SCHEDULE 14A INFORMATION
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Reunion Industries, Inc.
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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 June 26, 2003
Notice is hereby given that the Annual Meeting of the Stockholders of
Reunion Industries, Inc., a Delaware corporation ("Reunion Industries"), will
be held at Reunion Industries' offices, 11 Stanwix Street, Pittsburgh,
Pennsylvania 15222 on Thursday, June 26, 2003, 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 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. The Board is not aware of any other proposals for the June 26, 2003
meeting.
A record of stockholders has been taken as of the close of business on
May 15, 2003, 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
----------------------------------
John M. Froehlich
Secretary
May 20, 2003
REUNION INDUSTRIES, INC.
PROXY STATEMENT
General
This proxy statement is being mailed to stockholders commencing on or
about May 23, 2003 in connection with the solicitation by the board of
directors of Reunion Industries, Inc., a Delaware corporation ("Reunion
Industries" 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 Thursday, June 26, 2003, 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 pays for the cost of soliciting proxies from
stockholders. Reunion Industries also reimburses brokerage firms and other
custodians, nominees, and fiduciaries for their reasonable out-of-pocket
expenses for sending proxy materials to stockholders and obtaining their
proxies.
As of May 15, 2003, 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.
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. Directors W. R. Clerihue
(member, audit committee; chairman, compensation committee) and Franklin Myers
(chairman, audit committee) are not nominees for election. 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
applicable law.
Nominees
Six of the seven persons nominated for election at the annual meeting
currently are directors of Reunion Industries and have previously been elected
by the stockholders. Mr. David E. Jackson is standing for election for the
first time. 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.
- 1 -
Name Principal Position Reunion Age Director Since
----------------------- -------------------------- --- --------------
Thomas N. Amonett(1)(2) Director 59 1992
Charles E. Bradley, Sr. Director, Chairman & CEO 73 1995
Kimball J. Bradley Director, President & COO 37 2000
Thomas L. Cassidy(1) Director 74 1995
David E. Jackson Nominee 44 -
Joseph C. Lawyer Director and Vice Chairman 57 2000
John G. Poole Director 60 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 Partners, Inc. ("Stanwich
Partners") in 1982 and has served as its President since that time. Stanwich
Partners 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,
acting Chief Financial Officer and a director of Sanitas, Inc., an inactive
company, and President, acting Chief Financial Officer and a director of Texon
Energy Corporation, an inactive company. He was President and sole director
of Stanwich Financial Services Corp. when, on June 25, 2001, it 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. Stanwich Financial Services Corp. 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
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
- 2 -
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 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 2002, the board held three regularly scheduled meetings. The
compensation committee of the board held one meeting during 2002 and the audit
committee held six meetings. Each of the directors attended all of the
meetings of the board and of each committee on which he served during 2002
except for Mr. Myers, who did not attend two board meetings and one audit
committee meeting. The compensation committee meeting held during 2002 was
attended by Mr. Clerihue and, although not a memeber of the committee, Mr.
Lawyer.
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, Cassidy and
Clerihue (chairman), is responsible for the formulation and adoption of all
executive compensation, benefit and insurance programs, subject to full board
approval where legally required or in those instances where the underlying
benefit philosophy might be at variance with preexisting board policies. The
compensation committee also supervises the administration of all executive
compensation and benefit programs, including the establishment of any specific
criteria against which all annual performance based benefits are to be
measured.
The audit committee, comprised of Messrs. Amonett, Clerihue and Myers
(chairman), assists the board in assuring that the accounting and reporting
practices of Reunion Industries are in accordance with all applicable
requirements. The audit committee reviews with the auditors the scope of the
- 3 -
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. Stockholders who may wish to suggest individuals for possible
future consideration for board positions should direct recommendations to the
board of directors at Reunion.
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 nonemployee directors during 2002 for
service in all board capacities aggregated $106,500. 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
2002.
Nonemployee directors of Reunion Industries are eligible for awards under
the 1998 Stock Option Plan. During 2002, no options were granted.
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. No
premiums were paid by the Company in 2002.
