reunion Industries or until they
earlier die, resign or are removed from office in accordance with the
Company's By-Laws and applicable law.
Nominees
All persons nominated for election at the annual meeting currently are
directors of Reunion Industries and have previously been elected by the
stockholders. Mr. Charles E. Bradley, Sr. is the father of Mr. Kimball J.
Bradley. Reunion Industries knows of no other family relationships between any
director, executive officer or nominee and any other director, executive
officer or nominee. There are no arrangements or understandings between any
nominee for director and any other person pursuant to which such person was
selected as a nominee.
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Principal Position with
Name Reunion Industries, Inc. Age Director Since
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Thomas N. Amonett(1)(2) Director 60 1992
Charles E. Bradley, Sr. Director, Chairman & CEO 74 1995
Kimball J. Bradley Director, President & COO 39 2000
Thomas L. Cassidy(1)(2) Director 75 1995
David E. Jackson(1)(2) Director 45 2003
Joseph C. Lawyer Director and Vice Chairman 59 2000
John G. Poole Director 61 1996
(1) Member, Compensation Committee of the Board of Directors
(2) Member, Audit Committee of the Board of Directors
THOMAS N. AMONETT has served as a director of Reunion Industries since
July 1, 1992 and served as its President and Chief Executive Officer from
July 1, 1992 until October 26, 1995. He also served as the President of
Reunion Energy Company, then a wholly-owned subsidiary of Reunion Industries
in the oil and gas operating business, from July 1, 1992 until May 24, 1996.
Mr. Amonett is President and Chief Executive Officer of Champion Technologies,
Inc., a manufacturer and distributor of specialty chemicals and related
services, primarily to the oil and gas industry. From November 1998 to
June 1999, he was 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. Mr. Amonett serves as a director of Petro Corp. Incorporated, a
Houston-based oil and gas company, and Stelmar Shipping Ltd., an international
provider of petroleum product and crude oil transportation services.
CHARLES E. BRADLEY, SR. became a director of Reunion Industries on
June 20, 1995 and was appointed President and Chief Executive Officer of
Reunion Industries on October 26, 1995. He became Chairman effective March
16, 2000. Mr. Bradley, Sr. was a co-founder of Stanwich Consulting Corp.,
formerly known as Stanwich Partners, Inc. (SPI), in 1982 and has served as its
President since that time. SPI is a private investment company. He was a
director of Chatwins Group, Inc. (Chatwins Group) from 1986 until its merger
with Reunion Industries on March 16, 2000 and was Chairman of the Board of
Chatwins Group from 1988 until the merger. Mr. Bradley, Sr. is currently the
President and a director of Sanitas, Inc. and Texon Energy Corporation, both
inactive companies. Since May 1997, he has been President and sole director
of Stanwich Financial Services Corp. (SFSC), which, on June 25, 2001, filed a
voluntary petition in the United States Bankruptcy Court for the District of
Connecticut for reorganization under Chapter 11 of the United States
Bankruptcy Code. SFSC is in the structured settlement business. Mr. Bradley,
Sr. was chairman of the board of directors of DeVlieg-Bullard, Inc. when, on
July 15, 1999, it filed a voluntary petition in the United States Bankruptcy
Court for the Northern District of Ohio for reorganization under Chapter 11 of
the United States Bankruptcy Code. Mr. Bradley is the father of Kimball J.
Bradley.
KIMBALL J. BRADLEY became President and Chief Operating Officer of
Reunion Industries effective May 1, 2000. He was Executive Vice President of
Operations of Reunion Industries following the Chatwins Group merger and was a
Senior Vice President of Chatwins Group from August 1998 until the merger and
a Vice President of Chatwins Group from January 1996 to August 1998. From
November 1995 until August 1998, Mr. Bradley was President of the Auto-Lok
division of Chatwins Group, having served as acting President of Auto-Lok
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beginning in August 1995. Prior to assuming that position, he managed various
special projects at Chatwins Group's corporate office beginning in
November 1993 and at Chatwins Group's CP Industries division from
February 1993 to November 1993. Mr. Bradley is the son of Charles E. Bradley,
Sr.
THOMAS L. CASSIDY became a director of Reunion Industries on June 20,
1995. He was a Managing Director of Trust Company of the West, an investment
management firm, from 1984 until his retirement in 1999. Mr. Cassidy is a
Partner of TCW Capital, an affiliate of Trust Company of the West. Mr.
Cassidy was a director of Chatwins Group from March 1993 to June 1997.
DAVID E. JACKSON became a director of Reunion Industries on June 26,
2003. He is the CEO of Bingo Country Holdings, Ltd. in Toronto, Canada. He
has over fifteen years experience as a portfolio manager investing in
distressed securities having worked as a portfolio manager with Avenue Capital
Management, Oppenheimer & Co. Inc., EBF & Associates and Cargill, Inc.
JOSEPH C. LAWYER became Vice Chairman of Reunion Industries effective May
1, 2000. He was President and Chief Operating Officer of Reunion Industries
following the Chatwins Group merger and was President, Chief Executive Officer
and a director of Chatwins Group from 1988 until the merger. Mr. Lawyer is a
director of Respironics, Inc., a company engaged in design, manufacture and
sale of home and hospital respiratory medical products.
JOHN G. POOLE became a director of Reunion Industries on April 19, 1996.
Mr. Poole is a private investor. He was a co-founder of Stanwich Partners
with Charles E. Bradley, Sr. in 1982 and served as Stanwich Partners' Vice
President until 2001. Mr. Poole was a director of Chatwins Group from 1988
until the merger. He is also a director of Consumer Portfolio Services, Inc.,
engaged in the business of purchasing, selling and servicing retail automobile
installment sales contracts.
The Board of Directors recommends a vote for all nominees for the board
of directors.
Board and Committee Activity
During 2003, the board held three regularly scheduled meetings. The
compensation committee of the board held one meeting during 2003 and the audit
committee held four meetings. Each of the directors attended all of the
meetings of the board and of each committee on which he served during 2003
except for Mr. Amonett, who did not attend one board meeting and one audit
committee meeting.
Reunion's operations are managed under the general supervision and
direction of the board of directors, which has the ultimate responsibility for
the establishment and implementation of Reunion'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, comprised of Messrs. Amonett (chairman),
Cassidy and Jackson, 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.
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The audit committee, comprised of Messrs. Amonett, Cassidy and Jackson
(chairman), assists the board in assuring that the accounting and reporting
practices of Reunion Industries are in accordance with all applicable
requirements. Each member of the audit committee meets the independence and
financial experience requirements under the rules of both the Securities and
Exchange Commission (SEC) and American Stock Exchange (AMEX), where the
Company's stock is listed. In addition, the Board has determined that David
E. Jackson is an "audit committee financial expert" as defined by SEC rules.
Mr. Jackson's business experience is described above under the caption
"PROPOSAL 1. ELECTION OF DIRECTORS". The audit committee reviews with the
auditors the scope of the proposed audit work and meets with the auditors to
discuss matters relating to the audit and any other matter which the committee
or the auditors may wish to discuss. In addition, the audit committee
recommends the appointment of auditors to the board of directors each year and
would recommend the appointment of new auditors if future circumstances were
to indicate that such action is desirable.
The board of directors does not maintain executive or nominating
committees. Nominations for directorships are considered by the entire board.
The board believes that, in view of the small number of directors (7) and the
desirability of all directors, including "independent directors",
participating in the process, it is unnecessary to have a separate nominating
committee. The Company does not have a formal written policy or charter
concerning nominations. However, in evaluating a potential nominee, including
a nominee recommended by a stockholder, the board will consider the benefits
to the Company of such nomination, based on the nominee's skills and
experience related to managing a significant business, the willingness of the
person to serve and such person's character and reputation. Stockholders who
wish to suggest individuals for possible future consideration for board
positions or otherwise to communicate with the Board should direct
recommendations and other communications to the board of directors at the
Company's principal offices.
Director Compensation
Directors not otherwise compensated by Reunion 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 2003 for
service in all board capacities aggregated $86,000. Directors are reimbursed
for the actual cost of any travel expenses incurred. In addition to his
director's fees, Mr. Poole received $42,000 for consulting services during
2003.
Non-employee directors of Reunion Industries are eligible for awards
under the 1998 Stock Option Plan. During 2003, 20,000 options were granted to
one non-employee director.
Key Person Insurance
As of June 29, 1994, Chatwins Group and Charles E. Bradley, Sr. agreed to
a split-dollar life insurance arrangement. Pursuant to this arrangement,
Chatwins Group agreed to maintain three universal type life policies on Mr.
Bradley, Sr. and his wife. Chatwins Group will be reimbursed for the premiums
it pays for such policies from either the death benefit of the policies or
their cash surrender value. Mr. Bradley, Sr. agreed with Chatwins Group that
if the policy proceeds are insufficient to reimburse Chatwins Group for the
full amount of premiums paid, he would pay the shortfall to Chatwins Group.
This arrangement was assumed by Reunion in connection with the merger of
Chatwins Group with and into Reunion Industries on March 16, 2000. No
premiums were paid by the Company in 2003.
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As of October 24, 1994, Chatwins Group and Joseph C. Lawyer agreed to a
split-dollar life insurance arrangement. Pursuant to this arrangement,
Chatwins Group agreed to maintain a universal type life policy on Mr. Lawyer.
Chatwins Group will be reimbursed for the premiums it pays for such policy
from either the death benefit of the policy or its cash surrender value. Mr.
Lawyer agreed with Chatwins Group that if the policy proceeds are insufficient
to reimburse Chatwins Group for the full amount of premiums paid, he would pay
the shortfall to Chatwins Group. This arrangement was assumed by Reunion in
connection with the merger of Chatwins Group with and into Reunion on March
16, 2000. No premiums were paid by the Company in 2003.
As of December 12, 1995, Chatwins Group and John G. Poole agreed to a
split-dollar life insurance arrangement. Pursuant to this arrangement,
Chatwins Group agreed to maintain two universal type life policies on Mr.
Poole. Chatwins Group will be reimbursed for the premiums it pays for these
policies from either the death benefit of the policies or their cash surrender
value. Mr. Poole agreed with Chatwins Group that if the policy proceeds are
insufficient to reimburse Chatwins Group for the full amount of premiums paid,
he would pay the shortfall to Chatwins Group. This arrangement was assumed by
Reunion in connection with the merger of Chatwins Group with and into Reunion
on March 16, 2000. No premiums were paid by the Company in 2003.
Compensation Committee Interlocks and Insider Participation
Messrs. Amonett, Cassidy and Jackson are members of the Compensation
Committee. Mr. Amonett served as Reunion Industries' President and Chief
Executive Officer from July 1, 1992 until October 26, 1995. He also served as
the President of Reunion Energy Company, then a wholly-owned subsidiary of
Reunion Industries in the oil and gas operating business, from July 1, 1992
until May 24, 1996.
PROPOSAL 2. AMEND THE CERTIFICATE OF INCORPORATION TO INCREASE
THE NUMBER OF COMMON SHARES AUTHORIZED
AND ELIMINATE PREFERRED SHARES
Under the Company's Certificate of Incorporation, the authorized capital
stock is 30,000,000 shares, of which 20,000,000 shares are designated common
stock and 10,000,00 shares are designated preferred stock. Proposal 2 seeks
the approval of the stockholders for an amendment to the Certificate of
Incorporation to increase the number of authorized shares of common stock to
30,000,000, to eliminate the authorization to issue shares of preferred stock
and to delete other references to preferred stock in the Certificate of
Incorporation.
No shares of the preferred stock are currently outstanding. As of May
14, 2004, the number of shares of common stock outstanding was 16,278,519, and
3,705,185 shares of common stock were reserved for issuance under the
Company's existing stock option plans and upon exercise of currently
outstanding warrants previously issued by the Company (the "Existing
Warrants"). As a result, as of such date the Company had only 16,296 unissued
and unreserved shares of common stock available for future issuance.
The Company needs to increase its authorized common shares for the
following reasons and purposes:
1. Proposal 3 in this Proxy Statement seeks approval for the adoption of the
2004 Stock Option Plan of Reunion Industries, Inc. Such plan, if approved,
would authorize the granting of options to key employees, non-employee
directors and consultants of the Company, to purchase up to 1,000,000 shares
of the Company's common stock at a price per share not less than the Fair
Market Value per share of such stock on the respective dates of grant.
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2. In connection with a $1,000,000 loan made to the Company by LC Capital
Master Fund Ltd. ("LCC") in December, 2003, the Company has agreed to issue to
LCC a warrant to purchase 250,000 shares of common stock at an exercise price
of $0.01 per share (the "Proposed LCC December Financing Warrant"), provided
that this proposal is approved.
3. The Company's loan agreement with its senior secured lender, Congress
Financial Corporation ("Congress Financial"), provides for a loan facility of
up to $25,000,000 (the "Loan Facility"). The amount within that limit which
the Company may borrow at any time under the Loan Facility is based upon a
formula related to the value of the collateral securing the loan. The amount
outstanding under the Loan Facility on May 21, 2004 was $10.8 million. LCC
and WebFinancial Corporation ("WFC") have purchased a junior participation
interest of $1,500,000 each in the Loan Facility. The investments by LCC and
WFC in the Loan Facility have increased the amount which the Company may
currently borrow under such Facility, subject to the overall borrowing
limitation of $25,000,000, which will not increase. In consideration of such
investments, the Company agreed to issue warrants to LCC and WFC to purchase
750,000 shares of common stock (375,000 shares each) at a price of $0.01 per
share (the "Proposed Loan Facility Warrants"), provided that this proposal is
approved.
The Existing Warrants issued by the Company, as well as the Proposed LCC
December Financing Warrant and the Proposed Loan Facility Warrants, contain or
will contain anti-dilution rights, which entitle or will entitle the holders
of such warrants to an increase in the number of shares subject to such
warrants and/or a decrease in the exercise price thereof upon the occurrence
of certain events, including the Company's issuance of common stock, or
options or warrants to purchase common stock, at a price less than the fair
market value of such stock on the date of issuance or grant. The issuance of
the Proposed LCC December Financing Warrant and the Proposed Loan Facility
Warrants would trigger these anti-dilution rights under the Existing Warrants,
resulting in an estimated increase of 146,000 in the number of shares subject
to such warrants and an insignificant decrease in the exercise price of such
warrants (assuming the fair market value per share on the date of issuance of
the Proposed LCC December Financing Warrant and the Proposed Loan Facility
Warrants is the same as the closing price of the common stock on July 28, 2004
($0.45 per share)).
The purpose of the loans provided to the Company by LCC in December 2003
and by LCC and WFC in May, 2004 was to obtain much needed working capital, and
the Company used the loan proceeds for that purpose. These loans, being
subordinate to the Company's senior secured debt, involve substantial risk to
LCC and WFC. Accordingly, as additional consideration for the loans and the
related risk, LCC required the Company to agree to issue the Proposed LCC
December Financing Warrant, and LCC and WFC required the Company to agree to
issue the Proposed Loan Facility Warrants, in each case at an exercise price
of $0.01 per share and subject to stockholder approval of this Proposal 2.
In the event that the proposal to increase the number of common shares is
not approved, the Company will not have sufficient authorized unissued and
unreserved shares of common stock to implement the 2004 Stock Option Plan or
to issue the Proposed LCC December Financing Warrant or the Proposed Loan
Facility Warrants. In such event, Kimball J. Bradley, the Company's President
and a director, has agreed to sell and transfer, for $0.01 per share, 625,000
of his shares of the Company's common stock to LCC and 375,000 such shares to
WFC.
The issuance of the Proposed LCC December Financing Warrant and the
Proposed Loan Facility Warrants would be made in private offerings and would
not be registered with the SEC. However, each holder of such warrants would
be granted registration rights by the Company.
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Under the Certificate of Incorporation, the holders of the Company's
common stock do not have preemptive rights.