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
Industries in connection with the merger. No premiums were paid by the
Company in 2002.
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 Industries in connection with the merger. No premiums were paid by
the Company in 2002.
- 4 -
Compensation Committee Interlocks and Insider Participation
Messrs. Amonett, Cassidy and Clerihue 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.
VOTE REQUIRED AND VOTING PROCEDURE
The seven nominees for election as directors at the 2003 Annual Meeting
of Stockholders who receive the greatest number of votes cast for election at
the Annual Meeting of Stockholders shall be the duly elected directors upon
completion of the vote tabulation at the meeting, provided a majority of the
outstanding shares as of the record date, May 15, 2003, are present in person
or by proxy at the meeting.
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. Under applicable
provisions of Reunion Industries' bylaws, any proxy containing an abstention
from voting or a broker nonvote will be sufficient to represent the shares at
the meeting for purposes of determining whether a quorum is present, but will
count neither as a vote for nor against any nominee with respect to whom the
holder has abstained from voting.
MANAGEMENT INFORMATION
Executive Officers
The following individuals serve as our executive officers:
Name Age Position
----------------------- --- ----------------------------------------------
Charles E. Bradley, Sr. 73 Director, Chairman and Chief Executive Officer
Joseph C. Lawyer 57 Director and Vice Chairman
Kimball J. Bradley 37 Director, President and Chief Operating Officer
John M. Froehlich 60 Executive Vice President, Chief Financial
Officer and Secretary
Jack T. Croushore 57 President, CP Industries Division
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. FREOHLICH 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.
- 5 -
Executive Compensation
The following table reflects all forms of compensation for services to
Reunion Industries or Chatwins Group by our executive officers for the last
three completed fiscal years. Chatwins Group was merged into the Company on
March 16, 2000. 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. 2002 $400,024 $ 0 0 $ 6,516(2)
Chairman and Chief 2001 400,024 0 5,000 6,266(2)
Executive Officer 2000 336,498 0 45,000 356,395(2)
Joseph C. Lawyer 2002 245,830 0 0 1,020(3)
Vice Chairman 2001 289,011 0 10,000 9,520(3)
2000 368,532 0 45,000 51,193(3)
Kimball J. Bradley 2002 347,765 0 0 1,020(4)
President and Chief 2001 318,238 0 50,000 9,520(4)
Operating Officer 2000 290,968 150,000 45,000 14,020(4)
John M. Froehlich 2002 206,246 0 0 1,020(5)
Executive Vice 2001 180,000 0 25,000 9,520(5)
President of Finance 2000 163,247 50,000 39,000 13,948(5)
and Chief Financial
Officer
Jack T. Croushore 2002 209,000 0 0 6,476(6)
President CPI Division 2001 212,360 100,000 25,000 14,223(6)
2000 193,360 175,000 39,000 13,533(6)
(1) Amounts shown for bonuses are amounts earned for the period shown,
although such bonuses are generally paid in the subsequent year.
(2) Includes premiums paid by Reunion Industries and Chatwins Group for life
insurance for the benefit of Mr. Bradley of $355,375 in 2000; and 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 401(k) matching payments of $5,000 in 2000; premiums paid by
Chatwins Group for life insurance for the benefit of Mr. Lawyer of $37,173 in
2000; and payments under the Chatwins Group, Inc. Money Purchase Pension Plan
of $8,500 in 2001 and $8,000 in 2000. Includes a healthcare benefit credit of
$1,020 in each year.
(4) Includes 401(k) matching payments of $5,000 in 2000; and payments under
the Chatwins Group, Inc. Money Purchase Pension Plan of $8,500 in 2001 and
$8,000 in 2000. Includes a healthcare benefit credit of $1,020 in each year.
(5) Includes 401(k) matching payments of $4,928 in 2000; and payments under
the Chatwins Group, Inc. Money Purchase Plan of $8,500 in 2001 and $8,000 in
2000. Includes a healthcare benefit credit of $1,020 in each year.
(6) Includes 401(k) matching payments of $5,456 in 2002, $4,703 in 2001 and
$4,513 in 2000; and payments under the Chatwins Group, Inc. Money Purchase
Plan of $8,500 in 2001 and $8,000 in 2000. Includes a healthcare benefit
credit of $1,020 in each year.