Representatives of Mahoney Cohen & Company, CPA, P.C., the Company's
principal accountants for 2003 and for the current year are expected to be
present at the Annual Meeting to respond to appropriate questions and to make
a statement if they desire to do so.
As described under "Incorporation by Reference," below, certain financial
and other information about the Company is incorporated in this Proxy
Statement by reference to certain documents, which are being delivered to the
stockholders with this proxy statement.
The Board of Directors recommends a vote for approval to amend the
Company's Certificate of Incorporation to increase the number of shares of
authorized common stock to thirty million (30,000,000) and eliminate the
currently authorized class designated preferred stock.
PROPOSAL 3. ADOPTION OF 2004 STOCK OPTION PLAN
This proposal is to approve the adoption of the new 2004 Stock Option
Plan of Reunion Industries, Inc. (the "New Option Plan"), which the Board of
Directors has adopted, subject to stockholder approval. The Board believes
that a new stock option plan is necessary because the number of shares of the
Company's common stock available for future option grants under the existing
plans is only 161,600. The New Option Plan would provide for an additional
1,000,000 shares for future option grants to key employees, non-employee
directors and consultants of the Company. The Board of Directors believes
that the ability to offer key employees, directors and consultants of the
Company the opportunity to become owners of common stock of the Company will
help to align further their interests with those of Reunion Industries'
stockholders. On ________, the closing price per share of the Company's
common stock on the American Stock Exchange was $______.
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 A to
this Proxy Statement. 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, up to 1,000,000 shares of Common Stock (or
their equivalent in other equity securities) would be 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. 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.
- 9 -
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 will be 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 directors" (as
defined by Rule 16b-3 of the Securities and Exchange Commission (the "SEC"))
and "outside directors" (as defined in Section 162(m)(4) of the Internal
Revenue Code of 1986, as amended (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 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 to 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 key employees of the Company or any of its present or
future subsidiaries, as determined by the Committee. 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. As of June 30, 2004, the Company had 545 employees and
estimates that it had approximately 300 key employees, no consultants and four
non-employee directors. More than one option may be granted to a key
employee, non-employee director or consultant.
- 10 -
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. No
determination has been made by the Committee or the Board of Directors as to
which eligible participants will receive option grants under the New Option
Plan.
Non-qualified stock options ("NQSOs") will provide for the right to
purchase Common Stock at a specified price which may not be less than 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.
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 approved by the stockholders at the Annual
Meeting, the New Option Plan will become effective immediately.
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.
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 have lapsed or are otherwise
inapplicable. During the lifetime of the holder of any option, the option may
be exercised only by the holder.
- 11 -
The Company requires participants to discharge withholding tax
obligations, if any, 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.
Non-qualified stock options granted under the Plan do not qualify for any
special tax benefits to the optionee. An optionee will not recognize any
taxable income at the time he or she is granted non-qualified stock options.
Upon the exercise of non-qualified stock options, however, the optionee will
recognize ordinary income for federal tax purposes measured by the excess of
the then fair market value of the shares acquired over the aggregate option
exercise price. The income realized by the optionee will be subject to income
tax withholding by the Company out of the current earnings paid to the
optionee. If such earnings are insufficient to pay the tax, the optionee will
be required to make a direct payment to the Company for tax liability.
The optionee's basis for determination of gain or loss upon the
subsequent disposition of shares acquired upon the exercise of non-qualified
stock options will be the amount paid for such shares plus any ordinary income
recognized as a result of the exercise of such stock options. Upon a
disposition of any shares acquired pursuant to the exercise of non-qualified
stock options, the difference between the aggregate sale price and the
optionee's basis in the shares will be treated as a capital gain or loss and
will be characterized as long-term capital gain or loss if the shares have
been held for more than one year at the date of their disposition.
In general, there will be no federal tax consequences to the Company upon
the grant or termination of non-qualified stock options or a sale or
disposition of the shares acquired upon the exercise of non-qualified stock
options. Upon the exercise of non-qualified stock options, however, the
Company will be entitled to a deduction for federal income tax purposes equal
to the amount of ordinary income that an optioned is required to recognize as
a result of the exercise, provided that the deduction is not otherwise
disallowed under the Code.
Incentive Stock Options.
Incentive stock options qualify for favorable tax treatment for the
optionee under Section 422 of the Code. Optionees will not recognize any
income upon either the grant or the exercise of incentive stock options and
the Company may not take a deduction for federal tax purposes with respect to
such grant or exercise. Upon the sale of the shares of Common Stock obtained
through the exercise of incentive stock options by the optionee, the tax
treatment to the optionee and the Company will depend primarily upon whether
the optionee has met certain holding period requirements at the time the
optionee sells the shares. In addition, as discussed below, the exercise of
incentive stock options may subject the optionee to alternative minimum tax
liability.
- 12 -
If an optionee exercises incentive stock options and holds the stock
acquired for the later of (i) two years after the date of the grant of such
stock options or (ii) one year after the date the stock was acquired per the
exercise of the option, any gain realized upon disposition will be
characterized as long-term capital gain. In such case, the Company will not
be entitled to a federal tax deduction. If the optionee disposes of the
shares either within two years after the date that the options are granted or
within one year after the issuance of the shares to the optionee, such
disposition will be treated as a disqualifying disposition and an amount equal
to the lesser of (i) the fair market value of the shares on the date of
exercise minus the exercise price, or (ii) the amount realized on the
disposition minus the exercise price, will be taxed as ordinary income to the
optionee in the taxable year in which the disposition occurs. The excess, if
any, of the amount realized upon disposition over the fair marker value at the
time of the exercise of the stock options will be treated as long-term capital
gain if the shares have been held for more than one year following the
exercise of the stock options. In the event of a disqualifying disposition,
the Company may withhold income taxes from the optionee's compensation with
respect to the ordinary income realized by the optionee as a result of the
disqualifying disposition.
The exercise of incentive stock options may subject an optionee to
alternative minimum tax liability because the excess of the fair market value
of the shares at the time incentive stock options are exercised over the
exercise price of the stock options is included in income for purposes of the
alternative minimum tax, even though it is not included in the taxable income
for purposes of determining the regular tax liability of an optionee.
Consequently, an optionee may be obligated to pay alternative minimum tax in
the year the optionee exercises incentive stock options.
In general, there will be no federal income tax deductions allowed to the
Company upon the grant, exercise, or termination of incentive stock options.
However, in the event an optionee sells or disposes of stock received upon the
exercise of incentive stock options in a disqualifying disposition, the
Company is entitled to a deduction for federal income tax purposes in an
amount equal to the ordinary income, if any, recognized by the optionee upon
disposition of the shares, provided that the deduction is not otherwise
disallowed under the Internal Revenue Code.
The Board of Directors recommends a vote for approval of a new 2004 Stock
Option Plan and the reservation of 1,000,000 shares of Common Stock for future
issuance under such Plan.
MANAGEMENT INFORMATION
Executive Officers
The following individuals serve as our executive officers:
Name Age Position
----------------------- --- ----------------------------------------------
Charles E. Bradley, Sr. 74 Director, Chairman and Chief Executive Officer
Joseph C. Lawyer 58 Director and Vice Chairman
Kimball J. Bradley 38 Director, President and Chief Operating Officer
John M. Froehlich 61 Executive Vice President, Chief Financial
Officer and Secretary
Jack T. Croushore 59 President, CP Industries Division
- 13 -
The business experience of Charles E. Bradley, Sr., Kimball J. Bradley
and Joseph C. Lawyer is described above in the section entitled "Election of
Directors - Nominees."
JOHN M. FROEHLICH became Executive Vice President of Finance and Chief
Financial Officer of Reunion Industries on March 16, 2000. He became
Secretary on June 12, 2002. He was a Vice President of Chatwins Group from
1989 until the merger of Chatwins Group and Reunion Industries on March 16,
2000 and its Chief Financial Officer and Treasurer from 1988 until the merger.
JACK T. CROUSHORE became Division President of the CP Industries division
during 1988. From 1984 to 1988 he was Executive Vice President and Chief
Operating Officer of CP Industries, Inc. and its predecessor division of USX
Corporation. He was also a Vice President of Chatwins Group from 1988 to
2000.
Executive Compensation
The following table reflects all forms of compensation for services to
Reunion Industries by our executive officers for the last three completed
fiscal years. There was no other annual compensation for any executive of the
Company in the last three completed fiscal years.
Long-Term
Compensation
------------
Annual Compensation Shares
------------------- Underlying All Other
Name and Position Year Salary Bonus(1) Stock Option Compensation
----------------------- ---- -------- -------- ------------ ------------
Charles E. Bradley, Sr. 2003 $400,024 $ 0 100,000 $ 1,020(2)
Chairman and Chief 2002 400,024 0 0 6,516(2)
Executive Officer 2001 400,024 0 5,000 6,266(2)
Joseph C. Lawyer 2003 200,000 0 0 1,020(3)
Vice Chairman 2002 245,830 0 0 1,020(3)
2001 289,011 0 10,000 9,520(3)
Kimball J. Bradley 2003 366,819 0 400,000 15,480(4)
President and Chief 2002 347,765 0 0 1,020(4)
Operating Officer 2001 318,238 0 50,000 9,520(4)
John M. Froehlich 2003 210,001 0 0 8,801(5)
Executive Vice 2002 206,246 0 0 1,020(5)
President of Finance 2001 180,000 0 25,000 9,520(5)
and Chief Financial
Officer
Jack T. Croushore 2003 209,000 0 50,000 7,020(6)
President CPI Division 2002 209,000 0 0 6,476(6)
2001 212,360 100,000 25,000 14,223(6)
(1) Amounts shown for bonuses are amounts earned for the period
shown,althoughsuch bonuses are generally paid in the subsequent year.
(2) Includes 401(k) matching payments of $5,496 in 2002 and $5,246 in 2001.
Includes a healthcare benefit credit of $1,020 in each year.
(3) Includes payments under the Chatwins Group, Inc. Money Purchase Pension
Plan of $8,500 in 2001. Includes a healthcare benefit credit of $1,020 in
each year.
- 14 -
(4) Includes payments of life insurance premiums of $14,460 in 2003 and
payments under the Chatwins Group, Inc. Money Purchase Pension Plan of $8,500
in 2001. Includes a healthcare benefit credit of $1,020 in each year.
(5) Includes payments of life insurance premiums of $7,781 in 2003 and
payments under the Chatwins Group, Inc. Money Purchase Pension Plan of $8,500
in 2001. Includes a healthcare benefit credit of $1,020 in each year.
(6) Includes a car allowance of $6,000 in 2003; 401(k) matching payments of
$5,456 in 2002 and $4,703 in 2001; and payments under the Chatwins Group, Inc.
Money Purchase Plan of $8,500 in 2001. Includes a healthcare benefit credit
of $1,020 in each year.
Option Grants
There were 570,000 options granted in the year ended December 31, 2003,
of which 550,000 were granted to employees of Reunion and 20,000 were granted
to a non-employee director. The following table shows all options to acquire
Reunion Industries common stock granted to the named executive officers during
the fiscal year ended December 31, 2003.
Individual Grants(1) Projected
------------------------------------- Realizable Value
% of at Rates of
Number of Options Stock Price
Securities Granted to Exercise Apreciation for
Underlying Employees Price Option Term(2)
Options in Fiscal Per ----------------
Name Granted Year Share Expires 5% 10%
-------------------- ---------- ---------- ------- -------- ------- -------
Charles Bradley, Sr. 100,000(3) 18.18% $0.3520 12/01/08 $ 5,641 $16,336
Kimball J Bradley 100,000(4) 18.18% $0.2750 06/26/08 $ 4,407 $12,763
Kimball J. Bradley 300,000(3) 54.55% $0.3520 12/01/08 $16,923 $49,009
Jack T. Croushore 50,000(5) 9.09% $0.2500 06/26/13 $ 7,861 $19,722
(1) Options granted to Charles E. Bradley, Sr. and Kimball J. Bradley have an
exercise price equal to 110% of the fair market value of Reunion Industries'
common stock on the grant date. The remaining options have an exercise price
of 100% of the fair market value on the grant date. Reunion Industries has
not issued any stock appreciation rights.
(2) As required by SEC rules, these columns show potential gains that may
exist for the respective options, assuming that the market price for Reunion's
common stock appreciated from the grant date to the end of the option terms at
rates of 5% and 10%, respectively. The amounts are not estimates of Reunion's
future stock price performance and are not necessarily indicative of Reunion's
future stock performance. If the price of Reunion's common stock does not
increase above the exercise price, no value will be realized from these
options.
(3) These options were granted on December 1, 2003. Assuming continued
employment with Reunion, these options have a 5-year term and will become
exercisable in one-third increments on the first, second and third
anniversaries of their issuance.
(4) These options were granted on June 26, 2003. Assuming continued
employment with Reunion, these options have a 5-year term and became or will
become exercisable in one-third increments on the first, second and third
anniversaries of their issuance.
(5) These options were granted on June 26, 2003. Assuming continued
employment with Reunion, these options have a 10-year term and became or will
become exercisable in one-third increments on the first, second and third
anniversaries of their issuance.
- 15 -
Option Exercises and Year-End Values
There were no options exercised in the year ended December 31, 2003.
Equity Compensation Plan Information
The following table summarizes information with respect to options under
Reunion's equity compensation plans on December 31, 2003:
Equity Compensation Plans
---------------------------
Approved by Not Approved
Security by Security
Holders Holders
------------ ------------
Number of Securities to be issued upon
exercise of outstanding options,
warrants and rights 614,000 -
========= =========
Weighted-average exercise price of
outstanding options, warrants
and rights $0.51 -
========= =========
Number of Securities remaining available
for future issuance under equity
compensation plans (excluding outstanding
options, warrants and rights) 161,100 -
========= =========
- 16 -
Compensation Committee Report
The compensation committee of the board of directors has furnished the
following report on executive compensation for 2003:
The board of directors pursues a philosophy of seeking to improve Reunion
Industries' performance and to maximize shareholder value by, among other
things, relating executive compensation and stock-based benefits to the
Company's performance. In general, executive financial rewards may be
segregated into the following significant components: base compensation,
bonus, and stock option and other benefit plans.
Base compensation for senior executives is generally intended to be
competitive with that paid at comparable companies. However, no comparability
studies were conducted for executive salaries paid in 2003, and the committee
bases its base salary determinations primarily on its knowledge of
compensation paid to senior executives at other companies. The committee also
takes into account the responsibilities and individual performance of the
executives in setting base salaries and the committee may set the base
compensation for certain executives at a premium level if they are viewed as
essential to the organization. The committee uses these same criteria to
establish compensation for the chief executive officer and has not established
any quantitative criteria for his compensation.
Under the supervision of the compensation committee, annual bonuses
reflect a policy of requiring a specified level of company performance for the
year before any bonuses are earned by senior executives, with bonuses for
achieving higher levels of performance directly related to the level achieved.
In setting performance criteria, the committee will consider the total
compensation payable or potentially available to the chief executive and other
executive officers. While the development of any business necessarily
involves numerous factors, the board's primary emphasis will be on encouraging
management to increase Reunion Industries' net assets and cash flow, and in
certain instances, rationalization of certain company businesses or assets.
The board of directors believes that properly designed and administered
long-term, stock-based incentives for senior executives closely align the
executives' economic interest 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 and stockholders, to continue to
consider alternate forms of stock-based incentives designed to achieve the
maximum possible performance based benefit to all senior executives at the
least possible cost and the greatest attainable economic efficiency to Reunion
Industries, with such benefits designed as nearly as practicable to directly
align the economic interests of professional managers with those of Reunion
Industries' stockholders. In 2002, the board, including certain current
members of the compensation committee, directed Reunion's management to take
action to possibly improve the value of outstanding stock options as an
incentive to the Company's employees that held stock options, including
executive management. The board approved management's plan of repricing the
outstanding stock options to an amount closer to then recent trade amounts,
which ultimately gave executive management a larger ownership stake in Reunion
and an increased incentive to remain with the Company.