- 6 -
Option Grants
There were no options granted in the year ended December 31, 2002.
Option Exercises and Year-End Values
The following table sets forth information with respect to the exercise of
options during the year ended December 31, 2002. There were no unexercised
options to purchase shares of common stock held by named executive officers at
December 31, 2002.
Number of
Shares
Acquired on Value
Name Exercise Realized
----------------------- ------------ --------
Charles E. Bradley, Sr. 125,000 $ 0 (1)
Joseph C. Lawyer 0 0
Kimball J. Bradley 95,000 0 (1)
John M. Froehlich 64,000 0 (1)
Jack T. Croushore 64,000 0 (1)
(1) The closing price on the date of exercise was less than the exercise
price.
Repricing of Options
At its meeting on June 12, 2002, the Board of Directors directed the
Company's management to take action to possibly improve the value of
outstanding stock options as an incentive to the Company's employees that then
held stock options. At its meeting on September 26, 2002, the Company's
management presented its plan to the Board to offer to holders of the
Company's stock options the opportunity to reprice their stock options to an
amount closer to then recent trade amounts.
Elements of the repricing, if elected, included: (i) repricing of all
options held to $0.20 (twenty cents) per share, the closing price on the AMEX
of the Company's common stock on June 11, 2002, the day before the Board
directed management to take action, (ii) a no-exercise period through and
including December 12, 2002, (iii) automatic vesting of all repriced options
on December 13, 2002, and (iv) the opportunity to exercise all or any portion
of the repriced options at $0.20 per share through and including December 31,
2002. At the close of business on December 31, 2002, all repriced but
unexercised options were forfeited.
At the time of the repricing offer on September 30, 2002, there were
911,450 outstanding stock options held by directors, executive management and
other Company employees (including two former employees that retained their
stock options). Mr. Bradley, Sr. offset amounts owed to him under the SPI
Consulting Agreement against the $25,000 exercise price of his options.
Kimball Bradley exercised his options paying cash for the underlying
securities. Mr. Lawyer repriced his options but did not exercise them,
resulting in his 55,000 options being forfeited. Messrs. Froehlich and
Croushore offset amounts accrued for prior years' bonuses against the exercise
price of their options.
- 7 -
Results of the repricing offer by group are as follows:
Repricing Results by Group
Non-
Director Other
Directors Executive Employees Total
--------- --------- --------- ---------
Options on September 30, 2002 495,000 158,000 258,450 911,450
Elected to reprice - cash purchase (227,000) (30,000) (96,400) (353,400)
Elected to reprice - accrual offset (125,000) (128,000) (81,500) (334,500)
Elected to reprice - forfeited (99,000) - (80,550) (179,550)
--------- --------- --------- ---------
Options on December 31, 2002 44,000 - - 44,000
========= ========= ========= =========
Mr. Clerihue holds the only remaining options to purchase 44,000 shares
of the Company's common stock as he elected not to reprice. Exercise prices
per share related to these options are 15,000 at $5.0625, 10,000 at $3.00,
10,000 at $1.45 and 9,000 at $1.00.
The following table sets forth information with respect to options
repriced held by named executives during the year ended December 31, 2002.