Pursuant to applicable rules of the Securities and Exchange Commission,
as of May 14, 2004, members of the compensation committee are deemed to own
beneficially an aggregate of 147,029 shares, or less than 1.0%, of Reunion's
outstanding common stock. See "Ownership Information - Security Ownership of
Certain Beneficial Owners and Management".
The Compensation Committee
Thomas N. Amonett, Chairman; Thomas L. Cassidy; David E. Jackson
- 17 -
OWNERSHIP INFORMATION
Security Ownership of Certain Beneficial Owners and Management
Reunion Industries has 16,278,519 shares of common stock outstanding as
of ______, 2004. The following table sets forth information regarding the
beneficial ownership of our common stock by (i) each stockholder known to us
to own 5% or more of our common stock, (ii) each director of Reunion
Industries, (iii) each of the chief executive officer and the other named
executives, and (iv) all current directors and executive officers as a group.
Except as set forth in the footnotes to the following table, each stockholder
has sole dispositive and voting power with respect to the shares of our common
stock shown as owned by him or her.
% of
Outstanding
Beneficial Owner Shares Owned Shares
-------------------------------- ------------------------- -----------
Kimball J. Bradley 6,050,335 (1) 37.1%
c/o Reunion Industries, Inc.
11 Stanwix Street, suite 1400
Pittsburgh, PA 15222
The Charles E. Bradley, Sr.
Family Limited Partnership 4,310,813 (5) 26.5%
c/o Stanwich Consulting Corp.
62 Southfield Ave.
One Stamford Landing
Stamford, CT 06902
Stanwich Financial Services Corp. 1,651,697 (5) 10.1%
c/o Melissa Neier, Esq.
Ivey, Barnum & O'Mara
170 Mason Street
Greenwich, CT 06830
The John Grier Poole Family
Limited Partnership 1,499,747 (6)(7) 9.2%
One Rye Road
Portchester, NY 10573
Amanda Poole, David Poole and
Jesse Poole 1,499,747 (6) 9.2%
c/o John G. Poole
One Rye Road
Portchester, NY 10573
Charles E. Bradley, Sr. 225,477 (2)(3)(4) 1.4%
c/o Stanwich Consulting Corp.
62 Southfield Ave.
One Stamford Landing
Stamford, CT 06902
Thomas N. Amonett 78,000 0.5%
Thomas L. Cassidy 62,362 0.4%
David E. Jackson 6,667 (8) 0.1%
Joseph C. Lawyer 701,751 (9) 4.3%
John G. Poole 757,438 (10) 4.7%
John M. Froehlich 74,008 0.5%
Jack T. Croushore 211,854 (11) 1.3%
All Officers and Directors as
a group (9 individuals) 8,167,892 (12) 50.2%
(1) Includes (a) 4,310,813 shares owned by The Charles E. Bradley, Sr. Family
Limited Partnership (the "Bradley Partnership") of which Kimball J. Bradley is
general partner and (b) 33,333 shares subject to an option that became
exercisable on June 26, 2004.
- 18 -
(2) Mr. Bradley, Sr. and his wife own, respectively, a 28% and a 1% limited
partnership interest in the Bradley Partnership, which in turn beneficially
owns 4,310,813 shares of common stock. Because Mr. Bradley, Sr. and his wife
have no dispositive power as to the shares owned by the Bradley Partnership,
he disclaims any beneficial ownership thereof, and none of such shares are
included as being beneficially owned by him in the table above.
(3) Excludes 1,651,697 shares owned by Stanwich Financial Services Corp.,
with which Mr. Bradley, Sr. is the indirect sole shareholder. He has no
voting or dispositive powers as to these shares. See note (5) below.
(4) Includes 100,000 shares owned by Hanna Investment Corporation, with which
Mr. Bradley, Sr. shares voting and dispositive power. Mr. Bradley, Sr. is the
controlling stockholder of the parent company of Hanna Investment Corporation
and may be deemed to be the beneficial owner of these shares.
(5) The voting and dispositive powers as to these shares is held by the
Liquidating Agent and the Executive Committee (subject to court oversight)
appointed in SFSC's bankruptcy proceeding.
(6) Pursuant to the Securities Pledge Agreement dated as of May 1, 1993 among
the Charles E. Bradley, Sr. Family Limited Partnership, the John Grier Poole
Family Limited Partnership, and U.S. Bank, National Association, as successor
Collateral Agent to State Street Bank and Trust Company and the First National
Bank of Boston, the Bradley Partnership pledged 4,145,247 shares and the Poole
Partnership pledged 552,703 shares to secure the obligations of Reunion
Industries under the Indenture, dated as of May 1, 1993, between Reunion and
the Collateral Agent relating to certain Senior Notes issued by Reunion
Industries in 1993 that were due in 2003.
(7) These shares are owned by the John Grier Poole Family Limited
Partnership. Amanda Poole, David Poole and Jesse Poole are co-general
partners (and limited partners) of such partnership. As such, they share
voting and dispositive powers as to such shares with each other and with such
partnership.
(8) Represents shares subject to an option that became exercisable on June
26, 2004.
(9) Includes 3,567 shares beneficially owned by Mr. Lawyer's wife, as to
which he has no voting or dispositive power. Mr. Lawyer may be deemed to be
the beneficial owner of these shares.
(10) Includes 139,808 shares as to which Mr. Poole has voting rights, but not
dispositive rights.
(11) Includes 16,666 shares subject to an option that became exercisable on
June 24, 2006.
(12) Includes 56,666 shares subject to options that became exercisable on June
26, 2004.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires Reunion's directors and officers and persons who own beneficially
more than 10% of the common stock of Reunion Industries to file with the
Securities and Exchange Commission and the American Stock Exchange initial
reports of beneficial ownership and reports of changes in beneficial ownership
of the common stock of Reunion Industries. Directors, officers and persons
- 19 -
owning more than 10% of the common stock of Reunion Industries are required to
furnish Reunion Industries with copies of all such reports. Based solely on
Reunion's review of the copies of such forms it has received and
representations from certain persons that they were not required to file
reports on Form 5 during 2003, Reunion Industries believes that all its
officers, directors and greater than 10% beneficial owners complied with all
filing requirements applicable to them with respect to transactions during
2003, except that (1) Mr. Bradley, Sr. filed five late reports (by a Form 5)
relating to eight transactions, (2) Mr. Kimball J. Bradley filed four late
reports (by a Form 5) relating to seven transactions, (3) The Charles E.
Bradley, Sr. Family Limited Partnership filed three late reports (by a Form 5)
relating to five transactions and (4) Mr. Lawyer filed one late report
relating to two transactions.
OTHER INFORMATION
Common Stock Performance Graph
The following graph illustrates the yearly percentage change in the
cumulative total stockholder return on Reunion Industries' common stock,
compared with the cumulative total return on the American Stock Exchange
(AMEX) Composite Index and the Industrial Manufacturing Index published by The
Center for research in Security Prices at the University of Chicago, published
by the AMEX for use by AMEX listed companies:
Five Year Total Return (1)
[FIVE YEAR PERFORMANCE GRAPH APPEARS HERE]
Fiscal Year Ending
----------------------------------------------
1998 1999 2000 2001 2002 2003
------ ------ ------ ------ ------ ------
Reunion Industries, Inc. 100.00 63.64 50.18 11.27 5.45 20.73
AMEX Composite Index 100.00 131.94 122.38 113.92 93.11 126.03
Industrial Manufacturing
Index 100.00 129.49 159.70 127.58 96.19 169.92
(1) Tabular data assumes that the value of the investment in Reunion
Industries' common stock and each index was $100.00 at January 1, 1999 and
that all dividends, if any, were reinvested. The Company paid no dividends in
any period presented.
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Certain Relationships and Related Transactions
Related Parties
Reunion Industries, Inc. - Reunion is a publicly traded Delaware
corporation headquartered in Pittsburgh, Pennsylvania. Charles E. Bradley,
Sr. (Mr. Bradley) is chairman of the board and Chief Executive Officer of
Reunion. Kimball J. Bradley is President, Chief Operating Officer, a director
of Reunion and son of Mr. Bradley.
Stanwich Consulting Corp. - Stanwich Consulting Corp. (SCC), formerly
known as Stanwich Partners, Inc. (SPI), is engaged in consulting services in
the field of financial planning and reporting. Mr. Bradley is the President
of SCC.
Stanwich Financial Services Corp. - Stanwich Financial Services Corp.
(SFSC) is a privately held corporation in the structured settlement business.
SFSC is owned 100% by Mr. Bradley. On June 25, 2001, SFSC filed a voluntary
petition in the United States Bankruptcy Court for the District of Connecticut
for reorganization under Chapter 11 of the United States Bankruptcy Code. See
"SFSC Litigation Settlement" below.
NPS Acquisition Corp. - NPS Acquisition Corp. (NPSAC) was formed by Mr.
Bradley to acquire and hold NAPTech Pressure Systems (NAPTech). NAPTech was
based in Clearfield, Utah and manufactured seamless steel pressure vessels, an
existing Metals product line. In January 2001, NPSAC was merged into the
Company.
CPS Leasing, Inc. - CPS Leasing, Inc. (CPSL) is a subsidiary of Consumer
Portfolio Services, Inc. (CPS). Mr. Bradley and Mr. Poole are stockholders of
CPS. Mr. Poole is a director of CPS and Mr. Bradley was a director until July
2001. Charles E. Bradley Jr., Mr. Bradley's son and Kimball J. Bradley's
brother, is President of CPS. CPSL is primarily engaged in machinery and
equipment lease financing.
Transactions and Balances
SPI Consulting Agreement - Reunion maintained a consulting agreement with
SPI under which $300,000 was recorded as expense during the year ended
December 31, 2001. The agreement was terminated effective September 30, 2002.
During 2002, $225,000 was expensed related to this agreement. The Company
made advances during 2002 totaling $127,795 to SPI related to this agreement,
including $25,000 relating to stock options exercised by Mr. Bradley. At
December 31, 2003 and 2002, $117,205 was owed to SPI under this agreement and
is classified as due to related parties in the Company's consolidated balance
sheet for the year ended December 31, 2003.
SFSC Notes Payable - The Company assumed three notes payable to SFSC
related to acquisitions in 2000 and 2001. At December 31, 2003 and 2002,
their balances of $2,998,000, $500,000 and $100,000 are included in notes
payable - related parties in the accompanying consolidated balance sheet.
During 2003 and 2002, no interest was paid to SFSC related to these notes
payable. At December 31, 2003 and 2002, accrued and unpaid interest due to
SFSC related to these notes payable of $1,844,283 and $1,219,572,
respectively, is included in due to related parties in the Company's
consolidated balance sheet at December 31, 2003. However, see "SFSC
Litigation Settlement" below.
- 21 -
SFSC Note Receivable - In August 1999, pre-merger Reunion loaned $310,000
to SFSC. The loan was scheduled to be repaid in December 1999 with interest
at 15%. In December 1999, the Company agreed to extend the maturity to March
2000 and loaned an additional $40,000 to SFSC also with interest at 15%, which
was repaid in March 2000. The remaining balance including accrued and unpaid
interest due from SFSC at December 31, 2003 and 2002 is $465,000 and is
included in due from related parties in the Company's consolidated balance at
December 31, 2003. However, see "SFSC Litigation Settlement" below.
CPS Leasing, Inc. - Reunion entered into various operating lease
agreements with CPSL. During 2003 and 2002, lease payments totaling $336,000
and $580,000, respectively, were paid to or accrued for CPSL. At December 31,
2003, the Company has future minimum rental commitments under noncancellable
operating leases with CPSL totaling $1,460,000.
SFSC Collateral Fees - To close on a refinancing with Bank of America
(BOA) in March 2000, SFSC provided side collateral in the form of CPS debt and
common stock to support the borrowings. Under this arrangement, SFSC was to
receive a 5% collateral fee for as long as the collateral was in place. Such
collateral remained in place until the Congress refinancing in December 2003.
However, in January 2003, Mr. Bradley agreed to absorb this collateral fee
expense to SFSC on a going forward basis with no further obligation to the
Company. In each of 2002 and 2001, the Company recorded interest expense of
$283,000 related to this arrangement. No payments have been made under this
arrangement during 2003 or 2002. During 2001, the Company made a $100,000
payment related to this arrangement. At December 31, 2003 and 2002, $690,041
is included in due to related party in the Company's consolidated balance
sheet at December 31, 2003. However, see "SFSC Litigation Settlement" below.
In March 2000, SFSC pledged a $5.0 million note from CPS to secure the
obligations of NPSAC to the former owners of the business. NPSAC agreed to
pay SFSC a 2% credit support fee for this pledge. The Company assumed this
credit support obligation in the acquisition of NPSAC. No payments have been
made under this arrangement during 2003 or 2002. At December 31, 2003 and
2002, accrued and unpaid fees totaling $293,943 and $226,990, respectively,
were due to SFSC under this credit support obligation and included in due to
related parties in the Company's consolidated balance sheet at December 31,
2003. However, see "SFSC Litigation Settlement" below.
Cash Surrender Value of Life Insurance Policies - The Company pays the
premiums on life insurance policies covering Mr. Bradley, Mr. Joseph C. Lawyer
(Mr. Lawyer), the Company's vice chairman and a director, and Mr. Poole.
Pursuant to these arrangements, the Company will be reimbursed for the
premiums it pays for such policies from either the death benefit of the policy
or their cash surrender value. The covered individuals have agreed with the
Company that if the policy proceeds are insufficient to reimburse the Company
for the full amount of the premiums paid, they will cover the shortfall. As
of December 31, 2003 and 2002, premiums paid by the Company in excess of the
cash surrender values of the policies totaled $940,000 and $1,031,000,
respectively, and are included in due from related parties in the Company's
consolidated balance sheet at December 31, 2003.
Mr. Bradley Notes Payable - At the time of the merger, the Company
assumed a note payable to Mr. Bradley related to pre-merger Reunion's plastics
business. At December 31, 2002 and 2001, the balance of $1,017,000 is
included in notes payable - related parties in the Company's consolidated
balance sheet at December 31, 2003. However, see "SFSC Litigation Settlement"
below. No interest was paid in 2003 or 2002. The note payable and any
accrued and unpaid interest have been assigned to SFSC. During 2001, $55,000
was paid to SFSC related to this note payable. At December 31, 2003 and 2002,
- 22 -
accrued and unpaid interest due related to this note payable of $280,166 and
$168,283, respectively, is included in due to related parties in the Company's
consolidated balance sheet at December 31, 2003. However, see "SFSC
Litigation Settlement" below.
In January 2003, Mr. Bradley made a $500,000 payment on behalf of the
Company to the Shaw Group, former owner of Naptech Pressure Systems and holder
of a $3,644,000 15% note payable assumed by Reunion in the NPSAC acquisition
in January 2001. In exchange for the payment, the Company issued a $500,000
10% note payable to Mr. Bradley. The note payable and any accrued but unpaid
interest is due on October 31, 2004. At December 31, 2003, accrued and unpaid
interest related to this note totaled $50,000 and is included in due to
related parties in the Company's consolidated balance sheet at December 31,
2003. Mr. Bradley's rights under this note are subordinate to the Company's
indebtedness to Congress.
Mr. Bradley Guarantees - To facilitate the closing of the refinancing of
the Company's bank debt with Congress Financial Corporation (Congress) in
December 2003, Mr. Bradley provided a personal guarantee of $1.5 million of
the revolving credit portion of the new facilities. In exchange for his
guarantee, the Board of Directors approved a 2% guarantee fee to be paid to
Mr. Bradley during the time period such guarantee is in place. Amounts
payable under this arrangement are being offset against an employee advance
previously received by Mr. Bradley and owed to the Company. Such advance
totaled $58,000 at the time of the refinancing and, through December 31, 2003,
$2,384 of guarantee fees had been offset against such advance. See "Employee
Advances" below.