Option Repricing Information of Named Executives
Number of Exercise Length of
Shares Price per New Original
Underlying Share at Exercise Option
Options Time of Price Term at
Name Repriced Repricing per Share Repricing
----------------------- ---------- --------- --------- ----------
Charles E. Bradley, Sr. 20,000 $ 1.00000 $ 0.20000 7.75 years
5,000 1.45000 0.20000 8.75 years
25,000 3.00000 0.20000 7.50 years
75,000 7.21875 0.20000 0.75 years
Joseph C. Lawyer 20,000 1.00000 0.20000 7.75 years
10,000 1.45000 0.20000 8.75 years
25,000 3.00000 0.20000 7.50 years
Kimball J. Bradley 20,000 1.10000 0.20000 2.75 years
50,000 1.59500 0.20000 3.75 years
25,000 3.30000 0.20000 2.50 years
John M. Froehlich 19,000 1.00000 0.20000 7.75 years
25,000 1.45000 0.20000 8.75 years
20,000 3.00000 0.20000 7.50 years
Jack T. Croushore 19,000 1.00000 0.20000 7.75 years
25,000 1.45000 0.20000 8.75 years
20,000 3.00000 0.20000 7.50 years
- 8 -
Compensation Committee Report
The compensation committee of the board of directors has furnished the
following report on executive compensation for 2002:
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 2002, 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 the 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, possibly,
an increased incentive to remain with the Company.
Pursuant to applicable rules of the Securities and Exchange Commission,
as of May 15, 2003, members of the compensation committee are deemed to own
beneficially an aggregate of 186,029 shares, or approximately 1.2%, of
Reunion's outstanding common stock. See "Ownership Information - Security
Ownership of Certain Beneficial Owners and Management".
The Compensation Committee
W.R. Clerihue, Chairman; Thomas N. Amonett; Thomas L. Cassidy
- 9 -
OWNERSHIP INFORMATION
Security Ownership of Certain Beneficial Owners and Management
Reunion Industries has 16,278,519 shares of common stock outstanding as
of May 15, 2003. 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.
% of
Outstanding
Beneficial Owner Shares Owned Shares
-------------------------------- ------------------------- -----------
Charles E. Bradley, Sr. 6,601,464 (1)(2)(3)(5)(6) 40.6%
c/o Stanwich Partners, Inc.
62 Southfield Ave.
One Stamford Landing
Stamford, CT 06902
Kimball J. Bradley
c/o Reunion Industries, Inc.
11 Stanwix Street, suite 1400
Pittsburgh, PA 15222 6,378,582 (1)(5)(6) 39.2%
The Charles E. Bradley, Sr.
Family Limited Partnership
c/o Stanwich Partners, Inc.
62 Southfield Ave.
One Stamford Landing
Stamford, CT 06902 4,672,393 (5)(6) 28.7%
John G. Poole and the John Grier
Poole Family Limited Partnership
c/o Stanwich Partners, Inc.
62 Southfield Ave.
One Stamford Landing
Stamford, CT 06902 2,257,185 (4)(5) 13.9%
Stanwich Financial Services Corp.
62 Southfield Ave.
One Stamford Landing
Stamford, CT 06902 1,651,697 (2) 10.1%
Thomas N. Amonett 78,000 0.5%
Thomas L. Cassidy 62,362 0.4%
W.R. Clerihue 45,667 (7) 0.3%
Joseph C. Lawyer 701,751 (8) 4.3%
Franklin Myers 18,400 0.1%
John M. Froehlich 74,008 0.5%
Jack T. Croushore 195,187 1.2%
All Officers and Directors as
a group (10 individuals) 11,740,213 (7) 71.9%
(1) Includes 4,672,393 shares owned by The Charles E. Bradley, Sr. Family
Limited Partnership (the "Bradley Partnership"), of which Mr. Bradley, Sr.
owns 1% as general partner and 27% as a limited partner. The Partnership has
designated Mr. Kimball J. Bradley to vote these shares on its behalf.
Pursuant to Rule 13d-3, Mr. Charles E. Bradley, Sr. may be deemed to be the
beneficial owner of these shares with dispositive power (but no voting power)
with respect thereto that he shares with the Bradley Partnership, and Mr.
Kimball J. Bradley may be deemed to be the beneficial owner of these shares
with voting power (but no dispositive) with respect thereto that he shares
with the Bradley Partnership.
- 10 -
(2) Includes 1,651,697 shares owned by Stanwich Financial Services Corp.,
with which Mr. Bradley, Sr. shares voting and dispositive power. Mr. Bradley,
Sr. owns 100% of the parent company of Stanwich Financial Services Corp., and
may be deemed to be the beneficial owner of these shares. Disposition of
these shares is subject to the approval of the bankruptcy court before which
Stanwich Financial Services Corp.'s Chapter 11 case is pending.