At the time of the NPSAC acquisition by the Company, NPSAC was indebted
to Mr. Bradley in connection with an agreement whereby Mr. Bradley guaranteed
certain obligations of NPSAC to its former owners. At December 31, 2001, the
Company owed Mr. Bradley a total of $90,000 related to this agreement. During
2002, Mr. Bradley assigned his right to this guarantee fee plus interest at
approximately 11%, totaling $100,000, to two employees of the Company in
repayment of loans totaling $100,000 made to Mr. Bradley by these employees.
These employees also had received a total of $100,000 in advances from the
Company during 2001. See "Employee Advances" below.
Kimball Bradley Guarantees - To facilitate obtaining new financing with
two private investment funds and the closing of the refinancing of the
Company's bank debt with Congress in December 2003, Kimball Bradley provided
personal guarantees totaling $9.2 million, including guarantees of two notes
payable totaling $7.7 million and $1.5 of the revolving credit portion of the
new Congress facilities. In exchange for his guarantees, the Board of
Directors approved 2% guarantee fees to be paid to Kimball Bradley during the
time period such guarantees are in place. Amounts payable under these
arrangements are being offset against an employee advance previously received
by Kimball Bradley and owed to the Company. Such advance totaled $55,000 at
the time of the refinancing. In addition, Kimball Bradley owed the Company
$19,000 for the December 2002 exercise of 95,000 options which had been
repriced to $0.20. Through December 31, 2003, guarantee fees totaling $74,963
had been incurred by the Company, of which $74,000 was offset against amounts
due from Kimball Bradley. The remaining $963 is included in due to related
parties in the Company's consolidated balance sheet at December 31, 2003. See
"Employee Advances" below.
Employee Advances - At December 31, 2002, the Company had non-interest
bearing advances due from two employees totaling $113,000. The highest
balance during 2003 was $113,000. The highest balance during 2002 was
$213,000. During 2002, two employees with advances totaling $100,000 repaid
their advances by waiving their rights to the guarantee fee plus interest they
received from Mr. Bradley. See "Mr. Bradley Guarantees" and "Kimball Bradley
Guarantees" above.
- 23 -
SFSC Litigation Settlement
The Company had been named as one of several defendants in fifteen
consolidated lawsuits filed in December 2000 or early 2001 in the Superior
Court for Los Angeles County, California. The plaintiffs in these suits,
except one, are structured settlement payees to whom Stanwich Financial
Services Corp. (SFSC) is indebted. The Company and SFSC were related parties.
The plaintiffs alleged that the Company received loans from SFSC that have not
been repaid. On May 25, 2001, SFSC filed a Chapter 11 Bankruptcy Petition in
the U.S. Bankruptcy Court for the District of Connecticut.
A settlement was reached in the Superior Court action among the
plaintiffs, Bankers Trust Co. and certain other financial institution
defendants. In the settlement, Bankers Trust Co. and the other settling
financial institution defendants paid the plaintiffs an amount specified in
the settlement agreement, and Bankers Trust Co. received an assignment of the
claims of the plaintiffs and such other settling defendants against the
Company and other defendants. In the SFSC bankruptcy proceeding, the Company
and certain other defendants entered into a settlement with SFSC and Bankers
Trust Co. Under this settlement (1) the Company is obligated to pay SFSC a
settlement amount by December 31, 2006 in the sum of $4.29 million, plus
interest at the rate of 10% per annum, in full satisfaction of the Company's
indebtedness to SFSC under notes payable totaling $4.6 million, plus interest,
and for certain credit support fees payable, which settlement amount is net of
an offset against SFSC's note payable to the Company in the amount of $310,000
plus interest, and (2) provided it makes such settlement payment, the Company
is released from all claims that have been or could have been asserted against
the Company by the plaintiffs or the settling financial institution defendants
in the California Superior Court suits or by SFSC in the bankruptcy
proceeding. The settlement amount does not constitute a new liability of the
Company, as it relates to indebtedness and a note receivable that had
previously been recorded on the Company's balance sheet.
Previous Independent Accountants
On July 21, 2003, with the approval of the audit committee of the board
of directors, the Company replaced Ernst & Young LLP as its independent
accountants. The reports of Ernst & Young LLP on the financial statements for
the two fiscal years ended prior to July 21, 2003 contained no adverse opinion
or disclaimer of opinion and were not qualified or modified as to audit scope
or accounting principle. The reports of Ernst & Young LLP on the financial
statements for the two fiscal years ended prior to July 21, 2003 were modified
as to uncertainty concerning Reunion's ability to continue as a going concern.
In connection with its audits for the two most recent fiscal years and through
July 21, 2003, there were no disagreements with Ernst & Young LLP on any
matter of accounting principles or practices, financial statement disclosure,
or auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of Ernst & Young LLP, would have caused them to make reference
thereto in their reports on the financial statements for such years. During
the two most recent years and through July 21, 2003, there were no reportable
events (as defined in SEC Regulation S-K, Item 304 (a)(1)(v)).
Independent Accountants for 2003
On July 21, 2003, Wiss & Company LLP was selected by the audit committee
of the board of directors to audit Reunion Industries' financial statements
for the fiscal year ending December 31, 2003. In its letter to Reunion
September 30, 2003, Wiss & Company, LLP, the Registrant's then independent
accountants, informed the Registrant of its decision to discontinue providing
audit services to registrants with the SEC. A copy of Wiss & Company's
- 24 -
September 30, 2003 letter was filed as Exhibit 99 to the Company's Current
Report on Form 8-K filed with the SEC on October 29, 2003. Having only
provided financial statement review services to the Registrant relating to the
filing of its Quarterly Report on Form 10-Q for the period ended June 30, 2003
as filed with the SEC on August 14, 2003, Wiss & Company, LLP did not issue
any reports on the financial statements of the Registrant for the past two
fiscal years. In connection with its review of the Registrant's financial
statements for the period ended June 30, 2003 and through October 28, 2003,
there have been no disagreements with Wiss & Company, LLP on any matter of
accounting principles or practices, financial statement disclosure, or review
scope or procedure. During the period ended June 30, 2003 and through October
28, 2003, there have been no reportable events (as defined in SEC Regulation
S-K, Item 304 (a)(1)(v)).
Effective on October 28, 2003, Reunion engaged Mahoney Cohen & Company,
CPA, P.C. (Mahoney) as its new independent accountants. The selection of
Mahoney by Reunion was based on several factors, including the departure to
Mahoney from the Wiss & Company of the audit engagement management formerly
responsible for providing auditing services to the Company and our desire to
maintain continuity of engagement staffing. Prior to their appointment as
independent accountants, Mahoney Cohen & Company, CPA, P.C., had not been
consulted by the Company on any matters.
Representatives of Mahoney Cohen & Company, CPA, P.C. are expected to be
present at the Annual Meeting to respond to appropriate questions and to
make a statement if they desire to do so.
Fees Paid to Mahoney Cohen & Company, CPA, P.C., Wiss & Company, LLP and Ernst
& Young LLP
The following table presents fees paid by Reunion Industries for
professional services rendered by Mahoney Cohen & Company, CPA, P.C., Wiss &
Company, LLP and Ernst & Young, LLP for the years ended December 31, 2003 and
2002.
Fee Category and Service Provider 2003 2002
----------------------------------------------- -------- --------
Audit fees - Mahoney Cohen & Company, CPA, P.C. $156,500 $ -
Audit fees - Wiss & Company, LLP 6,500 -
Audit fees - Ernst & Young, LLP 18,300 178,000
Audit-related fees - Ernst & Young, LLP 47,675 36,500
-------- --------
Total fees $228,975 $214,500
======== ========
Audit fees were for professional services rendered for the audit of
Reunion Industries' consolidated financial statements and review of the
interim consolidated financial statements included in quarterly reports and
services that are normally provided in connection with statutory and
regulatory filings or engagements.
Audit-related fees were for assurance and related services that are
reasonably related to the performance of the audit or review of Reunion
Industries' consolidated financial statements and are not reported under audit
fees. These services primarily include employee benefit plan audits not
necessarily required by statute or regulation.
Except as indicated in the above table, the Company paid no fees to any
of its principal accountants in either 2003 or 2002, including any fees for
tax compliance, tax advice or tax planning.