(3) 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.
(4) Includes 1,499,746 shares owned by the John Grier Poole Family Limited
Partnership, of which Mr. Poole owns 1% and is the sole general partner.
Pursuant to Rule 13d-3, Mr. Poole may be deemed to be the beneficial owner of
these shares, with sole voting and dispositive power with respect thereto.
Also includes 139,808 shares as to which Mr. Poole has voting rights, but not
dispositive rights. Pursuant to Rule 13d-3, Mr. Poole may be deemed to be the
beneficial owner of these shares, with sole voting rights with respect
thereto.
(5) 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 are due in 2003. Because
"Realization Events" have occurred under the Securities Pledge Agreement as a
result of the Company's failure to make certain payments due under the Senior
Notes, the Collateral Agent has the right to receive any dividends from, and
any proceeds from the sale of such pledged shares (but not more than the
amount of the debt secured by such pledges). The Collateral Agent also has
the right to vote these shares during the continuation of such event.
(6) Mr. Bradley, Sr. and the Bradley Partnership have pledged, respectively,
51,897 and 361,580 shares to Sovereign Bank to secure certain indebtedness of
Mr. Bradley, Sr. Because a default has occurred under the indebtedness,
Sovereign Bank has the right to receive any dividends from, and any proceeds
from the sale of, the pledged shares (but not more than the amount of the debt
secured by such pledges), and it may have the right to vote with respect to
these pledged shares.
(7) Includes options, exercisable currently or within 60 days, to purchase
40,667 shares of common stock.
(8) 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.
- 11 -
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
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 for 2002, 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 2002,
except that Joseph C. Lawyer filed one late report of one transaction.
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
Composite Index and the Industrial Equipment and Components Index published by
Media General Financial Services, Inc.:
Five Year Total Return (1)
[FIVE YEAR PERFORMANCE GRAPH APPEARS HERE]
Fiscal Year Ending
----------------------------------------------
1997 1998 1999 2000 2001 2002
------ ------ ------ ------ ------ ------
Reunion Industries, Inc. 100.00 53.01 32.83 26.51 5.98 2.89
American Stock Exchange
Composite Index(2) 100.00 90.90 97.83 101.69 98.75 90.92
Industrial Equipment and
Components Index(2) 100.00 98.64 122.98 121.47 115.87 111.25
(1) Tabular data assumes that the value of the investment in Reunion
Industries' common stock and each index was $100.00 at January 1, 1998 and
that all dividends, if any, were reinvested.
(2) Index provided by Media General Financial Services, Inc.
- 12 -
Certain Relationships and Related Transactions
Related Parties
Reunion Industries, Inc. - Reunion is a publicly traded Delaware
corporation which is headquartered in Pittsburgh, Pennsylvania. Charles E.
Bradley, Sr. (Mr. Bradley) is chairman of the board and Chief Executive
Officer of Reunion. Kimball Bradley is President, Chief Operating Officer, a
director of Reunion and son of Mr. Bradley.
Stanwich Partners, Inc. - Stanwich Partners, Inc. (SPI) is engaged in
consulting services in the field of financial planning and reporting. Mr.
Bradley is the President, a director and stockholder of SPI.
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.
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.
In January 2001, NPSAC was merged into Reunion.
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 of CPS
until July 2001. Charles E. Bradley Jr., Mr. Bradley's son, 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 each of the years
ended December 31, 2001 and 2000, respectively. The agreement was terminated
effective September 30, 2002. During 2002, $225,000 was expensed related to
this agreement. The Company paid SPI $127,795 under this agreement during
2002. At December 31, 2002, $117,205 was owed to SPI under this agreement.
No amounts were owed under this agreement as of December 31, 2001.
SFSC Notes Payable - The Company assumed three notes payable to SFSC in
connection with acquisitions by merger in 2000 and 2001. At December 31,
2002, their principal balances were $2,998,000, $500,000 and $100,000. During
2002, no interest was paid to SFSC related to these notes payable. At
December 31, 2002, the total of accrued and unpaid interest due to SFSC
related to these notes payable was $1,219,572.
SFSC Note Receivable - SFSC owes Reunion $310,000 principal and $155,000
of interest for a loan originally made in 1999 with interest at 15%.
CPS Leasing, Inc. - During 2002, lease payments totaling $580,000 were
paid to CPSL. At December 31, 2002, the Company has future minimum rental
commitments under noncancellable operating leases with CPSL totaling
$2,144,000. No new leases were entered into in 2002.
SFSC Collateral Fees - SFSC provided side collateral to support Reunion's
borrowings under its credit facility with Bank of America. Under this
arrangement, SFSC is to receive a 5% collateral fee for as long as the
collateral is in place. During 2002, the Company recorded expense of $283,000
related to this arrangement. No payments were made under this arrangement
during 2002. At December 31, 2002, accrued and unpaid fees totaling $690,000
were due to SFSC.
- 13 -
In March 2000, SFSC pledged a $5,000,000 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. In 2001, the Company
assumed this credit support obligation in its acquisition by merger of NPSAC.
During 2002, no fees were paid to SFSC. At December 31, 2002, accrued and
unpaid fees totaling $227,000 were due to SFSC.
Cash Surrender Value of Life Insurance Policies - The Company pays the
premiums on life insurance policies covering Messrs. Bradley, Lawyer and
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, 2002, premiums paid by the Company since their issuance in
1994 in excess of the cash surrender values of the policies totaled
$1,031,000.
Mr. Bradley Note Payable - Reunion owed Mr. Charles E. Bradley $1,017,000
related to its plastics business. This note and any accrued and unpaid
interest thereunder were assigned to SFSC in 2000. No interest was paid in
2002. At December 31, 2002, accrued and unpaid interest due related to this
notes payable totaled $168,000.
Mr. Bradley Guarantee - Through the NPSAC acquisition by merger, the
Company assumed an obligation to pay Mr. Charles E. Bradley a guarantee fee in
connection with his guarantee of certain obligations of NPSAC to the former
owners of the NAPTech business that NPSAC acquired in 1998 (the "Bradley
Guarantee"). At December 31, 2001, a total of $90,000 was due to Mr. Bradley
under this agreement. During 2002, Mr. Bradley assigned his right to this
guarantee fee plus interest at approximately 11%, totaling $100,000, to
Messrs. Lawyer and Froehlich in repayment of loans totaling $100,000 they made
to Mr. Bradley. These employees also had received a total of $100,000 in
advances from the Company during 2001. See "Employee Advances" below.
Mr. Bradley Note Payable - In January 2003, the Company issued to Mr.
Charles E. Bradley a promissory note for $500,000 to evidence its obligation
to reimburse him for a payment made by him in that amount under the Bradley
Guarantee.
Employee Advances - At December 31, 2001, the Company had non-interest
bearing advances due from five employees totaling $213,000, which was also the
highest balance during 2002. During 2002, Messrs. Lawyer and Froehlich repaid
their advances totaling $100,000 by waiving their rights to the guarantee fee
plus interest they received by assignment from Mr. Bradley. See "Mr. Bradley
Guarantee" above.
Previous Independent Accountants
On May 1, 2001, PricewaterhouseCoopers LLP resigned as the independent
accountants of Reunion Industries effective after the completion of the review
of the Quarterly Report on Form 10-Q for the quarter ended March 31, 2001. The
report of PricewaterhouseCoopers LLP on the financial statements for the
fiscal year ended prior to May 1, 2001 contained no adverse opinion or
disclaimer of opinion and was not qualified or modified as to uncertainty,
audit scope or accounting principle. Reunion Industries had discussed with
PricewaterhouseCoopers LLP its relationship with the Reunion Industries in the
past, did not ask PricewaterhouseCoopers LLP to reconsider its decision and
feels such resignation was in the best interests of both parties. In
connection with its audit for the most recent fiscal year and through May 1,
2001, there had been no disagreements with PricewaterhouseCoopers LLP on any
matter of accounting principles or practices, financial statement disclosure,
or auditing scope or procedure, which disagreements, if not resolved to the
- 14 -
satisfaction of PricewaterhouseCoopers LLP, would have caused them to make
reference thereto in their report on the financial statements for such year.