- 25 -
Audit Committee Report
The audit committee of the board of directors has furnished the following
report on its activities during 2003:
The audit committee consists of three of Reunion Industries' outside
directors. The board of directors and the audit committee believe that the
audit committee's membership satisfies the American Stock Exchange rules
concerning audit committee membership, including the requirements that members
be independent and have financial sophistication. The Board of Directors has
adopted a formal written audit committee charter and the audit committee
performs a review and reassessment of the adequacy of the charter on an annual
basis.
In accordance with its written charter, the audit committee assists the
board of directors in fulfilling its oversight responsibilities by reviewing
the financial information that will be provided to the stockholders and
others, the systems of internal controls, and all audit processes.
In discharging its oversight responsibilities regarding the audit
process, the audit committee:
- reviewed and discussed the audited financial statements with
management;
- discussed with the independent accountants the material required to be
discussed by Statement on Auditing Standards No. 61, as currently in effect;
and
- reviewed the written disclosures and the letter from the independent
accountants required by the Independence Standards Board's Standard No. 1, as
currently in effect, and discussed with the independent accountants any
relationships that may impact their objectivity and independence.
Based upon the review and discussions referred to above, the audit
committee recommended to the board of directors that the audited financial
statements be included in the company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2003, as filed with the Securities and Exchange
Commission.
Members of the Audit Committee
David E. Jackson, Chairman
Thomas N. Amonett
Thomas L. Cassidy
- 26 -
Incorporation by Reference
The Company's Annual Report on Form 10-K for the year ended December 31,
2003, as amended by Form 10-K/A Amendment No. 1 (the "Form 10-K"), and its
Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, as amended
by Form 10-Q/A Amendment No. 1 (the "Form 10-Q"), are incorporated into, and
are being delivered with, this proxy statement. The Form 10-K also serves as
the Company's Annual Report to Stockholders for 2003.
Limitation on Incorporation by Reference
Notwithstanding any reference in prior or future filings of Reunion
Industries with the Securities and Exchange Commission which purports to
incorporate this proxy statement by reference into another filing, such
incorporation shall not include any material included herein under the
captions "Management Information - Compensation Committee Report", "Other
Information - Common Stock Performance Graph" or "Other Information - Audit
Committee Report".
Other Matters
The Form 10-K and Form 10-Q have been mailed with this proxy statement to
each stockholder entitled to vote at the Annual Meeting. Copies of the Form
10-K and Form 10-Q will be furnished upon written request to stockholders who
have not previously received a copy from Reunion Industries. In addition,
Reunion Industries will furnish any excluded exhibit to its Form 10-K upon
written request and upon payment of a fee limited to Reunion Industries'
reasonable expenses in furnishing such exhibit. Written requests may be
directed to Reunion Industries, Inc., attn: Investor Relations, 11 Stanwix
Street, Suite 1400, Pittsburgh, Pennsylvania 15222.
Deadline for Stockholder Proposals
Although a specific date has not been set, Reunion Industries intends to
hold its year 2005 annual meeting in June 2005. In order to be considered for
inclusion in the Company's proxy statement and form of proxy for such meeting,
any proposals by stockholders intending to be presented at such meeting must
be received by the Secretary of the Company at 11 Stanwich Street, Pittsburgh,
Pennsylvania 15222 by no later than January 31, 2005. Any proposal received
after January 31, 2005 will not be included in the Company's 2005 proxy
statement. If such proposals are in compliance with all of the requirements
of SEC Rule 14a-8, they will be included in the proxy statement and set forth
on the form of proxy issued for the annual meeting of stockholders to be held
in 2005.
If a stockholder intends to present a proposal at the 2005 annual meeting
of stockholders without seeking to include the proposal in Reunion Industries'
proxy statement, management proxies will be entitled to use the discretionary
voting authority that will be contained in the proxies for the 2005 annual
meeting of stockholders to vote on the stockholder's proposal at such meeting.
- 27 -
Proxies
The persons designated as proxies to vote shares at the meeting intend to
exercise their judgment in voting such shares on other matters that may
properly come before the meeting. Management does not expect that any matters
other than those referred to in this proxy statement will be presented for
action at the meeting.
By Order of the Board of Directors
/s/ John M. Froehlich
----------------------------------
John M. Froehlich
Secretary
_______, 2004
- 28 -
ANNEX A
THE 2004 STOCK OPTION PLAN
OF
REUNION INDUSTRIES, INC.
Reunion Industries, Inc., a Delaware corporation (the "COMPANY"), has
adopted The 2004 Stock Option Plan of Reunion Industries, Inc. (the "PLAN"),
effective , 2004, 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:
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(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
(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.
- 30 -
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 2004 Stock Option Plan of Reunion Industries,
Inc.
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.
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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 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 1,000,000. 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
- 32 -
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. 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 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.
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;
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(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 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 the Fair Market Value of the stock at the time
the option is granted;
(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
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(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 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
- 35 -
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.
- 36 -
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 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; (ii) 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); (iii) allow payment, in whole or
in part, through the delivery of property of any kind which constitutes good
and valuable consideration; (iv) 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
(vi)allow payment through any combination of the consideration provided in the
foregoing subparagraphs.
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;
(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;
- 37 -
(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. 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 may 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 2004 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.
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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 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
- 39 -
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 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),
- 40 -
(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 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
- 41 -
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 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.
- 42 -
8.6 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).
8.7 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.
8.8 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.
8.9 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
- 43 -
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.
8.10 Titles. Titles are provided herein for convenience only and are not
to serve as a basis for interpretation or construction of this Plan.
8.11 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 , 2004.
Executed on this day of , 2004.
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John M. Froehlich, Secretary
- 44 -
REVOCABLE PROXY
REUNION INDUSTRIES, INC.
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON _______, 2004
The undersigned stockholder of Reunion Industries, Inc. (the "Company")
hereby appoints Charles E. Bradley, Sr., Kimball J. Bradley, or Joseph C.
Lawyer, or any of them, attorneys and proxies of the undersigned; each with
full power of substitution, to vote on behalf of the undersigned at the Annual
Meeting of Stockholders of the Company to be held at the Company's offices, 11
Stanwix Street, Pittsburgh, Pennsylvania 15222, on _______, _______, 2004 and
any postponements or adjournments of such meeting, as set forth below, and in
their discretion to consider and act upon such other business as may properly
be presented at such meeting (and any postponements or adjournments thereof).
Please be sure to sign below and date this Proxy.
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| Date |
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| |
| |
----Stockholder sign above-----------Co-holder (if any) sign above-----
With- For All
1. The election as directors (except as For hold Except
indicated below) of all nominees. [_] [_] [_]
THOMAS N. AMONETT THOMAS L. CASSIDY JOSEPH C. LAWYER
CHARLES E. BRADLEY, SR. DAVID E. JACKSON JOHN G. POOLE
KIMBALL J. BRADLEY
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
"FOR ALL EXCEPT" AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
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For Against Abstain
2. To amend the Certificate of Incorporation [_] [_] [_]
to increase by 10 million the number of
authorized common shares and to eliminate
preferred shares.
3. To adopt the 2004 Stock Option Plan. [_] [_] [_]
PLEASE CHECK BOX IF YOU PLAN TO ATTEND THE ANNUAL MEETING:------------->[_]
The Board of Directors recommends a vote "FOR" the election as directors
of all nominees and "FOR" proposals 2 and 3. This proxy will be voted as
specified or, if no choice is specified, said proxies will vote "FOR" all
proposals and will consider and act upon such other business as may be
properly presented to the meeting.
The above signed hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders and the Proxy Statement furnished herewith.
Signature should agree with name printed hereon. If Stock is held in the
name of more than one person, EACH joint owner should sign. Executors,
administrators, trustees, guardians and attorneys should indicate the capacity
in which they sign. Attorneys should submit powers of attorney.
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^DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED.^
REUNION INDUSTRIES, INC.
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| PLEASE ACT PROMPTLY |
| SIGN, DATE & MAIL YOUR PROXY CARD TODAY |
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IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
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