During the most recent year and through May 1, 2001, there were no reportable
events (as defined in Regulation S-K Item 304 (a)(1)(v)).
Independent Accountants for 2001 and 2002
On May 15, 2001, Ernst & Young LLP was selected by the audit committee of
the board of directors to audit Reunion Industries' financial statements for
the fiscal years ending December 31, 2001 and 2002. Representatives of Ernst
& Young LLP are expected to be present at the Annual Meeting of Stockholders
on June 26, 2003 to respond to appropriate questions and to make a statement
if they desire to do so. A formal appointment of auditors for 2003 will be
made later in the year, but Ernst & Young LLP is continuing to provide audit-
related services for interim periods.
Audit Fees
Aggregate fees billed by Ernst & Young LLP for audit and quarterly review
services during 2002 were $178,000. Aggregate fees billed by
PricewaterhouseCoopers LLP for audit services as predecessor auditor during
2002 were $1,425.
All Other Fees
Additional fees totaling $36,500 were billed by Ernst & Young LLP during
2002 for audits of employee benefit plans. There were no fees for financial
information systems design and implementation services or for internal audit
services. The audit committee considers Ernst & Young LLP's provision of
services detailed herein to be compatible with maintaining that firm's
independence from Reunion Industries.
- 15 -
Audit Committee Report
The audit committee of the board of directors has furnished the following
report on its activities during 2002:
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, 2002, as filed with the Securities and Exchange
Commission.
Members of the Audit Committee
Franklin Myers, Chairman; Thomas N. Amonett; W.R. Clerihue
- 16 -
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 Annual Report to Stockholders covering the year ended December 31,
2002 has been mailed with this proxy statement to each stockholder entitled to
vote at the Annual Meeting. Copies of Reunion Industries' Annual Report on
Form 10-K (excluding certain exhibits) for the fiscal year ended December 31,
2002, as filed with the Securities and Exchange Commission, 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 Annual Report on 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 it has not yet determined a date for its 2004 annual meeting of
stockholders, Reunion Industries intends to hold the meeting in mid-2004.
Reunion Industries will inform stockholders of the date of the 2004 annual
meeting in a future periodic report to be filed with the Securities and
Exchange Commission. Proposals of stockholders of Reunion Industries intended
to be presented at the 2004 annual meeting of stockholders must be received by
the Secretary of Reunion Industries at 11 Stanwix Street, Pittsburgh,
Pennsylvania 15222 a reasonable time before Reunion Industries begins to
print and mail its proxy materials. If such proposal is in compliance with
all of the requirements of Rule 14a-8 under the Exchange Act, they will be
included in the proxy statement and set forth on the form of proxy issued for
the next annual meeting of stockholders.
If a stockholder intends to present a proposal at the 2004 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 2004 annual
meeting of stockholders to vote on the stockholder's proposal at the 2004
annual meeting of stockholders.
Proxies
The cost of soliciting proxies in the accompanying form will be borne by
Reunion Industries.
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
May 20, 2003
- 17 -
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 JUNE 26, 2003.
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 Thursday, June 26, 2003.
Please be sure to sign and date
-------------------------
this Proxy in the box below. | 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 DAVID E. JACKSON
CHARLES E. BRADLEY, SR, JOSEPH C. LAWYER
KIMBALL J. BRADLEY JOHN G. POOLE
THOMAS L. CASSIDY
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. In their discretion, upon such other matters [_] [_] [_]
as may properly come before the meeting,
hereby revoking any proxy or proxies
heretofore given by the undersigned.
PLEASE CHECK BOX IF YOU PLAN TO ATTEND -------------------> [_]
THE ANNUAL MEETING:
The Board of Directors recommends a vote FOR each of the proposals set
forth above; if no specification is made, the shares will be voted FOR such
proposals.
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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